- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 333-78573
333-78573-01
MUZAK HOLDINGS LLC
MUZAK HOLDINGS FINANCE CORP
(Exact Name of Registrants as Specified in their charter)
<TABLE>
<S> <C> <C>
DELAWARE 04-3433730
DELAWARE 04-3433728
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
5550 77 CENTER DRIVE SUITE 380
CHARLOTTE, NC 28217
(704) 559-5277
(Address, Including Zip Code and
Telephone Number including Area Code
of Registrants' Principal Executive Offices)
---------------
Securities registered pursuant to Section 12(g) of the Act: 13% Senior Discount
Notes due 2010
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrants have filed all documents
and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrants were required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Muzak Holdings Finance Corp. meets the conditions set forth in General
Instruction I (1) (a) and (b) of Form 10-K and is therefore filing this form
with the reduced disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MUZAK HOLDINGS LLC
MUZAK HOLDINGS FINANCE CORP
FORM 10-K INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
Part I
Item 1. Business .................................................................................. 3
Item 2. Properties ................................................................................ 7
Item 3. Legal Proceedings ......................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders ....................................... 8
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ..................... 8
Item 6. Selected Financial Data ................................................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................ 17
Item 8. Financial Statements and Supplementary Data ............................................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...... 17
Part III
Item 10. Directors and Executive Officers of the Registrants ....................................... 18
Item 11. Executive Compensation .................................................................... 20
Item 12. Security Ownership of Certain Beneficial Owners and Management ............................ 21
Item 13. Certain Relationships and Related Transactions ............................................ 22
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........................... 25
</TABLE>
SAFE HARBOR STATEMENT
This Form 10-K contains statements which, to the extent they are not
historical fact, constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements
involve risks and uncertainties. The forward-looking statements in this Form
10-K are intended to be subject to the safe harbor protection provided by the
Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this Form
10-K include industry-based factors such as the level of competition in the
business music industry, changes in consumer preference, competitive pricing,
concentrations in and dependence on satellite delivery capabilities, rapid
technological changes, as well as factors more specific to the Company such as
the substantial leverage of the Company, limitations imposed by the Company's
debt facilities, and changes made in connection with the integration of
operations acquired by the Company.
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Muzak Holdings LLC (together with its wholly owned subsidiaries,
collectively the "Company") is the leading provider of business music
programming in the United States based on market share. Together with its
independent franchisees, the Company serves an installed base of approximately
300,000 business locations nationwide. The Company and its independent
franchisees also sell, install and maintain electronic equipment related to the
Company's business.
The Company's nationwide network divides the country into 168 territories,
of which 50 are served by the Company's owned operations, and the remaining 118
are served by the Company's independent franchisees. The independent franchisees
have exclusive licenses to sell the Company's products and to use the Company's
trademarks in their territories. As of December 31, 1999, ABRY Partners, LLC and
its respective affiliates collectively own approximately 68% of the voting
interests in the Company.
The Company's customers typically enter into a noncancelable five-year
contract that renews automatically for at least one five-year term unless
specifically terminated at the initial contract expiration date. The average
length of service per customer is approximately 12 years. The Company typically
makes an initial one-time installation investment per location, in exchange for
recurring monthly fees. For music clients generated by the independent
franchisees, the Company receives a net monthly royalty fee for each client
location in exchange for music programming. The Company does not incur a
capital outlay for a new client location generated by a independent franchisee.
DEVELOPMENTS
ACQUISITIONS
The Company, formerly known as ACN Holdings, LLC, was formed in September
1998 pursuant to the laws of Delaware. Muzak LLC, a wholly owned subsidiary of
the Company, owns and operates franchisees. Muzak LLC began its operations on
October 7, 1998 with the acquisition of the independent franchisees in the
Baltimore, Charlotte, Hillsborough, Kansas City, St. Louis, Jacksonville,
Phoenix, and Fresno areas from Audio Communications Network, Inc. (the
"Predecessor Company") for $66.8 million. On March 18, 1999, Muzak Limited
Partnership ("Old Muzak") merged with and into Audio Communications Network LLC
("ACN"). At the time of the merger, ACN changed its name to Muzak LLC. Under the
terms of the agreement, the Company paid total consideration of $274.2 million,
which is comprised of the following: $125.5 million cash consideration, $114.9
million consideration in the tender offer and consent solicitation for the 10%
Senior Notes due 2003 of Old Muzak, $15.9 million for debt repayment of Old
Muzak outstanding obligations and assumed $17.9 million of other obligations. In
addition, at the time of the merger, the Company repaid $41.7 million borrowed
from ABRY Broadcast Partners by ACN in October 1998 in connection with the
acquisition of the Company's independent franchisees from the Predecessor
Company and converted $0.7 million into Class A units of the Company.
In 1999, prior to the merger, the Company made the following acquisitions:
o On January 15, 1999, the Company acquired all of the outstanding stock of
Business Sound, Inc. for approximately $4.1 million which included 3,661
Class A units of the Company. Business Sound was the Company's independent
franchisee for the New Orleans, Louisiana and Mobile, Alabama areas.
o On February 24, 1999, the Company acquired all of the outstanding stock
of Electro Systems for approximately $0.7 million, which included 650
Class A units of the Company, and assumed certain non-recourse debt.
Electro Systems was the Company's independent franchisee located in Panama
City, Florida.
3
<PAGE>
The Company made thirteen acquisitions between the merger of Old Muzak and
ACN on March 18, 1999 and December 31, 1999. The table below provides
information regarding these acquisitions (in millions, except for number of
units).
<TABLE>
<CAPTION>
ACQUIRED ASSETS ACQUIRED ACQUIRED
DATE PURCHASE PRICE (5) OR STOCK BUSINESS MARKETS
- -------------------- -------------------- -------------------------------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
March 18, 1999 $ 18.1 (1) Net assets of Capstar Broadcasting Corporation's Independent Georgia,
independent franchisee franchisee Florida
April 1, 1999 $ 0.2 Net assets of Custom On Hold Services Inc Audio Marketing Washington
May 1, 1999 $ 3.2 (2) Net assets of Capstar Broadcasting Corporation's Independent Nebraska
independent franchisee franchisee
June 1, 1999 $ 6.9 Net assets of Advertising on Hold, Inc Audio Marketing Florida,
Georgia,
North Carolina
June 1, 1999 $ 0.8 Net assets of CustomTronics Sound Business Music California
July 1, 1999 $ 0.9 Net assets of Penobscot Broadcasting Corporation Independent Maine
franchisee
August 1, 1999 $ 1.3 Net assets of LaBov and Beyond, Inc Audio Marketing Indiana
August 1, 1999 $ 3.5 Net assets of US West Communications Services, Audio Marketing National
Inc's Please Hold Promotions
September 1, 1999 $ 4.7 Stock of Broadcast International, Inc Business Music National
October 1, 1999 $ 10.3 Net assets of Midwest Systems and Services, Inc Business Music Illinois,
Indiana,
Ohio,
West Virginia
November 1, 1999 $ 2.9 Net assets of A & D Music, Inc Independent Oregon
franchisee
November 1, 1999 $ 7.9 (3) Stock of Audio Environment, Inc and Background Independent California
Music Broadcasters Inc franchisee
December 1, 1999 $ 13.2 (4) Net assets of Mountain West Audio, Inc Independent Utah,
franchisee Idaho,
Washington
</TABLE>
- ---------
(1) Total Purchase Price includes 13,535 Class A units of the Company.
(2) The Company acquired Capstar Broadcasting Corporation's ("Capstar")
independent franchisees located in Atlanta, Albany, and Macon, Georgia, Ft
Myers, Florida and Omaha Nebraska. The total consideration was accounted
for as an equity contribution to the Company and included 2,385 Class A
units of the Company.
(3) Total purchase price includes 100 Class A units of the Company.
(4) The Company paid $3.1 million of the purchase price of Mountain West Audio
as of December 31, 1999. In February 2000, the Company paid the remaining
purchase price, which included 456 Class A units of the Company.
(5) The purchase price does not include transaction costs.
FINANCING DEVELOPMENTS
From July 1, 1999 through November 24, 1999, the Company issued 15% junior
subordinated unsecured notes (the "ABRY Notes") to MEM Holdings, LLC in an
aggregate amount of $30.0 million. MEM Holdings is a holdings company that owns
68% of the voting interests in the Company. ABRY Broadcast Partners III and ABRY
Broadcast Partners II are the beneficial owners of MEM Holdings.
On July 14, 1999, the Company increased its borrowings under the Term Loan
B of the Senior Credit Facility by $30.0 million, for a total amount borrowed
under Term Loan B of $135.0 million.
In January 2000, the Company entered into an indenture for up to $50.0
million Senior Subordinated Floating Rate Notes (the "Floating Rate Notes").
The Floating Rate Notes will be available for drawdowns until July 31, 2000. As
of March 29, 2000, $25.0 million of the Floating Rate Notes were outstanding.
Proceeds from the issuance of Floating Rate Notes will be used to fund
acquisitions.
4
<PAGE>
PRODUCTS
The Company's core product is Audio Architecture, and complementary
products include Audio Marketing and Video Architecture. The Company believes
that the products assist customers in strengthening their brand images and
enhancing the experiences of their customers.
Audio Architecture is the art of creating business music programming
designed to enhance a client's brand image. The Company has an in-house staff
of audio architects that analyzes a variety of music to develop and maintain 60
core music programs in 10 genres that appeal to a wide range of tastes.
Programs include current top-of-the-charts hits to jazz, classic rock, urban,
country, Latin, classical music and others. The Company's audio architects
update the music programs on a daily basis, incorporating the continuous
release of new music recordings and drawing from the Company's extensive music
library. In designing the music programs, the audio architects use proprietary
computer software that allows them to efficiently access the extensive library,
avoid repeated songs and manage tempo and music variety to provide customers
with high quality, seamlessly arranged programs.
As a complement to Audio Architecture, the Company's Audio Marketing
creates customized music and messages that allow customers' telephone systems to
deliver targeted music and messaging during their customers time on hold. The
Company has the in-house capability to write, edit, produce and duplicate
messages. The Company's fully integrated sound studios and editing and tape
duplication facilities provide flexibility in responding to client's needs.
Video Architecture is video programming designed to enhance the brand
personality of the Company's customers by entertaining, informing and
captivating their customers. The Company has a library of video programs from
which customer specific programming is produced.
The Company's net sales of Audio Architecture, Audio Marketing and Video
Architecture were $65.4 million, $8.6 million, and $2.2 million, respectively
in 1999.
In connection with the sale of Audio Architecture, Audio Marketing, and
Video Architecture products, the Company sells and leases various audio and
video system-related products, principally sound systems. As part of a typical
music programming contract, the Company provides music receiving or playback
equipment to its customers. The Company's music clients generally purchase or
lease audio equipment that supplements the music receiving or playback
equipment. The Company also sells, installs, and maintains non-music related
equipment, such as intercom, paging and drive-thru systems.
CUSTOMERS
The Company provides its products to numerous types of businesses
including specialty retailers, restaurants, department stores, supermarkets,
drug stores, financial institutions, hotels, golf clubs, health and fitness
centers, business offices, manufacturing facilities, and medical centers.
During 1999, none of the Company's customers represented more than 2% of
revenues, and less than 2% of revenues were for services provided to customers
located outside of the United States. However, the Company has 16 independent
franchisees located outside the United States that serve areas in Canada,
Mexico, Bermuda, Japan, Indonesia, New Zealand, Europe, and Peru.
NATIONWIDE AFFILIATE NETWORK
The Company has a nationwide network that divides the country into 168
affiliate territories, of which 50 are served by the Company's owned operations
and the remaining 118 are served by the Company's independent franchisees. The
Company's owned operations generally operate in the larger and the more
populated territories. The Company's business relationships with its
independent franchisees are governed by independent affiliate agreements that
have ten-year renewable terms. In exchange for the exclusive right to offer and
sell the Company's products, the independent franchisees pay a monthly fee
based on the number of businesses within its territory. In addition, the
Company also receives a royalty or a wholesale fee depending on the type of
product sold.
DISTRIBUTION SYSTEMS
The Company transmits its offerings through various mediums including
direct broadcast satellite transmission, local broadcast transmission, audio
and videotapes and compact discs. During 1999, the Company served its customer
locations through the following means: approximately 61% through direct
broadcast satellite transmission, approximately 29% through local broadcast
technology, and approximately 10% through on-premises tapes or compact discs.
The Company's transmissions via direct broadcast satellite to customers
are primarily from transponders leased from Microspace and EchoStar Satellite
Corporation ("EchoStar"). Microspace provides the Company with facilities for
uplink
5
<PAGE>
transmission of medium-powered direct broadcast satellite signals to the
transponders. Microspace, in turn, leases its transponder capacity on
satellites operated by third parties. The term of the Company's principal
transponder lease with Microspace is projected to end in 2005.
The Company also furnishes music channels to commercial and residential
subscribers over EchoStar's satellite system. The Company furnishes 60 music
channels to commercial subscribers and 30 music channels to residential
subscribers over EchoStar's satellite system. Pursuant to the agreements with
EchoStar, EchoStar pays the Company a programming fee for each of its
residential subscribers and pays the Company's independent franchisees a
commission for sales made by EchoStar or its agents to commercial subscribers
in an affiliate's territory. The Company pays EchoStar a fee for uplink
transmission of music channels to its customers and rents space at EchoStar's
Cheyenne, Wyoming uplink facility. The Company also pays EchoStar a royalty and
combined access fees on music programs sold by the Company which are
distributed by EchoStar to commercial subscribers. EchoStar has the right to
cancel its distribution of the 30 music programs to residential subscribers at
any time upon 60 days notice. Upon such cancellation, EchoStar must pay the
Company the depreciated book value of its capital investment in equipment to
support the residential music channels and continue to provide 2.4 megahertz of
transponder capacity for use in serving commercial subscribers. In such event,
the Company would only be able to provide 30 music programs and would need to
lease other transponder space in order to continue providing the other 30 music
programs. The Company would also lose the programming fee generated by
EchoStar's residential subscribers. The Company's agreements with EchoStar are
projected to end in 2010.
During the first quarter of 2000, EchoStar approached the Company and
expressed a desire to reassess the business terms that pertain to EchoStar's
distribution of the residential music channels. The Company and EchoStar are in
the process of negotiating an understanding in which the programming fees
earned by the Company and paid by EchoStar in connection with the residential
music channels may be eliminated in consideration for a long-term supply
agreement with respect to satellite services. The Company expects to conclude
negotiations prior to the third quarter of 2000.
COMPETITION
The Company competes with many local, regional, national and international
providers of business music and business services. National competitors include
AEI Music Network, Inc., DMX, Inc. and Music Choice. Local and regional
competitors are typically smaller entities that target businesses with few
locations. Some of the Company's competitors may have substantially greater
financial, technical, personnel or other resources than the Company.
There are numerous methods by which our existing and future competitors
deliver programming, including various forms of DBS services, wireless cable,
fiber optic cable, digital compression over existing telephone lines, advance
television broadcast channels, Digital Audio Radio Service ("DARS"), and the
Internet. The Company may not be able to compete successfully with existing or
potential new competitors, maintain or increase current market share, compete
effectively with competitors that adopt new delivery methods and technologies,
or keep pace with discoveries or improvements in the communications, media and
entertainment industries such that existing technologies or delivery systems on
which the Company relies will not become obsolete. In addition, the terms of
the Company's debt impose operational and financial restrictions that may
inhibit the Company's ability to compete.
The Company principally competes on the basis of service, the quality and
variety of music programs, versatility and flexibility, the availability of
non-music services and, to a lesser extent, price. Even though the Company is
seldom the lowest-priced provider of business music in a territory, the Company
believes it can compete effectively on all these bases due to widespread
recognition of the MUZAK(R) trademark, the Company's nationwide network, the
quality and variety of music programming, the talent of the Company's audio
architects and the Company's multiple delivery systems.
SALES AND MARKETING
The Company employs a direct sales process in marketing products, which is
focused on securing new client contracts and renewing existing contracts.
Customer agreements typically have a non-cancelable term of five years and
renew automatically for at least one additional five-year term unless
specifically terminated at the initial contract expiration date. Repeat clients
comprise the core of the account base. The Company has local, national, and
regional sales forces. Local account executives typically focus on customers
that have fewer than 50 locations.
6
<PAGE>
MUSIC LICENSES
The Company licenses rights to rerecord and distribute music from a
variety of sources and pays royalties to songwriters and publishers through
contracts negotiated with performing rights societies such as the American
Society of Composers, Authors and Publishers ("ASCAP"), Broadcast Music, Inc.
("BMI"), and the Society of European Stage Authors and Composers ("SESAC").
The industry-wide agreement between business music providers and BMI
expired in December 1993. Since this time the Company has been operating under
an interim agreement pursuant to which the Company has continued to pay
royalties at the 1993 rates. Business music providers and BMI have been
negotiating the terms of a new agreement. The Company is involved in a rate
court proceeding, initiated by BMI in Federal Court in New York. At issue are
the music license fees payable by the Company and its owned operations as well
as licensed independent franchisees to BMI. The period from which such
"reasonable" license fees are payable covers the period January 1, 1994 to
December 31, 1999, and likely several years thereafter. BMI contends that those
fee levels understate reasonable fee levels by as much as 100%. The Company
vigorously contests BMI's assessment. The eventual court ruling setting final
fees for the period covered may require retroactive adjustment, upward or
downward, likely back to January 1, 1994, and possibly will also entail payment
of pre-judgment interest. Discovery in the proceeding has commenced and is not
yet completed. A trial date has not been set.
The industry wide agreement between business music providers and ASCAP
expired in May 1999. Negotiations between ASCAP and the Company began in June
1999, and the Company has continued to pay ASCAP royalties at the 1999 rates. In
1999, the Company paid approximately $4.1 million in royalties to ASCAP and BMI.
GOVERNMENT REGULATION
The Company is subject to governmental regulation by the United States and
the governments of other countries in which it provides services. The Company
provides music services in a few areas in the United States through 928 to 960
megahertz frequencies licensed by the Federal Communications Commission
("FCC"). Additionally, the FCC licenses the frequencies used by satellites on
which the Company transmits direct broadcast satellite services in the United
States. If the FCC or any other person revokes or refuses to extend any of
these licenses, the Company would be required to seek alternative transmission
facilities. Laws, regulations and policy, or changes therein, in other
countries could also adversely affect the Company's existing services or
restrict the growth of its business in these countries.
EMPLOYEES
As of December 31, 1999, the Company had 1,286 full-time and 38 part-time
employees. Approximately 100 of the technical and service personnel are covered
by eight union contracts, all of which are with the International Brotherhood
of Electrical Workers. All of the contracts, with the exception of one, expire
on dates ranging from October 31, 2000 to January 31, 2003. One of the
International Brotherhood of Electrical Workers contracts that covers less than
10 employees expired on February 28, 2000 and the Company is in the process of
negotiating a replacement agreement. Management believes that the Company's
relations with its employees and with the unions that represent them are
generally good.
ITEM 2. PROPERTIES
The Company's headquarters are located in Charlotte, North Carolina and
consist of approximately 10,000 square feet. As of December 31, 1999, the
Company also occupied approximately 80,000 square feet in Seattle, Washington
which served as Old Muzak's headquarters. In order to achieve operational
efficiencies and consolidate geographically disbursed business units, the
Company decided to relocate its headquarters to Fort Mill, South Carolina and
has entered into a lease which obligates the landlord to construct a 100,000
square foot facility in Fort Mill, South Carolina which will accommodate the
Company's headquarters, the Charlotte owned operation, and several of its other
divisions. The facility is currently under construction and is expected to be
completed during the third quarter of 2000. The Company has approximately 55
local sales offices in various locations, office and satellite uplink
facilities in Raleigh, North Carolina and Cheyenne, Wyoming and warehouses in
various locations. Approximately 95% of the total square footage of these
facilities is leased and the remainder is owned. In January 2000, the Company
entered into a lease for approximately 29,000 square feet to accommodate
additional headquarter employees on a temporary basis in Charlotte, North
Carolina. The Company believes that its facilities are sufficient to meet
existing needs.
7
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various proceedings in the ordinary course of
business. Management believes that such proceedings are routine in nature and
incidental to the conduct of its business, and that none of such proceedings, if
determined adversely to the Company, would have a material adverse effect on the
consolidated financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company does not have an established public trading market for its
equity securities. The equity securities of the Company are held by MEM Holdings
LLC, CBC Acquisition Company, Inc., and by current or former management. ABRY
Broadcast Partners III and ABRY Broadcast Partners II are the beneficial owners
of MEM Holdings.
The Company's bank agreement, the indentures with respect to the Senior
Subordinated and Floating Rate Notes of the Company, and the indenture with
respect to the Company's Senior Discount Notes restrict the ability of the
Company to make dividends and distributions in respect of their equity.
During 1999, the Company issued its membership units in the following
transactions:
o In January, the Company issued 3,661 Class A Units to MEM Holdings LLC in
connection with the Company's acquisition of Business Sound.
o In February, the Company issued 650 Class A Units to MEM Holdings LLC in
connection with the Company's acquisition of Electro Systems.
o In March, the Company issued:
o 17,836.88 Class A Units to MEM Holdings LLC, 850 Class A Units to
management, and 2,876.334 Class B-4 Units to Music Holdings Corp. in
connection with the Muzak, L.P. merger;
o 13,535.432 Class A Units to Capstar Broadcasting Corporation in
connection with the acquisition of the Georgia and Florida Capstar
franchisees;
o 3,037.63 Class A Units to holders of Class A Units at such time as a
yield on such Class A Units;
o 101.25 Class A Units to management holders of Class A Units as a yield
on the Class A Units held at such time; and
o 1,154.885 Class A Units, 2,484 Class B-1 Units, 2,501 Class B-2 Units,
2,515 Class B-3 Units and 25.883 Class B-4 Units to members of
management.
o In May, the Company issued 2,385.483 Class A Units to Capstar Broadcasting
Corporation and 0.886 Class B-4 Units to management and 98.51 B-4 units to
Music Holdings Corp. in connection with the acquisition of the Omaha
Capstar franchisee.
o In November, the Company issued 25 Class A Units to management and issued
100 Class A units to the principal shareholder of Audio Environments, Inc.
and Background Music Broadcasters, Inc. in connection with this
acquisition on November 1, 1999.
o In November, Capstar Broadcasting Corporation transferred 15,920.915
Class A units to CBC Acquisition Company, Inc.
All of such issuances were deemed exempt from registration under the
Securities Act by virtue of Section 4(2) thereof, as transactions not involving
a public offering.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is Selected Financial Data for Muzak Holdings LLC ("the
Company") for the period from October 7, 1998 to December 31, 1998 and for the
year ended December 31, 1999 and for Audio Communications Network, Inc. (the
"Predecessor Company") for the fiscal year ended December 31, 1997 and for the
period from January 1, 1998 to October 6, 1998. As discussed above in "Item 1.
Business", the Company, formerly known as ACN Holdings, LLC, was formed in
September 1998. Audio Communications Network LLC ("ACN"), a wholly owned
subsidiary of the Company, began its operations on October 7, 1998 by acquiring
the Predecessor Company. In connection with the merger with Old Muzak on March
18, 1999, ACN changed its name to Muzak LLC.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED OCTOBER 7, 1998 JANUARY 1, 1998 YEAR ENDED
DECEMBER 31, TO DECEMBER 31, TO OCTOBER 6, DECEMBER 31,
1999 1998 1998 1997
-------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales ................................... $ 130,016 $ 5,914 $ 18,917 $ 17,552
Gross Profit ................................ 81,697 3,358 10,711 10,383
Income (Loss) from Operations ............... 2,723 (119) (906) 1,213
Interest expense, net ....................... (29,394) (888) 2,520 2,649
Net Loss .................................... (26,212) (1,002) (3,428) (1,403)
BALANCE SHEET DATA (AT PERIOD END):
Total assets ................................ $ 497,315 $ 72,927 $ 43,854 $ 45,306
Long-term debt, including current portion ... 382,328 42,677 34,589 32,952
OTHER DATA:
Capital expenditures for property and
equipment ............................. .... $ 28,078 $ 1,308 $ 3,538 $ 296
EBITDA (1) .................................. $ 39,202 1,564 3,466 5,270
</TABLE>
- ---------
(1) EBITDA represents earnings before deductions for net interest expense,
income taxes, depreciation, and amortization. EBITDA does not represent
and should not be considered as an alternative to net income or cash flow
from operations as determined by generally accepted accounting principles.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-K contains statements which, to the extent they are not
historical fact, constitute forward-looking statements within the meaning of
Section 27A of the securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements
involve risks and uncertainties. The forward-looking statements in this Form
10-K are intended to be subject to the safe harbor protection provided by the
Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this Form
10-K include industry-based factors such as the level of competition in the
business music industry, changes in consumer preference, competitive pricing,
concentrations in and dependence on satellite delivery capabilities, rapid
technological changes, as well as factors more specific to the Company such as
the substantial leverage of the Company, limitations imposed by the Company's
debt facilities, and changes made in connection with the integration of
operations acquired by the Company.
GENERAL
The Company is the leading provider of business music programming in the
United States. Together with its independent franchisees, the Company serves an
installed base of approximately 300,000 business locations nationwide. The
Company and its independent franchisees also sell, install and maintain
electronic equipment related to the Company's business.
The Company, formerly known as ACN Holdings, LLC, was formed in September
1998 pursuant to the laws of Delaware. Audio Communications Network LLC ("ACN")
began its operations on October 7, 1998 with the acquisition of the independent
franchisees in the Baltimore, Charlotte, Hillsborough, Kansas City, St. Louis,
Jacksonville, Phoenix, and Fresno areas from Audio Communications Network, Inc.
(the "Predecessor Company") for $66.8 million. On March 18, 1999, Muzak Limited
Partnership ("Old Muzak") merged with and into ACN. At the time of the merger,
ACN changed its name to Muzak LLC. Under the terms of the agreement, the Company
paid total consideration of $274.2 million, which consisted of the following:
$125.5 million cash consideration, $114.9 million consideration in the tender
offer and consent solicitation for the 10% Senior Notes due 2003 of Old Muzak,
$15.9 million for debt repayment of Old Muzak outstanding obligations and
assumed $17.9 million of other obligations. In addition, at the time of the
merger, the Company repaid $41.7 million borrowed from ABRY Broadcast Partners
by ACN in October 1998 in connection with the acquisition of the Company's
independent franchisees from the Predecessor Company and converted $0.7 million
into Class A units. Since the merger, the Company has acquired thirteen
businesses for total consideration of $73.9 million, which included 16,476 Class
A units of the Company.
In 1999, prior to the merger, the Company made the following acquisitions:
o On January 15, 1999, the Company acquired all of the outstanding stock of
Business Sound, Inc. for approximately $4.1 million, which included 3,661
Class A units. Business Sound was the Company's independent franchisee for
the New Orleans, Louisiana and Mobile, Alabama areas.
9
<PAGE>
o On February 24, 1999, the Company acquired all of the outstanding stock of
Electro Systems for approximately $0.7 million, which included 650 Class A
units, and assumed certain non-recourse debt of $2.4 million. Electro
Systems was the Company's independent franchisee located in Panama City,
Florida.
The Company made thirteen acquisitions between the merger of Old Muzak and
ACN on March 18, 1999 and December 31, 1999. The table below provides
information regarding these acquisitions (in millions, except for number of
units).
<TABLE>
<CAPTION>
ACQUIRED ASSETS ACQUIRED ACQUIRED
DATE PURCHASE PRICE (5) OR STOCK BUSINESS MARKETS
- -------------------- -------------------- -------------------------------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
March 18, 1999 $ 18.1 (1) Net assets of Capstar Broadcasting Corporation's Independent Georgia,
independent franchisee franchisee Florida
April 1, 1999 $ 0.2 Net assets of Custom On Hold Services Inc Audio Marketing Washington
May 1, 1999 $ 3.2 (2) Net assets of Capstar Broadcasting Corporation's Independent Georgia
independent franchisee franchisee Nebraska
Florida
June 1, 1999 $ 6.9 Net assets of Advertising on Hold, Inc Audio Marketing Florida,
Georgia,
North Carolina
June 1, 1999 $ 0.8 Net assets of CustomTronics Sound Business Music California
July 1, 1999 $ 0.9 Net assets of Penobscot Broadcasting Corporation Independent Maine
franchisee
August 1, 1999 $ 1.3 Net assets of LaBov and Beyond, Inc Audio Marketing Indiana
August 1, 1999 $ 3.5 Net assets of US West Communications Services, Audio Marketing National
Inc's Please Hold Promotions
September 1, 1999 $ 4.7 Stock of Broadcast International, Inc Business Music National
October 1, 1999 $ 10.3 Net assets of Midwest Systems and Services, Inc Business Music Illinois,
Indiana,
Ohio,
West Virginia
November 1, 1999 $ 2.9 Net assets of A & D Music, Inc Independent Oregon
franchisee
November 1, 1999 $ 7.9 (3) Stock of Audio Environment, Inc and Background Independent California
Music Broadcasters Inc franchisee
December 1, 1999 $ 13.2 (4) Net assets of Mountain West Audio, Inc Independent Utah,
franchisee Idaho,
Washington
</TABLE>
- ---------
(1) Total purchase price included 13,535 Class A units of the Company.
(2) The Company acquired Capstar Broadcasting Corporation's ("Capstar")
independent franchisees located in Atlanta, Albany, and Macon, Georgia, Ft
Myers, Florida and Omaha, Nebraska. The total consideration was accounted
for as an equity contribution to the Company and included 2,385 Class A
units of the Company.
(3) Total purchase price included 100 Class A units of the Company.
(4) The Company paid $3.1 million of the purchase price of Mountain West Audio,
Inc. as of December 31, 1999. In February 2000, the Company paid the
remaining purchase price, which included 456 Class A units of the Company.
(5) The purchase price does not include transaction costs.
RECENT DEVELOPMENTS
ADDITIONAL FINANCING
In January 2000, the Company entered into an indenture for up to $50.0
million Senior Subordinated Floating Rate Notes (the "Floating Rate Notes").
The Floating Rate Notes are available to be drawn up to $50.0 million in
increments of no less than $2.5 million to fund acquisitions. The Floating Rate
Notes will be available for drawdowns until July 31, 2000. Commitments on all
amounts undrawn under the Floating Rate Notes by July 31, 2000 will expire and
will be ineligible for future draw downs. The Floating Rate Notes may be
redeemed at 100% if redeemed before July 31, 2000 and at 101.50%
10
<PAGE>
if redeemed August 1, 2000 through October 31, 2000. If the Company does not
redeem the Floating Rate Notes by November 1, 2000, the Floating Rate Notes
will automatically convert into fixed-rate permanent notes due March 2009. As
of March 29, 2000, $25.0 million of the Floating Rate Notes were outstanding.
Also, in February 2000, the Company received approximately $10.6 million
in equity contributions from its members. The proceeds of the equity
contributions will be used to make repayments on the revolving loan (as defined
below) and to fund acquisitions and for general corporate purposes.
ACQUISITIONS
On February 2, 2000, the Company acquired certain of the net assets of
Quincy Broadcasting Company, a Delaware corporation, for approximately $0.4
million. Quincy Broadcasting Company was the Company's independent franchisee
located in Quincy, Illinois.
On February 2, 2000, the Company acquired certain of the assets and
assumed certain obligations of General Communications Corporation ("On Hold
America"), an Indiana corporation, for approximately $0.9 million. On Hold
America was an audio marketing business serving areas primarily in Indiana,
Georgia, Florida, and Ohio.
On February 2, 2000, the Company acquired certain of the assets and
certain obligations of Texas Sound Co. Ltd for approximately $0.4 million.
Texas Sound Co. Ltd was a provider of business music and audio marketing
services.
On February 24, 2000, the Company acquired Telephone Audio Productions,
Inc., ("Sold on Hold Communications"), a Texas corporation, for approximately
$3.7 million. Sold on Hold Communications was an audio marketing and messaging
business serving various markets in the United States.
On March 24, 2000, the Company acquired the stock of Vortex Sound
Communications Company, Inc., ("Vortex") for approximately $9.2 million, which
included 802 Class A units. Vortex was the Company's independent franchisee
located in Washington, DC.
REVENUES AND EXPENSES
The Company derives the majority of its revenues from the sale of business
music products. The core product is Audio Architecture and its two
complementary products are Audio Marketing and Video Architecture. These
revenues are generated by clients, who pay monthly subscription fees under
noncancelable five year contracts.
The Company also derives revenues from the sale and lease of audio
system-related products, principally sound systems and intercoms, to business
music clients and other clients. In addition, the Company sells electronic
equipment, such as proprietary tape playback equipment and other audio and
video equipment to franchisees to support the sale of business music services.
Installation, service and repair revenues consist principally of revenues from
the installation of sound systems and other equipment that is not expressly
part of a business music contract, such as paging, security and drive-through
systems. These revenues also include revenue from the installation, service and
repair of equipment installed under a business music contract. Music contract
installation revenues are deferred and recognized over the term of the
respective contracts.
The cost of revenues for business services consists primarily of broadcast
delivery, programming and licensing associated with providing music and other
business programming to a client or a franchisee. The cost of revenues for
equipment represents the purchase cost plus handling, shipping and warranty
expenses. The cost of revenues for installation, service and repair consists
primarily of service and repair labor and labor for installation that is not
associated with new client locations. Installation costs associated with new
client locations are capitalized and charged to depreciation expense over the
estimated life of the clients' contract.
The Company's customers typically enter into a noncancelable five-year
contract that renews automatically for at least one five-year term unless
specifically terminated at the initial contract expiration date. The average
length of service per customer is approximately 12 years. The Company typically
makes an initial one-time installation investment per location, in exchange for
recurring monthly fees. For music clients generated by the independent
franchisees, the Company receives a net monthly royalty fee for each client
location in exchange for music programming. The Company does not incur a
capital outlay for a new client location generated by a independent franchisee.
The business music industry remains highly fragmented, with numerous
independent operators. The Company plans to pursue acquisitions of in market
competitors and of its independent franchisees. Through acquisitions, the
Company expects to realize cost savings by eliminating duplicative programming,
distribution, sales and marketing, and technical and other general
administrative expenses.
11
<PAGE>
The business music industry is influenced by the recording industry,
performing rights societies, government regulations, technological
advancements, satellite capabilities, and competition. The Company must license
rights to rerecord and distribute music and is reliant on third parties for
satellite capabilities.
Selling, general and administrative expenses include salaries, benefits,
commissions, travel, marketing materials, training and occupancy costs
associated with staffing and operating local and national sales offices. These
expenses also include personnel and other costs in connection with the
Company's headquarters functions. Sales commissions are capitalized and charged
as selling, general and administrative expense over the typical contract term
of five years. If a client contract is terminated early, the unamortized sales
commission is typically recovered from the salesperson.
RESULTS OF OPERATIONS
Set forth below are discussions of the results of operations for Muzak
Holdings LLC, ACN, Old Muzak and the Predecessor Company for the periods
indicated. ACN had no operations until it acquired the Predecessor Company in
October 1998. ACN changed its name to Muzak LLC in connection with its merger
with Old Muzak. The fiscal year ended December 31, 1999 includes operating
results of ACN Holdings LLC for the period from January 1, 1999 to March 17,
1999, and for Muzak Holdings LLC for the period March 18, 1999 to December 31,
1999.
MUZAK HOLDINGS LLC -- FISCAL YEAR ENDED DECEMBER 31, 1999
The Company did not compare the results for the year ended December 31,
1999 to the prior period as the prior period does not include a full year of
operations and the Company made numerous material acquisitions during 1999. As
a result, the comparison of 1999 to the period October 7, 1998 to December 31,
1998 is not meaningful.
REVENUES. Revenues totaled $130.0 million for the year ended December 31,
1999, comprised of $92.1 million business music revenues and $37.9 million
equipment and related services. Business music revenues and equipment and
related revenues from the acquisitions subsequent to the merger of ACN, Old
Muzak, and Capstar were $5.0 million and $1.0 million, respectively.
GROSS PROFIT. Gross profit was $81.7 million, and 62.8% as a percentage of
revenues for the year ended December 31, 1999. The general increase in gross
margin over the quarters during 1999 is due to growth in higher margin business
services as well as the acquisition of competitors and independent franchisees
business music contracts. Gross profit for the acquisitions subsequent to the
merger of ACN, Old Muzak, and Capstar was $3.2 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses were $42.5 million, comprised of $16.5 million of sales
and marketing expenses and $26.0 million of general and administrative
expenses. Duplicative facilities and expenses related to integrating
acquisitions resulted in an increase in selling, general, and administrative
expenses during 1999. As a percentage of total revenues, selling, general and
administrative expenses were 32.7% for the year ended December 31, 1999.
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization was
$36.5 million for the year ended December 31, 1999. Amortization expense
generally increased in the quarters throughout 1999 due to the intangibles
related to the acquisitions of competitors' and independent franchisees
business music contracts during 1999.
INTEREST EXPENSE. Interest expense, net of interest income, was $29.4
million for the year ended December 31, 1999. Interest expense was comprised
primarily of expenses related to the Senior Notes and to the Senior Credit
facility.
INCOME TAX BENEFIT. Income tax benefit was $0.4 million for the year ended
December 31, 1999 and related to the Company's corporate subsidiaries. The
Company is a limited liability company and is treated as a partnership for
income tax purposes.
MUZAK HOLDINGS LLC -- PERIOD FROM OCTOBER 7, 1998 TO DECEMBER 31, 1998
Revenues totaled $5.9 million for the period ended December 31, 1998,
comprised primarily of business music revenues. For the same period, cost of
sales totaled $2.6 million, resulting in a gross profit margin of 56.8%. Total
selling, general, and administrative expenses for the period totaled $1.8
million, comprised principally of salary, benefits, and overhead expenses.
12
<PAGE>
PREDECESSOR COMPANY -- AUDIO COMMUNICATIONS NETWORK INC. -- PERIOD FROM JANUARY
1, 1998 TO OCTOBER 6, 1998 COMPARED TO THE NINE MONTH PERIOD ENDED SEPTEMBER
30, 1997
REVENUES. Total revenues increased 60.2% from $11.8 million in 1997 to
$18.9 million in 1998, primarily as a result of the impact of a reverse
acquisition which occurred in May 1997, as well as the growth in business music
revenues and equipment sales and related services
GROSS PROFIT. Total gross profit increased 35.0% from $8.0 million in 1997
to $10.7 million in 1998. The Predecessor Company's gross margin in 1998 was
56.7%. Such gross margin is not comparable to the prior period as a result of a
reverse acquisition in 1997. The 1998 gross margin was negatively impacted by
approximately 3.0% or $0.6 million resulting from one-time charges related to
the Galaxy IV satellite failure.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses increased 84.7% from $3.9 million in 1997 to $7.2
million in 1998. Such increase was primarily the result of the impact of a
reverse acquisition in 1997, the growth in business music revenues and
equipment sales and related services and approximately $0.8 million being
incurred in 1998 pertaining to transaction costs related to the sale of Audio
Communications Network Inc. in October 1998.
OLD MUZAK -- YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31,
1997
REVENUES. Total revenues increased 9.4% from $91.2 million in 1997 to
$99.7 million in 1998 principally as a result of an 11.1% increase in music and
other business services revenues and a 6.1% increase in equipment sales and
related services. Music and other business services revenues increased due to
an increase in the number of broadcast music subscribers, sales growth and the
acquisition of competitors' business music contracts, together with an increase
in the royalties paid by independent franchisees resulting from growth in the
broadcast music subscribers in the franchise network. Royalties and other fees
from independent franchisees and international distributors included in
broadcast music revenues accounted for $8.9 million or 8.9% of Old Muzak's
revenues in 1998, compared with $8.8 million or 9.6% of Old Muzak's revenues in
1997. The continued decrease in the surcharges assessed to independent
franchisees for satellite transmission costs was offset by increased growth in
royalties related to new subscriber billing. Equipment and installation
revenues increased 4.7% and 8.7%, respectively due to the expansion of national
accounts.
GROSS PROFIT. Total gross profit increased 13.4% from $50.5 million in
1997 to $57.2 million in 1998. As a percentage of total revenues, gross profit
increased from 55.4% in 1997 to 57.4% in 1998. The improvement in gross profit
percentage in 1998 was due to growth of higher margin business services, such
as broadcast music, audio marketing, and on-premise music.
The improvement in gross profit was partially offset by approximately $1.5
million of one-time charges related to the Galaxy IV satellite failure. On May
19, 1998, services on the Galaxy IV satellite were permanently lost when the
satellite ceased communicating to uplink stations throughout the United States.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 3.2% from $33.3 million in 1997 to $34.3
million in 1998. As a percentage of total revenues, selling, general and
administrative expense decreased from 36.5% in 1997 to 34.4% in 1998. Selling
and marketing expenses increased 3.0% from $13.8 million in 1997 to $14.2
million in 1998, principally due to an increase in commissions paid as a result
of increased levels of sales of business products. General and administrative
costs increased 3.3% from $19.5 million in 1997 to $20.1 million in 1998,
primarily due to transaction costs related to the merger.
NON-CASH INCENTIVE COMPENSATION. Non-cash incentive compensation increased
from $0.2 million in 1997 to $2.2 million in 1998. This increase is primarily
due to the meeting of performance criteria for options issued combined with the
increase in value of Old Muzak.
DEPRECIATION EXPENSE. Depreciation expense decreased 8.6% from $10.7
million in 1997 to $9.7 million in 1998, principally as a result of a reduction
of depreciation expense for assets that were fully depreciated in 1997 related
to the acquisition of Old Muzak in September 1992.
AMORTIZATION EXPENSE. Amortization expense increased 18.1% from $10.0
million in 1997 to $11.8 million in 1998. The increase in amortization expense
was due to an increase in intangibles related to the increased investment in
the expanded customer base and acquisitions of competitor's business music
contracts in 1997 and 1998.
13
<PAGE>
INTEREST EXPENSE. Total interest expense increased 4.4% from $10.8 million
in 1997 to $11.2 million in 1998. The increase in interest expense in 1998
compared to 1997 is related to the increase in the average outstanding debt
during the year. Old Muzak's total interest-bearing debt increased from $101.0
million to $118.4 million at December 31, 1997 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents totaling $2.3 million and $1.3
million at December 31, 1999 and 1998, respectively. The Company had $10.0
million of borrowing availability under its credit agreements as of December
31, 1999. Availability under the revolving credit facility has been reduced by
outstanding letters of credit of $0.3 million.
SOURCES AND USES OF FUNDS
The Company's principal sources of funds are cash generated from
continuing operations, borrowings under the Senior Credit Facility, Floating
Rate Notes and proceeds from equity contributions. The Company's strategic plan
is to pursue opportunities to acquire music contract portfolios of competitors
and to review acquisitions of independent franchisees if they become available.
However, the Company may require additional debt or equity financing to
complete additional acquisitions. In February 2000, the Company received equity
contributions totaling $10.6 million from its members. The proceeds were used
to pay down the revolving loan and to fund acquisitions. Net cash used by
continuing operating activities of the Company was $2.3 million for 1999.
The Company's principal uses of funds from operating activities and
borrowings for the next several years are expected to fund acquisitions,
interest and principal payments on its indebtedness, net working capital
increases and capital expenditures. At December 31, 1999, the Company has total
outstanding indebtedness of $382.3 million (excluding approximately $0.3
million of outstanding letters of credit) at an average interest rate of 11.61%.
Of the total outstanding indebtedness, $349.5 million relates to the Senior
Credit Facility, the Senior Notes, and the Senior Discount Notes.
Proceeds from the Senior Credit Facility, the Senior Notes, and the Senior
Discount Notes were used to pay merger consideration consisting of $125.5
million in cash to the partners of Old Muzak, approximately $114.9. million
consideration in the tender offer and consent solicitation for the 10% Senior
Notes due 2003 of Old Muzak together with accrued interest, $15.9 million for
debt repayment of Old Muzak obligations, approximately $42.4 million of
borrowings by Audio Communications Network under ABRY Broadcast Partners III
subordinated note, merger consideration for Capstar Broadcasting Corporation,
and to pay fees and expenses in connection with the foregoing.
CAPITAL EXPENDITURES
The Company's business generally requires capital for the installation of
equipment for new business music clients. The Company currently anticipates
that its capital expenditures for fiscal 2000 will be in the range of $ 24.0
million to $ 29.0 million, a portion of which may be financed through leasing.
As of December 31, 1999, the Company had approximately $5.2 million in
outstanding capital expenditure commitments. Of the total, approximately $3.8
million in commitments are related to the construction of the Company's new
headquarters facility in Fort Mill, South Carolina. In addition, during 2000,
the Company will continue to pursue a business strategy that includes selective
acquisitions.
SENIOR CREDIT FACILITY
In March 1999, the Company entered into a new senior credit facility
("Senior Credit Facility") consisting of: (i) a term loan facility in the
amount of $30.0 million payable in semi-annual installments until final
maturity on December 31, 2005 ("Term Loan A"); (ii) a term loan facility in the
amount of $105.0 million payable in semi-annual installments until final
maturity on December 31, 2006 ("Term Loan B")(together with Term Loan A, the
"Term Loans"); and (iii) a revolving loan (the "Revolving Loan") in an
aggregate principal amount of up to $35.0 million terminating on December 31,
2005. In July 1999, the Company amended the Senior Credit Facility which
increased the principal amount of Term Loan B by $30.0 million to $135.0
million. In October 1999, the Company amended the Senior Credit Facility to
enable a related party to make a subordinated loan to the Company in the
aggregate principal amount of $20.0 million and to permit the Company to issue
additional senior subordinated notes and the Company to issue preferred stock if
certain covenants are met by the Company.
The Senior Credit Facility, which is guaranteed by the Company, and certain
of its domestic subsidiaries, contains restrictive covenants including
maintenance of interest and leverage ratios and various other restrictive
covenants
14
<PAGE>
which are customary for such facilities. In addition, the Company is generally
prohibited from incurring additional indebtedness, incurring liens, paying
dividends or making other restricted payments, consummating asset sales,
entering into transactions with affiliates, merging or consolidating with any
other person or selling assigning, transferring, leasing, conveying, or
otherwise disposing of assets. These conditions were satisfied as of December
31, 1999. Such limitations, together with the Company's highly leveraged nature
could limit the Company's corporate and operating activities in the future,
including the implementation of future acquisitions.
FLOATING RATE NOTES
In January 2000, the Company entered into an indenture for up to $50.0
million Senior Subordinated Floating Rate Notes (the "Floating Rate Notes").
The Floating Rate Notes will be available for drawdowns until July 31, 2000.
Commitments on all amounts undrawn under the Floating Rate Notes by July 31,
2000 will expire and will be ineligible for future drawdowns. The Floating Rate
Notes may be redeemed at 100% if redeemed before July 31, 2000 and at 101.50%
if redeemed August 1, 2000 through October 31, 2000. If the Company does not
redeem the Floating Rate Notes by November 1, 2000, the Floating Rate Notes
will automatically convert into fixed-rate permanent notes due March 2009. As
of March 29, 2000, $25.0 million of the Floating Rate Notes were outstanding.
Proceeds from the Floating Facility will be used to fund acquisitions.
SENIOR SUBORDINATED NOTES
On March 18, 1999, the Company together with its wholly owned subsidiary,
Muzak Finance Corp., co-issued $115.0 million in principal amount of Senior
Subordinated Notes ("Senior Notes") which mature on March 15, 2009. Interest is
payable semi-annually, in arrears, on March 15 and September 15 of each year,
commencing on September 15, 1999.
The Senior Notes are general unsecured obligations of the Company and Muzak
Finance and are subordinated in right of payment to all existing and future
Senior Indebtedness of the Company and Muzak Finance. The Senior Notes are
guaranteed by the Company, MLP Environmental Music, LLC, Business Sound, Inc.,
BI Acquisition LLC, Audio Environments, Inc., Background Music Broadcasters,
Inc., and Muzak Capital Corporation. The indenture governing the Senior Notes
generally prohibits the Company from making certain payments such as dividends
and distributions of their capital stock; repurchases or redemptions of their
capital stock, and investments (other than permitted investments) unless certain
conditions are met by the Company.
Before March 15, 2002, the issuers may redeem up to 35% of the aggregate
principal amount of the Notes originally issued under the indenture at a
redemption price of 109.875% of the aggregate principal amount so redeemed,
plus accrued and unpaid interest to the redemption date, with the net proceeds
of one or more equity offerings if certain conditions are met. After March 15,
2004, the issuers may redeem all or part of the Senior Notes at a redemption
price equal to 104.938% of the principal amount, which redemption price
declines to 100% of the principal amount in 2007.
SENIOR DISCOUNT NOTES
On March 18, 1999, the Company together with its wholly owned subsidiary
Muzak Holdings Finance Corp., co-issued $75.0 million in principal amount at
maturity or $39.9 million in accreted value on the issue date, of 13% Senior
Discount Notes (the "Senior Discount Notes") due 2010. Cash interest on the
Senior Discount Notes does not accrue and is not payable prior to March 15,
2004. The Senior Discount Notes were issued at a substantial discount from
their principal amount at maturity. Until March 15, 2004, the Senior Discount
Notes will accrete in value such that the accreted value on March 15, 2004 will
equal the principal amount at maturity of the Senior Discount Notes. From and
after March 15, 2004, interest on the Senior Discount Notes will accrue at a
rate of 13% per annum. Interest will be payable semi-annually in arrears on
each March 15 and September 15, commencing September 15, 2004, to holders of
record of the Senior Discount Notes at the close of business on the immediately
preceding March 1 and September 1.
The Senior Discount Notes are general unsecured obligations of the Company
and Muzak Holdings Finance Corp and effectively subordinated in right of payment
to all existing and future Senior Indebtedness of the Company and Muzak Finance
Corp. Muzak Holdings Finance Corp. has no operations and substantially no
assets. Accordingly, the Company is dependent upon the distribution of the
earnings of its subsidiaries to service its debt obligations. The indenture
governing the Senior Discount Notes generally prohibits the Company and its
restricted subsidiaries from making certain payments such as dividends and
distributions of their capital stock; repurchases or redemptions of their
capital stock, and investments (other than permitted investments) unless certain
conditions are met by the Company and its restricted subsidiaries.
15
<PAGE>
Before March 15, 2002, the issuers may redeem up to 35% of the aggregate
principal amount of the Senior Discount Notes originally issued under the
indenture at a redemption price of 113% of the aggregate principal amount so
redeemed, plus accrued and unpaid interest to the redemption date, with the net
proceeds of one or more equity offerings if certain conditions are met. After
March 15, 2004, the issuers may redeem all or part of the Senior Discount Notes
at a redemption price equal to 106.5% of the principal amount which redemption
price declines to 100% of the principal amount in 2007.
RELATED PARTY DEBT
From July 1, 1999 through November 24, 1999, the Company borrowed an
aggregate amount of $30.0 million from MEM Holdings LLC in the form of Junior
Subordinated Unsecured Notes (the "ABRY Notes"). The ABRY Notes mature on June
30, 2007, at which time principal and accrued interest are due. Interest
accrues at 15% per annum; any accrued interest not paid as of March 31, June
30, September 30 or December 31 will bear interest at 15% per annum until such
interest is paid or extinguished. The ABRY Notes are junior and subordinate to
payments for the Senior Credit Facility and the Senior Notes. Proceeds from the
ABRY Notes were used to fund operations and acquisitions.
INTEREST RATE EXPOSURE
Indebtedness under the Term Loan A and the revolving loans bears interest
at a per annum rate equal to the Company's choice of (i) the Alternate Base
Rate (which is the highest of prime rate and the Federal Funds Rate plus .5%)
plus a margin ranging from 1.00% to 2.00% or (ii) the offered rates for
Eurodollar deposits ("LIBOR") of one, two, three, or six months, as selected by
the Company, plus a margin ranging from 2.0% to 3.0%. Margins, which are
subject to adjustment based on the changes in the Company's ratio of
consolidated total debt to EBITDA (i.e., earnings before interest, taxes,
interest, depreciation, amortization and other non cash charges) were 2.0% in
the case of Alternate Base Rate and 3.0% in the case of LIBOR as of December
31, 1999. Indebtedness under the Term Loan B bears interest at a per annum rate
equal to the Company's choice of (i) the Alternate Base Rate (as described
above) plus a margin of 2.5% or (ii) LIBOR of one, two, three, or six months,
as selected by the Company plus a margin of 3.5%. Commitment fees range from
.375% to .625%.
Indebtedness under the Floating Rate Notes bears interest at a per annum
rate equal to (i) three month LIBOR plus a margin of 5.0% until July 31, 2000
(ii) at three month LIBOR plus a margin of 7.5% for the period beginning August
1, 2000 through October 31, 2000 and (iii) for the period from November 1, 2000
through maturity, at a fixed rate based on the greater of (a) three month LIBOR
plus 7.5% and (b) the yield on the Company's Senior Notes plus 2.5%.
Interest on the Senior Notes accrues at a rate of 9.875% per annum. Until
March 15, 2004, the Senior Discount Notes will accrete in value such that the
accreted value on March 15, 2004 will equal the principal amount at maturity of
the Senior Discount Notes. From and after March 15, 2004, interest on the
Senior Discount Notes will accrue at a rate of 13% per annum.
Cash interest paid was $14.1 million, $2 thousand, $2.9 million, and $2.2
million, for the fiscal year ended December 31, 1999, the period from October
7, 1998 through December 31, 1998, the period from January 1, 1998 through
October 6, 1998, and for the fiscal year ended December 31, 1997, respectively.
Due to the variable interest rates under the Senior Credit Facility, the
Company is sensitive to changes in interest rates. Accordingly, during April
1999, the Company entered into a four year interest rate swap agreement in
which the Company effectively exchanged $100.0 million of floating rate debt at
three month LIBOR for 5.59% fixed rate debt. The Company terminated this
agreement on January 28, 2000 and received approximately $4.4 million for this
agreement. On January 28, 2000, the Company entered into a new interest rate
swap agreement in which the Company effectively exchanged $100.0 million of
floating rate debt at three month Libor for 7.042% fixed rate debt. The
interest rate swap agreement terminates on April 19, 2002. Based on amounts
outstanding at December 31, 1999, a .5% increase in each of LIBOR and the
Alternate Base Rate (6.19% and 8.5% respectively, at December 31, 1999) would
impact interest costs by approximately $0.9 million annually on the Senior
Credit Facility.
DEBT MATURITIES
The current maturities of long-term debt primarily consist of the current
portion of the Senior Credit Facility and other miscellaneous debt. The
maturities of long-term debt of the Company's operations during 2000, 2001,
2002, 2003, and 2004 are $4.2 million, $5.2 million, $6.7 million, $7.8
million, $26.3 million, respectively. The Senior Notes mature in March 2009. In
addition, the Senior Credit Facility provides for mandatory prepayments with
net cash proceeds of certain asset sales, net cash proceeds of permitted debt
issuances, net cash proceeds from insurance recovery and condemnation events,
and beginning December 31, 2000 the Senior Credit Facility requires annual
excess cash repayments. The indentures governing the Senior Notes and the
Senior Discount Notes provide that in the event of certain asset dispositions,
the Company
16
<PAGE>
must apply net proceeds first to repay Senior Indebtedness. To the extent the
net proceeds have not been applied within 360 days from the asset disposition to
an investment in capital expenditures or other long term tangible assets used in
the business, and to the extent the remaining net proceeds exceed $10.0 million,
the Company must make an offer to purchase outstanding Senior Notes at 100% of
their principal amount plus accrued interest. To the extent there are excess
funds after the purchase of the Senior Notes, the Company must make an offer to
purchase outstanding Senior Discount Notes at 100% of the accreted value. The
Company must also make an offer to purchase outstanding Senior Notes and the
Senior Discount Notes at 101% of their principal amount plus accrued and unpaid
interest if a Change in Control of the Company occurs. Subject to compliance
with the Senior Credit facility, the Floating Rate Notes will be mandatory
redeemable with the proceeds of any securities issuances or incurrences of
indebtedness at any time on or prior to October 31, 2000. If the Company does
not redeem the Floating Rate Notes by November 1, 2000, the Floating Rate Notes
will automatically convert into fixed-rate permanent notes due March 15, 2009.
IMPACT OF YEAR 2000 COMPLIANCE
The Company's program to address the Year 2000 issue consisted of (i)
assessing the state of Year 2000 readiness of its systems and third parties
upon which it relies (ii) replacing the primary computer system at headquarters
and owned operations, (iii) testing these systems, and (iv) contingency
planning. The Company did not experience any significant disruption as a result
of the Year 2000 issue.
Costs related to the Year 2000 issue were approximately $1.0 million and
were funded through operating cash flows.
The Company completed its assessment of its Year 2000 risks related to
significant relationships with its critical third party suppliers and
customers. Despite these efforts, the Company can provide no assurance that all
third parties compliance plans were successfully completed in a timely manner,
although it is not aware of any problems which would significantly impact its
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE EXPOSURE
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's long-term debt obligations. The interest
rate exposure for the Company's variable rate debt obligations is currently
indexed to LIBOR of one, two, or three months as selected by the Company, or
the Alternate Base Rate. The Company uses interest rate swap agreements to
modify its exposure to interest rate movements and to reduce borrowing rates.
The table below provides information about the Company's debt obligations
and interest rate protection agreement. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. For interest rate protection agreements, the table
presents notional amounts and weighted average interest rates by expected
(contractual) maturity dates. Weighted average variable interest rates are
based on implied LIBOR in the yield curve at the reporting date. The principal
cash flows are in thousands.
<TABLE>
<CAPTION>
FAIR
EXPECTED MATURITY DATE VALUE
--------------------------------------------------------------------------- DECEMBER 31,
2000 2001 2002 2003 2004 THEREAFTER TOTAL 1999
------------ ------------ ------------ ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT:
Fixed rate ($US).......... $ 597 $ 81 $ 80 $ 411 $ 94 $ 221,851 $223,114 $188,357
Average interest rate .... 11.61% 11.61% 11.61% 11.61% 11.61% 11.61%
Variable rate ($US)....... $ 28,600 $ 5,100 $ 6,600 $ 7,350 $26,250 $ 116,100 $190,000 $190,000
Average interest rate .... 7.07% 7.26% 7.35% 7.41% 7.51% 7.78%
INTEREST RATE DERIVATIVES:
Variable to fixed swap
($US).................... $100,000 $100,000 $100,000 $ 4,400
Average pay rate ......... 6.918% 7.042% 7.042%
Average receive rate ..... 6.298% 7.260% 7.350%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements of Muzak Holdings LLC included
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is a limited liability company whose affairs are governed by a
Board of Directors. The following table sets forth information about the
directors of the Company and the executive officers of Muzak LLC as of December
31, 1999 and their ages as of December 31, 1999. Each of the directors
identified below is currently a director of the Company, has served as a
director of the Company since March 1999 and is serving a one-year term. The
election of directors is subject to the terms of the Members Agreement and
Securityholders Agreement and are described below under the heading "Certain
Relationships and Related Transactions."
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
- ------------------------------- ----- -----------------------------------------------
<S> <C> <C>
William A. Boyd ............... 58 Director,President and Chief Executive Officer
Steven K. Randall ............. 50 Executive Vice President
Brad D. Bodenman .............. 37 Chief Financial Officer and Treasurer
Steven M. Tracy ............... 49 Senior Vice President, Owned Operations
Michael F. Zendan II .......... 36 Vice President and General Counsel
Peni Garber ................... 36 Director, Vice President and Secretary
David W. Unger ................ 42 Director
Royce G. Yudkoff .............. 43 Director and Vice President
R. Steven Hicks ............... 50 Chairman of the Board
D. Geoff Armstrong ............ 42 Director
Andrew Banks .................. 44 Director
</TABLE>
The following sets forth biographical information with respect to the
directors of the Company and executive officers of the Company.
WILLIAM A. BOYD is a director, has been the Chief Executive Officer of the
Company since March 1999 and was the Chief Executive Officer of Old Muzak from
1997 to March 1999, Chairman of the Board of Music Holdings Corporation, the
general partner of the managing general partner of Old Muzak, from 1997 to
March 1999 and was a director of Music Holdings Corporation from 1996 to March
1999. From 1995 to 1996, Mr. Boyd was a private investor. From 1982 to 1995,
Mr. Boyd was owner and president of SunCom Communications, the largest
independent franchisee of Old Muzak. Mr. Boyd was President of the franchise
organization from 1994 to 1995 and from 1986 to 1987. Mr. Boyd was also
President of Old Muzak's Owned Affiliate division in 1987. Prior to owning a
franchise, Mr. Boyd held various positions with Old Muzak. Mr. Boyd is the
father of Robert T. Boyd, Vice President of Finance for Owned Operations.
STEVEN K. RANDALL has been an Executive Vice President of the Company
since November 1999. Prior to November 1999, Mr. Randall was the owner and
President of Mountain West Audio Inc., an independent franchisee of the Company.
He served in this capacity from 1979 until joining the Company in November
1999. While he was the owner of Mountainwest Audio, Mr. Randall served on the
President's Advisory Board and the National Sales Committee for the Company.
While serving as President of Mountain West Audio, he was an officer and board
member of the franchise organization.
BRAD D. BODENMAN has been Chief Financial Officer and Treasurer of the
Company since March 1999 and was the Chief Financial Officer of Old Muzak from
1998 to March 1999. Mr. Bodenman served as Old Muzak's Vice President, Finance
and Administration from 1997 to 1998, as its Controller from 1996 to 1997, as
its Director of Finance from 1994 to 1996, as an Accounting Manager from 1991 to
1994, and Accounting Supervisor from 1990 to 1991 and as Senior Accountant from
1989 to 1990. Prior to joining Old Muzak, he served as a senior accountant at
Price Waterhouse. Subsequent to December 31, 1999, Mr. Bodenman resigned his
position as Chief Financial Officer of the Company effective April 30, 2000.
STEVEN M. TRACY has served as Senior Vice President, Owned Operations of
the Company since March 1999 and was the Senior Vice President, Owned
Operations of Old Muzak from 1998 to March 1999. From 1997 to 1998, Mr. Tracy
was Old Muzak's Vice President, Owned Operations, Western Region. Prior to
1997, Mr. Tracy served as a Regional Director from 1994 to 1997, General
Manager from 1988 to 1994 and Vice President/General Manager for Old Muzak from
1986 to 1988.
MICHAEL F. ZENDAN II has been the Company's Vice President and General
Counsel since October 1999. From 1996 to October 1999, Mr. Zendan was Assistant
General Counsel (Aerospace) and Assistant Secretary for Coltec Industries Inc,
and
18
<PAGE>
was Assistant General Counsel (Industrial) for Coltec Industries Inc from
1994-1996, and served as Attorney and Senior Attorney for Coltec Industries Inc
from 1992-1994. From 1988-1992, he served as an Associate at Pepe & Hazard.
PENI GARBER is a principal and Secretary of ABRY Partners. She joined ABRY
Partners in 1990 from Price Waterhouse, where she served as Senior Accountant
in the Audit Division from 1985 to 1990. Ms. Garber is presently a director or
the equivalent of Nexstar Broadcasting Group LLC, Network Music Holdings LLC,
Quorum Broadcast Holdings Inc. Ms. Garber graduated summa cum laude from Bryant
College.
DAVID W. UNGER is a founder and managing Partner of Avalon Equity
Partners. From May 1997 to March 1999, he was Executive Vice President of Audio
Communications Network. Prior to May 1997, he was chairman of Suncom
Communications, LLC, an independent franchisee of the Company.
ROYCE G. YUDKOFF is the President and managing Partner of ABRY Partners.
Prior to joining ABRY Partners, Mr. Yudkoff was affiliated with Bain & Company
an international management consulting firm. At Bain, where he was Partner from
1985 through 1988, he shared significant responsibility for the firm's media
practice. Mr. Yudkoff is presently a director or the equivalent of various
companies including Quorum Broadcast Holdings Inc., Nexstar Broadcasting Group
LLC, Metrocall, Inc. and Pinnacle Towers Inc. Mr. Yudkoff graduated as a Baker
Scholar from the Harvard Business School and is an honors graduate of Dartmouth
College.
R. STEVEN HICKS. Mr. Hicks became a director of AMFM and was elected Vice
Chairman of AMFM and President and Chief Executive Officer of the AMFM New
Media Group in March 1999. Mr. Hicks has served as a director of AMFM since
August 1999. Mr. Hicks served as President, Chief Executive Officer and a
director of Capstar Broadcasting from June 1997 to July 1999. Mr. Hicks has
also served as Chairman of the Board of Capstar Broadcasting from June to
September 1997. Prior to joining Capstar, Mr. Hicks served as Chairman of the
Board and Chief Executive Officer of Gulfstar Communications, Inc. from July
1987 to January 1997 and as president and Chief Executive Officer of SFX
Broadcasting, Inc. ("SFX") from November 1993 to May 1996. Mr. Hicks is a
33-year veteran of the radio broadcasting industry.
D. GEOFFREY ARMSTRONG. Mr. Armstrong was elected Executive Vice President
and Chief Financial Officer of AMFM in March 1999. Mr. Armstrong served as
Executive Vice President and Chief Operating Officer of Capstar Broadcasting
from July 1998 to March 1999, and served as Director of Capstar Broadcasting
from July 1998 to July 1999. Mr. Armstrong served as the Chief Operating
officer and an Executive Vice president of SFX from November 1996 to May 1998
and served as a director of SFX from 1993 to 1998. Mr. Armstrong became the
Chief Officer of SFX in June 1996 and served as the Chief Financial Officer and
Treasurer of SFX from 1992 until March 1995. Mr. Armstrong currently serves as
a director of SFX Entertainment, Inc.
ANDREW BANKS is Chairman of ABRY Holdings, Inc. Previously, Mr. Banks was
affiliated with Bain & Company, an international management consulting firm. At
Bain, where he was a partner from 1986 until 1988, he shared significant
responsibility for the firm's media practice. Mr. Banks is presently a director
or the equivalent of Pinnacle Towers, Inc. Mr. Banks is a graduate of the
Harvard Law School, a Rhodes Scholar holding a Master's degree from Oxford
University and a graduate of the University of Florida.
19
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's Chief Executive officer and each of the Company's four most highly
compensated executive officers, at December 31, 1999, for services in all
capacities to the Company. Each of the executive officers listed below were not
employees of the Company until the merger between Audio Communications Network
LLC ("ACN") and Muzak Limited Partnership ("Old Muzak"), and therefore, except
as otherwise indicated, the following table includes compensation only for the
period from March 18, 1999 to December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION
--------------------------------------
RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS COMPENSATION(1)
- -------------------------------------------- ------ ----------- ----------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William A. Boyd (2) ....................... 1999 $237,527 $358,000 $35,000 $27,417 $2,625
Chief Executive Officer
Charles A. Saldarini (3) .................. 1999 $197,939 $358,000 $30,000 $ 7,495 $4,375
President and Chief Operating Officer
Steven K. Randall (4) ..................... 1999 $ 33,333 -- -- --
Executive Vice President
Steven M. Tracy (5) ....................... 1999 $118,750 -- $ 5,000 $ 6,256 $4,156
Senior Vice President, Owned
Operations
Brad D. Bodenman (6) ...................... 1999 $101,213 $ 7,500 -- $ 5,002 $3,804
Chief Financial Officer and Treasurer
Michael F. Zendan II (7) .................. 1999 $ 23,958 -- -- -- --
Vice President and General Counsel
</TABLE>
- ---------
(1) Consists of contributions by the Company to a defined contribution 401(k)
plan.
(2) Bonus amount includes $358,000 of retention bonus in connection with the
merger. Other Annual Compensation consists of a housing allowance of
$30,000 and a car allowance of $5,000. Aggregate restricted stock holdings
were 1,924 shares, with a value on December 31, 1999 of $27,417. One fifth
of the restricted stock award vested on March 18, 2000. The remainder is
to vest in four additional installments of 384.8 shares each on March 18,
2001, March 18, 2002, March 18, 2003 and March 18, 2004.
(3) Mr. Saldarini's employment with the Company terminated upon his retirement
on December 31, 1999. Bonus amount includes $358,000 of retention bonus in
connection with the merger. Other Annual Compenstaion consists of a
housing allowance of $25,000 and a car allowance of $5,000. Aggregated
restricted stock holdings were 526 shares, with a value on December 31,
1999 of $7,495. In connnection with Mr. Saldarini's change in employment
status, the Company repurchased the restricted stock in February 2000.
(4) Joined the Company November 1, 1999.
(5) Other Annual Compensation consists of a car allowance of $5,000. Aggregated
restricted stock holdings were 439 shares, with a value on December 31,
1999 of $6,256. One fifth of the restricted stock award vested on March
18, 2000. The remainder is to vest in four additional installments of 87.8
shares each on March 18, 2001, March 18, 2002, March 18, 2003, and March
18, 2004.
(6) Mr. Bodenman's aggregated restricted stock holdings were 351 shares, with a
value on December 31, 1999 of $5,002. One fifth of the restricted stock
award vested on March 18, 2000. The remainder is to vest in four
additional installments of 70.2 shares each on March 18, 2001, March 18,
2002, March 18, 2003, and March 18, 2004.
(7) Joined the Company on October 18, 1999.
20
<PAGE>
MANAGEMENT EMPLOYMENT AGREEMENTS
Concurrently with the consummation of the merger on March 18, 1999 of Old
Muzak with and into ACN, the Company entered into an employment agreement with
Mr. W. Boyd. After the merger, the Company entered into employment agreements
with Steven M. Tracy and Brad D. Bodenman, the terms of which are the same in
all material respects. The terms of these agreements are described below.
WILLIAM A. BOYD. Pursuant to the employment agreement dated as of March
18, 1999 by and among Mr. Boyd, the Company and the Company, the Company agreed
to employ Mr. Boyd as President and Chief Executive Officer until his
resignation, death, disability or termination of employment. Under the
employment agreement, Mr. Boyd is:
o Required to devote substantially all of his business time to the
Company,
o Entitled to a minimum base salary of $0.3 million, with annual increase
by the consumer price index of the preceding year,
o Eligible for a bonus, as determined by the Board of Directors of the
Company, up to $0.15 million with annual increases by the consumer price
index of the preceding year,
o Prohibited from competing with the Company during the term of his
employment period and for a period of twelve months thereafter, and
o Prohibited from disclosing any confidential information gained during
his employment period.
If the Company terminates Mr. Boyd's employment without "cause," Mr. Boyd
will be entitled to receive his base salary for a period of one year
thereafter.
OTHER EXECUTIVE OFFICERS. Steven M. Tracy, Brad D. Bodenman, Steven K.
Randall and the Company are parties to employment agreements the terms of which
are the same in all material respects. Each agreement may be terminated at any
time by either party. Under the agreements, the executive is:
o Entitled to compensation in accordance with the Company's employee
compensation plan, which may be amended by the Company at any time,
o Prohibited from competing with the Company during the term of employment
and for 18 months thereafter, and
o Prohibited from disclosing any confidential information gained during
the executive's employment period.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Class A units of the Company, which are the only outstanding
membership interests in the Company with voting rights, as of March 29, 2000,
by:
o Holders having beneficial ownership of more than 5% of the voting equity
interest of the Company,
o Each director of the Company
o Each of the Company's executive officers shown in the summary
compensation table, and
o All directors and executive officers as a group.
21
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP(A)
--------------------
BENEFICIAL OWNER NUMBER PERCENTAGE
- ------------------------------------------------------------------------------------------ -------- -----------
<S> <C> <C>
MEM Holdings , LLC ....................................................................... 47,948 67.9%
18 Newbury Street
Boston, MA 02116
CBC Acquisition Company .................................................................. 15,921 22.6%
600 Congress, Suite 1400
Austin, Texas 28701
William A. Boyd .......................................................................... 1,155 1.6%
Charles A. Saldarini ..................................................................... 150 *
Steven K. Randall ........................................................................ 456 *
Brad D. Bodenman ......................................................................... 50 *
Steven M. Tracy .......................................................................... 125 *
Michael F. Zendan II ..................................................................... -- *
Steven Hicks ............................................................................. -- *
D. Geoff Armstrong ....................................................................... -- *
Andrew Banks ............................................................................. -- *
Peni Garber .............................................................................. -- *
David W. Unger ........................................................................... 1,067 1.5%
Royce G. Yudkoff (b) ..................................................................... 47,948 68.0%
All directors and executive officers of the Company as a group (12 persons)............... 50,951 72.2%
</TABLE>
- ---------
* Less than 1%
(a) "Beneficial ownership" generally means any person who, directly or
indirectly, has or shares voting or investment power with respect to a
security or has the right to acquire such power within 60 days. Unless
otherwise indicated, the Company believes that each holder has sole voting
and investment power with regard to the equity interests listed as
beneficially owned.
(b) Mr. Yudkoff is the sole owner of the equity interests of ABRY Holdings III,
Inc., the general partner of ABRY Equity Investors, L.P., the general
partner of ABRY Broadcast Partners III. Mr. Yudkoff is also the sole owner
of ABRY Holdings, Inc., the general partner of ABRY Capital, L.P., which
is the general partner of ABRY Broadcast Partners II. ABRY Broadcast
Partners III and ABRY Broadcast Partners II are the beneficial owners of
MEM Holdings. As a result, Mr. Yudkoff may be deemed to beneficially own
the shares owned by MEM Holdings. The address of Mr. Yudkoff is the
address of MEM Holdings and ABRY Partners.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INVESTOR SECURITIES PURCHASE AGREEMENT
David W. Unger, ABRY Broadcast Partners III and the Company are parties
to an Investor Securities Purchase Agreement dated as of October 6, 1998,
pursuant to which the Company sold to investors, and investors purchased from
the Company, Class A units of the Company. The investors are entitled to
indemnification in some circumstances to the extent the Company is determined to
have breached representations, warranties or agreements contained in the
Investor Securities Purchase Agreement.
The Management Securities Repurchase Agreement between Mr. Unger and the
Company was terminated in August 1999.
MEMBERS AGREEMENT
The Company, MEM Holdings, Joseph Koff, Mr. Unger, CMS Co-Investment
Subpartnership, CMS Diversified Partners, L.P., Music Holdings Corp. and
Stephen F. Jones are parties to an Amended and Restated Members Agreement dated
as of March 18, 1999. Pursuant to the Members Agreement, MEM Holdings, Mr.
Koff, Mr. Unger and Music Holdings Corp. have agreed to vote their equity
interests in the Company to elect Mr. Unger to the Board of Directors of the
Company. The Members Agreement also contains:
o "co-sale" rights exercisable in the event of specified sales by ABRY
Broadcast Partners III,
22
<PAGE>
o "drag along" sale rights exercisable by the Board of Directors of the
Company and holders of a majority of the then class A Units, in the event
of an Approved Company Sale (as defined in the Members Agreement),
o preemptive rights and
o restrictions on transfers of membership interests by Mr. Koff, Mr. Unger,
Music Holdings Corp, and its permitted transferees.
The voting, co-sale, drag along and transfer restrictions will terminate
upon consummation of the first to occur of a Qualified Public Offering, as
defined in the Members Agreement, or an Approved Company Sale.
SECURITYHOLDERS AGREEMENT
The Company, MEM Holdings, and CBC Acquisition Company, Inc. are parties to
a Securityholders Agreement dated as of March 18, 1999. Pursuant to the
Securityholders Agreement, MEM Holdings and CBC Acquisition Company, Inc. have
agreed to vote their equity interests in the Company to establish the
composition of the Board of Directors of the Company and to elect Steven Hicks
as the Chairman. The Securityholders Agreement also contains:
o "co-sale" rights exercisable in the event of specified sales by MEM
Holdings or CBC Acquisition Company, Inc., respectively,
o "drag along" rights exercisable by the Board of Directors of the parent
and holders of a majority of the then class A units, in the event of an
Approved Company Sale, as defined in the Securityholders Agreement,
o preemptive rights, and
o any transfer by MEM Holdings is subject to a right to first offer by CBC
Acquisition Company, Inc., and vice versa.
The voting restrictions will terminate upon an Approved Company Sale. The
drag along and the transfer restrictions will terminate upon the consummation
of the first to occur of a Qualified Public Offering, as defined in the
Securityholders Agreement, or an Approved Company Sale. The co-sale rights will
terminate upon the consummation of the first to occur of an initial public
offering by the Company or an Approved Company Sale.
REGISTRATION AGREEMENT
The Company, MEM Holdings, Mr. Koff, Mr. Unger, Music Holdings Corp., CMS
Co-Investment Subpartnership, CMS Diversified Partners, L.P. and CBC
Acquisition Company, Inc. are parties to an Amended and Restated Registration
Agreement. Pursuant to this Registration Agreement, the holders of majority of
the ABRY Registrable Securities, as defined in the Registration Agreement, may
request a demand registration under the Securities Act of all or any portion of
the ABRY Registrable Securities:
o on Form S-1 or any similar long-form registration,
o on Form S-2 or S-3 or any similar short-form registration, if available,
and
o on any applicable form pursuant to Rule 415 under the Securities Act.
In accordance with the Registration Agreement, the holders of a majority
of CBC Acquisition Company, Inc. Registrable Securities, as defined in the
Registration Agreement, may request a demand registration under the Securities
Act of all or any portion of the Capstar Registrable Securities on Form S-1 or
any similar long-form registration and on Form S-2 or S-3 or any similar
short-form registration. In addition, all holders of Registrable Securities, as
defined in the registration Agreement, will have unlimited "piggyback"
registration rights, which entitle them to include their registrable equity
securities in registrations of securities by the Company, subject to the
satisfaction of specified conditions.
The Company is responsible for all expenses incident to its performance
under the Registration Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, fees of counsel for the Company and the holders of
registrable securities and all independent certified public accountants and
underwriters.
ABRY PARTNERS MANAGEMENT AND CONSULTING SERVICES AGREEMENT
Pursuant to a Management Agreement between ABRY Partners and the Company
dated October 6, 1998, ABRY Partners is entitled to a management fee when, and
if, it provides advisory and management consulting services to the Company and
based on the amount invested by ABRY partners and its affiliates in the
Company. The Company anticipates that any
23
<PAGE>
such management fee, if incurred, would be $0.3 million per annum payable
quarterly in arrears plus reimbursable expenses, adjusted as follows. The
Management Agreement provides that beginning in 1999, any applicable management
fee should be multiplied by 1.05 raised to the power obtained by subtracting
1998 from the number of the calendar year. Either ABRY Partners or the Company,
with the approval of the Board of Directors of the Company, may terminate the
management Agreement by prior written notice to the other.
ABRY BROADCAST PARTNER'S III'S SUBORDINATED NOTE
In connection with the acquisition of the Company's franchisees from Audio
Communications Network, Inc. ("Predecesser Company") the Company borrowed
approximately $40.8 million from ABRY Broadcast Partners III under ABRY
Broadcast Partners III's subordinated note. During 1998, no interest payments
were made on ABRY Broadcast Partners III's subordinated note and interest
accrued at 9% per annum. The Company repaid $41.7 million outstanding under ABRY
III's subordinated note at the time of the merger and converted $0.7 million
into voting units of the Company. With the proceeds of the note, ABRY made a
capital contribution of $17.9 million to the Company.
RELATED PARTY DEBT
From July 1, 1999 through November 24, 1999, the Company borrowed an
aggregate amount of $30.0 million from MEM Holdings LLC in the form of Junior
subordinated unsecured notes (the "ABRY Notes"). MEM Holdings is a holdings
company that owns 68% of the voting interests in the Company. ABRY Broadcast
Partners III and ABRY Broadcast Partners II are the beneficial owners of MEM
Holdings.
The ABRY Notes mature on June 30, 2007, at which time principal and accrued
interest are due. Interest accrues at 15% per annum; any accrued interest not
paid as of March 31, June 30, September 30 or December 31 with bear interest at
15% per annum until such interest is paid or extinguished. The ABRY Notes are
junior and subordinate to payments for the Senior Credit Facility and the Senior
Notes. At any time, the ABRY Notes, with the exception of a $3.0 million note,
may be converted into class A units of the Company. If the ABRY Notes, with the
exception of a $3.0 million note, have not been repaid in full as of May 2001,
the ABRY Notes will automatically be converted into class A units of the
Company.
FAMILY RELATIONSHIPS
William Boyd, the Company's Chief Executive Officer, is the father of
Robert Boyd, the Company's Vice President, of Finance for Owned Operations.
Robert Boyd earned over $60,000 during 1999.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
As a result of the consummation of the merger between Old Muzak and ACN,
the executive management of Old Muzak liquidated their stock options. Mr.
Willliam Boyd, Mr. Steven Tracy, Mr. Charles Saldarini, and Mr. Brad Bodenman
received $2.8 million, $84 thousand, $1.4 million, and $45 thousand,
respectively upon the liquidation of their stock options. In addition, Mr.
Steven Tracy, Mr. Charles Saldarini, and Mr. Brad Bodenman received $0.2
million, $0.5 million, and $0.2 million, respectively, which represented
consideration for partnership units of Old Muzak.
CERTAIN BUSINESS RELATIONSHIPS
The Company's Charlotte Owned Operation leased facilities from WRA
Associates during 1999. William A. Boyd is the managing partner of WRA
Associates. Other Partners include William Boyd, Robert Boyd, and Andy Boyd,
all of whom are sons of William A. Boyd. Payments to WRA Associates for these
facilities aggregated $86,095 during 1999.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
<TABLE>
<CAPTION>
PAGE
NUMBER
-------
<S> <C>
MUZAK HOLDINGS LLC
Report of Independent Public Accountants ................................................. F-1
Consolidated Balance Sheets at December 31, 1999 and December 31, 1998 ................... F-4
Consolidated Statements of Operations for the fiscal year ended December 31, 1999, and
the period from
October 7, 1998 to December 31, 1998 .................................................... F-5
Consolidated Statements of Cash Flows for the fiscal year ended December 31, 1999, and
the period from
October 7, 1998 to December 31, 1998 .................................................... F-6
Consolidated Statements of Changes in Member's Interest for the fiscal year ended
December 31, 1999, and the
period from October 7, 1998 to December 31, 1998 ........................................ F-7
Notes to Consolidated Financial Statements ............................................... F-8
AUDIO COMMUNICATIONS NETWORK, INC. (THE "PREDECESSOR COMPANY")
Report of Independent Public Accountants ................................................. F-2
Consolidated Statement of Operations for the period from January 1, 1998 to October 6, F-5
1998
Consolidated Statement of Cash flows for the period from January 1, 1998 to October 6, F-6
1998
Consolidated Statement of Stockholders' Equity for the period from January 1, 1998 to F-7
October 6, 1998
Notes to Consolidated Financial Statements ............................................... F-8
AUDIO COMMUNICATIONS NETWORK, INC. (THE "PREDECESSOR COMPANY")
Report of Independent Public Accountants ................................................. F-3
Consolidated Statement of Operations for the fiscal year ended December 31, 1997 ......... F-5
Consolidated Statement of Cash Flows for the fiscal year ended December 31, 1997 ......... F-6
Consolidated Statement of Stockholders' Equity for the fiscal year ended December 31, F-7
1997
Notes to Consolidated Financial Statements ............................................... F-8
</TABLE>
(a) (2) Financial Schedules:
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are omitted
because they are not required, are inapplicable, or the information is included
in the Consolidated Financial Statements or the Notes thereto.
(a) (3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- --------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of January 29, 1999 among ACN Holdings, LLC, Audio
Communication Network, LLC, Muzak Limited Partnership, MLP Acquisition L.P. and Muzak Holdings
Corp. (1)
2.2 First Amendment to the Agreement and Plan of Merger dated as of March 17, 1999 by and among Muzak
Holdings LLC (f/k/a ACN Holdings, LLC), Audio Communications Network, LLC, Muzak Limited
Partnership, MLP Acquisition, L.P. and Muzak Holdings Corp. (1)
2.3 Contribution Agreement between Capstar Broadcasting Corporation and ACN Holdings, LLC dated as of
February 19, 1999. (2)
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ------------------------------------------------------------------------------------------------------------
<S> <C>
2.4 First Amendment dated as of March 18, 1999, to the Contribution Agreement dated as of February 19,
1999, between Capstar Broadcasting Corporation and Muzak Holdings, LLC (f/k/a ACN Holdings, LLC).
(2)
3.1 Certificate of Formation of ACN Operating, LLC. (1)
3.2 Certificate of Amendment of the Certificate of Formation of ACN Operating, LLC. (1)
3.3 Certificate of Merger merging Muzak Limited Partnership into Audio Communications Network, LLC. (1)
3.4 Certificate of Incorporation of Muzak Finance Corp. (1)
3.5 Certificate of Incorporation of Muzak, Inc. (1)
3.6 First Amendment to Certificate of Incorporation of Muzak, Inc. (1)
3.7 Certificate of Formation of MLP Environmental Music, LLC. (1)
3.8 Articles of Incorporation of Music Acquisition, Inc. (1)
3.9 Certificate of Amendment by Shareholders of Music Acquisition, Inc. to the Articles of Incorporation of
Music Acquisition, Inc. (1)
3.10 Certificate of Amendment by Shareholders to the Articles of Incorporation of Ohio Sound and Music, Inc.
(1)
3.11 Certificate of Amendment by Shareholders to the Articles of Incorporation of Ohio Sound and Music, Inc.
(1)
3.12 Certificate of Formation of ACN Holdings, LLC. (1)
3.13 Certificate of Amendment to the Certificate of Formation of ACN Holdings, LLC. (1)
3.14 Amended and Restated Limited Liability Company Agreement of Muzak LLC, dated as of March 18,
1999 (1)
3.15 By-laws of Muzak Finance Corp (1)
3.16 By-laws of Muzak, Inc. (1)
3.17 Amended and Restated Limited Liability Agreement of MLP Environmental Music, LLC, dated as of
March 18, 1999 (1)
3.18 Code of Regulations of Business Sound, Inc. (1)
3.19 Amended and Restated Limited Liability Company Agreement of Muzak Holdings LLC, dated as of
March 18, 1999 (1)
3.20 Certificate of Formation of BI Acquisition, LLC. (1)
3.21 Limited Liability Agreement of BI Acquisition, LLC dated as of August 18, 1999 (1)
3.22 Certificate of Incorporation of ACN Holdings, Inc. (2)
3.23 Certificate of Amendment of Certificate of Incorporation of ACN Holdings, Inc. (2)
3.24 By-laws of ACN Holdings, Inc. (2)
4.1 Indenture, dated as of March 18, 1999 by and among Muzak LLC and Muzak Finance Corp., as Issuers,
Muzak Capital Corporation, MLP Environmental Music, LLC, Business Sound, Inc. and ACN Holdings
LLC, as Guarantors and State Street Bank and Trust Company, as Trustee.
4.2 Form of 9 7/8% Senior Subordinated Notes due 2009 (included in Exhibit 4.1 above as Exhibit A) (1)
4.3 Registration Rights Agreement, dated as of March 18, 1999 by and among Muzak LLC and Muzak
Finance Corp., the Guarantors named therein and CIBC Oppenheimer Corp. and Goldman, Sachs & Co.,
as Initial Purchasers. (1)
4.4 Purchase Agreement, dated March 12, 1999 by and among Audio Communications Network, LLC and
Muzak Finance Corp., the Guarantors named therein and CIBC Oppenheimer Corp. and Goldman, Sachs
& Co., as Initial Purchasers. (1)
4.5 Supplemental Indenture, dated as of August 30, 1999 by and among Muzak LLC, Muzak Finance Corp.,
Muzak Capital Corporation, MLP Environmental Music, LLC, Business Sound, Inc., Muzak Holdings
LLC and BI Acquisition, LLC, as Guarantors and State Street Bank and Trust Company, as Trustee. (1)
4.6 Indenture, dated as of February 2, 2000 by and among Muzak LLC and Muzak Finance Corp., as Issuers
and State Street Bank and Trust Company, as Trustee.
4.7 Purchase Agreement, dated February 2, 2000 by and among Muzak LLC and Muzak Finance Corp., the
Guarantors named therein and CIBC Inc.
4.8 Registration Rights Agreement, dated as of February 2, 2000 by and among Muzak LLC and Muzak
Finance Corp., the Guarantors named therein and CIBC Inc.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- --------------------------------------------------------------------------------------------------------
<S> <C>
4.9 Indenture, dated as of March 18, 1999 by and among Muzak Holdings LLC and Muzak Holdings Finance
Corp., as Issuers and State Street Bank and Trust Company, as Trustee. (2)
4.10 Form of Series A 13% Senior Discount Notes due 2010 (included in Exhibit 4.1 above as Exhibit A). (2)
4.11 Registration Rights Agreement, dated as of March 18, 1999, Muzak Holdings, LLC and Muzak Holdings
Finance Corp., and Issuers and CIBC Oppenheimer Corp. and Goldman, Sachs & Co. as Initial
Purchasers. (2)
4.12 Purchase Agreement, dated as of March 12, 1999, by and among ACN Holdings, LLC and Muzak
Holdings Finance Corp., as Issuers and CIBC Oppenheimer Corp. and Goldman, Sachs & Co. as Initial
Purchasers. (2)
4.13 Muzak LLC 15% Junior Unsecured Promissory Note due 2007 (1)
4.14 Muzak LLC 15% Junior Unsecured Promissory Note due 2007.
4.15 Muzak LLC 15% Junior Unsecured Promissory Note due 2007.
4.16 Muzak LLC 15% Junior Unsecured Promissory Note due 2007.
10.1 Credit and Guaranty Agreement, dated as of March 18, 1999 among Audio Communications Network,
LLC, as Borrower, Muzak Holdings LLC and certain subsidiaries of Audio Communications Network,
LLC, as Guarantors, various lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent, Canadian
Imperial Bank of Commerce, as Administrative Agent and Goldman Sachs Credit Partners L.P. and CIBC
Oppenheimer Corp. as Co-Lead Arrangers. (1)
10.2 Pledge and Security Agreement, dated as of March 18, 1999, among Audio Communications Network,
LLC, Muzak Holdings LLC, and certain present and future domestic subsidiaries of Audio Communi-
cations Network, LLC, as Guarantors, and Canadian Imperial Bank of Commerce, as agent for the benefit
of Lenders and Lender Counterparties and Indemnities. (1)
10.3 Indenture relating to the Senior Discount Notes, dated as of March 18, 1999, by and among, Muzak
Holdings LLC and Muzak Holdings Finance Corp., as Issuers, and State Street Bank and Trust Company,
as Trustee. (2)
10.4* Amended and Restated Members Agreement, dated as of March 18, 1999, by and among Muzak Holdings
LLC (f/k/a ACN Holdings, LLC), MEM Holdings LLC, David Unger, Joseph Koff, William Boyd and
Music Holdings Corp. (1)
10.5* Management and Consulting Services Agreement dated as of October 6, 1998 by and between ABRY
Partners, Inc. and ACN Operating, LLC. (1)
10.6* Form of Employment Agreement by and between Muzak LLC and each of the executive officers of
Muzak other than William A. Boyd and David Unger. (1)
10.7* Executive Employment Agreement, dated as of March 18, 1999, among Muzak Holdings LLC, Muzak
LLC, and William A. Boyd. (1)
10.8* Executive Employment Agreement dated as of October 6, 1998, by and among ACN Operating, LLC,
Audio Communications Network, LLC and David Unger. (1)
10.9* First Amendment to the Executive Employment Agreement dated as of March 18, 1999 to the certain
Executive Employment Agreement dated as of October 6, 1998, by and between Audio Communications
Network, LLC f/k/a ACN Operating, LLC and David Unger. (1)
10.10 First Amendment, Consent and Waiver, dated as of July 1, 1999 to the Credit and Guaranty Agreement,
dated as of March 18, 1999 among Muzak LLC, as Borrower, Muzak Holdings LLC and certain
Subsidiaries of Muzak LLC, as Guarantors, various Lenders, Goldman Sachs Credit Partners L.P., as
Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent and Goldman Sachs
Credit Partners L.P. and CIBC Oppenheimer Corp. as Co-Lead Arrangers. (1)
10.11 Securities Repurchase Agreement dated as of October 6, 1998 by and among ACN Holdings, LLC, David
Unger and ABRY Broadcast Partners III, L.P. (2)
10.12 Second Amendment Consent and Waiver dated October 26, 1999 to the Credit and Guaranty Agreement
dated as of March 18, 1999 with Muzak LLC as borrower. (3)
10.13 Third Amendment Consent and Waiver dated January 14, 2000 to the Credit and Guaranty Agreement
dated as of March 18, 1999 with Muzak LLC as Borrower.
10.14 Securityholders Agreement dated as of March 18, 1999 by and among Muzak Holdings LLC (f/f/a ACN
Holdings, LLC), MEM Holdings, LLC and Capstar Broadcasting Corporation. (2)
10.15 Investor Securities Purchase Agreement dated as of October 6, 1998 by and among ACN Holdings, LLC
and the investors named therein. (2)
10.16 Form of Incentive Unit Agreement by and among Muzak Holdings LLC, each of the Name Executives
and ABRY Broadcast Partners III, L.P. (2)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------
<S> <C>
21.1 Subsidiaries of Muzak LLC and Muzak Finance Corp. (1)
27 Financial Data Schedule.
</TABLE>
- ---------
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the Muzak LLC's Registration Statement on Form
S-4, File No. 333-78571.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-4, File No. 333-78573.
(3) Incorporated by reference to the Company's Report on Form 10-Q for the
fiscal quarter ended September 30, 1999.
(b) Reports on Form 8-K.
(c) During the last quarter of the fiscal year for which this report on
Form 10-K was filed, the Company filed no reports on Form 8-K.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 31st day of
March, 2000.
MUZAK HOLDINGS LLC
MUZAK HOLDINGS FINANCE CORP.
By: /s/ William A. Boyd
--------------------------------------
NAME: WILLIAM A. BOYD
TITLE: CHIEF EXECUTIVE OFFICER
AND PRESIDENT
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------- --------------------------------------
<S> <C>
/s/ William A. Boyd Director, President and Chief Executive
------------------------ Officer (Principal Executive Officer)
WILLIAM A. BOYD
/s/ Brad D. Bodenman Chief Financial Officer (Principal
------------------------ Financial Officer and Principal
BRAD D. BODENMAN Accounting Officer)
/s/ Peni Garber Director
------------------------
PENI GARBER
/s/ David W. Unger Director
------------------------
DAVID W. UNGER
/s/ Royce Yudkoff Director
------------------------
ROYCE YUDKOFF
/s/ Steven Hicks Chairman of the Board
------------------------
STEVEN HICKS
/s/ D. Geoff Armstrong Director
------------------------
D. GEOFF ARMSTRONG
/s/ Andrew Banks Director
------------------------
ANDREW BANKS
</TABLE>
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Muzak Holdings LLC:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 25 related to Muzak Holdings LLC present
fairly, in all material respects, the financial position of Muzak Holdings LLC
and its subsidiaries (the "Company"), formally known as ACN Holdings, LLC, at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for the year ended December 31, 1999 and for the period from October 7,
1998 to December 31, 1998, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 24, 2000
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Muzak Holdings LLC
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 25 related to Audio Communications
Network, Inc. ("ACN" or "Predecessor Company") present fairly, in all material
respects, the results of their operations and their cash flows for the period
from January 1, 1998 to October 6, 1998 in conformity with generally accepted
accounting principles in the United States. These financial statements are the
responsibility of ACN's management; our responsibility is to express an opinion
on these financial statements based on our audit. We conducted our audit of
these statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
February 19, 1999
Charlotte, North Carolina
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Muzak Holdings LLC:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Audio Communications Network, Inc. and
its subsidiaries (the "Predecessor Company") for the year ended December 31,
1997. These financial statements are the responsibility of the Predecessor
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of the Predecessor
Company for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Orlando, Florida
March 31, 1998
F-3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
MUZAK HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 2,275 $ 1,293
Accounts receivable, net of allowances of $3,683 and $450 39,203 1,764
Inventories ............................................. 12,283 1,323
Prepaid expenses and other assets ....................... 2,304 125
--------- --------
Total current assets ................................... 56,065 4,505
Property and equipment, net ............................... 95,050 17,499
Intangible assets, net .................................... 314,364 49,039
Deferred charges and other assets, net .................... 31,836 1,884
--------- --------
TOTAL ASSETS ........................................... $ 497,315 $ 72,927
========= ========
LIABILITIES AND MEMBERS' INTEREST
CURRENT LIABILITIES:
Revolving credit facility ............................... $ 25,000 $ --
Current maturities of long term debt .................... 4,197 --
Related party notes ..................................... -- 42,183
Current maturities of other liabilities ................. 1,394 34
Accounts payable ........................................ 15,123 2,439
Accrued expenses ........................................ 34,433 1,525
Advance billings ........................................ 11,171 --
--------- --------
Total current liabilities .............................. 91,318 46,181
Long-term debt ............................................ 323,131 460
Related party notes ....................................... 30,000 --
Other liabilities ......................................... 9,798 26
Commitments and Contingencies .............................
MEMBERS' INTEREST
Class A units ........................................... 70,599 27,262
Class B units ........................................... 2,822 --
Accumulated deficit ..................................... (30,353) (1,002)
--------- --------
Total members' interest ................................ 43,068 27,260
--------- --------
TOTAL LIABILITIES AND MEMBERS' INTEREST ................ $ 497,315 $ 72,927
========= ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.
F-4
<PAGE>
MUZAK HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 7, 1998 JANUARY 1, 1998
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 OCTOBER 6, 1998 DECEMBER 31, 1997
------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Revenues:
Music and other business services .... $ 92,149 $ 3,909 $ 12,315 $ 12,784
Equipment and related services ....... 37,867 2,005 6,602 4,768
--------- -------- -------- --------
130,016 5,914 18,917 17,552
--------- -------- -------- --------
Cost of revenues:
Music and other business services .... 19,317 833 2,670 3,597
Equipment and related services ....... 29,002 1,723 5,536 3,572
--------- -------- -------- --------
48,319 2,556 8,206 7,169
--------- -------- -------- --------
Gross profit ........................... 81,697 3,358 10,711 10,383
--------- -------- -------- --------
Selling, general and administrative
expenses ............................. 42,495 1,794 7,245 5,113
Depreciation and amortization expense .. 36,479 1,683 4,372 4,057
--------- -------- -------- --------
Income (loss) from operations .......... 2,723 (119) (906) 1,213
Other income (expense):
Interest expense, net ................ (29,394) (888) (2,520) (2,649)
Other, net ........................... 20 5 6 59
--------- -------- -------- --------
Loss before income taxes ............... (26,651) (1,002) (3,420) (1,377)
Income tax provision (benefit) ......... (439) -- 8 26
--------- -------- -------- --------
Net loss ............................... $ (26,212) $ (1,002) $ (3,428) $ (1,403)
========= ======== ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.
F-5
<PAGE>
MUZAK HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
PERIOD FROM
PERIOD FROM JANUARY 1,
OCTOBER 7, 1998 1998
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, OCTOBER 6, YEAR ENDED
1999 1998 1998 DECEMBER 31, 1997
-------------- ----------------- ------------ ------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ........................................ $ (26,212) $ (1,002) $ (3,428) $ (1,403)
Adjustments to derive cash flow from
continuing operating activities:
Deferred income tax benefit ..................... (458) -- -- --
Depreciation and amortization ................... 36,479 1,683 4,372 4,259
Amortization of senior discount notes ........... 4,218 -- -- --
Amortization of deferred financing fees ......... 1,226 20 58 --
Deferred subscriber acquisition costs ........... (7,246) (209) (524) (712)
Unearned installment income ..................... 1,110 -- -- --
Net change in certain assets and liabilities, net
of business acquisitions .......................
(Increase) decrease in accounts receivable ..... (15,413) 95 241 (1,055)
(Increase) decrease in inventory ............... (3,225) (524) 303 (3,389)
Increase in accrued expenses ................... 3,716 597 112 576
Increase (decrease) in accounts payable ........ (2,587) 546 379 (999)
Increase in advance billings ................... 5,244 -- -- --
Other, net ..................................... 822 (39) 80 819
---------- -------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES .................................. (2,326) 1,167 1,593 (1,904)
---------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash ....................... (306,052) (67,028) -- --
Capital expenditures for property and
equipment ...................................... (30,785) (1,308) (3,538) (591)
Proceeds from the sale of intangible assets ..... -- -- -- 185
Cash acquired in acquisition .................... -- -- -- 876
---------- -------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES .................................. (336,837) (68,336) (3,538) 470
---------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior subordinated
notes .......................................... 115,000 -- -- --
Proceeds from issuance of senior discount notes.. 39,996 -- -- --
Proceeds from issuance of senior credit facility 165,000 -- -- --
Proceeds from long-term debt .................... -- -- 2,200 25,534
Proceeds from sale of stock ..................... -- -- 7 71
Proceeds from issuance of membership units....... 24,279 27,262 -- --
Repayment of notes payable to related parties ... (41,683) -- --
Issuance of notes payable to related party ...... 30,000 40,818 -- --
Net borrowings under revolver ................... 25,000 --
Repayments of other debt ........................ (3,534) (8) (552) (23,624)
Payment of fees associated with the financing ... (13,913) -- -- --
---------- ---------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 340,145 68,072 1,655 1,981
---------- ---------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................... 982 903 (290) 547
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ......................................... 1,293 390 680 133
---------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........ $ 2,275 $ 1,293 $ 390 $ 680
========== ========== ========= =========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.
F-6
<PAGE>
MUZAK HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND MEMBERS'
INTEREST
(IN THOUSANDS, EXCEPT FOR UNITS)
PREDECESSOR COMPANY
<TABLE>
<CAPTION>
CONTRIBUTED CONTRIBUTED
CAPITAL- CAPITAL TOTAL
PREFERRED COMMON IN EXCESS ACCUMULATED STOCKHOLDERS'
INVESTMENT WARRANTS STOCK OF PAR DEFICIT EQUITY
------------ ------------- -------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 ................. $ 3,750 $ 194 $ -- $ -- $ (1,395) $ 2,549
Merger-related activity ................... (3,750) (194) 1,102 9,683 -- 6,841
Stock issued to directors and employees
in lieu of cash compensation ............ -- -- 10 111 -- 121
Stock purchased by employees under
stock purchase plan ..................... -- -- 1 10 -- 11
Stock options exercised ................... -- -- 13 47 -- 60
Net loss .................................. -- -- -- -- (1,403) (1,403)
-------- ------ ------ ------ -------- --------
Balance, December 31, 1997 ................. -- -- 1,126 9,851 (2,799) 8,179
Stock options exercised .................... -- -- 1 6 -- 7
Net loss ................................... -- -- -- -- (3,428) (3,428)
-------- ------ ------ ------ -------- --------
Balance at October 6, 1998 ................. $ -- $ -- $1,127 $9,857 $ (6,227) $ 4,757
======== ====== ====== ====== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MUZAK HOLDINGS LLC:
<TABLE>
<CAPTION>
TOTAL
CLASS A CLASS B ACCUMULATED MEMBERS'
UNITS DOLLARS UNITS DOLLARS DEFICIT EQUITY
-------- --------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 7, 1998 (prior to initial
contribution by members).......................... -- $ -- -- $ -- $ -- $ --
Issuance of units ................................. 27,262 27,262 2,414 -- -- 27,262
Net loss .......................................... -- -- -- -- (1,002) (1,002)
------ ------- ------ ------- -------- --------
Balance, December 31, 1998 ........................ 27,262 $27,262 2,414 $ -- $ (1,002) $ 26,260
Issuance of units ................................. 40,198 $40,198 7,867 $2,822 $ -- $ 43,020
Split of common units affected in the form of a
dividend ......................................... 3,139 3,139 -- (3,139) --
Net loss .......................................... -- -- -- -- (26,212) (26,212)
------ ------- ----- ------ --------- ---------
Balance, December 31, 1999 ........................ 70,599 $70,599 10,281 $2,822 $ (30,353) $ 43,068
====== ======= ====== ====== ========= =========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
consolidated financial statements.
F-7
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Muzak Holdings LLC ("the Company"), formerly known as ACN
Holdings, LLC, was formed in September 1998 pursuant to the laws of Delaware.
Muzak LLC, a wholly owned subsidiary of the Company, owns and operates
franchisees. Muzak LLC began its operations on October 7, 1998 with the
acquisition of the independent franchisees in the Baltimore, Charlotte,
Hillsborough, Kansas City, St. Louis, Jacksonville, Phoenix, and Fresno areas
from Audio Communications Network, Inc. (the "Predecessor Company"). On March
18, 1999, Muzak Limited Partnership ("Old Muzak") merged with and into Audio
Communications Network, LLC ("ACN"). At the time of the merger, ACN changed its
name to Muzak LLC.
As of December 31, 1999, ABRY Partners, LLC. and its respective affiliates
collectively own approximately 68% of the beneficial interests in the Company's
voting interests.
The Company derives the majority of its revenues from the sale of business
music products. The core porduct is Audio Architecture and its two
complementary products are Audio Marketing and Video Imaging. These revenues
are generated by clients, who pay monthly subscription fees under noncancelable
five year contracts.
The Company also derives revenues from the sale and lease of audio
system-related products, principally sound systems and intercoms, to business
music clients and other clients. In addition, the Company sells electronic
equipment, such as proprietary tape playback equipment and other audio and
video equipment to franchisees to support the sale of business music services.
Installation, service and repair revenues consist principally of revenues from
the installation of sound systems and other equipment that is not expressly
part of a business music contract, such as paging, security and drive-through
systems. These revenues also include revenue from the installation, service and
repair of equipment installed under a business music contract. Music contract
installation revenues are deferred and recognized over the term of the
respective contracts.
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of the Company and its subsidiaries; Muzak LLC, Muzak Holdings Finance
Corporation, Muzak Capital Corporation, Muzak Finance Corporation, Business
Sound Inc., Electro Systems Corporation, BI Acquisition LLC, MLP Environmental
Music, LLC, Audio Environments, Inc, and Background Music Broadcasters, Inc. All
significant intercompany items have been eliminated in consolidation. Certain
prior year items have been reclassified to conform with the fiscal 1999
presentation.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financials statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three
months or less.
INVENTORIES -- Inventories consist primarily of electronic equipment and
are valued at the lower of cost or market, but not in excess of net realizable
value. Cost is determined on the first-in, first-out basis.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, ranging from 3 to 30 years. Sound and music equipment
installed at customer premises under contracts to provide music programming
services is transferred from inventory to property and equipment at cost plus
an allocation of installation costs and is amortized over 5 years. Impairment
losses are recognized if recorded values exceed undiscounted future cash flows,
by reducing them to estimated fair value. No impairment losses were recognized
by the Company or the Predecessor Company for the periods presented.
INTANGIBLE ASSETS -- Goodwill, the excess of the purchase price over the
fair value of net assets of businesses acquired, is amortized over twenty years
using the straight-line method. Income producing contracts are amortized using
the straight-line method over periods ranging from 8-14 years. Management
evaluates the recoverability of intangibles by comparing
F-8
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
recorded values to the undiscounted future cash flows that can be generated by
such assets. Impairment losses are recognized if recorded values exceed
undiscounted future cash flows, by reducing them to estimated fair value. No
impairment losses were recognized by the Company and the Predecessor Company for
the periods presented.
INCOME TAXES -- The Company is a Limited Liability Company that is treated
as a partnership for income tax purposes. No provision for income taxes is
required by the Company as its income and expenses are taxable to or deductible
by its members. The Company's corporate subsidiaries are subject to income
taxes and account for deferred income taxes under the liability method which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities.
REVENUE RECOGNITION -- Revenues from music services are recognized on a
straight-line basis over the term of the customer contracts in the period
services are provided. Revenues for equipment sales and related installation
are recognized upon delivery or installation. Contracts are typically for a
five-year non-cancelable period with renewal options for an additional five
years. Fees received for services to franchisees are recognized as revenues in
the month services are provided.
SUBSCRIBER ACQUISITION COSTS -- Subscriber acquisition costs are direct
sales commissions incurred in connection with acquiring new subscribers, which
are amortized as a component of selling, general, and administrative expenses
over the life of the customer contract or five years, whichever is shorter, on
a straight-line basis. If a customer contract terminates early, the unamortized
subscriber acquisition costs is typically recovered from the salesperson.
Subscriber acquisition costs are included in deferred charges and other assets,
net.
ADVANCE BILLINGS -- The Company invoices certain customers in advance for
contracted music and other business services. Amounts invoiced in advance of
the service period are deferred when invoiced and recognized as revenue in the
period earned.
CONCENTRATION OF CREDIT RISK -- Concentrations of credit risk with respect
to trade accounts receivable are limited as the Company sells its products to
customers in diviersified industries thorughout the United States. The Company
performs ongoing credit evaluations of its customers' financial condition and
maintains allowances for potential credit losses. Actual losses have been
within management's expectations and estimates.
2. ACQUISITIONS
On October 7, 1998, the Company acquired certain assets and liabilities of
the Predecessor Company for $66.8 million. The acquisition was accounted for
using the purchase method of accounting. Accordingly, the consideration paid was
allocated based on the estimated fair market value of the net assets acquired.
The excess of the consideration paid over the estimated fair market value of the
net assets acquired approximated $17.0 million and is being amortized using the
straight-line method over 20 years.
In order to complete the acquisition of the Predecessor Company, the
Company received a $8.4 million capital contribution and issued notes payable of
$40.8 million to a Member (see Note 6).
As discussed in Note 1, on March 18, 1999 Old Muzak merged with and into
ACN. Under the terms of the agreement, the Company paid total consideration of
$274.2 million, which is comprised of the following: $125.5 million cash
consideration, $114.9 million consideration in the tender offer and consent
solicitation for the 10% Senior Notes due 2003 of Old Muzak, $15.9 million for
debt repayment of Old Muzak outstanding obligations and assumed $17.9 million
of other obligations. In addition, at the time of the merger, the Company
repaid $41.7 million borrowed from ABRY Broadcast Partners by ACN in October
1998 in connection with the acquisition of the Company's independent
franchisees from the Predecessor Company and converted $0.7 million into voting
units of the Company.
In 1999, prior to the merger, the Company made the following acquisitions:
F-9
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
o On January 15, 1999, the Company acquired all of the outstanding stock of
Business Sound, Inc. for approximately $4.1 million, which included 3,661
Class A units of the Company. Business Sound was the Company's independent
franchisee for the New Orleans, Louisiana and Mobile, Alabama areas.
o On February 24, 1999, the Company acquired all of the outstanding stock
of Electro Systems for approximately $0.7 million, which included 650
Class A units of the Company, and assumed certain nonrecourse debt. Electro
Systems was the Company's independent franchisee located in Panama City,
Florida.
The Company made thirteen acquisitions between the merger on March 18,
1999 and December 31, 1999. The table below provides information regarding
these acquisitions (in millions, except for number of units).
<TABLE>
<CAPTION>
ACQUIRED ASSETS ACQUIRED ACQUIRED
DATE PURCHASE PRICE(5) OR STOCK BUSINESS MARKETS
- ------------------- ------------------- ------------------------------------------------------ ----------------- ---------------
<S> <C> <C> <C> <C>
March 18, 1999 $ 18.1 (1) Net assets of Capstar Broadcasting Independent Georgia,
Corporation's independent franchisee franchisee Florida
April 1, 1999 $ 0.2 Net assets of Custom On Hold Services Inc Audio Marketing Washington
May 1, 1999 $ 3.2 (2) Net assets of Capstar Broadcasting Corporation's Independent Georgia
independent franchisee franchisee Nebraska
Florida
June 1, 1999 $ 6.9 Net assets of Advertising on Hold, Inc Audio Marketing Florida,
Georgia,
North Carolina
June 1, 1999 $ 0.8 Net assets of CustomTronics Sound Business Music California
July 1, 1999 $ 0.9 Net assets of Penobscot Broadcasting Corporation Independent Maine
franchisee
August 1, 1999 $ 1.3 Net assets of LaBov and Beyond, Inc Audio Marketing Indiana
August 1, 1999 $ 3.5 Net assets of US West Communications Services, Inc's Audio Marketing National
Please Hold Promotions
September 1, 1999 $ 4.7 Stock of Broadcast International, Inc Business Music National
October 1, 1999 $ 10.3 Net assets of Midwest Systems and Services, Inc Business Music Illinois,
Indiana,
Ohio,
West Virginia
November 1, 1999 $ 2.9 Net assets of A & D Music, Inc Independent Oregon
franchisee
November 1, 1999 $ 7.9 (3) Stock of Audio Environment, Inc and Background Independent California
Music Broadcasters Inc franchisee
December 1, 1999 $ 13.2 (4) Net assets of Mountain West Audio, Inc Independent Utah,
franchisee Idaho,
Washington
</TABLE>
- ---------
(1) Total purchase price included 13,535 Class A units of the Company.
(2) The Company acquired Capstar Broadcasting Corporation's ("Capstar")
independent franchisees located in Atlanta, Albany, and Macon, Georgia, Ft
Myers, Florida and Omaha Nebraska. The total consideration was accounted
for as an equity contribution to the Company and included 2,385 Class A
units of the Company.
(3) Total purchase price included 100 Class A units of the Company.
(4) The Company paid $3.1 million of the purchase price of Mountain West Audio
Inc., as of December 31, 1999. In February 2000, the Company paid the
remaining purchase price, which included 456 Class A units of the Company.
(5) The purchase price does not include transaction costs.
F-10
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
The results of operations of the acquired companies are included in the
Company's consolidated statement of operations for the periods in which they
were owned by the Company.
The acquisitions were accounted for under the purchase method of
accounting. Accordingly, the consideration was allocated to the net assets
acquired based on the fair market values at the date of acquisition as
determined through the use of an independent appraisal. The excess of purchase
price for each acquisition over the estimated fair value of the tangible and
identifiable intangible assets acquired approximated $127.9 million and is
being amortized over a period of twenty years on a straight-line basis.
The following presents the unaudited pro forma results assuming that the
acquisitions discussed above and financings (see Note 6) had occurred as of the
beginning of fiscal 1999 and 1998. These pro forma results are not necessarily
indicative of the results that will occur in future periods (in thousands).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Revenues ..................... $ 170,970 $ 161,379
Loss from operations ......... (2,075) (9,554)
Net Loss ..................... (39,026) (40,572)
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
USEFUL
LIFE DECEMBER 31, DECEMBER 31,
(YEARS) 1999 1998
--------- -------------- -------------
<S> <C> <C> <C>
Equipment provided to subscribers ......... 4-6 $ 72,598 $ 16,186
Capitalized Install Labor ................. 5 18,270 --
Other ..................................... 3-30 22,606 2,113
--------- --------
113,474 18,299
Less accumulated depreciation ............. (18,424) (800)
--------- --------
$ 95,050 $ 17,499
========= ========
</TABLE>
Depreciation of property and equipment was $17.6 million, $0.8 million,
$1.9 million, and $1.4 million for year ended December 31, 1999, the period
from October 7, 1998 to December 31, 1998, for the period from January 1, 1998
to October 6, 1998, and for the year ended December 31, 1997, respectively.
F-11
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
USEFUL LIFE DECEMBER 31, DECEMBER 31,
(YEARS) 1999 1998
------------- -------------- -------------
<S> <C> <C> <C>
Goodwill .............................. 20 $ 143,094 $ 15,112
Income producing contracts ............ 8-14 136,184 34,810
License agreements .................... 20 5,082 --
Trademarks ............................ 5 14,866 --
Non-compete agreements ................ 2-7 16,401 --
Other ................................. 5-20 18,430 --
--------- --------
334,057 49,922
Less accumulated amortization ......... (19,693) (883)
--------- --------
$ 314,364 $ 49,039
========= ========
</TABLE>
Amortization of intangible assets was $18.8 million, $0.8 million, $2.5
million, and $2.6 million for the year ended December 31, 1999, the period from
October 7, 1998 to December 31, 1998, for the period from January 1, 1998 to
October 6, 1998, and for the year ended December 31, 1997, respectively.
5. ACCRUED EXPENSES
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
Accrued Interest ...................................... $ 7,245 --
Additional purchase price of Mountain West Audio, Inc. 10,200 --
Accrued compensation and benefits ..................... 2,323 30
Licensing related accruals ............................ 2,754 65
Other ................................................. 11,911 1,430
------- -----
$34,433 $ 1,525
======= =======
</TABLE>
- ---------
Additional purchase price for Mountain West Audio, Inc. was paid in February
2000.
6. DEBT
Debt obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
Revolving loan -- Senior credit facility ......... $ 25,000 $ --
======== =======
Related Party Notes .............................. $ 30,000 $42,183
======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
Long term debt:
Senior Credit Facility .......... $165,000 $ --
Senior Notes .................... 115,000 --
Senior Discount Notes............ 44,214 --
Other ........................... 3,114 460
-------- ----
Total debt obligations .......... 327,328 460
Less current maturities ......... (4,197) --
-------- ----
$323,131 $460
======== ====
</TABLE>
F-12
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
SENIOR CREDIT FACILITY
In March 1999, the Company entered into a new senior credit facility
("Senior Credit Facility") consisting of: (i) a term loan facility in the amount
of $30.0 million payable in semi-annual installments until final maturity on
December 31, 2005 ("Term Loan A") ; (ii) a term loan facility in the amount of
$105.0 million payable in semi-annual installments until final maturity on
December 31, 2006 ("Term Loan B")(together with Term Loan A , the "Term Loans");
and (iii) a revolving loan (the "Revolving Loan") in an aggregate principal
amount of up to $35.0 million terminating on December 31, 2005. In July 1999,
the Company amended the Senior Credit Facility which increased the principal
amount of the Term Loan B by $30.0 million to $135.0 million. In October 1999,
the Company amended the Senior Credit Facility to enable a related party to make
a subordinated loan to the Company in the aggregate principal amount of $20.0
million and to permit the Company to issue additional senior subordinated notes
and to issue preferred stock if certain covenants are met by the Company.
The Senior Credit Facility, which is guaranteed by the Company and
certain of its domestic subsidiaries, contains restrictive covenants including
maintenance of interest and leverage ratios and various other restrictive
covenants which are customary for such facilities. In addition, the Company is
generally prohibited from incurring additional indebtedness, incurring liens,
paying dividends or making other restricted payments, consummating asset sales,
entering into transactions with affiliates, merging or consolidating with any
other person or selling assigning, transferring, leasing, conveying, or
otherwise disposing of assets. These conditions were satisfied as of December
31, 1999.
Indebtedness under the Term Loan A and the Revolving Loans bear interest
at a per annum rate equal to the Company's choice of (i) the Alternate Base
Rate (which is the highest of prime rate and the Federal Funds Rate plus .5%)
plus a margin ranging from 1.00% to 2.00% or (ii) the offered rates for
Eurodollar deposits ("LIBOR") of one, two, three, or six months, as selected by
the Company, plus a margin ranging from 2.0%to 3.0%. Margins, which are subject
to adjustment based on the changes in the Company's ratio of consolidated total
debt to EBITDA (i.e., earnings before interest, taxes, interest, depreciation,
amortization and other non cash charges) were 2.0% in the case of Alternate
Base Rate and 3.0% in the case of LIBOR as of December 31, 1999. Indebtedness
under the Term Loan B bears interest at a per annum rate equal to the Company's
choice of (i) the Alternate Base Rate (as described above) plus a margin of
2.5% or (ii) LIBOR of one, two, three, or six months, as selected by the
Company plus a margin of 3.5%. The weighted average rate of interest on the
Senior Credit Facility at December 31, 1999 was 9.01%.
SENIOR NOTES
On March 18, 1999, the Company together with its wholly owned subsidiary,
Muzak Finance Corp., co-issued $115.0 million in principal amount of 9 7/8%
Senior Subordinated Notes ("Senior Notes") which mature on March 15, 2009.
Interest is payable semi-annually, in arrears, on March 15 and September 15 of
each year. The Senior Notes are general unsecured obligations of the Company
and Muzak Finance and are subordinated in right of payment to all existing and
future Senior Indebtedness of the Company and Muzak Finance. The Senior Notes
are guaranteed by the Company, MLP Environmental Music, LLC, Business Sound,
Inc., BI Acquisition LLC, Audio Environments, Inc., Background Music
Broadcasters, Inc., and Muzak Capital Corporation. The indenture governing the
Senior Notes prohibits the Company from making certain payments such as
dividends and distributions of their capital stock; repurchases or redemptions
of their capital stock, and investments (other than permitted investments)
unless certain conditions are met by the Company. Before March 15, 2002, the
issuers may redeem up to 35% of the aggregate principal amount of the Notes
originally issued under the indenture at a redemption price of 109.875% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest to the
redemption date, with the net proceeds of one or more equity offerings if
certain conditions are met. After March 15, 2004, the issuers may redeem all or
part of the Notes at a redemption price equal to 104.938% of the principal
which redemption price declines to 100% of the principal amount in 2007.
SENIOR DISCOUNT NOTES
On March 18, 1999, the Company together with its wholly owned subsidiary Muzak
Holdings Finance Corp., co-issued $75.0 million in principal amount at maturity,
or $39.9 million in accreted value on the issue date, of 13% Senior Discounted
Notes (the "Senior Discount Notes") due March 2010. Cash interest on the Senior
Discount Notes does not accrue and is not payable prior to March 15, 2004. The
Discounted Notes were issued at a substantial discount from their principal
amount at maturity. Until March 15, 2004, the Discounted Notes will accrete in
value such that the accreted value on March 15, 2004 will equal the principal
amount at maturity of the Senior Discount Notes. From and after March 15, 2004,
interest on the Senior Discount Notes will accrue at a rate of 13% per annum.
Interest will be payable semi-annually in arrears on each March 15 and September
15, commencing September 15, 2004, to holders of record of the Senior Discount
Notes at the close of business on the immediately preceding March 1 and
September 1.
F-13
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
RELATED PARTY NOTES
From July 1, 1999 through November 24, 1999, the Company borrowed an
aggregate amount of $30.0 million, from MEM Holdings LLC in the form of Junior
Subordinated Unsecured Notes (the "ABRY Notes"). MEM Holdings is a company that
owns 68% of the voting interests in the Company. ABRY Broadcast Partners III and
ABRY Broadcast Partners II are the beneficial owners of MEM Holdings.
The ABRY Notes mature on June 30, 2007, at which time principal and accrued
interest are due. Interest accrues at 15% per annum; any accrued interest not
paid as of March 31, June 30, September 30 or December 31 will bear interest at
15% per annum until such interest is paid or extinguished. The ABRY Notes are
junior and subordinate to payments for the Senior Credit Facility, and the
Senior Notes. At any time, all of the ABRY Notes, with the exception of the $3.0
million note may be converted into class A units of the Company. If the ABRY
Notes with the exception of the $3.0 million note, have not been repaid in full
as of May, 2001, the ABRY Notes will automatically be converted into class A
units. Proceeds from the ABRY Notes were used to fund operations and
acquisitions.
In order to complete the acquisition of the Predecessor Company, the
Company issued Notes payable to a member for $40.8 million in 1998. The Company
repaid $41.7 million outstanding under this note at the time of the merger and
converted $0.7 million into Class A units of the Company.
OTHER DEBT
In connection with the purchase of ElectroSystems on February 24, 1999,
the Company assumed several promissory notes, totaling $2.4 million as of the
acquisition date. All of the notes, with the exception of one, bear interest at
9.887% and mature in November 2016. The Company is required to make interest
only payments on a monthly basis through October 2006, and principal and
interest payments for the remainder of the term. The Note terms are the same
for all but one of the notes. This note bears interest at 8% with principal and
interest payments due monthly until maturity in October 2006.
See Note 15 for a description of additional debt incurred by the Company
after December 31, 1999.
ANNUAL MATURITIES
Annual maturities of long-term debt obligations are as follows (in
thousands):
<TABLE>
<S> <C>
2000 ............... $ 4,197
2001 ............... 5,181
2002 ............... 6,680
2003 ............... 7,761
2004 ............... 26,344
Thereafter ......... 277,165
</TABLE>
Total interest paid by the Company on all indebtedness was $14.1 million,
$2.0 thousand, $2.9 million, and $2.2 million for the year ended December 31,
1999, the period from October 7, 1998 through December 31, 1998, for the period
from January 1, 1998 through October 6, 1998 and the year ended December 31,
1997, respectively.
INTEREST RATE PROTECTION PROGRAMS
During April 1999, the Company entered into a four year interest rate swap
agreement in which the Company effectively exchanged $100.0 million of floating
rate debt at three month LIBOR for 5.59% fixed rate debt. This agreement is
designated as a hedge of interest rates, and the differential to be paid or
received on the swap is accrued as an adjustment to interest expense as
interest rates change. The Company is exposed to credit loss in the event of
nonperformance by the other party to the swap agreement. However, the Company
does not anticipate nonperformance by the counterparty. The effect of this
interest rate protection agreement on the operating results of the Company was
to increase interest expense by $67 thousand in fiscal 1999. The Company
terminated this agreement on January 28, 2000 and received approximately $4.4
million for this agreement. The proceeds will be recorded an as adjustment to
interest expense.
F-14
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
On January 28, 2000, the Company entered into a new interest rate swap
agreement in which the Company effectively exchanged $100.0 million of floating
rate debt at three month LIBOR for 7.042% fixed rate debt. The interest rate
swap agreement terminates on April 19, 2002. Payments received, if any, as a
result of this agreement are accrued as an adjustment to interest expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's debt as of December 31, 1999 and
December 31, 1998 were $378.4 million and $42.7 million, respectively. The fair
value of the Senior Notes and the Senior Discount Notes are based upon quoted
market price. The fair value of the other long-term debt of the Company
approximates the carrying value.
The fair value of the interest rate swap agreement was approximately $4.4
million as of December 31, 1999. The fair values of interest rate swaps are
obtained from dealer quotes which represents the estimated amount the Company
would receive or pay to terminate agreements taking into consideration current
interest rates and creditworthiness of the counterparties.
7. LEASE COMMITMENTS
The Company is the lessee under various long-term operating and capital
leases for machinery, equipment, buildings, and vehicles for periods ranging
from 2 years to 10 years. The Company has also entered into various agreements
to lease transponders to transmit music programs via direct broadcast
satellite. The majority of these leases contain renewal provisions.
At December 31, 1999, future minimum lease payments under operating and
capital leases as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING CAPITAL OPERATING
- ---------------------------------- ----------- ----------
<S> <C> <C>
December 2000 .................. $ 1,260 $ 8,030
December 2001 .................. 1,038 7,180
December 2002 .................. 567 6,749
December 2003 .................. 194 6,269
December 2004 .................. 2 5,854
Later Years .................... -- 10,442
Less Imputed Interest .......... (323) --
Less Executory Cost ............ (446) --
------- --------
$ 2,292 $ 44,524
======= ========
</TABLE>
Rental expense under operating leases was $6.3 million, $94 thousand, $0.2
million, and $0.7 million for the year ended December 31, 1999, for the period
from October 7, 1998 through December 31, 1998, for the period from January 1,
1998 through October 6, 1998, and for the year ended December 31, 1997,
respectively.
8. EMPLOYEE BENEFIT PLANS
During 1999, the Company maintained two defined contribution plans.
Substantially all employees are covered under a plan whereby eligible employees
may contribute up to 14% of their compensation per year, subject to certain tax
law restrictions. The Company has the option to make a matching contribution up
to a maximum of 100% of the first 3% and 50% of the next 3%, up to 6% of the
total base salary contributed by the employee each year. Participants are
immediately vested in their contributions as well as the employer's
contributions. Certain other employees are covered under a plan whereby
employees may contribute up to 15% of pre-tax pay and employer contributions
are discretionary. Participants are immediately vested in their contributions
and become fully vested in employer contributions after the third year of
service with the Company.
Plan expense was $0.8 million, $55 thousand, $23 thousand, and $32
thousand for the year ended December 31, 1999, for the period from October 7,
1998 to December 31, 1998, the period from January 1, 1998 to October 6, 1998
and the year ended December 31, 1997, respectively.
F-15
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. MEMBERS' INTEREST
The Company has authorized two classes of equity units: class A units
("Class A Units") and class B units ("Class B Units")(collectively, the
"Units"). Each class of units represents a fractional part of the membership
interests of the Company.
VOTING UNITS
Each class A unit is entitled to voting rights equal to the percentage
such unit represents of the aggregate number of outstanding class A units. Each
class A unit accrues a preferred return (the "ACN Holdings Preferred Return")
annually on the original issue price ("the "Capital Value") of each voting unit
at a rate of 15% per annum. The Company can not pay distributions, other than
tax distributions, in respect of other classes of securities, including
distributions made in connection with a liquidation, until the Capital Value
and accrued ACN Holdings Preferred Return in respect of each voting unit is
paid to each holder (such distributions being the "Priority Distributions"). In
addition to these Priority Distributions, each holder of these voting units is
also entitled to participate in distributions payable to the residual common
equity interests of the Company (the "Last Priority Distributions").
NON VOTING UNITS
The class B units are non-voting equity interests in the Company which are
divided into four subclasses, Class B-1 units, Class B-2 units, Class B-3
units, and Class B-4 units. Each holder of class B units is entitled to
participate in Last Priority Distributions, if any, provided that Priority
Distributions on all voting interests have been paid in full. The Company is
authorized to issue class B-5 units, however no B-5 units are outstanding as of
December 31, 1999. The class B-1 units, B-2 units, and B-3 units have a vesting
period of five years, and the class B-4 units vest immediately upon issuance.
Upon a change in control, as defined, all of these units become fully vested
and exercisable. As of December 31, 1999 and 1998, the Company had 2,410 and
804 B-1 units outstanding, respectively. As of December 31, 1999 and 1998, the
Company had 2,429 and 806 B-2 units outstanding, respectively. As of December
31, 1999 and 1998, the Company had 2,441 and 804 B-3 units outstanding,
respectively. As of December 31, 1999, the Company had 3,002 B-4 units
outstanding, with a value of $2.8 million. There were no B-4 units outstanding
as of December 31, 1998.
10. INCOME TAXES
The provision (benefit) for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
PERIOD FROM PERIOD FROM YEAR
OCTOBER 7, 1998 JANUARY 1, 1998 ENDED
YEAR ENDED THROUGH THROUGH DECEMBER 31,
DECEMBER 31, 1999 DECEMBER 31, 1998 OCTOBER 6, 1998 1997
------------------- ------------------- ----------------- -------------
<S> <C> <C> <C> <C>
Current tax:
Federal .............. $ 8 $-- $-- $--
State ................ 10 -- 8 26
------ --- --- ---
18 -- 8 26
------ --- --- ---
Deferred tax (benefit):
Federal .............. (384) -- -- --
State ................ (73) -- -- --
------ --- --- ---
(457) -- -- --
------ --- --- ---
Total .............. $ (439) $ 0 $ 8 $26
====== === === ===
</TABLE>
F-16
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES -- (CONTINUED)
The Company's effective tax rate differs from the statutory federal tax
rate for the following reasons:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
PERIOD FROM PERIOD FROM YEAR
OCTOBER 7, 1998 JANUARY 1, 1998 ENDED
YEAR ENDED THROUGH THROUGH DECEMBER 31,
DECEMBER 31, 1999 DECEMBER 31, 1998 OCTOBER 6, 1998 1997
------------------- ------------------- ----------------- -------------
<S> <C> <C> <C> <C>
Federal tax (benefit) of statutory rates $ (7,761) $ (401) $ (1,197) $ (477)
State income taxes ...................... (40) -- -- 17
Goodwill and nondeductive expenses ...... 30 -- 467 253
Losses allocated directly to partners ... 7,332 401 -- --
Increase in valuation allowance ......... -- -- 738 294
Other ................................... -- -- -- (61)
-------- ------ -------- ------
$ (439) $ 0 $ 8 $ 26
======== ====== ======== ======
</TABLE>
The components of the net deferred tax asset (liability) at December 31
are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
----------- -----
<S> <C> <C>
Net operating loss carryforwards .......................................... $ 937 $--
Property and equipment .................................................... (150) --
Intangible assets ......................................................... (2,714) --
Capitalized commissions ................................................... (217) --
Other ..................................................................... 38 --
-------- ---
Net deferred tax liability (included in other long term liabilities) ..... $ (2,106) $--
======== ===
</TABLE>
11. RELATED PARTY TRANSACTIONS
During October 1998, the Company entered into a Management Agreement with
ABRY Partners which provides that the Company will pay a management fee as
defined in the Management Agreement. There were no fees incurred under the
agreement during 1999 and for the period from October 7, 1998 to December 31,
1998. Either the Company or ABRY Partners, with the approval of the Board of
Directors of the Company, may terminate the Management Agreement by prior
written notice to the other.
During fiscal 1999, the Company borrowed $30.0 million from MEM Holdings
under junior subordinated notes. See Note 6 for a description of this related
party note.
12. MUZAK HOLDINGS FINANCE CORP.
Muzak Holdings Finance Corp. had no operating activities during the twelve
months ended December 31, 1999.
13. COMMITMENTS AND CONTINGENCIES
LITIGATION
F-17
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
The Company is involved in various claims and lawsuits arising out of the
normal conduct of its business. Although the ultimate outcome of these legal
proceedings cannot be predicted with certainty, the management of the Company
believes that the resulting liability, if any, will not have a material effect
upon the Company's consolidated financial statements or liquidity.
OTHER COMMITMENTS
As of December 31, 1999, the Company's operations has approximately $5.2
million in outstanding capital expenditure commitments. The Company, as
discussed in Note 7 above, is the lessee under various operating and capital
leases for equipment, vehicles, satellite capacity, and buildings.
14. QUARTERLY FINANCIAL DATA (UNAUDITED): (IN THOUSANDS)
The quarterly data below is based on the Company's fiscal periods.
<TABLE>
<CAPTION>
FISCAL 1999
-----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales ............ $ 12,151 $ 35,518 $ 40,255 $ 42,092
Gross Profit ......... 7,680 22,030 24,867 27,120
Net Loss ............. (816) (6,926) (8,550) (9,920)
</TABLE>
F-18
<PAGE>
MUZAK HOLDINGS LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED): (IN THOUSANDS) -- (CONTINUED)
<TABLE>
<CAPTION>
FISCAL 1998
----------------------------
PERIOD FROM OCTOBER 7, 1998
THROUGH DECEMBER 31, 1998
----------------------------
<S> <C>
Net Sales .............................. $ 5,914
Gross Profit ........................... 3,358
Net Loss ............................... (1,002)
</TABLE>
In the first quarter of 1999, the Company misreported a $0.7 million
extraordinary gain on the extinguishment of debt related to the conversion of
certain related party debt and associated interest and goodwill by the same
amount related to the Old Muzak acquisition. The effect of the adjustment was
to eliminate the extraordinary gain and reduce goodwill by $.7 million.
The Company's operations are not subject to significant seasonal
influences.
15. SUBSEQUENT EVENTS
In January 2000, the Company entered into an indenture for up to $50.0
million Senior Subordinated Floating Rate Notes (the "Floating Rate Notes").
The Floating Rate Notes are available to be drawn up to $50.0 million in
increments of no less than $2.5 million to fund acquisitions. The Floating Rate
Notes will be available for drawdowns until July 31, 2000. Commitments on all
amounts undrawn under the Floating Rate Notes by July 31, 2000 will expire and
will be ineligible for future draw downs. The Floating Rate Notes may be
redeemed at 100% if redeemed before July 31, 2000 and at 101.50% if redeemed
August 1, 2000 through October 31, 2000. If the Company does not redeem the
Floating Rate Notes by November 1, 2000, the Floating Rate Notes will
automatically convert into fixed-rate permanent notes due March 2009. As of
March 29, 2000, $25.0 million of the Floating Rate Notes were outstanding.
On February 2, 2000, the Company acquired certain of the net assets of
Quincy Broadcasting Company, a Delaware corporation, for approximately $0.4
million. Quincy Broadcasting Company was the Company's independent franchisee
located in Quincy, Illinois.
On February 2, 2000, the Company acquired certain of the assets and
assumed certain obligations of General Communications Corporation ("On Hold
America"), an Indiana corporation, for approximately $0.9 million. On Hold
America was an audio marketing business serving areas primarily in Indiana,
Georgia, Florida, and Ohio.
On February 2, 2000, the Company acquired certain of the assets and
certain obligations of Texas Sound Co. Ltd for approximately $0.4 million.
Texas Sound Co. Ltd was a provider of business music and audio marketing
services.
On February 24, 2000, the Company acquired Telephone Audio Productions,
Inc., ("Sold on Hold Communications"), a Texas corporation, for approximately
$3.7 million. Sold on Hold Communications was an audio marketing and messaging
business serving various markets in the United States.
On March 24, 2000, the Company acquired the stock of Vortex Sound
Communications Company, Inc., ("Vortex") for $9.2 million, which included 802
units of the Company. Vortex was the Company's independent franchisee located in
Washington, DC.
The following presents the unaudited pro forma results of the Company for
the year ended December 31, 1999, as if the acquisitions and financings,
including those discussed above in subsequent events, occurred on January 1,
1999. These unaudited pro forma results are not necessarily indicative of the
results that will occur in future periods (in thousands).
<TABLE>
<S> <C>
Revenues ..................... $ 176,507
Loss from operations ......... (598)
Net Loss ..................... (38,983)
</TABLE>
F-19
EXHIBIT 4.1
================================================================================
MUZAK LLC
and
MUZAK FINANCE CORP.,
--------------------
as Issuers,
The GUARANTORS named herein
_______________________
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
INDENTURE
================================================================================
Dated as of March 18, 1999
Up to $150,000,000 aggregate principal amount of
9 7/8% Senior Subordinated Notes due 2009
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- - ------- -------
<S> <C>
310(a)(1)................................................. 7.10
(a)(2)................................................. 7.10
(a)(3)................................................. N.A.
(a)(4)................................................. N.A.
(b).................................................... 7.08; 7.10; 12.02
(b)(1)................................................. 7.10
(b)(9)................................................. 7.10
(c).................................................... N.A.
311(a).................................................... 7.11
(b).................................................... 7.11
(c).................................................... N.A.
312(a).................................................... 2.05
(b).................................................... 10.03
(c).................................................... 10.03
313(a).................................................... 7.06
(b)(1)................................................. 7.06
(b)(2)................................................. 7.06
(c).................................................... 12.02
(d).................................................... 7.06
314(a).................................................... 4.02; 4.04; 12.02
(b).................................................... N.A.
(c)(1)................................................. 12.04; 12.05
(c)(2)................................................. 12.04; 12.05
(c)(3)................................................. N.A.
(d).................................................... N.A.
(e).................................................... 10.05
(f).................................................... N.A.
315(a).................................................... 7.01; 7.02
(b).................................................... 7.05; 10.02
(c).................................................... 7.01
(d).................................................... 6.05; 7.01; 7.02
(e).................................................... 6.11
316(a) (last sentence).................................... 12.06
(a)(1)(A).............................................. 6.05
(a)(1)(B).............................................. 6.04
(a)(2)................................................. 8.02
(b).................................................... 6.07
(c).................................................... 8.04
317(a)(1)................................................. 6.08
(a)(2)................................................. 6.09
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(b).................................................... 7.12
318(a).................................................... 12.01
</TABLE>
N.A. means Not Applicable
____________________
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.......................................... 1
Section 1.01. Other Definitions.................................... 48
Section 1.02. Incorporation by Reference of Trust Indenture Act.... 49
Section 1.03. Rules of Construction................................ 49
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture........... 50
Section 2.02. Execution and Authentication......................... 51
Section 2.03. Registrar and Paying Agent........................... 52
Section 2.04. Paying Agent to Hold Money in Trust.................. 53
Section 2.05. Noteholder Lists..................................... 54
Section 2.06. Transfer and Exchange................................ 54
Section 2.07. Replacement Notes.................................... 55
Section 2.08. Outstanding Notes.................................... 55
Section 2.09. Temporary Notes...................................... 56
Section 2.10. Cancellation......................................... 56
Section 2.11. Defaulted Interest................................... 57
Section 2.12. Deposit of Moneys.................................... 57
Section 2.13. CUSIP Number......................................... 57
Section 2.14. Book-Entry Provisions for Global Notes............... 58
Section 2.15. Registration of Transfers and Exchanges.............. 60
Section 2.16. Joint and Several Liability.......................... 66
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee................................... 67
Section 3.02. Selection by Trustee of Notes to Be Redeemed......... 67
Section 3.03. Notice of Redemption................................. 67
Section 3.04. Effect of Notice of Redemption....................... 69
Section 3.05. Deposit of Redemption Price.......................... 69
Section 3.06. Notes Redeemed in Part............................... 69
Section 3.07. Optional Redemption.................................. 70
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes..................................... 71
Section 4.02. Provision of Financial Statements and Other
Information..................................... 71
Section 4.03. Waiver of Stay, Extension or Usury Laws.............. 72
Section 4.04. Compliance Certificate; Notice of Default; Tax
Information..................................... 72
Section 4.05. Taxes................................................ 74
Section 4.06. Limitation on Additional Indebtedness................ 74
Section 4.07. Limitation on Restricted Payments.................... 75
Section 4.08. Limitation on Other Senior Subordinated Indebtedness. 80
Section 4.09. Limitation on Certain Asset Sales.................... 81
Section 4.10. Limitation on Transactions with Affiliates........... 86
Section 4.11. Limitations on Liens................................. 89
Section 4.12. Limitations on Investments........................... 89
Section 4.13. Limitation on Sale and Lease-Back Transactions....... 89
Section 4.14. Payments for Consent................................. 90
Section 4.15. Corporate Existence.................................. 90
Section 4.16. Change of Control.................................... 91
Section 4.17. Maintenance of Office or Agency...................... 94
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.18. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries............... 94
Section 4.19. Limitation on Conduct of Business.................... 97
Section 4.20. Compliance with Laws................................. 97
Section 4.21. Limitation on Preferred Stock of Restricted
Subsidiaries.................................... 97
Section 4.22. Limitation on Creation of Subsidiaries............... 98
Section 4.23. Maintenance of Properties and Insurance.............. 98
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation Merger and Sale of
Assets.......................................... 99
Section 5.02. Successor Person Substituted......................... 101
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.................................... 102
Section 6.02. Acceleration......................................... 104
Section 6.03. Other Remedies....................................... 105
Section 6.04. Waiver of Past Defaults and Events of Default........ 106
Section 6.05. Control by Majority.................................. 106
Section 6.06. Limitation on Suits.................................. 107
Section 6.07. Rights of Holders to Receive Payment................. 107
Section 6.08. Collection Suit by Trustee........................... 108
Section 6.09. Trustee May File Proofs of Claim..................... 108
Section 6.10. Priorities........................................... 109
Section 6.11. Undertaking for Costs................................ 109
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.................................... 110
Section 7.02. Rights of Trustee.................................... 112
Section 7.03. Individual Rights of Trustee......................... 113
Section 7.04. Trustee's Disclaimer................................. 113
Section 7.05. Notice of Defaults................................... 114
Section 7.06. Reports by Trustee to Holders........................ 114
Section 7.07. Compensation and Indemnity........................... 115
Section 7.08. Replacement of Trustee............................... 116
Section 7.09. Successor Trustee by Consolidation, Merger or
Conversion...................................... 117
Section 7.10. Eligibility; Disqualification........................ 117
Section 7.11. Preferential Collection of Claims Against Issuers.... 118
Section 7.12. Paying Agents........................................ 118
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders........................... 119
Section 8.02. With Consent of Holders.............................. 120
Section 8.03. Compliance with Trust Indenture Act.................. 122
Section 8.04. Revocation and Effect of Consents.................... 122
Section 8.05. Notation on or Exchange of Notes..................... 123
Section 8.06. Trustee to Sign Amendments, etc...................... 123
ARTICLE 9
CHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Satisfaction and Discharge of Indenture.............. 123
Section 9.02. Legal Defeasance..................................... 124
Section 9.03. Covenant Defeasance.................................. 125
Section 9.04. Conditions to Defeasance or Covenant Defeasance...... 126
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.05. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous
Provisions...................................... 129
Section 9.06. Reinstatement........................................ 130
Section 9.07. Moneys Held by Paying Agent.......................... 130
Section 9.08. Moneys Held by Trustee............................... 131
ARTICLE 10
GUARANTEES
Section 10.01. Guarantees........................................... 131
Section 10.02. Limitation on Liability.............................. 134
Section 10.03. Successors and Assigns............................... 135
Section 10.04. No Waiver............................................ 135
Section 10.05. Modification......................................... 135
Section 10.06. Release of Guarantor................................. 136
Section 10.07. Execution of Supplemental Indenture for Future
Guarantors....................................... 136
Section 10.08. Execution and Delivery of Guarantees................. 137
Section 10.09. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness.............................. 137
Section 10.10. Payment Over of Proceeds upon Dissolution, etc.,
of a Guarantor................................... 138
Section 10.11. Suspension of Guaranteed Obligations When
Guarantor Senior Indebtedness in Default......... 140
Section 10.12. Subrogation to Rights of Holders of Guarantor
Senior Indebtedness.............................. 143
Section 10.13. Guarantee Subordination Provisions Solely to
Define Relative Rights........................... 144
Section 10.14. Application of Certain Article 11 Provisions......... 145
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness............. 145
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 11.02. Payment Over of Proceeds upon Dissolution, etc....... 146
Section 11.03. Suspension of Payment When Senior Indebtedness in
Default......................................... 148
Section 11.04. Trustee's Relation to Senior Indebtedness............ 151
Section 11.05. Subrogation of Rights of Holders of Senior
Indebtedness.................................... 152
Section 11.06. Provisions Solely to Define Relative Rights.......... 152
Section 11.07. Trustee to Effectuate Subordination.................. 153
Section 11.08. No Waiver of Subordination Provisions................ 154
Section 11.09. Notice to Trustee.................................... 155
Section 11.10. Reliance on Judicial Order or Certificate of
Liquidating Agent............................... 156
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights................ 157
Section 11.12. Article Applicable to Paying Agents.................. 157
Section 11.13. No Suspension of Remedies............................ 157
Section 11.14. Acceleration of Payment of Notes..................... 158
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls......................... 158
Section 12.02. Notices.............................................. 159
Section 12.03. Communications by Holders with Other Holders......... 160
Section 12.04. Certificate and Opinion as to Conditions Precedent... 160
Section 12.05. Statements Required in Certificate and Opinion....... 161
Section 12.06. When Treasury Notes Disregarded...................... 161
Section 12.07. Rules by Trustee and Agents.......................... 162
Section 12.08. Business Days; Legal Holidays........................ 162
Section 12.09. Governing Law........................................ 162
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 12.10. No Adverse Interpretation of Other Agreements........ 162
Section 12.11. No Recourse Against Others........................... 163
Section 12.12. Successors........................................... 163
Section 12.13. Multiple Counterparts................................ 163
Section 12.14. Table of Contents, Headings, etc..................... 163
Section 12.15. Separability......................................... 163
</TABLE>
EXHIBITS
- - --------
Exhibit A. Form of Note......................................... A-1
Exhibit B. Form of Legend for Global Notes...................... B-1
Exhibit C. Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors....... C-1
Exhibit D. Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S.............. D-1
Exhibit E. Form of Guarantee.................................... E-1
Exhibit F. Form of Supplemental Indenture....................... F-1
-viii-
<PAGE>
INDENTURE, dated as of March 18, 1999, among MUZAK LLC, a Delaware
limited liability company (the "Company"), MUZAK FINANCE CORP., a Delaware
corporation ("Finance Corp." and, together with the Company, the "Issuers") each
of the Guarantors (as defined herein) and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts banking corporation, as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Issuers' 9 7/8% Senior
Subordinated Notes due 2009 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
-----------
"ABRY" means ABRY Partners, Inc., a Delaware corporation.
"ABRY Management Agreement" means the Management Agreement dated as of
October 6, 1998, and as amended prior to the Issue Date, between ABRY and the
Company.
"ABRY Subordinated Debt" means Indebtedness of the Company in
principal amount not to exceed $30 million in the aggregate at any time
outstanding (a) that is owed to ABRY III, ABRY, MEM Holdings, Inc. or any other
investment fund controlled by ABRY, (b) as to which the payment of principal of
(and premium, if any) and interest and other payment obligations in respect of
such Indebtedness shall be subordinate to the prior payment in full of the
Company's Obligations under the Notes such that no payments of principal (or
premium, if any) or interest on or otherwise due in respect of such Indebtedness
may be permitted for so long as any Default or Event of Default shall have
occurred and be continuing, (c) that shall automatically convert into common
equity of Holdings within 18 months of the date of issuance thereof, unless
refinanced, and (d) the terms of which have been determined to be fair and rea-
<PAGE>
-2-
sonable to the Company as determined in good faith by the Board of Directors of
the Company and evidenced by a Board Resolution delivered to the Trustee.
"ABRY II" means ABRY Broadcast Partners II, L.P., a Delaware limited
partnership.
"ABRY III" means ABRY Broadcast Partners III, L.P., a Delaware limited
partnership.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or is merged into or consolidated with any other Person or which is
assumed in connection with the acquisition of assets from such Person and, in
each case, whether or not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
or such merger, consolidation or acquisition.
"Acquisition EBITDA" means, with respect to any Asset Acquisition, (i)
EBITDA attributable to the assets to be acquired in such Asset Acquisition for
the same fiscal quarter utilized in determining "Consolidated Leverage Ratio"
plus (ii) the projected, quantifiable cost reductions expected to be realized
and non-recurring costs and expenses, in each case, in connection with such
Asset Acquisition and as a result of, in the case of cost reductions, an
established program of cost reductions adopted in good faith by the Board of
Directors of the Company. For purposes of the foregoing, cost reductions and
non-recurring costs and expenses, in each case, shall be calculated on a pro
forma basis as if such cost reductions and non-recurring costs and expenses, in
each case, had been implemented at the beginning of such fiscal quarter. Prior
to the consummation of any transaction requiring the inclusion of Acquisition
EBITDA in the calculation of Consolidated Leverage Ratio, the Company shall
deliver to the Trustee an Officers' Certificate indicating the cost reductions
and non-recurring costs and expenses, in each case, taken into account in
determining Acquisition EBITDA and the assumptions underlying such cost
reductions and non-recurring costs and expenses.
<PAGE>
-3-
"Adjusted Net Assets" of any Person at any date shall mean the lesser
of
(1) the amount by which the fair salable value of the assets of such
Person at such date exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all
other fixed and contingent liabilities), but excluding liabilities under
the Guarantee of such Person at such date, and
(2) the amount by which the fair salable value of the assets of such
Person at such date exceeds the amount that will be required to pay the
probable liability of such Person on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any
collection from any Subsidiary of such Person in respect of the obligations
of such Person under the Guarantee of such Person), excluding Indebtedness
in respect of the Guarantee of such Person, as they become absolute and
matured.
"Affiliate" means, with respect to any specific Person, any other
Person that directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that, for purposes of Section 4.10 of this
Indenture, beneficial ownership of at least 10% of the voting securities of a
Person, either directly or indirectly, shall be deemed to be control.
Notwithstanding the foregoing, no Person (other than the Company or any
Subsidiary of the Company) in whom a Securitization Entity makes an Investment
in connection with a Qualified Securitization Transaction shall be deemed to be
an Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
<PAGE>
-4-
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
service of notices and demands.
"Asset Acquisition" means
(1) an Investment by the Company or any Restricted Subsidiary of the
Company in any other Person pursuant to which such Person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company or
(2) the acquisition by the Company or any Restricted Subsidiary of
the Company of the assets of any Person (other than a Restricted Subsidiary
of the Company) which constitute all or substantially all of the assets of
such Person or comprise any division or line of business of such Person or
any other Properties or assets of such Person other than in the ordinary
course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (including any Sale and Lease-
Back Transaction), other than in the ordinary course of business or to the
Company or any of its Restricted Subsidiaries, in any single transaction or
series of related transactions of
(1) any Capital Stock of or other equity interest in any Restricted
Subsidiary of the Company or
(2) any other Property or assets of the Company or of any Restricted
Subsidiary thereof;
provided that Asset Sales shall not include
- - --------
(1) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration of
less than $1 million,
(2) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company as permitted under
Section 5.01 of this In-
<PAGE>
-5-
denture or any disposition that constitutes a Change of Control,
(3) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof,
(4) the factoring of accounts receivable arising in the ordinary
course of business pursuant to customary arrangements,
(5) the licensing of intellectual property,
(6) disposals or replacements of obsolete equipment in the ordinary
course of business,
(7) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
Qualified Securitization Transaction to a Securitization Entity for the
fair market value thereof, including cash in an amount at least equal to
75% of the fair market value thereof as determined in accordance with GAAP
(for the purposes of this clause (7), Purchase Money Notes shall be deemed
to be cash),
(8) transfers of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
Qualified Securitization Transaction (or a fractional undivided interest
therein) by a Securitization Entity in a Qualified Securitization
Transaction, and
(9) any transfer of assets acquired by the Company or any of its
Restricted Subsidiaries to an independent affiliate of the Company or any
of its Restricted Subsidiaries in accordance with the terms of the License
Agreements as such agreements are in effect on the Issue Date and as the
same may be amended or restated in a manner which is not more
disadvantageous to the Holders in any
<PAGE>
-6-
material respect than the terms of such agreements as in effect on the
Issue Date.
"Asset Sale Proceeds" means, with respect to any Asset Sale,
(1) cash and Cash Equivalents received by the Company or any
Restricted Subsidiary of the Company from such Asset Sale (including cash
and Cash Equivalent received as consideration for the assumption of
liabilities incurred in connection with or in anticipation of such Asset
Sale), after
(a) provision for all income or other taxes measured by or
resulting from such Asset Sale (after taking into account any
reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements),
(b) payment of all brokerage commissions, underwriting and other
fees and expenses related to such Asset Sale,
(c) provision for minority interest holders in any Restricted
Subsidiary of the Company as a result of such Asset Sale,
(d) repayment of Indebtedness that is secured by the assets
subject to such Asset Sale or otherwise required to be repaid in
connection with such Asset Sale and
(e) deduction of appropriate amounts to be provided by the
Company or a Restricted Subsidiary of the Company as a reserve, in
accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the
Company or a Restricted Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or
against
<PAGE>
-7-
any indemnification obligations associated with the assets sold or
disposed of in such Asset Sale, and
(2) promissory notes and other noncash consideration received by the
Company or any Restricted Subsidiary of the Company from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or
noncash consideration into cash or Cash Equivalents.
"Attributable Indebtedness" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the greater of
(1) the fair value of the Property subject to such arrangement and
(2) the present value of the notes (discounted at the rate of
interest implied in such transaction, determined in accordance with GAAP)
of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale and Lease-Back
Transaction (including any period for which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clauses (3)(a) or (3)(b), and which have not yet been
the basis for an Excess Proceeds Offer in accordance with clause (3)(c) of
Section 4.09(a) under this Indenture.
"Bank Indebtedness" means (i) the Indebtedness outstanding or arising
under the Senior Credit Facility, (ii) all obligations incurred by or owing to
the holders of such Indebtedness or any agent or representative thereof
outstanding or arising under the Senior Credit Facility (including, but not
limited to, all premium, interest (including, but not limited to, interest
accruing pursuant to the terms of the Senior Credit Facility on or after the
filing of any petition in any bankruptcy, reorganization or similar proceeding
relating to the Company or any Restricted Subsidiary, whether or not a
<PAGE>
-8-
claim for such is allowed in such proceeding), all fees and expenses of counsel,
reimbursement obligations, indemnities and all other charges, fees, expenses,
claims, and other amounts), and (iii) all interest rate agreement and hedging
obligations arising in connection therewith with any party to the Senior Credit
Facility or any of their affiliates.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person (or, if such Person is a limited liability company, the
board of managers of such company) or similar governing body or any duly
authorized committee thereof.
"Board Resolution" means with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership or limited liability company
interests or any other participation, right or other interest in the nature of
an equity interest in such Person including, without limitation, Common Stock
and Preferred Stock of such Person, or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligation" means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"Cash Equivalents" means
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency or
instrumentality thereof and
<PAGE>
-9-
backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by (i) any bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $250,000,000 or (ii) Brown Brothers Harriman;
(5) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in clause
(4) above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
A "Change of Control" of the Company will be deemed to have occurred
at such time as
(1) any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"),
<PAGE>
-10-
other than a Permitted Holder, becomes the beneficial owner (as defined in
Rule under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time) of more than 35% of the total voting power of the Company's Capital
Stock, and the Permitted Holders beneficially do not own, in the aggregate,
a greater percentage of the total voting power of the Capital Stock of the
Company than such other Person or Group and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company,
(2) there shall be consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving Person or
pursuant to which the Common Stock of the Company would be converted into
cash, securities or other Property, other than a merger or consolidation of
the Company in which the holders of the Capital Stock of the Company
outstanding immediately prior to the consolidation or merger hold, directly
or indirectly, at least a majority of the Capital Stock of the surviving
corporation immediately after such consolidation or merger,
(3) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new Directors whose election by such Board of
Directors or whose nomination for election by the equityholders of the
Company has been approved by 66 2/3% of the Directors then still in office
who either were Directors at the beginning of such period or whose election
or recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors of the Company or
(4) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or
<PAGE>
-11-
dissolution of the Company (whether or not otherwise in compliance with the
provisions of this Indenture).
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" of any Person means all Capital Stock of such Person
that is generally entitled to
(1) vote in the election of directors of such Person or
(2) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or
others that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces such party pursuant to Article 5 of this
Indenture and thereafter means the successor.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Restricted Subsidiaries on a
consolidated basis including, but not limited to,
(1) Redeemable Dividends, whether paid or accrued, on Preferred
Stock,
(2) imputed interest included in Capitalized Lease Obligations,
(3) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(4) the net costs associated with Hedging Obligations,
<PAGE>
-12-
(5) amortization of other financing fees and expenses,
(6) the interest portion of any deferred payment obligation,
(7) amortization of discount or premium, if any, and
(8) all other non-cash interest expense (other than interest
amortized to cost of sales)
plus, without duplication,
(1) all net capitalized interest for such period,
(2) all interest incurred or paid under any guarantee of Indebtedness
(including a guarantee of principal, interest or any combination thereof)
of any Person, and
(3) the amount of all dividends or distributions paid on Disqualified
Capital Stock (other than dividends paid or payable in shares of Capital
Stock of the Company that does not constitute Disqualified Capital Stock).
"Consolidated Leverage Ratio" means, with respect to any Person, the
ratio of
(1) the sum of the aggregate outstanding amount of Indebtedness of
such Person and its Restricted Subsidiaries and Preferred Stock of any such
Restricted Subsidiary issued in accordance with Section 4.21 of this
Indenture as of the date of calculation (the "Transaction Date") on a
consolidated basis determined in accordance with GAAP to
(2) the product of (a) such Person's EBITDA for the full fiscal
quarter (the "One Quarter Period") ending on or prior to the date of
determination for which financial statements are available and (b) four.
For purposes of this definition, clauses (1) and (2) above shall be calculated
after giving effect on a pro forma basis to:
--- -----
<PAGE>
-13-
(a) the incurrence or repayment of any Indebtedness of such Person or
any of its Restricted Subsidiaries or the issuance or redemption or other
repayment of Preferred Stock of any such Restricted Subsidiary (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness and, in
the case of any Restricted Subsidiary, the issuance or redemption or other
repayment of Preferred Stock (and the application of the proceeds thereof),
other than the incurrence or repayment of Indebtedness in the ordinary
course of business for working capital purposes pursuant to working capital
facilities, occurring during the One Quarter Period or at any time
subsequent to the last day of the One Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment or issuance or
redemption or other repayment, as the case may be (and the application of
the proceeds thereof), occurred on the first day of the One Quarter Period;
and
(b) any Asset Sales or Asset Acquisitions occurring during the One
Quarter Period or at any time subsequent to the last day of the One Quarter
Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for
any Acquired Indebtedness) occurred on the first day of the One Quarter
Period as follows:
(x) with respect to Asset Sales, the EBITDA attributable to the
assets which are the subject of Asset Sales that occurred shall be
excluded; and
(y) with respect to Asset Acquisitions, the Acquisition EBITDA
attributable to the assets which are the subject of the applicable
Asset Acquisition shall be included.
If such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding paragraph shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted
<PAGE>
-14-
Subsidiary or such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that
-------- -------
(1) the Net Income of any Person other than a Restricted Subsidiary
of the referent Person shall be included only to the extent of the amount
of dividends or distributions paid to the referent Person or a Restricted
Subsidiary of such referent Person,
(2) the Net Income of any Restricted Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions shall be excluded to the
extent of such restriction or limitation,
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded,
(4) any net gain or loss (in the case of any net loss, only to the
extent that such determination of Consolidated Net Income is being made in
connection with the determination of amounts available for Restricted
Payments pursuant to the provisions described under Section 4.07 of this
Indenture) resulting from an Asset Sale by the Person in question or any of
its Restricted Subsidiaries other than in the ordinary course of business
shall be excluded,
(5) extraordinary gains and losses shall be excluded,
(6) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued) shall be
excluded and
<PAGE>
-15-
(7) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets shall be excluded.
"Control Investment Affiliate" means, as to any Person, any other
Person which (a) is an Affiliate of such Person and (b) is organized by such
Person primarily for the purpose of making equity or debt investments in one or
more companies.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 225 Franklin Street, Boston, Massachusetts 02110.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from
April 1, 1999 to the end of such Person's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
"Cumulative EBITDA" means, with respect to any Person, as of any date
of determination, EBITDA from April 1, 1999 to the end of such Person's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness," as to the Company or any Guarantor,
as the case may be, means
<PAGE>
-16-
(1) any Bank Indebtedness and
(2) any other Senior Indebtedness or Guarantor Senior Indebtedness,
as the case may be, which at the time of determination exceeds $25 million
in aggregate principal amount (or accreted value in the case of
Indebtedness issued at a discount) outstanding or available under a
committed facility, which is specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by
such Person and as to which the Trustee has been given written notice of
such designation.
"Director" means, with respect to any Person, a member of the Board of
Directors of such Person (or, if such Person is a limited liability company, a
member of the board of managers of such Person).
"Disqualified Capital Stock" means any Capital Stock of a Person or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to include any Preferred Stock of a
Person or a Restricted Subsidiary of such Person, with respect to either of
which, under the terms of such Preferred Stock, by agreement or otherwise, such
Person or Restricted Subsidiary is obligated to pay current dividends or
distributions in cash during the period prior to the maturity date of the Notes;
provided, however, that Preferred Stock of a Person or any Restricted Subsidiary
thereof that is issued with the benefit of provisions requiring a change of
control offer or asset sale offer to be made for such Preferred Stock in the
event of a change of control of such Person or Restricted Subsidiary or the sale
of any assets of such Person or Restricted Subsidiary which provisions have
substantially the same effect as the provisions described under Sections 4.16
and 4.09 of
<PAGE>
-17-
this Indenture, respectively, shall not be deemed to be Disqualified Capital
Stock solely by virtue of such provisions.
"EBITDA" means, with respect to any Person and its Restricted
Subsidiaries, for any period, an amount equal to
(1) the sum of
(a) Consolidated Net Income for such period, plus
(b) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized
in computing net loss under clause (a) hereof, plus
(c) Consolidated Interest Expense for such period, plus
(d) depreciation for such period on a consolidated basis, plus
(e) amortization of intangibles for such period (but excluding
any non-cash item to the extent it represents the amortization of a
prepaid cash expense that was paid in any prior period) on a
consolidated basis, plus
(f) any other non-cash items reducing Consolidated Net Income
for such period except for any non-cash items that represent accruals
of, or reserves for, cash disbursements to be made in any future
accounting period, minus
(2) all non-cash items increasing Consolidated Net Income (other than
any non-cash items representing deferred revenue to the extent that such revenue
was not included in Consolidated Net Income in any prior period) for such
period, all for such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP;
<PAGE>
-18-
provided, however, that, for purposes of calculating EBITDA during any fiscal
- - -------- -------
quarter, cash income from a particular Investment (other than a Restricted
Subsidiary) of such Person shall be included only
(1) if cash income has been received by such Person with respect to
such Investment during each of the previous four fiscal quarters, or
(2) if the cash income derived from such Investment is attributable
to Cash Equivalents.
"Electro Systems" means Electro Systems Corporation, a Florida
corporation.
"Electro Systems Acquisition" means the acquisition of Electro Systems
pursuant to a Stock Purchase Agreement dated as of February 18, 1999 between the
Company and Carolina Georgia Sound, Inc.
"Equity Offering" means any public or private sale of Common Stock
(other than Disqualified Capital Stock) of the Company or Holdings pursuant to
which the Company or Holdings, as the case may be, receives net proceeds of at
least $20 million; provided, however, that in the case of an Equity Offering by
-------- -------
Holdings, Holdings shall have contributed to the capital of the Company the
portion of the Net Proceeds necessary to redeem the Notes pursuant to Section
3.07(b) of this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations of the Commission promulgated thereunder.
"fair market value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be
<PAGE>
-19-
evidenced by a Board Resolution of the Company delivered to the Trustee.
"Finance Corp." means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the
Company that is not organized under the laws of the United States or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"Guarantee" means any guarantee of the obligations of the Issuers
under this Indenture and the Notes by Holdings and any Restricted Subsidiary in
accordance with the provisions of this Indenture. When used as a verb,
"Guarantee" shall have a corresponding meaning.
"Guarantor" means each of Holdings and each Restricted Subsidiary of
the Company which Guarantees the Notes pursuant to the terms of this Indenture;
provided that upon the release and discharge of such Restricted Subsidiary from
- - --------
its Guarantee in accordance with the terms of this Indenture, such Restricted
Subsidiary shall cease to be a Guarantor.
"Guarantor Senior Indebtedness" means (1) all Bank Indebtedness of any
Guarantor and (2) all principal of and premium, if any, and interest (including,
but not limited to, interest accruing on or after the filing of any petition in
any bankruptcy, reorganization or similar proceeding relating to any Guarantor,
whether or not a claim for such is allowed in such proceeding) on, and any and
all other fees, fees and expenses of counsel, expense reimbursement obligations,
indemnities and other amounts due pursuant to the terms of all agreements,
indentures, documents and instruments providing for,
<PAGE>
-20-
creating, securing or evidencing or otherwise entered into in connection with
(a) all obligations of any Guarantor with respect to any Hedging
Obligations,
(b) all obligations of any Guarantor to reimburse any bank or other
person in respect of amounts paid under letters of credit, acceptances or
other similar instruments,
(c) all other Indebtedness of any Guarantor which does not provide
that it is to rank pari passu with or subordinate to the Guarantee of such
---- -----
Guarantor, and
(d) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Guarantor Senior
Indebtedness described above,
in each case, whether outstanding on the Issue Date or created thereafter.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include
(1) Indebtedness of any Guarantor to any of its Subsidiaries, or to
any Affiliate of such Guarantor or any of such Affiliate's Subsidiaries,
(2) Indebtedness represented by the Guarantees,
(3) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Guarantor Senior
Indebtedness,
(4) any trade payable arising from the purchase of goods or materials
or for services obtained in the ordinary course of business,
(5) Indebtedness incurred in violation of this Indenture,
<PAGE>
-21-
(6) Indebtedness represented by Disqualified Capital Stock and
(7) any Indebtedness to or guaranteed on behalf of, any shareholders,
Director, officer or employee of the Company or any Guarantor or any
Subsidiary of the Company or such Guarantor.
"Hedging Obligations" means, with respect to any Person, the net
payment obligations of such Person under (a) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements entered into in order to protect such Person against
fluctuations in commodity prices, interest rates or currency exchange rates.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Holdings" means Muzak Holdings LLC, a Delaware limited liability
company, until a successor replaces such party pursuant to this Indenture and
thereafter means the successor.
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
--------
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion
<PAGE>
-22-
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included
(1) any Capitalized Lease Obligations of such Person,
(2) obligations secured by a lien to which the Property or assets
owned or held by such Person is subject, whether or not the obligation or
obligations secured thereby shall have been assumed,
(3) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items
would appear upon the balance sheet of the guarantor),
(4) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction,
(5) Disqualified Capital Stock of such Person or any Restricted
Subsidiary thereof, and
(6) hedging obligations of any such Person (if and to the extent such
hedging obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP).
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation; provided that
--------
<PAGE>
-23-
(1) the amount outstanding at any time of any Indebtedness issued
with original issue discount is the principal amount of such Indebtedness
less the remaining unamortized portion of the original issue discount of
such Indebtedness at such time as determined in conformity with GAAP,
(2) Indebtedness shall not include any liability for federal, state,
local or other taxes,
(3) the amount of Indebtedness of a Person which is without recourse
to any Property or assets of such Person except to the extent of any Lien
on Property or assets of such Person which secures such Indebtedness shall
be the lesser of the principal amount of such Indebtedness and the fair
market value of the Property or assets subject to the Lien, and
(4) the amount of Indebtedness represented by Disqualified Capital
Stock shall be the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any.
The "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock.
Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be
"Indebtedness" of the Company or any of its Restricted Subsidiaries for purposes
of this definition. Furthermore, guarantees of (or obligations
<PAGE>
-24-
with respect to letters of credit supporting) Indebtedness otherwise included in
the determination of such amount shall not also be included.
"Indenture" means this Indenture as amended, restated or supplemented
from time to time.
"Independent Financial Advisor" means an investment banking firm of
national reputation in the United States
(1) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in the
Company and
(2) which, in the judgment of the Board of Directors of the Company,
is otherwise independent and qualified to perform the task for which it is
to be engaged.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or
(7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Investments" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than advances and accounts
receivable arising in the ordinary course of business of such Person), loan or
capital contribution to (by means of transfers of Property to others, payments
for Property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude
<PAGE>
-25-
(1) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices of such Person and
(2) the repurchase of securities of any Person by such Person.
If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Capital Stock of any direct or indirect Restricted
Subsidiary of the Company such that such Restricted Subsidiary would no longer
constitute a Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Capital Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means March 18, 1999.
"Issuers" means each party named as such in the first paragraph of
this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor.
"License Agreements" means the License Agreements between the Company
and its independent affiliates.
"Lien" means, with respect to any Property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Maturity Date" means March 15, 2009.
<PAGE>
-26-
"Merger Transactions" means those transactions referred to
collectively in the Offering Memorandum as "Merger Transactions."
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Notes" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture and any
notes issued in exchange therefor as contemplated hereunder.
"Obligations" means all obligations for principal, premium, interest,
penalties, charges, fees, fees and expenses of counsel, indemnities,
reimbursement obligations, damages, claims and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the offering memorandum dated March 12,
1999 pursuant to which the Notes were originally offered.
"Officer" means, with respect to any Person, the Chief Executive
Officer, the Chief Financial Officer, Treasurer or the President, of such
Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Of-
<PAGE>
-27-
ficer or any Treasurer of such Person that shall comply with applicable
provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel who
and which is reasonably acceptable to the Trustee complying with the
requirements of this Indenture. Such legal counsel shall be outside counsel and
not an employee of or in-house counsel to the Company.
"Payment Default" means any default, whether or not any requirement
for the giving of notice, the lapse of time or both, or any other condition to
such default becoming an event of default has occurred, in the payment of
principal of or premium, if any, or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Pending Capstar Acquisition" means the acquisition by Holdings of
certain Muzak franchises from Capstar Broadcasting Corporation pursuant to a
Contribution Agreement between Holdings and Capstar Broadcasting Corporation,
dated February 19, 1999, and the subsequent transfer of such assets to the
Company in exchange for equity interests in the Company.
"Permitted Asset Swap" means, with respect to any Person, the
substantially concurrent exchange of assets of such Person for assets of another
Person which are useful to the business of such aforementioned Person.
"Permitted Holders" means each of ABRY III, ABRY II and each Control
Investment Affiliate of ABRY III or ABRY II.
"Permitted Indebtedness" means:
(1) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Senior Credit Facility in an aggregate
principal amount not to exceed $200 million outstanding at any time less
(i) any mandatory prepayment actually made thereunder (to the extent, in
the case of payments of revolving credit borrowings, that the corresponding
commitments have been permanently reduced) or scheduled payments actually
made there-
<PAGE>
-28-
under and (ii) the aggregate amount of Indebtedness of Securitization
Entities in Qualified Securitization Transactions (other than Qualified
Securitization Transactions involving equipment and related assets);
(2) Indebtedness under the Notes and the Guarantees outstanding on
the Issue Date in an aggregate principal amount not to exceed $115 million;
(3) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(4) Indebtedness of the Company to any Guarantor or to any Wholly
Owned Subsidiary that is not a Guarantor and Indebtedness of any Restricted
Subsidiary to the Company or to any Guarantor or to any Wholly Owned
Subsidiary that is not a Guarantor;
(5) Purchase Money Indebtedness that does not in the aggregate exceed
5% of the Company's consolidated total assets;
(6) the incurrence by the Company or any Restricted Subsidiary of
Hedging Obligations that are incurred in the ordinary course of business of
the Company or such Restricted Subsidiary and not for speculative purposes;
provided that, in the case of any Hedging Obligation that relates to (i)
--------
interest rate risk, the notional principal amount of such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligation related and (ii) currency risk, such Hedging
Obligation does not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(7) Refinancing Indebtedness;
(8) Indebtedness of Foreign Restricted Subsidiaries of the Company in
an aggregate principal amount not to ex-
<PAGE>
-29-
ceed $10 million at any one time outstanding; provided the aggregate amount
--------
then outstanding under this clause (8) when added to the aggregate amount
then outstanding under clause (1) above shall not exceed the aggregate
amount permitted under clause (1) above;
(9) guarantees by the Company and its Restricted Subsidiaries of each
other's Indebtedness; provided that such Indebtedness is permitted to be
--------
incurred under this Indenture;
(10) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims;
(11) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in
each case, incurred or assumed in connection with the acquisition or
disposition of any business, assets or a Restricted Subsidiary of the
Company, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition; provided that, in
--------
the case of a disposition, the maximum assumable liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(12) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
<PAGE>
-30-
(13) the ABRY Subordinated Debt;
(14) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is not recourse to the Company or
any Subsidiary of the Company (except for Standard Securitization
Undertakings);
(15) Indebtedness of the Company issued to current or former members
of management of the Company or any of its Restricted Subsidiaries to
finance the repurchase, redemption or other acquisition of Capital Stock of
Holdings pursuant to clause (6) of Section 4.07(b) of this Indenture; and
(16) additional Indebtedness of the Company and its Restricted
Subsidiaries not to exceed $5 million in aggregate principal amount at any
one time outstanding.
"Permitted Investments" means
(1) Investments by the Company or by a Restricted Subsidiary thereof,
in the Company, a Guarantor or a Wholly Owned Subsidiary that is not a
Guarantor;
(2) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment
(a) such Person becomes a Guarantor or a Wholly Owned Subsidiary
that is not a Guarantor or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Company, a Guarantor or a Wholly Owned
Subsidiary that is not a Guarantor;
(3) Investments in cash and Cash Equivalents;
(4) reasonable and customary loans and advances made to employees in
the ordinary course of business;
<PAGE>
-31-
(5) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any Capital Stock, bonds, notes,
debentures, partnership or joint venture interests or other securities that
are issued by a third party to the Company or such Restricted Subsidiary
solely as partial consideration for the consummation of an Asset Sale that
is otherwise permitted under Section 4.09 of this Indenture;
(6) Hedging Obligations entered into in the ordinary course of the
Company's or its Restricted Subsidiaries' business and not for speculative
purposes;
(7) any acquisition of assets to be used in the business of the
Company or any of its Restricted Subsidiaries solely in exchange for the
issuance of Capital Stock (other than Disqualified Capital Stock) of the
Company;
(8) additional Investments not to exceed $5 million at any one time
outstanding;
(9) Investments existing on the Issue Date;
(10) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers;
(11) guarantees by the Company or any Restricted Subsidiary of
Indebtedness otherwise permitted to be incurred by Restricted Subsidiaries
of the Company under this Indenture; and
(12) any Investment by the Company or a Restricted Subsidiary of the
Company in a Securitization Entity or any Investment by a Securitization
Entity in any other Person in connection with a Qualified Securitization
Transaction; provided that any Investment in a Securitization Entity is in
--------
the form of a Purchase Money Note or an equity interest.
<PAGE>
-32-
"Permitted Liens"
(1) Liens on Property or assets of, or any shares of Capital Stock of
or secured indebtedness of, any Person existing at the time such Person
becomes a Restricted Subsidiary of the Company or at the time such Person
is merged into the Company or any of its Restricted Subsidiaries; provided
--------
that such Liens are not incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary of the Company or merging
into the Company or any of its Restricted Subsidiaries,
(2) Liens securing Indebtedness under the Senior Credit Facility and
Liens securing other Senior Indebtedness of the Company or any Guarantor;
provided in each case, such Indebtedness is incurred in compliance with
--------
Section 4.06 of this Indenture,
(3) Liens securing Refinancing Indebtedness; provided that any such
--------
Lien does not extend to or cover any Property, Capital Stock or
Indebtedness other than the Property, shares or debt securing the
Indebtedness so refunded, refinanced or extended,
(4) Liens in favor of the Company or any of its Restricted
Subsidiaries,
(5) Liens securing industrial revenue bonds,
(6) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under this Indenture; provided that
--------
(a) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of the purchase price, or the cost of
installation, construction or improvement, of the Property to which
such Purchase Money Indebtedness relates, and
(b) such Lien does not extend to or cover any Property other than
such item of Property and any improvements on such Property,
<PAGE>
-33-
(7) statutory liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor,
(8) Liens for taxes, assessments or governmental charges that are
being contested in good faith by appropriate proceedings,
(9) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances or title defects or leases or subleases granted to
others in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries,
(10) other Liens securing obligations incurred in the ordinary course
of business which obligations do not exceed $5 million in the aggregate at
any one time outstanding,
(11) Liens existing on the Issue Date and Liens securing the Notes
and the Guarantees,
(12) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including landlord Liens on leased
properties and any Lien securing letters of credit issued in the ordinary
course of business consistent with past practice in connection therewith,
or to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and return-
of-money bonds and other similar obligations,
(13) attachment or judgment Liens not giving rise to an Event of
Default,
<PAGE>
-34-
(14) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory or other
goods,
(15) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other Property
relating to such letters of credit and products and proceeds thereof,
(16) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off,
(17) Liens securing Hedging Obligations with respect to Indebtedness
that is otherwise permitted under this Indenture,
(18) Liens securing Indebtedness of Foreign Restricted Subsidiaries
of the Company incurred in reliance on clause (8) of the definition of
Permitted Indebtedness,
(19) Liens on assets transferred to a Securitization Entity or on
assets of a Securitization Entity, in either case incurred in connection
with a Qualified Securitization Transaction,
(20) Liens arising from filing Uniform Commercial Code financing
statements regarding leases,
(21) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods,
(22) deposits made in the ordinary course of business to secure
liability to insurance carriers,
<PAGE>
-35-
(23) any interest or title of a lessor or a sublessor under an
operating lease,
(24) Liens under licensing agreements for use of intellectual
property entered into in the ordinary course of business,
(25) Liens imposed by law incurred by the Company or any of its
Restricted Subsidiaries in the ordinary course of business, and
(26) any extensions, substitutions, replacements or renewals of the
foregoing.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Purchase Money Indebtedness" means Indebtedness and Capitalized Lease
Obligations of any Person incurred in the normal course of business of such
Person for the purpose of financing all or any part of the purchase price, or
the cost of installation, construction or improvement of, any Property.
"Purchase Money Note" means a promissory note of a Securitization
Entity evidencing a line of credit, which may be
<PAGE>
-36-
irrevocable, from the Company or any Subsidiary of the Company in connection
with a Qualified Securitization Transaction to a Securitization Entity, which
note shall be repaid from cash available to the Securitization Entity, other
than amounts required to be established as reserves pursuant to agreements,
amounts paid to investors in respect of interest, principal and other amounts
owing to such investors and amounts paid in connection with the purchase of
newly generated receivables or newly acquired equipment.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A promulgated under the Securities Act.
"Qualified Securitization Transaction" means any transaction or series
of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether now existing or
arising or acquired in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing such accounts receivable and equipment, all contracts and contract
rights and all guarantees or other obligations in respect of such accounts
receivable and equipment, proceeds of such accounts receivable and equipment and
other assets (including contract rights) which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable and equipment.
"Redeemable Dividend" means, for any dividend or distribution with
regard to Preferred Stock, the quotient of the dividend or distribution divided
by the difference between one and the maximum statutory federal income tax rate
(expressed as a decimal number between 1 and 0) then applicable to the issuer of
such Preferred Stock.
<PAGE>
-37-
"Redemption Date" when used with respect to any Note to be redeemed
means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, modifies, replaces, defers, supplements or extends any Indebtedness
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to the terms of this
Indenture (other than pursuant to clauses (1), (4), (6) and (8) through (16) of
the definition of Permitted Indebtedness), but only to the extent that
(1) the Refinancing Indebtedness is subordinated to the Notes to at
least the same extent as the Indebtedness being refunded, refinanced,
modified, replaced, deferred, supplemented or extended, if at all,
(2) the Refinancing Indebtedness is scheduled to mature either
(a) no earlier than the Indebtedness being refunded, refinanced,
modified, replaced, deferred, supplemented or extended, or
(b) after the maturity date of the Notes,
(3) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a
Weighted Average Life to Maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the Weighted Average Life to
Maturity of the portion of the Indebtedness being refunded, refinanced,
modified, replaced, deferred, supplemented or extended that is scheduled to
mature on or prior to the maturity date of the Notes, and
(4) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the sum of
<PAGE>
-38-
(a) the aggregate principal amount of the Indebtedness being
refunded, refinanced, modified, replaced, deferred, supplemented or
extended,
(b) the amount of accrued and unpaid interest, if any, and
premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced, modified,
replaced, deferred, supplemented or extended and
(c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of March 18, 1999 among the Issuers, the Guarantors and CIBC
Oppenheimer Corp. and Goldman Sachs & Co., as Initial Purchasers.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Restricted Payment" means any of the following:
(1) the declaration or payment of any dividend or any other
distribution or payment on Capital Stock of the Company or any Restricted
Subsidiary of the Company or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Company or
any Restricted Subsidiary of the Company (other than (a) dividends or
distributions payable solely in Capital Stock (other than Disqualified
Capital Stock), and (b) in the case of Restricted Subsidiaries of the
Company, dividends or distributions payable to the Company or to a
Restricted Subsidiary of the Company and to the other holders of Capital
Stock of each such Restricted Subsidiary, in each case on a pro rata
--------
basis),
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than Capital
<PAGE>
-39-
Stock owned by the Company or a Wholly Owned Subsidiary of the Company,
excluding Disqualified Capital Stock),
(3) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for
value of any Indebtedness which is subordinated in right of payment to the
Notes prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment (other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date
of acquisition) other than the ABRY Subordinated Debt,
(4) the making of any Investment or guarantee of any Investment in
any Person other than a Permitted Investment,
(5) any designation of a Restricted Subsidiary as an Unrestricted
Subsidiary (valued at the fair market value of the net assets of such
Restricted Subsidiary) and
(6) forgiveness of any Indebtedness of an Affiliate of the Company
(other than a Restricted Subsidiary) to the Company or a Restricted
Subsidiary of the Company.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
promulgated under the Securities Act; provided that the Trustee shall be
--------
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Restricted Subsidiary" means a Subsidiary of the Company other than
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such action (and
treating any Indebtedness of such Unrestricted Subsidiary or Person as having
been incurred at the time of such action),
<PAGE>
-40-
(1) the Company could have incurred at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.06
of this Indenture, and
(2) no Default or Event of Default shall have occurred and be
continuing or result therefrom.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal property, which Property has been
or is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company makes
an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
or equipment and which is designated by the Board of Directors of the Company
(as provided below) as a Securitization Entity: (a) no portion of the
Indebtedness or any other obligation (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
<PAGE>
-41-
pursuant to Standard Securitization Undertakings or (iii) subjects any Property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons that are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing receivables of such
entity, and (c) to which neither the Company nor any Subsidiary of the Company
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution of
the Company giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing conditions.
"Senior Credit Facility" means one or more credit agreements, loan
agreements or similar agreements providing for working capital advances, term
loans, letter of credit facilities or similar advances, loans, or facilities to
the Company or any of its Subsidiaries, including the Credit and Guaranty
Agreement dated as of March 18, 1999, among the Company, Holdings, certain of
the Company's subsidiaries, the lenders party thereto in their capacities as
lenders thereunder, Goldman Sachs Credit Partners L.P., as Syndication Agent,
Canadian Imperial Bank of Commerce, as Administrative Agent, and Goldman Sachs
Credit Partners L.P. and CIBC Oppenheimer Corp., as Co-Lead Arrangers, initially
providing for term loan and revolving credit facilities including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit facilities and/or related documents may be
further amended, restated, supplemented, renewed, refinanced, replaced,
restructured or otherwise modified from time to time whether or not with the
same agents, trustee, representative lenders or group of lenders or holders, and
ir-
<PAGE>
-42-
respective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include agreements in respect of interest rate agreements and hedging
obligations with lenders party to any Senior Credit Facility and their
affiliates and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Senior
Credit Facility and any and all refundings, refinancings (in whole or in part)
and replacements of any Senior Credit Facility, whether by the same or any other
agents, trustee, representative lenders or lenders or group of lenders,
including one or more agreements (i) extending the maturity of, or increasing
the amount of, any Indebtedness incurred thereunder or contemplated thereby, or
(ii) adding or deleting borrowers or guarantors thereunder, so long as borrowers
and issuers include one or more of the Company and its Restricted Subsidiaries
and their respective successors and assigns,
"Senior Discount Notes" means $75,000,000 aggregate principal amount
at maturity of 13% Senior Discount Notes due 2010 of Holdings and Muzak Holdings
Finance Corp., a Delaware corporation, as co-issuers, in accordance with the
terms of such security as in effect on the Issue Date.
"Senior Discount Notes Indenture" means the indenture pursuant to
which the Senior Discount Notes are issued, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Senior Indebtedness" means (1) all Bank Indebtedness and (2) all
principal of and premium, if any, and interest (including, but not limited to,
interest accruing on or after the filing of any petition in any bankruptcy,
reorganization or similar proceeding relating to the Company or any Restricted
Subsidiary, whether or not a claim for such is allowed in such proceeding) on,
and any and all other fees, fees and expenses of counsel, expense reimbursement
obligations, indemnities and other amounts due pursuant to the terms of all
agreements, indentures, documents and instruments providing for, creating,
securing or evidencing or otherwise entered into in connection with
<PAGE>
-43-
(a) all obligations of the Company with respect to any
Hedging Obligations,
(b) all obligations of the Company to reimburse any bank or other
person in respect of amounts paid under letters of credit, acceptances or
other similar instruments,
(c) all other Indebtedness of the Company or any Guarantor which does
not provide that it is to rank pari passu with or subordinate to the Notes,
---- -----
and
(d) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Senior
Indebtedness described above,
in each case, whether outstanding on the Issue Date or created thereafter.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include
(1) Indebtedness of the Company to any of its Subsidiaries, or to any
Affiliate of the Company or any of such Affiliate's Subsidiaries,
(2) Indebtedness represented by the Notes,
(3) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Senior Indebtedness,
(4) any trade payable arising from the purchase of goods or materials
or for services obtained in the ordinary course of business,
(5) Indebtedness incurred in violation of this Indenture,
(6) Indebtedness represented by Disqualified Capital Stock and
<PAGE>
-44-
(7) any Indebtedness to or guaranteed on behalf of, any shareholders,
Director, officer or employee of the Company or any Subsidiary of the
Company.
"Significant Subsidiary" means, with respect to any Person, any
Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Exchange Act, as such Rule is in effect on the Issue Date.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in an accounts
receivable or equipment transaction.
"Subsidiary" of any specified Person means any corporation,
partnership, limited liability company, joint venture, association or other
business entity, whether now existing or hereafter organized or acquired,
(1) in the case of a corporation, of which more than 50% of the total
voting power of the Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of
its Subsidiaries; or
(2) in the case of a partnership, limited liability company, joint
venture, association or other business entity, with respect to which such
first-named Person or any of its Subsidiaries has the power to direct or
cause the direction of the management and policies of such entity by
contract or otherwise or if in accordance with GAAP such entity is
consolidated with the first-named Person for financial statement purposes.
Notwithstanding the foregoing a charitable trust or foundation organized
pursuant to section 501(c)(3) of the Internal Revenue Code of 1986, as amended,
shall not be a "Subsidiary."
<PAGE>
-45-
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
(15 U.S. Code sections 77aaa-77bbbb) as in effect on the date of this Indenture
(except as provided in Section 8.03 hereof).
"Trust Officer" means any officer of the Trustee in its Corporate
Trust Department with direct responsibility for the administration of the trusts
established hereby and, also, with respect to any particular matter, any other
officer of the Trustee to whom such matter is referred because of such officer's
knowledge of, and familiarity with, the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Unrestricted Subsidiary" means
(1) any Subsidiary of an Unrestricted Subsidiary and
(2) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a Board Resolution of the
Company ;
provided that a Subsidiary may be so classified as an Unrestricted Subsidiary
- - --------
only if
(a) such classification is in compliance with Section 4.07 of this
Indenture,
(b) immediately after giving effect to such classification, the
Company could have incurred at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.06 of this
Indenture,
(c) no Default or Event of Default shall have occurred and be
continuing or result therefrom, and
(d) neither the Company nor any Restricted Subsidiary shall at any
time
<PAGE>
-46-
(i) provide a guarantee of, or similar credit support to, any
Indebtedness of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Indebtedness),
(ii) be directly or indirectly liable for any Indebtedness of
such Subsidiary or
(iii) be directly or indirectly liable for any other Indebtedness
which provides that the holder thereof may (upon notice, lapse of time
or both) declare a default thereon (or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity) upon the
occurrence of a default with respect to any other Indebtedness (other
than Indebtedness assumed by such Subsidiary in connection with the
Electro Systems Acquisition) that is Indebtedness of such Subsidiary
(including any corresponding right to take enforcement action against
such Subsidiary),
except in the case of clause (i) or (ii) to the extent
(i) that the Company or such Restricted Subsidiary could
otherwise provide such a guarantee or incur such Indebtedness (other
than as Permitted Indebtedness) pursuant to Section 4.06 of this
Indenture and
(ii) the provision of such guarantee and the incurrence of such
Indebtedness otherwise would be permitted under Section 4.07 of this
Indenture.
The Trustee shall be given prompt notice by the Company of each Board Resolution
of the Company under this provision, together with a copy of each such Board
Resolution. Electro Systems shall be an Unrestricted Subsidiary as of the Issue
Date.
"U.S. Government Obligations" means (a) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or
<PAGE>
-47-
(b) obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian
with respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt; provided
--------
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or a specific payment of principal or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
Section 1.01. Other Definitions.
------------------
The definitions of the following terms may be found in the sections
indicated as follows:
<PAGE>
-48-
Term Defined in Section
---- ------------------
"Affiliate Transaction"..................................... 4.10
"Agent Members"............................................. 2.14
"Bankruptcy Law"............................................ 6.01
"Business Day".............................................. 12.08
"Certificated Notes"........................................ 2.01
"Change of Control Offer"................................... 4.16
"Change of Control Payment Date"............................ 4.16
"Change of Control Purchase Price".......................... 4.15
"Covenant Defeasance"....................................... 9.03
"Custodian"................................................. 6.01
"Event of Default".......................................... 6.01
"Excess Proceeds Offer"..................................... 4.09
"Excess Proceeds Payment Date".............................. 4.09
"Global Notes".............................................. 2.01
"Guaranteed Obligations..................................... 10.01
"Guarantor Payment Blockage Period"......................... 10.11
"Guarantor Representation".................................. 10.11
"Initial Blockage Period"................................... 11.03
"Initial Guarantee Blockage Period"......................... 10.11
"Legal Defeasance".......................................... 9.02
"Legal Holiday"............................................. 12.08
"Paying Agent".............................................. 2.03
"Payment Blockage Period"................................... 11.03
"Permitted Tax Distributions"............................... 4.07
"Registered Exchange"....................................... 2.02
"Registrar"................................................. 2.03
"Regulation S Global Notes"................................. 2.01
"Representative"............................................ 11.03
"Resale Restriction Termination Date"....................... 2.15
"U.S. Global Notes"......................................... 2.01
Section 1.02. Incorporation by Reference of
Trust Indenture Act.
-----------------------------
Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this In-
<PAGE>
-49-
denture. The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Issuers, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) words used herein implying any gender shall apply to every
gender.
<PAGE>
-50-
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
------------------------------------------
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part of
this Indenture. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. The Issuers may use "CUSIP" numbers in
issuing the Notes. The Issuers shall approve the form of the Notes. Each Note
shall be dated the date of its authentication.
Unless the applicable Holder requests Notes in the form of physical
certificated Notes in registered form ("Certificated Notes"), which shall be
substantially in the form of Exhibit A, Notes offered and sold in reliance on
Rule 144A or in offshore transactions in reliance on Regulation S shall be
issued initially in the form of permanent Global Notes in registered form,
substantially in the form set forth in Exhibit A ("Global Notes"), deposited
with the Depository, duly executed by the Issuers and authenticated by the
Trustee as hereinafter provided and shall bear the legend set forth on Exhibit
B. The aggregate principal amount of any Global Note may from time to time be
increased or decreased by adjustments made on the records of the Depository, as
hereinafter provided.
Notes offered and sold to Qualified Institutional Buyers in reliance
on Rule 144A issued in the form of one or more Global Notes (the "U.S. Global
Note") shall be registered in the name of the Depository or its nominee and
deposited with the Depository, duly executed by the Issuers and authenticated by
the Trustee as hereinafter provided, for credit by the Depository to the
respective accounts of beneficial owners of the Notes represented thereby (or
such other accounts as they may direct).
<PAGE>
-51-
Notes offered and sold in reliance on Regulation S issued in the form
of Global Notes (the "Regulation S Global Note") shall be registered in the name
of the Depository or its nominee, duly executed by the Issuers and authenticated
by the Trustee as hereinafter provided, for credit by the Depository to the
respective accounts of the beneficial owners of the Notes represented thereby
(or such other accounts as they may direct).
The Issuers shall cause the U.S. Global Note and the Regulation S
Global Note to have separate CUSIP and ISIN numbers.
Section 2.02. Execution and Authentication.
----------------------------
The Notes shall be executed on behalf of the Issuers by two Officers
of each of the Issuers or an Officer and the Secretary of each of the Issuers.
Such signature may be either manual or facsimile. The Issuers' seals may be
impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile
form.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authentication agent shall authenticate Notes for
original issue in the aggregate principal amount not to exceed $150,000,000 upon
receipt of an authentication order in the form of an Officers' Certificate;
provided that the aggregate principal amount of Notes on the Issue Date shall
- - --------
not exceed $115,000,000. The aggregate principal amount of Notes outstanding at
any time may not exceed $150,000,000 except as provided in Section 2.07 hereof.
Upon receipt of an authentication order in the form of an Officers' Certificate,
the Trustee shall authenticate an additional series of Notes
<PAGE>
-52-
for issuance in exchange for all Notes previously issued pursuant to an exchange
offer registered under the Securities Act (a "Registered Exchange") or pursuant
to a Private Exchange (as defined in the Registration Rights Agreement).
Exchange Notes (as defined in the Registration Rights Agreement) may have such
distinctive series designation and "CUSIP" numbers as and such changes in the
form thereof as are specified in the Officers' Certificate referred to in the
preceding sentence. Exchange Notes issued pursuant to a Registered Exchange
shall not bear the Private Placement Legend. The Notes shall be issuable only in
registered form without coupons and only in denominations of $1,000 and integral
multiples thereof.
The Trustee may appoint an authenticating agent to authenticate Notes.
Any such appointment shall be evidenced by an instrument signed by an authorized
officer of the Trustee, a copy of which shall be furnished to the Issuers. An
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same right as an
Agent to deal with the Issuers or an Affiliate of any Issuer.
Section 2.03. Registrar and Paying Agent.
--------------------------
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency located in the Borough of Manhattan, City of New York, State of New
York where Notes may be presented for payment ("Paying Agent") and an office or
agency where notices and demands to or upon the Issuers in respect of the Notes
and this Indenture may be served. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Registrar shall provide the
Issuers a current copy of such register from time to time upon request of the
Issuers. The Issuers may have one or more co-registrars and one or more
additional paying agents. None of the Issuers nor any Affiliate of the Issuers
may act as Paying Agent. The Issuers may change any Paying Agent, Registrar or
co-registrar without notice to any Noteholder.
<PAGE>
-53-
The Issuers shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Issuers shall notify the Trustee of the name and address of any such Agent. If
the Issuers fail to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fail to give the foregoing notice, the Trustee shall
act as such. The Issuers initially appoint the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
-----------------------------------
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on Notes (whether such assets have
been distributed to it by the Issuers or any other obligor on the Notes), and
shall notify the Trustee in writing of any Default in making any such payment.
The Issuers at any time may require a Paying Agent to distribute all assets held
by it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to forthwith distribute to the Trustee
all assets so held in trust by such Paying Agent together with a complete
accounting of such sums. Upon doing so, the Paying Agent shall have no further
liability for such assets.
Section 2.05. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Issuers shall furnish to
the Trustee on or before each March 1 and September 1 in each year, and at such
other times as the Trustee may request in writing, a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Noteholders.
<PAGE>
-54-
Section 2.06. Transfer and Exchange.
---------------------
When a Note is presented to the Registrar with a request to register
the transfer thereof, the Registrar shall register the transfer as requested if
the requirements of applicable law are met and, when Notes are presented to the
Registrar with a request to exchange them for an equal principal amount of Notes
of other authorized denominations, the Registrar shall make the exchange as
requested; provided that every Note presented or surrendered for registration of
--------
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Issuers and the Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing.
To permit transfers and exchanges, upon surrender of any Note for registration
of transfer at the office or agency maintained pursuant to Section 2.03 hereof,
the Issuers shall execute and the Trustee shall authenticate Notes at the
Registrar's request. Any exchange or transfer shall be without charge, except
that the Issuers may require payment by the Holder of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation to a
transfer or exchange, but this provision shall not apply to any exchange
pursuant to Sections 2.09, 3.06 or 8.05 hereof. The Trustee shall not be
required to register transfers of Notes or to exchange Notes for a period of 15
days before selection of any Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Notes called or being called
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Depository of
such Global Note (or its agent), and that ownership of a beneficial interest in
the Global Note shall be required to be reflected in a book entry.
<PAGE>
-55-
Section 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder
presents evidence to the satisfaction of the Issuers and the Trustee that the
Note has been lost, destroyed or wrongfully taken, the Issuers shall issue and
the Trustee shall authenticate a replacement Note. An indemnity bond may be
required by the Issuers or the Trustee that is sufficient in the judgment of the
Issuers and the Trustee to protect the Issuers, the Trustee or any Agent from
any loss which any of them may suffer if a Note is replaced. In every case of
destruction, loss or theft, the applicant shall also furnish to the Issuers and
to the Trustee evidence to their satisfaction of the destruction, loss or the
theft of such Note and the ownership thereof. Each of the Issuers and the
Trustee may charge for its expenses in replacing a Note. Every replacement Note
is an additional obligation of the Issuers. In the event any such mutilated,
lost, destroyed or wrongfully taken Note has become due and payable, the Issuers
in their discretion may pay such Note instead of issuing a new Note in
replacement thereof. The provisions of this Section 2.07 are exclusive and
shall preclude (to the extent lawful) all other rights and remedies with respect
to replacement or payment of mutilated, lost, destroyed or wrongfully taken
Notes.
Section 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding until the Issuers and the Trustee receive proof satisfactory to each
of them that the replaced Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and accrued interest on
Notes payable on that date,
<PAGE>
-56-
then on and after that date such Notes cease to be outstanding and interest on
them ceases to accrue.
Subject to Section 12.06, a Note does not cease to be outstanding
solely because the Issuers or any Affiliate of an Issuer hold the Note.
Section 2.09. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Issuers may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form, and shall carry all rights, of definitive Notes but
may have variations that the Issuers consider appropriate for temporary Notes.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes presented to it.
Section 2.10. Cancellation.
------------
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and retain or, upon written request of the Issuers, may destroy or
return to the Issuers in accordance with its normal practice, all Notes
surrendered for transfer, exchange, payment or cancellation and if such Notes
are destroyed, deliver a certificate of destruction to the Issuers. Subject to
Section 2.07 hereof, the Issuers may not issue new Notes to replace Notes in
respect of which they have previously paid all principal, premium and interest
accrued thereon, or delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
------------------
If the Issuers default in a payment of interest on the Notes, they
shall pay the defaulted amounts, plus any interest payable on defaulted amounts
pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Issuers shall fix the special record
<PAGE>
-57-
date and payment date in a manner satisfactory to the Trustee and provide the
Trustee at least 20 days notice of the proposed amount of defaulted interest to
be paid and the special payment date. At least 15 days before the special record
date, the Issuers shall mail or cause to be mailed to each Noteholder at its
address as it appears on the Notes register maintained by the Registrar a notice
that states the special record date, the payment date (which shall be not less
than five nor more than ten days after the special record date), and the amount
to be paid. In lieu of the foregoing procedures, the Issuers may pay defaulted
interest in any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
-----------------
Prior to 10:00 a.m., New York City time, on each Interest Payment
Date, Redemption Date and Maturity Date, the Issuers shall have deposited with
the Paying Agent in immediately available funds U.S. legal tender sufficient to
make payments, if any, due on such Interest Payment Date, Redemption Date or
Maturity Date, as the case may be, in a timely manner which permits the Trustee
to remit payment to the Holders on such Interest Payment Date, Redemption Date
or Maturity Date, as the case may be. The principal and interest on Global
Notes shall be payable to the Depository or its nominee, as the case may be, as
the sole registered owner and the sole holder of the Global Notes represented
thereby. The principal and interest on Notes in certificated form shall be
payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
------------
The Issuers in issuing the Notes may use one or more "CUSIP" numbers,
and if so, the Trustee shall use such CUSIP numbers in notices of redemption or
exchange as a convenience to Holders, provided that any such notice may state
--------
that no representation is made as to the correctness or accuracy of the CUSIP
numbers printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes.
<PAGE>
-58-
Section 2.14. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository and (ii) bear legends as set
forth in Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository or under the Global Note, and the Depository may
be treated by the Issuers, the Trustee and any agent of the Issuers or the
Trustee as the absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder.
(b) Interests of beneficial owners in the Global Notes may be
transferred or exchanged for Certificated Notes in accordance with the rules and
procedures of the Depository and the provisions of Section 2.15. In addition,
Certificated Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes if (i) the Depository (x) notifies
the Issuers that it is unwilling or unable to continue as Depository for any
Global Note or (y) has ceased to be a clearing company registered under the
Exchange Act and, in each case, a successor depositary is not appointed by the
Issuers within 90 days of such notice, (ii) the Issuers, at their option, notify
the Trustee in writing that they elect to cause the issuance of Certificated
Notes, or (iii) a Default or an Event of Default has occurred and is continuing
and the Registrar has received a written request from the Depository to issue
Certificated Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Certificated Notes are to be
issued) reflect on
<PAGE>
-59-
its books and records the date and a decrease in the principal amount of the
Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Issuers shall execute,
and the Trustee shall upon receipt of a written order from the Issuers
authenticate and make available for delivery, one or more Certificated Notes of
like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and the Issuers shall execute,
and the Trustee shall, upon receipt of an authentication order from the Issuers
in the form of an Officers' Certificate, authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Certificated Notes of authorized denominations.
(e) Any Certificated Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or
(d) shall, except as otherwise provided by Section 2.15, bear the Private
Placement Legend.
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 2.15. Registration of Transfers and Exchanges.
----------------------------------------
(a) Transfer and Exchange of Certificated Notes. When Certificated
-------------------------------------------
Notes are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Certificated Notes; or
<PAGE>
-60-
(ii) to exchange such Certificated Notes for an equal principal
amount of Certificated Notes of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.15 for such transactions are met; provided, however, that the
-------- -------
Certificated Notes presented or surrendered for registration of transfer or
exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Certificated Notes the offer and sale of which
have not been registered under the Securities Act and are presented for
transfer or exchange prior to (x) the date which is two years after the
later of the date of original issue and the last date on which any Issuer
or any Affiliate of an Issuer was the owner of such Note, or any
predecessor thereto and (y) such later date, if any, as may be required by
any subsequent change in applicable law (the "Resale Restriction
Termination Date"), such Certificated Notes shall be accompanied, in the
sole discretion of the Issuers, by the following additional information and
documents, as applicable:
(A) if such Certificated Note is being delivered to the Registrar
or co-Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit C hereto); or
---------
(B) if such Certificated Note is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a certification to
that effect (substantially in the form of Exhibit C hereto); or
---------
<PAGE>
-61-
(C) if such Certificated Note is being transferred in reliance on
Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit C hereto) and a transferor
---------
certificate for Regulation S transfers substantially in the form of
Exhibit D-1 hereto; or
-----------
(D) if such Certificated Note is being transferred to an
Institutional Accredited Investor, delivery of certification
substantially in the form of Exhibit C hereto, a certificate of the
---------
transferee in substantially the form of Exhibit D-2 and an Opinion of
-----------
Counsel and/or other information reasonably satisfactory to the
Issuers to the effect that such transfer is in compliance with the
Securities Act; or
(E) if such Certificated Note is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to that
effect substantially in the form of Exhibit C hereto; or
---------
(F) if such Certificated Note is being transferred in reliance on
another exemption from the registration requirements of the Securities
Act, a certification to that effect (substantially in the form of
Exhibit C hereto) and an Opinion of Counsel reasonably acceptable to
---------
the Issuers to the effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Certificated Note for a Beneficial
----------------------------------------------------------------
Interest in a Global Note. A Certificated Note may not be exchanged for a
- - -------------------------
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of
a Certificated Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) in the case of Certificated Notes, the offer and sale of which
have not been registered under the Securi-
<PAGE>
-62-
ies Act and which are presented for transfer prior to the Resale
Restriction Termination Date, certification, substantially in the form of
Exhibit C hereto, that such Certificated Note is being transferred (I) to a
---------
Qualified Institutional Buyer or (II) in an offshore transaction in
reliance on Regulation S (and in the case of this clause II, the Issuers
shall have received a transferor certificate for Regulation S transfers
substantially in the form of Exhibit D-1 hereto); and
-----------
(B) written instructions from the Holder thereof directing the
Registrar or co-Registrar to make, or to direct the Depository to make, an
endorsement on the applicable Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global Note,
then the Registrar or co-Registrar shall cancel such Certificated Note and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Notes represented by the applicable Global
Note to be increased accordingly. If no Global Note representing Notes held by
Qualified Institutional Buyers or Persons acquiring Notes in offshore
transactions in reliance on Regulation S, as the case may be, is then
outstanding, the Issuers shall issue and the Trustee shall, upon receipt of an
authentication order in the form of an Officers' Certificate in accordance with
Section 2.02, authenticate such a Global Note in the appropriate principal
amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
-------------------------------------
of Global Notes or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depository therefor. Upon
receipt by the Registrar or co-Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a U.S. Global
Note or Regulation S Global Note, as the case may be, to another
<PAGE>
-63-
type of Global Note, together with the applicable Global Notes (or, if the
applicable type of Global Note required to represent the interest as requested
to be transferred is not then outstanding, only the Global Note representing the
interest being transferred), the Registrar or Co-Registrar shall cancel such
Global Notes (or Global Note) and the Issuers shall issue and the Trustee shall,
upon receipt of an authentication order in the form of an Officers' Certificate
in accordance with Section 2.02, authenticate new Global Notes of the types so
cancelled (or the type so cancelled and applicable type required to represent
the interest as requested to be transferred) reflecting the applicable increase
and decrease of the principal amount of Notes represented by such types of
Global Notes, giving effect to such transfer. If the applicable type of Global
Note required to represent the interest as requested to be transferred is not
outstanding at the time of such request, the Issuers shall issue and the Trustee
shall, upon written instructions from the Issuers in accordance with Section
2.02, authenticate a new Global Note of such type in principal amount equal to
the principal amount of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Note for a
--------------------------------------------------------
Certificated Note. (i) Any Person having a beneficial interest in a Global Note
- - -----------------
may upon request exchange such beneficial interest for a Certificated Note.
Upon receipt by the Registrar or co-Registrar of written instructions, or such
other form of instructions as is customary for the Depository, from the
Depository or its nominee on behalf of any Person having a beneficial interest
in a Global Note and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest containing
registration instructions and, in the case of any such transfer or exchange of a
beneficial interest in Notes the offer and sale of which have not been
registered under the Securities Act and which Notes are presented for transfer
or exchange prior to the Resale Restriction Termination Date, the following
additional information and documents:
<PAGE>
-64-
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a certification
from such Person to that effect (substantially in the form of Exhibit C
---------
hereto); or
(B) if such beneficial interest is being transferred to a Qualified
Institutional Buyer in accordance with Rule l44A, a certification to that
effect (substantially in the form of Exhibit C hereto); or
---------
(C) if such beneficial interest is being transferred in reliance on
Regulation S, delivery of a certification to that effect (substantially in
the form of Exhibit C hereto) and a transferor certificate for Regulation S
---------
transfers substantially in the form of Exhibit D-1 hereto; or
-----------
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of certification substantially
in the form of Exhibit C hereto, a certificate of the transferee in
---------
substantially the form of Exhibit D-2 and an Opinion of Counsel and/or
-----------
other information reasonably satisfactory to the Issuers to the effect that
such transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to that
effect substantially in the form of Exhibit C hereto; or
---------
(F) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the Securities Act,
a certification to that effect (substantially in the form of Exhibit C
---------
hereto) and an Opinion of Counsel reasonably satisfactory to the Issuers to
the effect that such transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the standing
instructions and procedures existing between
<PAGE>
-65-
the Depository and the Registrar or co-Registrar, the aggregate principal amount
of the applicable Global Note to be reduced and, following such reduction, the
Issuers will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate in accordance with Section 2.02, the Trustee will
authenticate and deliver to the transferee a Certificated Note in the
appropriate principal amount.
(ii) Certificated Notes issued in exchange for a beneficial interest
in a Global Note pursuant to this Section 2.15(d) shall be registered in such
names and in such authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Registrar or co-Registrar in writing. The Registrar or co-
Registrar shall deliver such Certificated Notes to the Persons in whose names
such Certificated Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
-----------------------------------------------------
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Registrar or
co-Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar or co-Registrar shall deliver only Notes that
bear the Private Placement Legend unless, and the Trustee is hereby authorized
to deliver Notes without the Private Placement Legend if, (i) the Resale
Restriction Termination Date shall have occurred, (ii) there is delivered to the
Trustee an Opinion of Counsel reasonably satisfactory to the Issuers and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities
<PAGE>
-66-
Act or (iii) such Note has been sold pursuant to an effective registration
statement under the Securities Act.
(g) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Issuers shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
Section 2.16. Joint and Several Liability.
---------------------------
Except as otherwise expressly provided herein, the Issuers shall be
jointly and severally liable for the performance of all obligations and
covenants under this Indenture and the Notes.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
------------------
If the Issuers elect to redeem Notes pursuant to Section 3.07 hereof,
at least 60 days prior to the Redemption Date or during such other period as the
Trustee may agree to, the Issuers shall notify the Trustee in writing of the
Redemption Date, the principal amount of Notes to be redeemed and the redemption
price, and deliver to the Trustee an Officers' Certificate stating that such
redemption will comply with the conditions contained in Section 3.07 hereof, as
appropriate.
<PAGE>
-67-
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
In the event that less than all of the Notes are to be redeemed at any
time, selection of the Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a pro rata basis, by lot or by such method as
--------
the Trustee shall deem fair and appropriate; provided, that no Notes of $1,000
--------
principal amount or less shall be redeemed in part. The Trustee may select for
redemption portions of the principal of the Notes that have denominations larger
than $1,000. The Trustee shall promptly notify the Issuers of the Notes
selected for redemption and, in the case of any Notes selected for partial
redemption, the principal amount thereof to be redeemed. For all purposes of
this Indenture unless the context otherwise requires, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
Section 3.03. Notice of Redemption.
--------------------
Notice of redemption shall be mailed by first class mail at least 30
but not more than 60 calendar days before the Redemption Date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed.
The notice shall identify the Notes to be redeemed (including the
CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest, if any,
to be paid;
(3) that, if any Note is being redeemed in part, the portion of the
principal amount at maturity (equal to $1,000 in principal amount or any
integral multiple
<PAGE>
-68-
thereof) of such Note to be redeemed and that, on and after the Redemption
Date, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion thereof will be issued;
(4) the name, address and telephone number of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent at the address specified to collect the redemption price plus
accrued interest, if any;
(6) that, unless the Issuers default in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the redemption price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Paying Agent;
(7) the paragraph of Section 3.07 hereof pursuant to which the Notes
called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
Section 3.04. Effect of Notice of Redemption.
------------------------------
Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including any premium, plus accrued interest to the
Redemption Date, if any. Upon surrender to the Paying Agent, such Notes shall
be paid at the redemption price, including any premium, plus accrued interest to
the Redemption Date, if any, provided that if the Redemption Date is after a
--------
regular interest payment record date and on or prior to the Interest Payment
Date, the accrued interest shall be payable to the Holder of the redeemed Notes
registered on the relevant record date.
<PAGE>
-69-
Section 3.05. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 a.m., New York City time, on each Redemption
Date, the Issuers shall have deposited with the Paying Agent in immediately
available funds U.S. legal tender sufficient to pay the redemption price of and
accrued interest on all Notes to be redeemed on that date.
On and after any Redemption Date, if U.S. legal tender sufficient to
pay the redemption price of and accrued interest on Notes called for redemption
shall have been made available in accordance with the preceding paragraph, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. If any Note called for redemption shall
not be so paid, interest will continue to accrue and be paid, from the
Redemption Date until such redemption payment is made, on the unpaid principal
of the Note and any interest not paid on such unpaid principal, in each case, at
the rate and in the manner provided in the Notes.
Section 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
Section 3.07. Optional Redemption.
--------------------
(a) The Issuers may redeem the Notes that are redeemable at their
option, in whole at any time or in part from time to time on or after March 15,
2004 at the redemption prices (expressed as percentages of the principal amount
thereof), set forth below plus accrued and unpaid interest, if any, to the
Redemption Date, if redeemed during the twelve-month period beginning on March
15 of each year indicated below:
<PAGE>
-70-
Year Percentage
---- ----------
2004............................... 104.938%
2005............................... 103.292%
2006............................... 101.646%
2007 and thereafter................ 100.000%
(b) The Issuers may redeem up to 35% of the principal amount of the
Notes originally issued under this Indenture, at any time and from time to time
prior to March 15, 2002, at a redemption price equal to 109.875% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest, if
any, to the Redemption Date out of the net cash proceeds of one or more Equity
Offerings; provided, that at least 65% of the principal amount of the Notes
--------
originally issued under this Indenture remains outstanding immediately after any
such redemption (it being expressly agreed that for purposes of determining
whether this condition is satisfied, Notes owned by the Issuers or any of its
Affiliates shall be deemed not to be outstanding). In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Issuers shall
make such redemption not more than 60 days following the closing of any such
Equity Offering.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
----------------
The Issuers shall pay the principal of and interest (including all
Additional Interest (as defined in the Registration Rights Agreement) as
provided in the Registration Rights Agreement on the Notes on the dates and in
the manner provided in the Notes and this Indenture. An installment of
principal or interest shall be considered paid on the date it is due if the
Trustee or Paying Agent holds, for the benefit of the Holders, on that date U.S.
legal tender designated for and sufficient to pay such installment.
Exhibit 4.6
================================================================================
MUZAK LLC
and
MUZAK FINANCE CORP.,
as Issuers,
The GUARANTORS named herein
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
---------------------
INDENTURE
Dated as of February 2, 2000
---------------------
Up to $50,000,000 aggregate principal amount of
Senior Subordinated Floating Rate Notes due 2009
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
<S> <C>
TIA Indenture
Section Section
- ------- --------
310(a)(1)....................................................................... 7.10
(a)(2)....................................................................... 7.10
(a)(3)....................................................................... N.A.
(a)(4)....................................................................... N.A.
(b).......................................................................... 7.08; 7.10; 12.02
(b)(1)....................................................................... 7.10
(b)(9)....................................................................... 7.10
(c).......................................................................... N.A.
311(a).......................................................................... 7.11
(b).......................................................................... 7.11
(c).......................................................................... N.A.
312(a).......................................................................... 2.05
(b).......................................................................... 10.03
(c).......................................................................... 10.03
313(a).......................................................................... 7.06
(b)(1)....................................................................... 7.06
(b)(2)....................................................................... 7.06
(c).......................................................................... 12.02
(d).......................................................................... 7.06
314(a).......................................................................... 4.02; 4.04; 12.02
(b).......................................................................... N.A.
(c)(1)....................................................................... 12.04; 12.05
(c)(2)....................................................................... 12.04; 12.05
(c)(3)....................................................................... N.A.
(d).......................................................................... N.A.
(e).......................................................................... 10.05
(f).......................................................................... N.A.
315(a).......................................................................... 7.01; 7.02
(b).......................................................................... 7.05; 10.02
(c).......................................................................... 7.01
(d).......................................................................... 6.05; 7.01; 7.02
(e).......................................................................... 6.11
316(a) (last sentence).......................................................... 12.06
(a)(1)(A).................................................................... 6.05
(a)(1)(B).................................................................... 6.04
(a)(2)....................................................................... 8.02
(b).......................................................................... 6.07
(c).......................................................................... 8.04
317(a)(1)....................................................................... 6.08
(a)(2)....................................................................... 6.09
(b).......................................................................... 7.12
318(a).......................................................................... 12.01
</TABLE>
N.A. means Not Applicable
- --------------------
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions.......................................................................1
Section 1.01. Other Definitions................................................................42
Section 1.02. Incorporation by Reference of
Trust Indenture Act...........................................................43
Section 1.03. Rules of Construction............................................................43
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.......................................44
Section 2.02. Execution and Authentication.....................................................45
Section 2.03. Registrar, Paying Agent and Calculation Agent....................................46
Section 2.04. Paying Agent to Hold Money in Trust..............................................47
Section 2.05. Noteholder Lists.................................................................47
Section 2.06. Transfer and Exchange............................................................47
Section 2.07. Replacement Notes................................................................48
Section 2.08. Outstanding Notes................................................................49
Section 2.09. Temporary Notes..................................................................49
Section 2.10. Cancellation.....................................................................49
Section 2.11. Defaulted Interest...............................................................50
Section 2.12. Deposit of Moneys................................................................50
Section 2.13. CUSIP Number.....................................................................50
Section 2.14. Book-Entry Provisions for Global Notes...........................................51
Section 2.15. Registration of Transfers and Exchanges..........................................52
Section 2.16. Joint and Several Liability......................................................58
Section 2.17. Ranking of Notes and Guarantees Relative to Existing Notes and
Related Guarantees............................................................58
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee...............................................................58
Section 3.02. Selection by Trustee of Notes to Be Redeemed.....................................58
Section 3.03. Notice of Redemption.............................................................59
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 3.04. Effect of Notice of Redemption...................................................60
Section 3.05. Deposit of Redemption Price......................................................60
Section 3.06. Notes Redeemed in Part...........................................................61
Section 3.07. Redemption.......................................................................61
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.................................................................63
Section 4.02. Provision of Financial Statements and Other Information..........................63
Section 4.03. Waiver of Stay, Extension or Usury Laws..........................................64
Section 4.04. Compliance Certificate; Notice of Default; Tax Information.......................65
Section 4.05. Taxes............................................................................66
Section 4.06. Limitation on Additional Indebtedness............................................66
Section 4.07. Limitation on Restricted Payments................................................67
Section 4.08. Limitation on Other Senior Subordinated Indebtedness.............................71
Section 4.09. Limitation on Certain Asset Sales................................................72
Section 4.10. Limitation on Transactions with Affiliates.......................................76
Section 4.11. Limitations on Liens.............................................................78
Section 4.12. Limitations on Investments.......................................................79
Section 4.13. Limitation on Sale and Lease-Back Transactions...................................79
Section 4.14. Payments for Consent.............................................................79
Section 4.15. Corporate Existence..............................................................80
Section 4.16. Change of Control................................................................80
Section 4.17. Maintenance of Office or Agency..................................................83
Section 4.18. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.......................................................83
Section 4.19. Limitation on Conduct of Business................................................86
Section 4.20. Compliance with Laws.............................................................86
Section 4.21. Limitation on Preferred Stock of Restricted Subsidiaries.........................86
Section 4.22. Limitation on Creation of Subsidiaries...........................................86
Section 4.23. Maintenance of Properties and Insurance..........................................87
Section 4.24. Pending ABRY Equity Contribution.................................................88
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 5
SUCCESSOR CORPORATION
Page
----
<S> <C> <C>
Section 5.01. Limitation on Consolidation Merger and Sale of Assets............................88
Section 5.02. Successor Person Substituted.....................................................89
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................................90
Section 6.02. Acceleration.....................................................................92
Section 6.03. Other Remedies...................................................................93
Section 6.04. Waiver of Past Defaults and Events of Default....................................93
Section 6.05. Control by Majority..............................................................94
Section 6.06. Limitation on Suits..............................................................94
Section 6.07. Rights of Holders to Receive Payment.............................................95
Section 6.08. Collection Suit by Trustee.......................................................95
Section 6.09. Trustee May File Proofs of Claim.................................................95
Section 6.10. Priorities.......................................................................96
Section 6.11. Undertaking for Costs............................................................96
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................................................97
Section 7.02. Rights of Trustee................................................................99
Section 7.03. Individual Rights of Trustee....................................................100
Section 7.04. Trustee's Disclaimer............................................................100
Section 7.05. Notice of Defaults..............................................................100
Section 7.06. Reports by Trustee to Holders...................................................100
Section 7.07. Compensation and Indemnity......................................................101
Section 7.08. Replacement of Trustee..........................................................102
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion........................103
Section 7.10. Eligibility; Disqualification...................................................103
Section 7.11. Preferential Collection of Claims Against Issuers...............................104
Section 7.12. Paying Agents...................................................................104
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders......................................................104
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 8.02. With Consent of Holders.........................................................105
Section 8.03. Compliance with Trust Indenture Act.............................................107
Section 8.04. Revocation and Effect of Consents...............................................107
Section 8.05. Notation on or Exchange of Notes................................................108
Section 8.06. Trustee to Sign Amendments, etc.................................................108
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Satisfaction and Discharge of Indenture.........................................108
Section 9.02. Legal Defeasance................................................................109
Section 9.03. Covenant Defeasance.............................................................110
Section 9.04. Conditions to Defeasance or Covenant Defeasance.................................110
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions...............................................113
Section 9.06. Reinstatement...................................................................114
Section 9.07. Moneys Held by Paying Agent.....................................................114
Section 9.08. Moneys Held by Trustee..........................................................115
ARTICLE 10
GUARANTEES
Section 10.01. Guarantees......................................................................115
Section 10.02. Limitation on Liability.........................................................117
Section 10.03. Successors and Assigns..........................................................118
Section 10.04. No Waiver.......................................................................118
Section 10.05. Modification....................................................................118
Section 10.06. Release of Guarantor............................................................119
Section 10.07. Execution of Supplemental Indenture for Future Guarantors.......................119
Section 10.08. Execution and Delivery of Guarantees............................................120
Section 10.09. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness.............120
Section 10.10. Payment Over of Proceeds upon Dissolution, etc., of a Guarantor.................121
Section 10.11. Suspension of Guaranteed Obligations When Guarantor Senior
Indebtedness in Default......................................................123
Section 10.12. Subrogation to Rights of Holders of Guarantor Senior Indebtedness...............125
Section 10.13. Guarantee Subordination Provisions Solely to Define Relative Rights.............126
Section 10.14. Application of Certain Article 11 Provisions....................................127
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 11
SUBORDINATION OF NOTES
<S> <C> <C>
Section 11.01. Notes Subordinate to Senior Indebtedness........................................127
Section 11.02. Payment Over of Proceeds upon Dissolution, etc..................................128
Section 11.03. Suspension of Payment When Senior Indebtedness in Default.......................130
Section 11.04. Trustee's Relation to Senior Indebtedness.......................................132
Section 11.05. Subrogation of Rights of Holders of Senior Indebtedness.........................132
Section 11.06. Provisions Solely to Define Relative Rights.....................................133
Section 11.07. Trustee to Effectuate Subordination.............................................134
Section 11.08. No Waiver of Subordination Provisions...........................................134
Section 11.09. Notice to Trustee...............................................................135
Section 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent..................136
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation
of Trustee's Rights..........................................................137
Section 11.12. Article Applicable to Paying Agents.............................................137
Section 11.13. No Suspension of Remedies.......................................................137
Section 11.14. Acceleration of Payment of Notes................................................137
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls....................................................138
Section 12.02. Notices.........................................................................138
Section 12.03. Communications by Holders with Other Holders....................................140
Section 12.04. Certificate and Opinion as to Conditions Precedent..............................140
Section 12.05. Statements Required in Certificate and Opinion..................................140
Section 12.06. When Treasury Notes Disregarded.................................................141
Section 12.07. Rules by Trustee and Agents.....................................................141
Section 12.08. Business Days; Legal Holidays...................................................141
Section 12.09. Governing Law...................................................................141
Section 12.10. No Adverse Interpretation of Other Agreements...................................142
Section 12.11. No Recourse Against Others......................................................142
Section 12.12. Successors......................................................................142
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 12.13. Multiple Counterparts...........................................................142
Section 12.14. Table of Contents, Headings, etc................................................142
Section 12.15. Separability....................................................................143
EXHIBITS
- --------
Exhibit A. Form of Note............................................................................A-1
Exhibit B. Form of Legend for Global Notes.........................................................B-1
Exhibit C. Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB
Accredited Investors....................................................................C-1
Exhibit D. Form of Certificate to Be Delivered in Connection with Transfers Pursuant
to Regulation S.........................................................................D-1
Exhibit E. Form of Guarantee.......................................................................E-1
Exhibit F. Form of Supplemental Indenture..........................................................F-1
</TABLE>
-vi-
<PAGE>
INDENTURE, dated as of February 2, 2000, among MUZAK LLC, a
Delaware limited liability company (the "Company"), MUZAK FINANCE CORP., a
Delaware corporation ("Finance Corp." and, together with the Company, the
"Issuers"), each of the Guarantors (as defined herein) and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts banking corporation, as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Issuers'
Senior Subordinated Floating Rate Notes due 2009.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"ABRY" means ABRY Partners, Inc., a Delaware corporation.
"ABRY Equity Contributions" means, collectively, the New ABRY
Equity Contribution and the Pending ABRY Equity Contribution.
"ABRY Management Agreement" means the Management Agreement
dated as of October 6, 1998, and as amended prior to the Issue Date, between
ABRY and the Company.
"ABRY Subordinated Debt" means Indebtedness of the Company in
principal amount not to exceed $30 million in the aggregate at any time
outstanding (a) that is owed to ABRY III, ABRY, MEM Holdings, Inc. or any other
investment fund controlled by ABRY, (b) as to which the payment of principal of
(and premium, if any) and interest and other payment obligations in respect of
such Indebtedness shall be subordinate to the prior payment in full of the
Company's Obligations under the Notes such that no payments of principal (or
premium, if any) or interest on or otherwise due in respect of such Indebtedness
may be permitted for so long as any Default or Event of Default shall have
occurred and be continuing, (c) that shall automatically convert into common
equity of Holdings within 18 months of the date of issuance thereof, unless
refinanced, and (d) the terms of which have been determined to be fair and
reasonable to the Company as determined in good faith by the Board
<PAGE>
-2-
of Directors of the Company and evidenced by a Board Resolution delivered to the
Trustee.
"ABRY II" means ABRY Broadcast Partners II, L.P., a Delaware
limited partnership.
"ABRY III" means ABRY Broadcast Partners III, L.P., a Delaware
limited partnership.
"Acquired Indebtedness" means Indebtedness of a Person
(including an Unrestricted Subsidiary) existing at the time such Person becomes
a Restricted Subsidiary or is merged into or consolidated with any other Person
or which is assumed in connection with the acquisition of assets from such
Person and, in each case, whether or not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary or such merger, consolidation or acquisition.
"Acquisition EBITDA" means, with respect to any Asset
Acquisition, (i) EBITDA attributable to the assets to be acquired in such Asset
Acquisition for the same fiscal quarter utilized in determining "Consolidated
Leverage Ratio" plus (ii) the projected, quantifiable cost reductions expected
to be realized and non-recurring costs and expenses, in each case, in connection
with such Asset Acquisition and as a result of, in the case of cost reductions,
an established program of cost reductions adopted in good faith by the Board of
Directors of the Company. For purposes of the foregoing, cost reductions and
non-recurring costs and expenses, in each case, shall be calculated on a pro
forma basis as if such cost reductions and non-recurring costs and expenses, in
each case, had been implemented at the beginning of such fiscal quarter. Prior
to the consummation of any transaction requiring the inclusion of Acquisition
EBITDA in the calculation of Consolidated Leverage Ratio, the Company shall
deliver to the Trustee an Officers' Certificate indicating the cost reductions
and non-recurring costs and expenses, in each case, taken into account in
determining Acquisition EBITDA and the assumptions underlying such cost
reductions and non-recurring costs and expenses.
"Additional Notes" means any Notes issued as pay-in-kind
interest on outstanding Notes pursuant to paragraph 1 of Exhibit A and
authenticated and delivered under this Indenture pursuant to Section 2.02 of
this Indenture.
"Adjusted Net Assets" of any Person at any date shall mean the
lesser of
<PAGE>
-3-
(1) the amount by which the fair salable value of the assets
of such Person at such date exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after giving
effect to all other fixed and contingent liabilities), but excluding
liabilities under the Guarantee of such Person at such date, and
(2) the amount by which the fair salable value of the assets
of such Person at such date exceeds the amount that will be required to
pay the probable liability of such Person on its debts (after giving
effect to all other fixed and contingent liabilities and after giving
effect to any collection from any Subsidiary of such Person in respect
of the obligations of such Person under the Guarantee of such Person),
excluding Indebtedness in respect of the Guarantee of such Person, as
they become absolute and matured.
"Affiliate" means, with respect to any specific Person, any
other Person that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by," and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that, for purposes of Section
4.10 of this Indenture, beneficial ownership of at least 10% of the voting
securities of a Person, either directly or indirectly, shall be deemed to be
control. Notwithstanding the foregoing, no Person (other than the Company or any
Subsidiary of the Company) in whom a Securitization Entity makes an Investment
in connection with a Qualified Securitization Transaction shall be deemed to be
an Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"Agent" means any Registrar, Paying Agent, co-registrar,
Calculation Agent or agent for service of notices and demands.
"Asset Acquisition" means
(1) an Investment by the Company or any Restricted Subsidiary
of the Company in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company,
<PAGE>
-4-
or shall be merged with or into the Company or any Restricted
Subsidiary of the Company or
(2) the acquisition by the Company or any Restricted
Subsidiary of the Company of the assets of any Person (other than a
Restricted Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprise any division
or line of business of such Person or any other Properties or assets of
such Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, assignment, transfer, lease or other disposition (including any Sale
and Lease-Back Transaction), other than in the ordinary course of business or to
the Company or any of its Restricted Subsidiaries, in any single transaction or
series of related transactions of
(1) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company or
(2) any other Property or assets of the Company or of any
Restricted Subsidiary thereof;
provided that Asset Sales shall not include
(1) a transaction or series of related transactions for which
the Company or its Restricted Subsidiaries receive aggregate
consideration of less than $1 million,
(2) the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the assets of the Company as permitted
under Section 5.01 of this Indenture or any disposition that
constitutes a Change of Control,
(3) the sale or discount, in each case without recourse, of
accounts receivable arising in the ordinary course of business, but
only in connection with the compromise or collection thereof,
(4) the factoring of accounts receivable arising in the
ordinary course of business pursuant to customary arrangements,
(5) the licensing of intellectual property,
<PAGE>
-5-
(6) disposals or replacements of obsolete equipment in the
ordinary course of business,
(7) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
Qualified Securitization Transaction to a Securitization Entity for the
fair market value thereof, including cash in an amount at least equal
to 75% of the fair market value thereof as determined in accordance
with GAAP (for the purposes of this clause (7), Purchase Money Notes
shall be deemed to be cash),
(8) transfers of accounts receivable, equipment and related
assets (including contract rights) of the type specified in the
definition of Qualified Securitization Transaction (or a fractional
undivided interest therein) by a Securitization Entity in a Qualified
Securitization Transaction, and
(9) any transfer of assets acquired by the Company or any of
its Restricted Subsidiaries to an independent affiliate of the Company
or any of its Restricted Subsidiaries in accordance with the terms of
the License Agreements as such agreements are in effect on the Issue
Date and as the same may be amended or restated in a manner which is
not more disadvantageous to the Holders in any material respect than
the terms of such agreements as in effect on the Issue Date.
"Asset Sale Proceeds" means, with respect to any Asset Sale,
(1) cash and Cash Equivalents received by the Company or any
Restricted Subsidiary of the Company from such Asset Sale (including
cash and Cash Equivalent received as consideration for the assumption
of liabilities incurred in connection with or in anticipation of such
Asset Sale), after
(a) provision for all income or other taxes measured
by or resulting from such Asset Sale (after taking into
account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing
arrangements),
(b) payment of all brokerage commissions,
underwriting and other fees and expenses related to such Asset
Sale,
<PAGE>
-6-
(c) provision for minority interest holders in any
Restricted Subsidiary of the Company as a result of such Asset
Sale,
(d) repayment of Indebtedness that is secured by the
assets subject to such Asset Sale or otherwise required to be
repaid in connection with such Asset Sale and
(e) deduction of appropriate amounts to be provided
by the Company or a Restricted Subsidiary of the Company as a
reserve, in accordance with GAAP, against any liabilities
associated with the assets sold or disposed of in such Asset
Sale and retained by the Company or a Restricted Subsidiary
after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities and liabilities
related to environmental matters or against any
indemnification obligations associated with the assets sold or
disposed of in such Asset Sale, and
(2) promissory notes and other noncash consideration received
by the Company or any Restricted Subsidiary of the Company from such
Asset Sale or other disposition upon the liquidation or conversion of
such notes or noncash consideration into cash or Cash Equivalents.
"Attributable Indebtedness" in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(1) the fair value of the Property subject to such arrangement
and
(2) the present value of the notes (discounted at the rate of
interest implied in such transaction, determined in accordance with
GAAP) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and Lease-Back
Transaction (including any period for which such lease has been
extended).
"Available Asset Sale Proceeds" means, with respect to any
Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not
been applied in accordance with clause (3)(a) or (3)(b), and that have not yet
been the basis for an Excess Proceeds Offer in accordance with clause (3)(c), of
Section 4.09(a) under this Indenture.
<PAGE>
-7-
"Bank Indebtedness" means (i) the Indebtedness outstanding or
arising under the Senior Credit Facility, (ii) all obligations incurred by or
owing to the holders of such Indebtedness or any agent or representative thereof
outstanding or arising under the Senior Credit Facility (including, but not
limited to, all premium, interest (including, but not limited to, interest
accruing pursuant to the terms of the Senior Credit Facility on or after the
filing of any petition in any bankruptcy, reorganization or similar proceeding
relating to the Company or any Restricted Subsidiary, whether or not a claim for
such is allowed in such proceeding), all fees and expenses of counsel,
reimbursement obligations, indemnities and all other charges, fees, expenses,
claims, and other amounts), and (iii) all interest rate agreement and hedging
obligations arising in connection therewith with any party to the Senior Credit
Facility or any of their affiliates.
"Board of Directors" means, with respect to any Person, the
board of directors of such Person (or, if such Person is a limited liability
company, the board of managers of such company) or similar governing body or any
duly authorized committee thereof.
"Board Resolution" means with respect to any Person, a copy of
a resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification.
"Calculation Agent" means the Person appointed by the Company
to calculate the interest rate on the Notes. The Calculation Agent shall
initially be the Trustee.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated and
whether or not voting) of corporate stock, partnership or limited liability
company interests or any other participation, right or other interest in the
nature of an equity interest in such Person including, without limitation,
Common Stock and Preferred Stock of such Person, or any option, warrant or other
security convertible into any of the foregoing.
"Capitalized Lease Obligation" means with respect to any
Person, Indebtedness represented by obligations under a lease that is required
to be capitalized for financial reporting purposes in accordance with GAAP, and
the amount of such
<PAGE>
-8-
Indebtedness shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"Capstar Acquisition" means the acquisition by Holdings of
certain Muzak franchises from Capstar Broadcasting Corporation pursuant to a
Contribution Agreement between Holdings and Capstar Broadcasting Corporation,
dated February 19, 1999, and the subsequent transfer of such assets to the
Company in exchange for equity interests in the Company.
"Cash Equivalents" means
(1) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued
by any agency or instrumentality thereof and backed by the full faith
and credit of the United States, in each case maturing within one year
from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one
of the two highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by (i) any
bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital
and surplus of not less than $250,000,000 or (ii) Brown Brothers
Harriman;
(5) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (1)
above entered into with any bank meeting the qualifications specified
in clause (4) above; and
<PAGE>
-9-
(6) investments in money market funds which invest
substantially all their assets in securities of the types described in
clauses (1) through (5) above.
A "Change of Control" of the Company will be deemed to have
occurred at such time as
(1) any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), other than a Permitted
Holder, becomes the beneficial owner (as defined in Rule under Rule
13d-3 or any successor rule or regulation promulgated under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time) of more than 35% of the total voting power of the Company's
Capital Stock, and the Permitted Holders beneficially do not own, in
the aggregate, a greater percentage of the total voting power of the
Capital Stock of the Company than such other Person or Group and do not
have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of
the Company,
(2) there shall be consummated any consolidation or merger of
the Company in which the Company is not the continuing or surviving
Person or pursuant to which the Common Stock of the Company would be
converted into cash, securities or other Property, other than a merger
or consolidation of the Company in which the holders of the Capital
Stock of the Company outstanding immediately prior to the consolidation
or merger hold, directly or indirectly, at least a majority of the
Capital Stock of the surviving corporation immediately after such
consolidation or merger,
(3) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (together with any new Directors whose election by such
Board of Directors or whose nomination for election by the
equityholders of the Company has been approved by 66 2/3% of the
Directors then still in office who either were Directors at the
beginning of such period or whose election or recommendation for
election was previously so approved) cease to constitute a majority of
the Board of Directors of the Company or
<PAGE>
-10-
(4) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of
the Company (whether or not otherwise in compliance with the provisions
of this Indenture).
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to
(1) vote in the election of directors of such Person or
(2) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers
or others that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Restricted
Subsidiaries on a consolidated basis including, but not limited to,
(1) Redeemable Dividends, whether paid or accrued, on
Preferred Stock,
(2) imputed interest included in Capitalized Lease
Obligations,
(3) all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing,
(4) the net costs associated with Hedging Obligations,
(5) amortization of other financing fees and expenses,
<PAGE>
-11-
(6) the interest portion of any deferred payment obligation,
(7) amortization of discount or premium, if any, and
(8) all other noncash interest expense (other than interest
amortized to cost of sales)
plus, without duplication,
(1) all net capitalized interest for such period,
(2) all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any
combination thereof) of any Person, and
(3) the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in
shares of Capital Stock of the Company that does not constitute
Disqualified Capital Stock).
"Consolidated Leverage Ratio" means, with respect to any
Person, the ratio of
(1) the sum of the aggregate outstanding amount of
Indebtedness of such Person and its Restricted Subsidiaries and
Preferred Stock of any such Restricted Subsidiary issued in accordance
with Section 4.21 of this Indenture as of the date of calculation (the
"Transaction Date") on a consolidated basis determined in accordance
with GAAP to
(2) the product of (a) such Person's EBITDA for the full
fiscal quarter (the "One Quarter Period") ending on or prior to the
date of determination for which financial statements are available and
(b) four.
For purposes of this definition, clauses (1) and (2) above shall be calculated
after giving effect on a pro forma basis to:
(a) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries or the issuance or
redemption or other repayment of Preferred Stock of any such Restricted
Subsidiary (and the application of the proceeds thereof) giving rise to
the need to make such calculation and any incurrence or repayment of
other Indebtedness and, in the case of any Restricted Subsidiary, the
issuance or redemption or other repayment of
<PAGE>
-12-
Preferred Stock (and the application of the proceeds thereof), other
than the incurrence or repayment of Indebtedness in the ordinary course
of business for working capital purposes pursuant to working capital
facilities, occurring during the One Quarter Period or at any time
subsequent to the last day of the One Quarter Period and on or prior to
the Transaction Date, as if such incurrence or repayment or issuance or
redemption or other repayment, as the case may be (and the application
of the proceeds thereof), occurred on the first day of the One Quarter
Period; and
(b) any Asset Sales or Asset Acquisitions occurring during the
One Quarter Period or at any time subsequent to the last day of the One
Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any Acquired Indebtedness) occurred on the first day
of the One Quarter Period as follows:
(x) with respect to Asset Sales, the EBITDA
attributable to the assets which are the subject of Asset
Sales that occurred shall be excluded; and
(y) with respect to Asset Acquisitions, the
Acquisition EBITDA attributable to the assets which are the
subject of the applicable Asset Acquisition shall be included.
If such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding paragraph shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, however, that
(1) the Net Income of any Person other than a Restricted
Subsidiary of the referent Person shall be included only to the extent
of the amount of dividends or distributions paid to the referent Person
or a Restricted Subsidiary of such referent Person,
<PAGE>
-13-
(2) the Net Income of any Restricted Subsidiary of the Person
in question that is subject to any restriction or limitation on the
payment of dividends or the making of other distributions shall be
excluded to the extent of such restriction or limitation,
(3) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded,
(4) any net gain or loss (in the case of any net loss, only to
the extent that such determination of Consolidated Net Income is being
made in connection with the determination of amounts available for
Restricted Payments pursuant to the provisions described under Section
4.07 of this Indenture) resulting from an Asset Sale by the Person in
question or any of its Restricted Subsidiaries other than in the
ordinary course of business shall be excluded,
(5) extraordinary gains and losses shall be excluded,
(6) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued)
shall be excluded and
(7) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets shall be excluded.
"Control Investment Affiliate" means, as to any Person, any
other Person which (a) is an Affiliate of such Person and (b) is organized by
such Person primarily for the purpose of making equity or debt investments in
one or more companies.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 225 Franklin Street, Boston, Massachusetts 02110.
"Cumulative Consolidated Interest Expense" means, with respect
to any Person, as of any date of determination, Consolidated Interest Expense
from April 1, 1999 to the end of
<PAGE>
-14-
such Person's most recently ended full fiscal quarter prior to such date, taken
as a single accounting period.
"Cumulative EBITDA" means, with respect to any Person, as of
any date of determination, EBITDA from April 1, 1999 to the end of such Person's
most recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness," as to the Company or any
Guarantor, as the case may be, means
(1) any Bank Indebtedness and
(2) any other Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be, which at the time of determination
exceeds $25 million in aggregate principal amount (or accreted value in
the case of Indebtedness issued at a discount) outstanding or available
under a committed facility, which is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by such Person and as to which the Trustee has been given
written notice of such designation.
"Director" means, with respect to any Person, a member of the
Board of Directors of such Person (or, if such Person is a limited liability
company, a member of the board of managers of such Person).
"Disqualified Capital Stock" means any Capital Stock of a
Person or a Restricted Subsidiary thereof which, by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable at
the option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes. Without limitation of the foregoing,
Disquali-
<PAGE>
-15-
fied Capital Stock shall be deemed to include any Preferred Stock of a Person or
a Restricted Subsidiary of such Person, with respect to either of which, under
the terms of such Preferred Stock, by agreement or otherwise, such Person or
Restricted Subsidiary is obligated to pay current dividends or distributions in
cash during the period prior to the maturity date of the Notes; provided,
however, that Preferred Stock of a Person or any Restricted Subsidiary thereof
that is issued with the benefit of provisions requiring a change of control
offer or asset sale offer to be made for such Preferred Stock in the event of a
change of control of such Person or Restricted Subsidiary or the sale of any
assets of such Person or Restricted Subsidiary which provisions have
substantially the same effect as the provisions described under Sections 4.16
and 4.09 of this Indenture, respectively, shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions.
"EBITDA" means, with respect to any Person and its Restricted
Subsidiaries, for any period, an amount equal to
(1) the sum of
(a) Consolidated Net Income for such period, plus
(b) the provision for taxes for such period based on
income or profits to the extent such income or profits were
included in computing Consolidated Net Income and any
provision for taxes utilized in computing net loss under
clause (a) hereof, plus
(c) Consolidated Interest Expense for such period,
plus
(d) depreciation for such period on a consolidated
basis, plus
(e) amortization of intangibles for such period (but
excluding any noncash item to the extent it represents the
amortization of a prepaid cash expense that was paid in any
prior period) on a consolidated basis, plus
(f) any other noncash items reducing Consolidated Net
Income for such period except for any noncash items that
represent accruals of, or reserves for, cash disbursements to
be made in any future accounting period, minus
<PAGE>
-16-
(2) all noncash items increasing Consolidated Net Income
(other than any noncash items representing deferred revenue to the
extent that such revenue was not included in Consolidated Net Income in
any prior period) for such period, all for such Person and its
Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP;
provided, however, that, for purposes of calculating EBITDA during any fiscal
quarter, cash income from a particular Investment (other than a Restricted
Subsidiary) of such Person shall be included only
(1) if cash income has been received by such Person with
respect to such Investment during each of the previous four fiscal
quarters, or
(2) if the cash income derived from such Investment is
attributable to Cash Equivalents.
"Electro Systems" means Electro Systems Corporation, a Florida
corporation.
"Electro Systems Acquisition" means the acquisition of Electro
Systems pursuant to a Stock Purchase Agreement dated as of February 18, 1999
between the Company and Carolina Georgia Sound, Inc.
"Equity Offering" means any public or private sale of Common
Stock (other than Disqualified Capital Stock) of the Company or Holdings
pursuant to which the Company or Holdings, as the case may be, receives net
proceeds of at least $20 million; provided, however, that in the case of an
Equity Offering by Holdings, Holdings shall have contributed to the capital of
the Company the portion of the Net Proceeds necessary to redeem the Notes
pursuant to Section 3.07(b) of this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and the rules and regulations of the Commission promulgated thereunder.
"Existing Notes" means the 9 7/8% Senior Subordinated Notes
due 2009 of the Issuers issued pursuant to an indenture dated as of March 18,
1999 by and among the Issuers, the Guarantors and the Trustee.
"Existing Notes Issue Date" means March 18, 1999.
<PAGE>
-17-
"fair market value" means, with respect to any asset or
Property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Company delivered to the Trustee.
"Finance Corp." means the party named as such in the first
paragraph of this Indenture until a successor replaces such party pursuant to
Article 5 of this Indenture and thereafter means the successor.
"Foreign Restricted Subsidiary" means any Restricted
Subsidiary of the Company that is not organized under the laws of the United
States or any State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time.
"Guarantee" means any guarantee of the obligations of the
Issuers under this Indenture and the Notes by Holdings and any Restricted
Subsidiary in accordance with the provisions of this Indenture. When used as a
verb, "Guarantee" shall have a corresponding meaning.
"Guarantor" means each of Holdings and each Restricted
Subsidiary of the Company which Guarantees the Notes pursuant to the terms of
this Indenture; provided that upon the release and discharge of such Restricted
Subsidiary from its Guarantee in accordance with the terms of this Indenture,
such Restricted Subsidiary shall cease to be a Guarantor.
"Guarantor Senior Indebtedness" means (1) all Bank
Indebtedness of any Guarantor and (2) all principal of and premium, if any, and
interest (including, but not limited to, interest accruing on or after the
filing of any petition in any bankruptcy, reorganization or similar proceeding
relating to any Guarantor, whether or not a claim for such is allowed in such
proceeding) on, and any and all other fees, fees and expenses of counsel,
expense reimbursement obligations, indemnities and other amounts due pursuant to
the terms of all agreements, indentures, documents and instruments providing
for,
<PAGE>
-18-
creating, securing or evidencing or otherwise entered into in connection with
(a) all obligations of any Guarantor with respect to any
Hedging Obligations,
(b) all obligations of any Guarantor to reimburse any bank or
other person in respect of amounts paid under letters of credit,
acceptances or other similar instruments,
(c) all other Indebtedness of any Guarantor which does not
provide that it is to rank pari passu with or subordinate to the
Guarantee of such Guarantor, and
(d) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Guarantor
Senior Indebtedness described above,
in each case, whether outstanding on the Issue Date or created thereafter.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include
(1) Indebtedness of any Guarantor to any of its Subsidiaries,
or to any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries,
(2) Indebtedness represented by (a) the Guarantees and (b) the
guarantees of the Existing Notes,
(3) any Indebtedness which by the express terms of the
agreement or instrument creating, evidencing or governing the same is
junior or subordinate in right of payment to any item of Guarantor
Senior Indebtedness,
(4) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business,
(5) Indebtedness incurred in violation of this Indenture,
(6) Indebtedness represented by Disqualified Capital Stock and
(7) any Indebtedness to or guaranteed on behalf of, any
shareholders, Director, officer or employee of the
<PAGE>
-19-
Company or any Guarantor or any Subsidiary of the Company or such
Guarantor.
"Hedging Obligations" means, with respect to any Person, the
net payment obligations of such Person under (a) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements entered into in order to protect such Person against
fluctuations in commodity prices, interest rates or currency exchange rates.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"Holdings" means Muzak Holdings LLC, a Delaware limited
liability company, until a successor replaces such party pursuant to this
Indenture and thereafter means the successor.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any Property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included
(1) any Capitalized Lease Obligations of such Person,
<PAGE>
-20-
(2) obligations secured by a lien to which the Property or
assets owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed,
(3) guarantees of items of other Persons which would be
included within this definition for such other Persons (whether or not
such items would appear upon the balance sheet of the guarantor),
(4) all obligations for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit
transaction,
(5) Disqualified Capital Stock of such Person or any
Restricted Subsidiary thereof, and
(6) hedging obligations of any such Person (if and to the
extent such hedging obligations would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP).
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation; provided that
(1) the amount outstanding at any time of any Indebtedness
issued with original issue discount is the principal amount of such
Indebtedness less the remaining unamortized portion of the original
issue discount of such Indebtedness at such time as determined in
conformity with GAAP,
(2) Indebtedness shall not include any liability for federal,
state, local or other taxes,
(3) the amount of Indebtedness of a Person which is without
recourse to any Property or assets of such Person except to the extent
of any Lien on Property or assets of such Person which secures such
Indebtedness shall be the lesser of the principal amount of such
Indebtedness and the fair market value of the Property or assets
subject to the Lien, and
(4) the amount of Indebtedness represented by Disqualified
Capital Stock shall be the greater of its volun-
<PAGE>
-21-
tary or involuntary liquidation preference and its maximum fixed
repurchase price, but excluding accrued dividends, if any.
The "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Company or any of its Restricted Subsidiaries for
purposes of this definition. Furthermore, guarantees of (or obligations with
respect to letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Independent Financial Advisor" means an investment banking
firm of national reputation in the United States
(1) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial
interest in the Company and
(2) which, in the judgment of the Board of Directors of the
Company, is otherwise independent and qualified to perform the task for
which it is to be engaged.
"Initial Notes" means the Senior Subordinated Floating Rate
Notes due 2009 issued on the Issue Date and authenticated and delivered under
this Indenture pursuant to Section 2.02 of this Indenture.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) promulgated under the Securities Act.
<PAGE>
-22-
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Investments" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than advances and accounts
receivable arising in the ordinary course of business of such Person), loan or
capital contribution to (by means of transfers of Property to others, payments
for Property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude
(1) extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices of such Person and
(2) the repurchase of securities of any Person by such Person.
If the Company or any Restricted Subsidiary of the Company
sells or otherwise disposes of any Capital Stock of any direct or indirect
Restricted Subsidiary of the Company such that such Restricted Subsidiary would
no longer constitute a Subsidiary, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Capital Stock of such Restricted Subsidiary not sold or disposed
of.
"Issue Date" means February 2, 2000.
"Issuers" means each party named as such in the first
paragraph of this Indenture until a successor replaces such party pursuant to
Article 5 of this Indenture and thereafter means the successor.
"License Agreements" means the License Agreements between the
Company and its independent affiliates.
"Lien" means, with respect to any Property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any
<PAGE>
-23-
kind or nature whatsoever on or with respect to such Property or assets
(including without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity Date" means March 15, 2009.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"New ABRY Equity Contribution" means the contribution of $4.3
million in cash made to the common equity capital of the Company by certain of
its existing stockholders on February 1, 2000.
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means (i) the Initial Notes, (ii) any other Senior
Subordinated Floating Rate Notes due 2009 issued after the Issue Date in
accordance with Section 2.02 of this Indenture and (iii) any Additional Notes
issued in accordance with the terms of this Indenture, in all cases, treated as
a single class of securities and any notes issued in exchange therefor as
contemplated hereunder.
"Obligations" means all obligations for principal, premium,
interest, penalties, charges, fees, fees and expenses of counsel, indemnities,
reimbursement obligations, damages, claims and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chief
Executive Officer, the Chief Financial Officer, Treasurer or the President, of
such Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer,
<PAGE>
-24-
the President or any Vice President and the Chief Financial Officer or any
Treasurer of such Person that shall comply with applicable provisions of this
Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel who and which is reasonably acceptable to the Trustee complying with the
requirements of this Indenture. Such legal counsel shall be outside counsel and
not an employee of or in-house counsel to the Company.
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or both, or any other
condition to such default becoming an event of default has occurred, in the
payment of principal of or premium, if any, or interest on or any other amount
payable in connection with Designated Senior Indebtedness.
"Pending ABRY Equity Contribution" means the contribution of
not less than $6.3 million in cash made to the common equity capital of the
Company by certain of its existing stockholders which is to occur after the
Issue Date, but on or before February 10, 2000.
"Permitted Asset Swap" means, with respect to any Person, the
substantially concurrent exchange of assets of such Person for assets of another
Person which are useful to the business of such aforementioned Person.
"Permitted Holders" means each of ABRY III, ABRY II and each
Control Investment Affiliate of ABRY III or ABRY II.
"Permitted Indebtedness" means:
(1) Indebtedness of the Company or any Restricted Subsidiary
arising under or in connection with the Senior Credit Facility in an
aggregate principal amount not to exceed $200 million outstanding at
any time less (i) any mandatory prepayment actually made thereunder (to
the extent, in the case of payments of revolving credit borrowings,
that the corresponding commitments have been permanently reduced) or
scheduled payments actually made thereunder and (ii) the aggregate
amount of Indebtedness of Securitization Entities in Qualified
Securitization Transactions (other than Qualified Securitization
Transactions involving equipment and related assets);
(2) Indebtedness under (a) the Existing Notes and the related
guarantees outstanding on the Issue Date in an
<PAGE>
-25-
aggregate principal amount not to exceed $115 million and (b) the Notes
and the Guarantees;
(3) Indebtedness not covered by any other clause of this
definition which is outstanding on the Issue Date;
(4) Indebtedness of the Company to any Guarantor or to any
Wholly Owned Subsidiary that is not a Guarantor and Indebtedness of any
Restricted Subsidiary to the Company or to any Guarantor or to any
Wholly Owned Subsidiary that is not a Guarantor;
(5) Purchase Money Indebtedness that does not in the aggregate
exceed 5% of the Company's consolidated total assets;
(6) the incurrence by the Company or any Restricted Subsidiary
of Hedging Obligations that are incurred in the ordinary course of
business of the Company or such Restricted Subsidiary and not for
speculative purposes; provided that, in the case of any Hedging
Obligation that relates to (i) interest rate risk, the notional
principal amount of such Hedging Obligation does not exceed the
principal amount of the Indebtedness to which such Hedging Obligation
related and (ii) currency risk, such Hedging Obligation does not
increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in
foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(7) Refinancing Indebtedness;
(8) Indebtedness of Foreign Restricted Subsidiaries of the
Company in an aggregate principal amount not to exceed $10 million at
any one time outstanding; provided the aggregate amount then
outstanding under this clause (8) when added to the aggregate amount
then outstanding under clause (1) above shall not exceed the aggregate
amount permitted under clause (1) above;
(9) guarantees by the Company and its Restricted Subsidiaries
of each other's Indebtedness; provided that such Indebtedness is
permitted to be incurred under this Indenture;
(10) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement ob-
<PAGE>
-26-
ligations with respect to letters of credit issued in the ordinary
course of business, including, without limitation, letters of credit in
respect of workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims;
(11) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in
each case, incurred or assumed in connection with the acquisition or
disposition of any business, assets or a Restricted Subsidiary of the
Company, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition; provided
that, in the case of a disposition, the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(12) obligations in respect of performance and surety bonds
and completion guarantees provided by the Company or any Restricted
Subsidiary of the Company in the ordinary course of business;
(13) the ABRY Subordinated Debt;
(14) the incurrence by a Securitization Entity of Indebtedness
in a Qualified Securitization Transaction that is not recourse to the
Company or any Subsidiary of the Company (except for Standard
Securitization Undertakings);
(15) Indebtedness of the Company issued to current or former
members of management of the Company or any of its Restricted
Subsidiaries to finance the repurchase, redemption or other acquisition
of Capital Stock of Holdings pursuant to clause (6) of Section 4.07(b)
of this Indenture; and
(16) additional Indebtedness of the Company and its Restricted
Subsidiaries not to exceed $5 million in aggregate principal amount at
any one time outstanding.
"Permitted Investments" means
<PAGE>
-27-
(1) Investments by the Company or by a Restricted Subsidiary
thereof, in the Company, a Guarantor or a Wholly Owned Subsidiary that
is not a Guarantor;
(2) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment
(a) such Person becomes a Guarantor or a Wholly Owned
Subsidiary that is not a Guarantor or
(b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the
Company, a Guarantor or a Wholly Owned Subsidiary that is not
a Guarantor;
(3) Investments in cash and Cash Equivalents;
(4) reasonable and customary loans and advances made to
employees in the ordinary course of business;
(5) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any Capital Stock, bonds, notes,
debentures, partnership or joint venture interests or other securities
that are issued by a third party to the Company or such Restricted
Subsidiary solely as partial consideration for the consummation of an
Asset Sale that is otherwise permitted under Section 4.09 of this
Indenture;
(6) Hedging Obligations entered into in the ordinary course of
the Company's or its Restricted Subsidiaries' business and not for
speculative purposes;
(7) any acquisition of assets to be used in the business of
the Company or any of its Restricted Subsidiaries solely in exchange
for the issuance of Capital Stock (other than Disqualified Capital
Stock) of the Company;
(8) additional Investments not to exceed $5 million at any one
time outstanding;
(9) Investments existing on the Issue Date;
(10) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization
<PAGE>
-28-
or similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers;
(11) guarantees by the Company or any Restricted Subsidiary of
Indebtedness otherwise permitted to be incurred by Restricted
Subsidiaries of the Company under this Indenture; and
(12) any Investment by the Company or a Restricted Subsidiary
of the Company in a Securitization Entity or any Investment by a
Securitization Entity in any other Person in connection with a
Qualified Securitization Transaction; provided that any Investment in a
Securitization Entity is in the form of a Purchase Money Note or an
equity interest.
"Permitted Liens" means
(1) Liens on Property or assets of, or any shares of Capital
Stock of or secured indebtedness of, any Person existing at the time
such Person becomes a Restricted Subsidiary of the Company or at the
time such Person is merged into the Company or any of its Restricted
Subsidiaries; provided that such Liens are not incurred in connection
with, or in contemplation of, such Person becoming a Restricted
Subsidiary of the Company or merging into the Company or any of its
Restricted Subsidiaries,
(2) Liens securing Indebtedness under the Senior Credit
Facility and Liens securing other Senior Indebtedness of the Company or
any Guarantor; provided in each case, such Indebtedness is incurred in
compliance with Section 4.06 of this Indenture,
(3) Liens securing Refinancing Indebtedness; provided that any
such Lien does not extend to or cover any Property, Capital Stock or
Indebtedness other than the Property, shares or debt securing the
Indebtedness so refunded, refinanced or extended,
(4) Liens in favor of the Company or any of its Restricted
Subsidiaries,
(5) Liens securing industrial revenue bonds,
(6) Liens to secure Purchase Money Indebtedness that is
otherwise permitted under this Indenture; provided that
<PAGE>
-29-
(a) the principal amount of the Indebtedness secured
by such Lien does not exceed 100% of the purchase price, or
the cost of installation, construction or improvement, of the
Property to which such Purchase Money Indebtedness relates,
and
(b) such Lien does not extend to or cover any
Property other than such item of Property and any improvements
on such Property,
(7) statutory liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings, if a reserve or
other appropriate provision, if any, as shall be required in conformity
with GAAP shall have been made therefor,
(8) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings,
(9) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances or title defects or leases or subleases
granted to others in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries,
(10) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $5 million in the
aggregate at any one time outstanding,
(11) Liens (a) existing on the Issue Date, (b) securing the
Notes and the Guarantees and (c) securing the Existing Notes and the
related guarantees in accordance with the terms thereof as in effect on
the Issue Date,
(12) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, including landlord Liens
on leased properties and any Lien securing letters of credit issued in
the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of ten-
<PAGE>
-30-
ders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations,
(13) attachment or judgment Liens not giving rise to an Event
of Default,
(14) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment, or storage of such inventory or
other goods,
(15) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
Property relating to such letters of credit and products and proceeds
thereof,
(16) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off,
(17) Liens securing Hedging Obligations with respect to
Indebtedness that is otherwise permitted under this Indenture,
(18) Liens securing Indebtedness of Foreign Restricted
Subsidiaries of the Company incurred in reliance on clause (8) of the
definition of Permitted Indebtedness,
(19) Liens on assets transferred to a Securitization Entity or
on assets of a Securitization Entity, in either case incurred in
connection with a Qualified Securitization Transaction,
(20) Liens arising from filing Uniform Commercial Code
financing statements regarding leases,
(21) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of custom duties in connection
with the importation of goods,
(22) deposits made in the ordinary course of business to
secure liability to insurance carriers,
<PAGE>
-31-
(23) any interest or title of a lessor or a sublessor under an
operating lease,
(24) Liens under licensing agreements for use of intellectual
property entered into in the ordinary course of business,
(25) Liens imposed by law incurred by the Company or any of
its Restricted Subsidiaries in the ordinary course of business, and
(26) any extensions, substitutions, replacements or renewals
of the foregoing.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government (including any agency or
political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Purchase Agreement" means the purchase agreement dated as of
February 2, 2000 by and among the Issuers, the Guarantors and CIBC Inc., as
purchaser.
"Purchase Money Indebtedness" means Indebtedness and
Capitalized Lease Obligations of any Person incurred in the normal course of
business of such Person for the purpose of financing all or any part of the
purchase price, or the cost of installation, construction or improvement of, any
Property.
"Purchase Money Note" means a promissory note of a
Securitization Entity evidencing a line of credit, which may be irrevocable,
from the Company or any Subsidiary of the Company in connection with a Qualified
Securitization Transaction to a
<PAGE>
-32-
Securitization Entity, which note shall be repaid from cash available to the
Securitization Entity, other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts paid in
connection with the purchase of newly generated receivables or newly acquired
equipment.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"Qualified Securitization Transaction" means any transaction
or series of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether now existing or
arising or acquired in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing such accounts receivable and equipment, all contracts and contract
rights and all guarantees or other obligations in respect of such accounts
receivable and equipment, proceeds of such accounts receivable and equipment and
other assets (including contract rights) which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable and equipment.
"Redeemable Dividend" means, for any dividend or distribution
with regard to Preferred Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Preferred Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, modifies, replaces, defers, supplements or extends the Notes or any
other Indebtedness outstanding on the Issue Date or other Indebtedness permitted
to be incurred by the Company or its Restricted Subsidiaries pursuant to the
<PAGE>
-33-
terms of this Indenture (other than pursuant to clauses (1), (4), (6) and (8)
through (16) of the definition of Permitted Indebtedness), but only to the
extent that
(1) the Refinancing Indebtedness is subordinated to the Notes
to at least the same extent as the Indebtedness being refunded,
refinanced, modified, replaced, deferred, supplemented or extended, if
at all,
(2) the Refinancing Indebtedness is scheduled to mature either
(a) no earlier than the Indebtedness being refunded,
refinanced, modified, replaced, deferred, supplemented or
extended, or
(b) after the maturity date of the Notes,
(3) the portion, if any, of the Refinancing Indebtedness that
is scheduled to mature on or prior to the maturity date of the Notes
has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Indebtedness being
refunded, refinanced, modified, replaced, deferred, supplemented or
extended that is scheduled to mature on or prior to the maturity date
of the Notes, and
(4) such Refinancing Indebtedness is in an aggregate principal
amount that is equal to or less than the sum of
(a) the aggregate principal amount of the
Indebtedness being refunded, refinanced, modified, replaced,
deferred, supplemented or extended,
(b) the amount of accrued and unpaid interest, if
any, and premiums owed, if any, not in excess of preexisting
prepayment provisions on such Indebtedness being refunded,
refinanced, modified, replaced, deferred, supplemented or
extended and
(c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of February 2, 2000 among the Issuers, the Guarantors and
CIBC Inc., as purchaser.
<PAGE>
-34-
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Restricted Payment" means any of the following:
(1) the declaration or payment of any dividend or any other
distribution or payment on Capital Stock of the Company or any
Restricted Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of
the Company or any Restricted Subsidiary of the Company (other than (a)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock), and (b) in the case of Restricted
Subsidiaries of the Company, dividends or distributions payable to the
Company or to a Restricted Subsidiary of the Company and to the other
holders of Capital Stock of each such Restricted Subsidiary, in each
case on a pro rata basis),
(2) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any of its
Restricted Subsidiaries (other than Capital Stock owned by the Company
or a Wholly Owned Subsidiary of the Company, excluding Disqualified
Capital Stock),
(3) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement
for value of any Indebtedness which is subordinated in right of payment
to the Notes prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment (other than subordinated Indebtedness
acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition) other than the ABRY
Subordinated Debt,
(4) the making of any Investment or guarantee of any
Investment in any Person other than a Permitted Investment,
(5) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary (valued at the fair market value of the net
assets of such Restricted Subsidiary) and
(6) forgiveness of any Indebtedness of an Affiliate of the
Company (other than a Restricted Subsidiary) to the Company or a
Restricted Subsidiary of the Company.
<PAGE>
-35-
"Restricted Security" has the meaning set forth in Rule
144(a)(3) promulgated under the Securities Act; provided that the Trustee shall
be entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Restricted Subsidiary" means a Subsidiary of the Company
other than an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Indebtedness of such Unrestricted Subsidiary or Person
as having been incurred at the time of such action),
(1) the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.06 of this Indenture, and
(2) no Default or Event of Default shall have occurred and be
continuing or result therefrom.
"Rule 144A" means Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the Commission.
"Sale and Lease-Back Transaction" means any arrangement with
any Person providing for the leasing by the Company or any Restricted Subsidiary
of the Company of any real or tangible personal property, which Property has
been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person in contemplation of such leasing.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Securitization Entity" means a Wholly Owned Subsidiary of the
Company (or another Person in which the Company or any Subsidiary of the Company
makes an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
or equipment and which is designated by the
<PAGE>
-36-
Board of Directors of the Company (as provided below) as a Securitization
Entity: (a) no portion of the Indebtedness or any other obligation (contingent
or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the
Company (excluding guarantees of obligations (other than the principal of, and
interest on, Indebtedness) pursuant to Standard Securitization Undertakings),
(ii) is recourse to or obligates the Company or any Subsidiary of the Company in
any way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any Property or asset of the Company or any Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Standard Securitization Undertakings, (b) with which
neither the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
the Company or such Subsidiary than those that might be obtained at the time
from Persons that are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing receivables of such
entity, and (c) to which neither the Company nor any Subsidiary of the Company
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution of
the Company giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing conditions.
"Senior Credit Facility" means one or more credit agreements,
loan agreements or similar agreements providing for working capital advances,
term loans, letter of credit facilities or similar advances, loans, or
facilities to the Company or any of its Subsidiaries, including the Credit and
Guaranty Agreement dated as of March 18, 1999, as amended through the Issue
Date, among the Company, Holdings, certain of the Company's subsidiaries, the
lenders party thereto in their capacities as lenders thereunder, Goldman Sachs
Credit Partners L.P., as Syndication Agent, Canadian Imperial Bank of Commerce,
as Administrative Agent, and Goldman Sachs Credit Partners L.P. and CIBC
Oppenheimer Corp., as Co-Lead Arrangers, initially providing for term loan and
revolving credit facilities including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
credit facilities and/or related documents may be further amended, restated,
supplemented, renewed, refinanced, replaced, restructured or otherwise modified
from time to time whether or not with the same agents, trustee, representative
lenders or
<PAGE>
-37-
group of lenders or holders, and irrespective of any changes in the terms and
conditions thereof. Without limiting the generality of the foregoing, the term
"Senior Credit Facility" shall include agreements in respect of interest rate
agreements and hedging obligations with lenders party to any Senior Credit
Facility and their affiliates and shall also include any amendment, amendment
and restatement, renewal, extension, restructuring, supplement or modification
to any Senior Credit Facility and any and all refundings, refinancings (in whole
or in part) and replacements of any Senior Credit Facility, whether by the same
or any other agents, trustee, representative lenders or lenders or group of
lenders, including one or more agreements (i) extending the maturity of, or
increasing the amount of, any Indebtedness incurred thereunder or contemplated
thereby, or (ii) adding or deleting borrowers or guarantors thereunder, so long
as borrowers and issuers include one or more of the Company and its Restricted
Subsidiaries and their respective successors and assigns,
"Senior Discount Notes" means $75,000,000 aggregate principal
amount at maturity of 13% Senior Discount Notes due 2010 of Holdings and Muzak
Holdings Finance Corp., a Delaware corporation, as co-issuers, in accordance
with the terms of such security as in effect on the Issue Date.
"Senior Discount Notes Indenture" means the indenture pursuant
to which the Senior Discount Notes are issued, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Senior Indebtedness" means (1) all Bank Indebtedness and (2)
all principal of and premium, if any, and interest (including, but not limited
to, interest accruing on or after the filing of any petition in any bankruptcy,
reorganization or similar proceeding relating to the Company or any Restricted
Subsidiary, whether or not a claim for such is allowed in such proceeding) on,
and any and all other fees, fees and expenses of counsel, expense reimbursement
obligations, indemnities and other amounts due pursuant to the terms of all
agreements, indentures, documents and instruments providing for, creating,
securing or evidencing or otherwise entered into in connection with
(a) all obligations of the Company with respect to any Hedging
Obligations,
<PAGE>
-38-
(b) all obligations of the Company to reimburse any bank or
other person in respect of amounts paid under letters of credit,
acceptances or other similar instruments,
(c) all other Indebtedness of the Company or any Guarantor
which does not provide that it is to rank pari passu with or
subordinate to the Notes, and
(d) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Senior
Indebtedness described above,
in each case, whether outstanding on the Issue Date or created thereafter.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include
(1) Indebtedness of the Company to any of its Subsidiaries, or
to any Affiliate of the Company or any of such Affiliate's
Subsidiaries,
(2) Indebtedness represented by the Notes and the Existing
Notes,
(3) any Indebtedness which by the express terms of the
agreement or instrument creating, evidencing or governing the same is
junior or subordinate in right of payment to any item of Senior
Indebtedness,
(4) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business,
(5) Indebtedness incurred in violation of this Indenture,
(6) Indebtedness represented by Disqualified Capital Stock and
(7) any Indebtedness to or guaranteed on behalf of, any
shareholders, Director, officer or employee of the Company or any
Subsidiary of the Company.
"Significant Subsidiary" means, with respect to any Person,
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Exchange Act, as such Rule is in effect on the Issue Date.
<PAGE>
-39-
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in an accounts
receivable or equipment transaction.
"Subsidiary" of any specified Person means any corporation,
partnership, limited liability company, joint venture, association or other
business entity, whether now existing or hereafter organized or acquired,
(1) in the case of a corporation, of which more than 50% of
the total voting power of the Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named
Person or any of its Subsidiaries; or
(2) in the case of a partnership, limited liability company,
joint venture, association or other business entity, with respect to
which such first-named Person or any of its Subsidiaries has the power
to direct or cause the direction of the management and policies of such
entity by contract or otherwise or if in accordance with GAAP such
entity is consolidated with the first-named Person for financial
statement purposes.
Notwithstanding the foregoing a charitable trust or foundation organized
pursuant to section 501(c)(3) of the Internal Revenue Code of 1986, as amended,
shall not be a "Subsidiary."
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 (15 U.S. Code sections 77aaa-77bbbb) as in effect on the date of this
Indenture (except as provided in Section 8.03 hereof).
"Trust Officer" means any officer of the Trustee in its
Corporate Trust Department with direct responsibility for the administration of
the trusts established hereby and, also, with respect to any particular matter,
any other officer of the Trustee to whom such matter is referred because of such
officer's knowledge of, and familiarity with, the particular subject.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
<PAGE>
-40-
"Unrestricted Subsidiary" means
(1) any Subsidiary of an Unrestricted Subsidiary and
(2) any Subsidiary of the Company which is classified after
the Issue Date as an Unrestricted Subsidiary by a Board Resolution of
the Company;
provided that a Subsidiary may be so classified as an Unrestricted Subsidiary
only if
(a) such classification is in compliance with Section 4.07 of
this Indenture,
(b) immediately after giving effect to such classification,
the Company could have incurred at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.06 of this Indenture,
(c) no Default or Event of Default shall have occurred and be
continuing or result therefrom, and
(d) neither the Company nor any Restricted Subsidiary shall at
any time
(i) provide a guarantee of, or similar credit support
to, any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such
Indebtedness),
(ii) be directly or indirectly liable for any
Indebtedness of such Subsidiary or
(iii) be directly or indirectly liable for any other
Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon (or
cause the payment thereof to be accelerated or payable prior
to its final scheduled maturity) upon the occurrence of a
default with respect to any other Indebtedness (other than
Indebtedness assumed by such Subsidiary in connection with the
Electro Systems Acquisition) that is Indebtedness of such
Subsidiary (including any corresponding right to take
enforcement action against such Subsidiary),
except in the case of clause (i) or (ii) to the extent
<PAGE>
-41-
(i) that the Company or such Restricted Subsidiary
could otherwise provide such a guarantee or incur such
Indebtedness (other than as Permitted Indebtedness) pursuant
to Section 4.06 of this Indenture and
(ii) the provision of such guarantee and the
incurrence of such Indebtedness otherwise would be permitted
under Section 4.07 of this Indenture.
The Trustee shall be given prompt notice by the Company of each Board Resolution
of the Company under this provision, together with a copy of each such Board
Resolution. Electro Systems shall be an Unrestricted Subsidiary as of the Issue
Date.
"U.S. Government Obligations" means (a) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
<PAGE>
-42-
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares)
of which are owned, directly or indirectly, by the Company.
Section 1.01. Other Definitions.
The definitions of the following terms may be found in the
sections indicated as follows:
Term Defined in Section
---- ------------------
"Affiliate Transaction".............................. 4.10
"Agent Members"...................................... 2.14
"Bankruptcy Law"..................................... 6.01
"Business Day"....................................... 12.08
"Certificated Notes"................................. 2.01
"Change of Control Offer"............................ 4.16
"Change of Control Payment Date"..................... 4.16
"Change of Control Purchase Price"................... 4.15
"Covenant Defeasance"................................ 9.03
"Custodian".......................................... 6.01
"Event of Default"................................... 6.01
"Excess Proceeds Offer".............................. 4.09
"Excess Proceeds Payment Date"....................... 4.09
"Global Notes"....................................... 2.01
"Guaranteed Obligations.............................. 10.01
"Guarantor Payment Blockage Period".................. 10.11
"Guarantor Representation"........................... 10.11
"Initial Blockage Period"............................ 11.03
"Initial Guarantee Blockage Period".................. 10.11
"Legal Defeasance"................................... 9.02
"Legal Holiday"...................................... 12.08
"Paying Agent"....................................... 2.03
"Payment Blockage Period"............................ 11.03
"Permitted Tax Distributions"........................ 4.07
"Registered Exchange"................................ 2.02
"Registrar".......................................... 2.03
"Regulation S Global Notes".......................... 2.01
"Representative"..................................... 11.03
"Resale Restriction Termination Date"................ 2.15
"U.S. Global Notes".................................. 2.01
<PAGE>
-43-
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on the indenture securities" means the Issuers, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) words used herein implying any gender shall apply to every
gender.
<PAGE>
-44-
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A which is incorporated in and
made part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Issuers may use
"CUSIP" numbers in issuing the Notes. The Issuers shall approve the form of the
Notes. Each Note shall be dated the date of its authentication.
Unless the applicable Holder requests Notes in the form of
physical certificated Notes in registered form ("Certificated Notes"), which
shall be substantially in the form of Exhibit A, Notes offered and sold in
reliance on Rule 144A or in offshore transactions in reliance on Regulation S
shall be issued initially in the form of permanent Global Notes in registered
form, substantially in the form set forth in Exhibit A ("Global Notes"),
deposited with the Depository, duly executed by the Issuers and authenticated by
the Trustee as hereinafter provided and shall bear the legend set forth on
Exhibit B. The aggregate principal amount of any Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Depository, as hereinafter provided.
Notes offered and sold to Qualified Institutional Buyers in
reliance on Rule 144A issued in the form of one or more Global Notes (the "U.S.
Global Note") shall be registered in the name of the Depository or its nominee
and deposited with the Depository, duly executed by the Issuers and
authenticated by the Trustee as hereinafter provided, for credit by the
Depository to the respective accounts of beneficial owners of the Notes
represented thereby (or such other accounts as they may direct).
Notes offered and sold in reliance on Regulation S issued in
the form of Global Notes (the "Regulation S Global Note") shall be registered in
the name of the Depository or its nominee, duly executed by the Issuers and
authenticated by the Trustee as hereinafter provided, for credit by the
Depository to the respective accounts of the beneficial owners of the
<PAGE>
-45-
Notes represented thereby (or such other accounts as they may direct).
The Issuers shall cause the U.S. Global Note and the
Regulation S Global Note to have separate CUSIP and ISIN numbers.
Section 2.02. Execution and Authentication.
The Notes shall be executed on behalf of the Issuers by two
Officers of each of the Issuers or an Officer and the Secretary of each of the
Issuers. Such signature may be either manual or facsimile. The Issuers' seals
may be impressed, affixed, imprinted or reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authentication agent shall authenticate (i)
Initial Notes for original issue on the Issue Date in an aggregate principal
amount not to exceed $12,000,000, (ii) one or more series of Notes for original
issue after the Issue Date (such Notes to be substantially in the form of
Exhibit A) in an aggregate principal amount not to exceed $38,000,000 and (iii)
any Additional Notes, in each case upon receipt of an authentication order in
the form of an Officers' Certificate. The aggregate principal amount of Notes
(excluding any Additional Notes) outstanding at any time may not exceed
$50,000,000 except as provided in Section 2.07 hereof. Upon receipt of an
authentication order in the form of an Officers' Certificate, the Trustee shall
authenticate an additional series of Notes for issuance in exchange for all
Notes previously issued pursuant to an exchange offer registered under the
Securities Act (a "Registered Exchange") or pursuant to a Private Exchange (as
defined in the Registration Rights Agreement). Exchange Notes (as defined in the
Registration Rights Agreement) may have such distinctive series designation and
"CUSIP" numbers as and such changes in the form thereof as are specified in the
Officers' Certificate referred to in the preceding sentence. Exchange Notes
issued pursuant to a Registered Exchange shall not bear the Private Placement
Legend.
<PAGE>
-46-
The Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent to
authenticate Notes. Any such appointment shall be evidenced by an instrument
signed by an authorized officer of the Trustee, a copy of which shall be
furnished to the Issuers. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same right as an Agent to deal with the Issuers or
an Affiliate of any Issuer.
Section 2.03. Registrar, Paying Agent and Calculation Agent.
The Issuers shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency located in the Borough of Manhattan, City of New York, State of
New York where Notes may be presented for payment ("Paying Agent") and an office
or agency where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Registrar shall provide the
Issuers a current copy of such register from time to time upon request of the
Issuers. The Issuers may have one or more co-registrars and one or more
additional paying agents. None of the Issuers nor any Affiliate of the Issuers
may act as Paying Agent or Calculation Agent. The Issuers may change any Paying
Agent, Registrar, co-registrar or Calculation Agent without notice to any
Noteholder.
The Issuers shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or Calculation Agent not a party to this
Indenture. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuers shall notify the Trustee of the name and
address of any such Agent. If the Issuers fail to maintain a Registrar, Paying
Agent or Calculation Agent, or agent for service of notices and demands, or fail
to give the foregoing notice, the Trustee shall act as such. The Issuers
initially appoint the Trustee as Registrar, Paying Agent, Calculation Agent and
agent for service of notices and demands in connection with the Notes.
<PAGE>
-47-
Section 2.04. Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, premium, if any, or interest on Notes (whether such
assets have been distributed to it by the Issuers or any other obligor on the
Notes), and shall notify the Trustee in writing of any Default in making any
such payment. The Issuers at any time may require a Paying Agent to distribute
all assets held by it to the Trustee and account for any assets disbursed and
the Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to forthwith
distribute to the Trustee all assets so held in trust by such Paying Agent
together with a complete accounting of such sums. Upon doing so, the Paying
Agent shall have no further liability for such assets.
Section 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Issuers shall
furnish to the Trustee on or before each March 1, June 1, September 1, and
December 1 in each year, and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Noteholders.
Section 2.06. Transfer and Exchange.
When a Note is presented to the Registrar with a request to
register the transfer thereof, the Registrar shall register the transfer as
requested if the requirements of applicable law are met and, when Notes are
presented to the Registrar with a request to exchange them for an equal
principal amount of Notes of other authorized denominations, the Registrar shall
make the exchange as requested; provided that every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Issuers and the Registrar duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit transfers and exchanges, upon surrender of
any Note for registration of transfer at the office or agency maintained
pursuant to Section 2.03 hereof, the Issuers shall execute and the Trustee shall
<PAGE>
-48-
authenticate Notes at the Registrar's request. Any exchange or transfer shall be
without charge, except that the Issuers may require payment by the Holder of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation to a transfer or exchange, but this provision shall not apply to any
exchange pursuant to Sections 2.09, 3.06 or 8.05 hereof. The Trustee shall not
be required to register transfers of Notes or to exchange Notes for a period of
15 days before selection of any Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Notes called or being called
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial interests in such Global
Note may be effected only through a book entry system maintained by the
Depository of such Global Note (or its agent), and that ownership of a
beneficial interest in the Global Note shall be required to be reflected in a
book entry.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the
Holder presents evidence to the satisfaction of the Issuers and the Trustee that
the Note has been lost, destroyed or wrongfully taken, the Issuers shall issue
and the Trustee shall authenticate a replacement Note. An indemnity bond may be
required by the Issuers or the Trustee that is sufficient in the judgment of the
Issuers and the Trustee to protect the Issuers, the Trustee or any Agent from
any loss which any of them may suffer if a Note is replaced. In every case of
destruction, loss or theft, the applicant shall also furnish to the Issuers and
to the Trustee evidence to their satisfaction of the destruction, loss or the
theft of such Note and the ownership thereof. Each of the Issuers and the
Trustee may charge for its expenses in replacing a Note. Every replacement Note
is an additional obligation of the Issuers. In the event any such mutilated,
lost, destroyed or wrongfully taken Note has become due and payable, the Issuers
in their discretion may pay such Note instead of issuing a new Note in
replacement thereof. The provisions of this Section 2.07 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.
<PAGE>
-49-
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding until the Issuers and the Trustee receive proof satisfactory to
each of them that the replaced Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date
money sufficient to pay the principal of, premium, if any, and accrued interest
on Notes payable on that date, then on and after that date such Notes cease to
be outstanding and interest on them ceases to accrue.
Subject to Section 12.06, a Note does not cease to be
outstanding solely because the Issuers or any Affiliate of an Issuer hold the
Note.
Section 2.09. Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, of definitive
Notes but may have variations that the Issuers consider appropriate for
temporary Notes. Without unreasonable delay, the Issuers shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes
presented to it.
Section 2.10. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and retain or, upon written request of the Issuers, may destroy or
return to the Issuers in accordance with its normal practice, all Notes
surrendered for transfer, exchange, payment or cancellation and if such Notes
are destroyed, deliver a certificate of destruction to the Issuers. Subject to
Section 2.07 hereof, the Issuers may not issue new Notes to replace Notes in
respect of which they have previously paid all principal, premium and interest
accrued thereon, or delivered to the Trustee for cancellation.
<PAGE>
-50-
Section 2.11. Defaulted Interest.
If the Issuers default in a payment of interest on the Notes,
they shall pay the defaulted amounts, plus any interest payable on defaulted
amounts pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Issuers shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the Trustee
at least 20 days notice of the proposed amount of defaulted interest to be paid
and the special payment date. At least 15 days before the special record date,
the Issuers shall mail or cause to be mailed to each Noteholder at its address
as it appears on the Notes register maintained by the Registrar a notice that
states the special record date, the payment date (which shall be not less than
five nor more than ten days after the special record date), and the amount to be
paid. In lieu of the foregoing procedures, the Issuers may pay defaulted
interest in any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date, Redemption Date and Maturity Date, the Issuers shall have
deposited with the Paying Agent in immediately available funds U.S. legal tender
sufficient to make payments, if any, due on such Interest Payment Date,
Redemption Date or Maturity Date, as the case may be, in a timely manner which
permits the Trustee to remit payment to the Holders on such Interest Payment
Date, Redemption Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Notes in certificated
form shall be payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
The Issuers in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the Trustee shall use such CUSIP numbers in notices of
redemption or exchange as a convenience to Holders, provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP numbers printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes.
<PAGE>
-51-
Section 2.14. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository and (ii) bear legends
as set forth in Exhibit B.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository or under the Global Note, and the
Depository may be treated by the Issuers, the Trustee and any agent of the
Issuers or the Trustee as the absolute owner of the Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Issuers, the Trustee or any agent of the Issuers or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder.
(b) Interests of beneficial owners in the Global Notes may be
transferred or exchanged for Certificated Notes in accordance with the rules and
procedures of the Depository and the provisions of Section 2.15. In addition,
Certificated Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes if (i) the Depository (x) notifies
the Issuers that it is unwilling or unable to continue as Depository for any
Global Note or (y) has ceased to be a clearing company registered under the
Exchange Act and, in each case, a successor depositary is not appointed by the
Issuers within 90 days of such notice, (ii) the Issuers, at their option, notify
the Trustee in writing that they elect to cause the issuance of Certificated
Notes, or (iii) a Default or an Event of Default has occurred and is continuing
and the Registrar has received a written request from the Depository to issue
Certificated Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Certificated Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Issuers
shall execute, and the Trustee shall upon receipt of a written order from the
Issuers authenticate and make available for delivery, one or more Certificated
Notes of like tenor and amount.
<PAGE>
-52-
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Issuers
shall execute, and the Trustee shall, upon receipt of an authentication order
from the Issuers in the form of an Officers' Certificate, authenticate and
deliver, to each beneficial owner identified by the Depository in writing in
exchange for its beneficial interest in the Global Notes, an equal aggregate
principal amount of Certificated Notes of authorized denominations.
(e) Any Certificated Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph
(b), (c) or (d) shall, except as otherwise provided by Section 2.15, bear the
Private Placement Legend.
(f) The Holder of any Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
Section 2.15. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented to the Registrar or co-Registrar with a
request:
(i) to register the transfer of the Certificated Notes; or
(ii) to exchange such Certificated Notes for an equal
principal amount of Certificated Notes of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.15 for such transactions are met; provided, however, that the
Certificated Notes presented or surrendered for registration of transfer or
exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
<PAGE>
-53-
(II) in the case of Certificated Notes the offer and sale of
which have not been registered under the Securities Act and are
presented for transfer or exchange prior to (x) the date which is two
years after the later of the date of original issue and the last date
on which any Issuer or any Affiliate of an Issuer was the owner of such
Note, or any predecessor thereto and (y) such later date, if any, as
may be required by any subsequent change in applicable law (the "Resale
Restriction Termination Date"), such Certificated Notes shall be
accompanied, in the sole discretion of the Issuers, by the following
additional information and documents, as applicable:
(A) if such Certificated Note is being delivered to
the Registrar or co-Registrar by a Holder for registration in
the name of such Holder, without transfer, a certification
from such Holder to that effect (substantially in the form of
Exhibit C hereto); or
(B) if such Certificated Note is being transferred to
a Qualified Institutional Buyer in accordance with Rule 144A,
a certification to that effect (substantially in the form of
Exhibit C hereto); or
(C) if such Certificated Note is being transferred in
reliance on Regulation S, delivery of a certification to that
effect (substantially in the form of Exhibit C hereto) and a
transferor certificate for Regulation S transfers
substantially in the form of Exhibit D-1 hereto; or
(D) if such Certificated Note is being transferred to
an Institutional Accredited Investor, delivery of
certification substantially in the form of Exhibit C hereto, a
certificate of the transferee in substantially the form of
Exhibit D-2 and an Opinion of Counsel and/or other information
reasonably satisfactory to the Issuers to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such Certificated Note is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect substantially in the form of
Exhibit C hereto; or
(F) if such Certificated Note is being transferred in
reliance on another exemption from the reg-
<PAGE>
-54-
istration requirements of the Securities Act, a certification to that
effect (substantially in the form of Exhibit C hereto) and an Opinion
of Counsel reasonably acceptable to the Issuers to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Certificated Note for a
Beneficial Interest in a Global Note. A Certificated Note may not be exchanged
for a beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Certificated Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) in the case of Certificated Notes, the offer and sale of
which have not been registered under the Securities Act and which are
presented for transfer prior to the Resale Restriction Termination
Date, certification, substantially in the form of Exhibit C hereto,
that such Certificated Note is being transferred (I) to a Qualified
Institutional Buyer or (II) in an offshore transaction in reliance on
Regulation S (and in the case of this clause II, the Issuers shall have
received a transferor certificate for Regulation S transfers
substantially in the form of Exhibit D-1 hereto); and
(B) written instructions from the Holder thereof directing the
Registrar or co-Registrar to make, or to direct the Depository to make,
an endorsement on the applicable Global Note to reflect an increase in
the aggregate principal amount of the Notes represented by the Global
Note,
then the Registrar or co-Registrar shall cancel such Certificated Note and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Notes represented by the applicable Global
Note to be increased accordingly. If no Global Note representing Notes held by
Qualified Institutional Buyers or Persons acquiring Notes in offshore
transactions in reliance on Regulation S, as the case may be, is then
outstanding, the Issuers shall issue and the Trustee shall, upon receipt of an
authentication order in the form of an Officers' Certificate in accordance with
Section 2.02, authenticate such a Global Note in the appropriate principal
amount.
<PAGE>
-55-
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or co-Registrar of written instructions,
or such other instruction as is customary for the Depository, from the
Depository or its nominee, requesting the registration of transfer of an
interest in a U.S. Global Note or Regulation S Global Note, as the case may be,
to another type of Global Note, together with the applicable Global Notes (or,
if the applicable type of Global Note required to represent the interest as
requested to be transferred is not then outstanding, only the Global Note
representing the interest being transferred), the Registrar or Co-Registrar
shall cancel such Global Notes (or Global Note) and the Issuers shall issue and
the Trustee shall, upon receipt of an authentication order in the form of an
Officers' Certificate in accordance with Section 2.02, authenticate new Global
Notes of the types so cancelled (or the type so cancelled and applicable type
required to represent the interest as requested to be transferred) reflecting
the applicable increase and decrease of the principal amount of Notes
represented by such types of Global Notes, giving effect to such transfer. If
the applicable type of Global Note required to represent the interest as
requested to be transferred is not outstanding at the time of such request, the
Issuers shall issue and the Trustee shall, upon written instructions from the
Issuers in accordance with Section 2.02, authenticate a new Global Note of such
type in principal amount equal to the principal amount of the interest requested
to be transferred.
(d) Transfer of a Beneficial Interest in a Global Note for a
Certificated Note. (i) Any Person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a Certificated Note. Upon
receipt by the Registrar or co-Registrar of written instructions, or such other
form of instructions as is customary for the Depository, from the Depository or
its nominee on behalf of any Person having a beneficial interest in a Global
Note and upon receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person designated by the
Depository as having such a beneficial interest containing registration
instructions and, in the case of any such transfer or exchange of a beneficial
interest in Notes the offer and sale of which have not been registered under the
Securities Act and which Notes are presented for transfer or ex-
<PAGE>
-56-
change prior to the Resale Restriction Termination Date, the following
additional information and documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner, a
certification from such Person to that effect (substantially in the
form of Exhibit C hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule l44A, a
certification to that effect (substantially in the form of Exhibit C
hereto); or
(C) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit C hereto) and a transferor
certificate for Regulation S transfers substantially in the form of
Exhibit D-1 hereto; or
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of certification
substantially in the form of Exhibit C hereto, a certificate of the
transferee in substantially the form of Exhibit D-2 and an Opinion of
Counsel and/or other information reasonably satisfactory to the Issuers
to the effect that such transfer is in compliance with the Securities
Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect substantially in the form of Exhibit C
hereto; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in the
form of Exhibit C hereto) and an Opinion of Counsel reasonably
satisfactory to the Issuers to the effect that such transfer is in
compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the aggregate principal amount of the applicable Global Note to be
reduced and, following such reduction, the Issuers will execute and, upon
receipt of an authentication order in the form of an Offi-
<PAGE>
-57-
cers' Certificate in accordance with Section 2.02, the Trustee will authenticate
and deliver to the transferee a Certificated Note in the appropriate principal
amount.
(ii) Certificated Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.15(d) shall be registered
in such names and in such authorized denominations as the Depository, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Registrar or co-Registrar in writing. The Registrar or co-Registrar
shall deliver such Certificated Notes to the Persons in whose names such
Certificated Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar or
co-Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar or co-Registrar shall deliver only Notes that
bear the Private Placement Legend unless, and the Trustee is hereby authorized
to deliver Notes without the Private Placement Legend if, (i) the Resale
Restriction Termination Date shall have occurred, (ii) there is delivered to the
Trustee an Opinion of Counsel reasonably satisfactory to the Issuers and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act or (iii) such Note has been sold pursuant to an effective
registration statement under the Securities Act.
(g) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to
<PAGE>
-58-
Section 2.14 or this Section 2.15. The Issuers shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
Section 2.16. Joint and Several Liability.
Except as otherwise expressly provided herein, the Issuers
shall be jointly and severally liable for the performance of all obligations and
covenants under this Indenture and the Notes.
Section 2.17. Ranking of Notes and Guarantees Relative to
Existing Notes and Related Guarantees.
The Issuers and the Guarantors covenant and agree, and each
Holder, by its acceptance thereof, likewise covenants and agrees, that the
Indebtedness represented by the Notes and the Guarantees and the payment of all
Obligations on the Notes and the Guarantees hereby expressly rank pari passu in
right of payment with the Existing Notes and the related guarantees thereof, as
applicable.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Issuers elect or are required to redeem Notes pursuant
to Section 3.07 hereof, at least 60 days prior to the Redemption Date (except in
the case of a redemption pursuant to Section 3.07(c) (in which case the Issuers
shall give the Trustee notice as soon as reasonably practicable but in no event
later than three Business Days prior to the Redemption Date)) or during such
other period as the Trustee may agree to, the Issuers shall notify the Trustee
in writing of the Redemption Date, the principal amount of Notes to be redeemed
and the redemption price, and deliver to the Trustee an Officers' Certificate
stating that such redemption will comply with the conditions contained in
Section 3.07 hereof, as appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
In the event that less than all of the Notes are to be
redeemed at any time, selection of the Notes for redemption
<PAGE>
-59-
will be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided,
that no Notes of $1,000 principal amount or less shall be redeemed in part. The
Trustee may select for redemption portions of the principal of the Notes that
have denominations larger than $1,000. The Trustee shall promptly notify the
Issuers of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture unless the context otherwise requires,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Notice of redemption shall be mailed by first class mail at
least 30 but not more than 60 calendar days before the Redemption Date (except
in the case of a redemption pursuant to Section 3.07(c) (in which case the
notice shall be mailed at least one Business Day prior to the Redemption Date))
to each Holder of Notes to be redeemed at its registered address. If any Note is
to be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed.
The notice shall identify the Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest,
if any, to be paid;
(3) that, if any Note is being redeemed in part, the portion
of the principal amount at maturity (equal to $1,000 in principal
amount or any integral multiple thereof) of such Note to be redeemed
and that, on and after the Redemption Date, upon surrender of such
Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be issued;
(4) the name, address and telephone number of the Paying
Agent;
<PAGE>
-60-
(5) that Notes called for redemption must be surrendered to
the Paying Agent at the address specified to collect the redemption
price plus accrued interest, if any;
(6) that, unless the Issuers default in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the redemption price plus accrued
interest to the Redemption Date upon surrender of the Notes to the
Paying Agent;
(7) the paragraph of Section 3.07 hereof pursuant to which the
Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being
redeemed.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus accrued interest
to the Redemption Date, if any. Upon surrender to the Paying Agent, such Notes
shall be paid at the redemption price, including any premium, plus accrued
interest to the Redemption Date, if any, provided that if the Redemption Date is
after a regular interest payment record date and on or prior to the Interest
Payment Date, the accrued interest shall be payable to the Holder of the
redeemed Notes registered on the relevant record date.
Section 3.05. Deposit of Redemption Price.
On or prior to 10:00 a.m., New York City time, on each
Redemption Date, the Issuers shall have deposited with the Paying Agent in
immediately available funds U.S. legal tender sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date.
On and after any Redemption Date, if U.S. legal tender
sufficient to pay the redemption price of and accrued interest on Notes called
for redemption shall have been made available in accordance with the preceding
paragraph, the Notes called for redemption will cease to accrue interest and the
only right of the Holders of such Notes will be to receive payment of the
redemption price of and, subject to the first pro-
<PAGE>
-61-
viso in Section 3.04, accrued and unpaid interest on such Notes to the
Redemption Date. If any Note called for redemption shall not be so paid,
interest will continue to accrue and be paid, from the Redemption Date until
such redemption payment is made, on the unpaid principal of the Note and any
interest not paid on such unpaid principal, in each case, at the rate and in the
manner provided in the Notes.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Redemption.
(a) Optional Redemption. The Issuers may redeem the Notes that
are redeemable at their option, in whole at any time or in part from time to
time, (i) from and including the Issue Date through to and including July 31,
2000 at a redemption price of 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to the Redemption Date, (ii) from and including
August 1, 2000 through to and including October 31, 2000 at a redemption price
of 101.50% of the principal amount thereof plus accrued and unpaid interest, if
any, to the Redemption Date and (iii) (A) from and including March 15, 2004
through to and including March 14, 2005 at a redemption price equal to 100% of
the principal amount thereof plus a premium equal to one-half of the interest
rate then borne by the Notes, (B) from and including March 15, 2005 through to
and including March 14, 2006 at a redemption price equal to 100% of the
principal amount thereof plus a premium equal to one-third of the interest rate
then borne by Notes, (C) from and including March 15, 2006 through to and
including March 14, 2007 at a redemption price equal to 100% of the principal
amount thereof plus a premium equal to one-sixth of the interest rate then borne
by the Notes and (D) from and including March 15, 2007 through to and including
the Maturity Date at a redemption price equal to 100% of the principal amount
thereof, in each case plus accrued and unpaid interest, if any, to the
Redemption Date.
Except as set forth in paragraph (b) of this Section 3.07, the
Issuers may not redeem the Notes at their option from and including November 1,
2000 through to and including March 14, 2004.
<PAGE>
-62-
(b) Redemption with Net Cash Proceeds of Equity Offerings. The
Issuers may redeem up to 35% of the principal amount of the Notes originally
issued under this Indenture, at any time and from time to time from and after
November 1, 2000 but prior to March 15, 2002, at a redemption price equal to
100% of the aggregate principal amount so redeemed plus a premium equal to the
interest rate then borne by the Notes, plus accrued and unpaid interest, if any,
to the Redemption Date, out of the net cash proceeds of one or more Equity
Offerings; provided, that at least 65% of the principal amount of the Notes
originally issued under this Indenture remains outstanding immediately after any
such redemption (it being expressly agreed that for purposes of determining
whether this condition is satisfied, Notes owned by the Issuers or any of their
Affiliates shall be deemed not to be outstanding). In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Issuers shall
make such redemption not more than 60 days following the closing of any such
Equity Offering.
(c) Mandatory Redemption. Subject to compliance with the terms
of the Senior Credit Facility (provided that no amendment to the Senior Credit
Facility which is entered into after the Issue Date and on or before October 31,
2000 shall have terms which are materially more restrictive with respect to the
rights of Holders under this Section 3.07(c) than the terms of the Senior Credit
Facility as in effect on the Issue Date), if on or before October 31, 2000 any
Issuer or any of its Subsidiaries receives cash proceeds from (x) the issuance
of Capital Stock (other than (A) proceeds of Capital Stock issued to any Issuer
or any Restricted Subsidiary of any Issuer, (B) proceeds from the issuance to
any employee of any Issuer or any Restricted Subsidiary of any Issuer of Common
Stock or options to purchase Common Stock of any Issuer or any Restricted
Subsidiary pursuant to employee stock options and incentive plans in existence
on the Issue Date, (C) the issuance of Capital Stock as consideration for the
acquisition of any Person or any property or assets of any Person in compliance
with the other terms of this Indenture and (D) proceeds from the issuance of
Capital Stock by the Company to any holder of the Company's Capital Stock as of
the Issue Date and from any contribution to the common equity of the Company by
any holder of the Company's Capital Stock as of the Issue Date, not to exceed
$5,000,000 in the aggregate) or (y) the incurrence of any Indebtedness (other
than (A) Permitted Indebtedness, (B) the Attributable Indebtedness in respect of
any Sale and Lease-Back Transaction, (C) any Indebtedness of any Person assumed
by the Issuer or any of its Subsidiaries in connection with the acquisition of
such Person or its property or assets and (D) any In-
<PAGE>
-63-
debtedness issued to the transferor of any Person, property or assets as
consideration for the acquisition by any Issuer or its Subsidiaries of such
Person, property or assets), the Issuers shall promptly redeem that principal
amount of Notes redeemable with such net proceeds received at the redemption
prices set forth below (expressed as a percentage of the principal amount
thereof) plus accrued and unpaid interest, if any, to the Redemption Date, if
redeemed during the period indicated below:
Period Percentage
------ ----------
Issue Date through to and including
July 31, 2000 100.000%
August 1, 2000 through to and in- 101.500%
cluding October 31, 2000
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall pay the principal of and interest (including
all Additional Interest (as defined in the Registration Rights Agreement) as
provided in the Registration Rights Agreement on the Notes on the dates and in
the manner provided in the Notes and this Indenture. An installment of principal
or interest shall be considered paid on the date it is due if the Trustee or
Paying Agent holds, for the benefit of the Holders, on that date U.S. legal
tender designated for and sufficient to pay such installment. Interest on the
Notes shall be computed as set forth in Exhibit A.
The Issuers shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and interest
on overdue interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. Provision of Financial Statements and Other Information.
(a) Commencing with the first fiscal quarter of the Company
ending after the Issue Date, the Issuers will file with the Commission all
information, documents and reports required
<PAGE>
-64-
to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act and will provide the Trustee and the Noteholders with copies of all such
information, documents and reports within 15 days of filing thereof with the
Commission; provided that if the Issuers are not required to file such
information, documents or reports with the Commission, they will nonetheless
continue to furnish such information, documents and reports required to be filed
by issuers subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act to the Trustee and the Noteholders within 15 days of the date on
which filing with the Commission would have been required. The Issuers shall
also comply with the provisions of TIA ss. 314(a). The Trustee shall retain such
reports, information and documents at its Corporate Trust Office and permit any
Noteholder to examine such material upon prior written request at reasonable
times. Except to determine whether the Issuers have complied with the provisions
of this Section 4.02, the Trustee shall not be required to examine or review
such material or any of it and shall not be considered to have had notice,
constructive or otherwise, from anything set forth in such material of any
Default or other fact or event which might require the Trustee to take any
action or give any notice hereunder.
(b) The Issuers will, upon request, provide to any Holder or
any prospective transferee of any such Holder any information concerning the
Issuers (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144 and Rule 144A under
the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Issuers covenant (to the extent that they may lawfully do
so) that they will not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Issuers from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that they may
lawfully do so) the Issuers hereby expressly waive all benefit or advantage of
any such law, and covenant that they will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
<PAGE>
-65-
Section 4.04. Compliance Certificate; Notice of Default; Tax Information.
(a) The Issuers shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate (one of the signers
of which shall be the principal executive officer, principal financial officer
or principal accounting officer of each Issuer) stating that a review of the
activities of the Issuers and their Subsidiaries during such fiscal year has
been made under the supervision of the signing Officers with a view to
determining whether the Issuers have kept, observed, performed and fulfilled
their obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge the
Issuers have kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and, in the case of Restricted Payments, listing all
Restricted Payments for such quarter, and are not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all of such Defaults
or Events of Default of which he or she may have knowledge and what action each
is taking or proposes to take with respect thereto) and that to the best of his
or her knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal of or interest, if any, on the Notes
are prohibited or if such event has occurred, a description of the event and
what action the Issuers are taking or propose to take with respect thereto.
(b) The Issuers will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Issuers are taking or propose to
take with respect thereto.
(c) The annual financial statements delivered pursuant to
Section 4.02 shall be accompanied by a written report of the Issuers'
independent accountants (who shall be a firm of established national reputation)
that in conducting their audit of such financial statements nothing has come to
their attention that would lead them to believe that any Issuer has violated any
material provisions of Article Four, Five or Six of this Indenture insofar as
they relate to accounting matters or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any
<PAGE>
-66-
Person for any failure to obtain knowledge of any such violation.
(d) The Issuers shall calculate and deliver to the Trustee all
original issue discount information to be reported by the Trustee to Holders as
required by law.
Section 4.05. Taxes.
The Issuers shall, and shall cause each of their Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness); provided that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Issuers and any of the
Guarantors may incur Indebtedness (including Acquired Indebtedness) if after
giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, the Company's Consolidated Leverage Ratio
is less than 6.5 to 1 if such Indebtedness is incurred on or before March 15,
2001 and 6.0 to 1 if such Indebtedness is incurred thereafter.
(b) Notwithstanding the foregoing clause (a), the Company and
its Restricted Subsidiaries may incur Permitted Indebtedness. For purposes of
determining compliance with this Section 4.06, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness as of the date of incurrence thereof or is entitled to be
incurred pursuant to the first paragraph of this covenant as of the date of
incurrence thereof, the Company shall, in its sole discretion, classify or
reclassify such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, the accretion of accreted value and the payment
of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant and the payment of
dividends on Disqualified Capital Stock in the form of additional shares of the
same class of Disqualified Capital Stock will not be deemed an issuance of
Disqualified Capital Stock.
<PAGE>
-67-
Section 4.07. Limitation on Restricted Payments.
(a) The Company will not make, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make, any Restricted
Payment, unless:
(1) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(2) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.06 of
this Indenture; and
(3) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of
(a) 100% of the Company's Cumulative EBITDA (or, in
the event that such Cumulative EBITDA shall be a deficit,
minus 100% of such deficit) minus 1.4 times the Company's
Cumulative Consolidated Interest Expense,
(b) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale after the Existing Notes
Issue Date of Capital Stock (other than Disqualified Capital
Stock or Capital Stock of the Company issued to any Subsidiary
of the Company) of the Company or any Indebtedness or other
securities of the Company convertible into or exercisable or
exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which have been so converted,
exercised or exchanged, as the case may be,
(c) without duplication of any amounts included in
clause (3)(b) above, 100% of the aggregate net proceeds
(including the fair market value of Property other than cash)
received by the Company from any equity contribution from a
holder of the Company's Capital Stock (provided that the net
proceeds from the ABRY Equity Contributions shall be excluded
from such calculation and, if applicable, from clause (b)
above, until the Conversion Date), excluding, in the case of
clauses (3)(b) and (c), (i) any net proceeds
<PAGE>
-68-
from an Equity Offering to the extent used to redeem the Notes
and (ii) any net proceeds directly or indirectly received in
connection with the Capstar Acquisition, and
(d) without duplication, the sum of
(i) the aggregate amount returned in cash
on or with respect to Investments (other than
Permitted Investments) made subsequent to the
Existing Notes Issue Date whether through interest
payments, principal payments, dividends or other
distributions;
(ii) the net proceeds received by the
Company or any of its Restricted Subsidiaries from
the disposition, retirement or redemption of all or
any portion of such Investments (other than to a
Subsidiary of the Company); and
(iii) upon redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the fair market value
of the net assets of such Subsidiary;
provided, however, that the sum of clauses (d)(i), (ii) and (iii) above
shall not exceed the aggregate amount of all such Investments made
subsequent to the Existing Notes Issue Date.
For purposes of determining under clause (3) above the amount
expended for Restricted Payments, cash distributed shall be valued at the face
amount thereof and Property other than cash shall be valued at its fair market
value.
(b) The provisions of this Section 4.07 shall not prohibit
(1) the payment of any distribution within 60 days after the
date of declaration thereof, if at such date of declaration such
payment would comply with the provisions of this Indenture,
(2) the repurchase, redemption, defeasance or other
acquisition or retirement of any shares of Capital Stock of the Company
or of Indebtedness that is subordinated to the Notes by conversion
into, or by or in exchange for, shares of Capital Stock of the Company
(other than Dis-
<PAGE>
-69-
qualified Capital Stock), or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock),
(3) the redemption, repurchase, defeasance, retirement or
other acquisition of Indebtedness of the Company that is subordinated
to the Notes in exchange for, by conversion into, or out of the net
cash proceeds of a substantially concurrent sale or incurrence of,
Indebtedness of the Company (other than any Indebtedness owed to a
Subsidiary) that is Refinancing Indebtedness,
(4) the retirement of any shares of Disqualified Capital Stock
of the Company by conversion into, or by exchange for, shares of
Disqualified Capital Stock of the Company, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Disqualified Capital
Stock of the Company,
(5) the payment of any dividend or distribution to the extent
necessary to permit direct or indirect beneficial owners of shares of
Capital Stock of the Company to pay federal, state or local income tax
liabilities arising from income of the Company and attributable to them
solely as a result of the Company (and any intermediate entity through
which the holder owns such shares) being a limited liability company,
partnership or similar entity for federal income tax purposes
(collectively "Permitted Tax Distributions"),
(6) the repurchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or the payment
of a dividend to Holdings to effect the repurchase, redemption or other
acquisition or retirement for value of Holdings' Capital Stock that is
held by any current or former members of the management of the Company
(or any of its Restricted Subsidiaries) pursuant to any management
equity subscription or purchase agreement, members agreement,
securityholders agreement or stock option agreement or similar
agreement, in an aggregate amount not to exceed $2 million in any
fiscal year (which amount shall be increased by the amount of any
proceeds to the Company from (x) without duplication of any amounts
included in clauses 3(b) and (c) of subsection (a) above, sales of
Capital Stock (other than Disqualified Capital Stock) of the Company or
Holdings (which net pro-
<PAGE>
-70-
ceeds have been contributed by the Company) to management or other
employees subsequent to the Existing Notes Issue Date and (y) any
"key-man" life insurance policies which are used to make such
redemptions or repurchases); provided, that the cancellation of
Indebtedness owing to the Company from management or other employees of
the Company or any of its Restricted Subsidiaries in connection with a
repurchase of Capital Stock of the Company will not be deemed to
constitute a Restricted Payment under this Indenture,
(7) the making of distributions, loans or advances in an
amount not to exceed $1 million in any calendar year sufficient to
permit Holdings to pay the ordinary operating expenses of Holdings
(including, without limitation, directors' fees, indemnification
obligations, professional fees and expenses) relating to Holdings'
ownership of Capital Stock of the Company,
(8) payments or distributions to Holdings on and after
September 15, 2004 in an amount sufficient to permit Holdings to make
cash interest payments when due to holders of the Senior Discount Notes
in accordance with the terms of the Senior Discount Notes as in effect
on the Existing Notes Issue Date,
(9) [RESERVED]
(10) Investments received in connection with an Asset Sale
that complies with Section 4.09 of this Indenture,
(11) payments or distributions to dissenting stockholders
pursuant to transactions permitted under the terms of this Indenture,
(12) repurchases of Capital Stock deemed to occur upon the
exercise of stock options if such Capital Stock represents a portion of
the exercise price thereof,
(13) payments to enable the Company or Holdings to make
payments to holders of their Capital Stock in lieu of issuance of
fractional shares of their Capital Stock,
(14) payment of principal and interest on funds on the ABRY
Subordinated Debt in accordance with the terms thereof,
<PAGE>
-71-
(15) any dividend or distribution made so long as concurrently
therewith a capital contribution in an equal amount is made to the
Company, and
(16) other Restricted Payments in an aggregate amount not to
exceed $5 million.
In calculating the aggregate amount of Restricted Payments
made subsequent to the Issue Date for purposes of clause (3) of subsection (a)
above, amounts expended pursuant to clauses (1), (2), (8) and (15) of the
immediately preceding paragraph shall be included in such calculation.
(c) Not later than the date of making any Restricted Payment,
the Issuers shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Issuers' latest available financial statements, and (other
than with respect to any Restricted Payment permitted under clauses (5), (6) and
(7)) that no Default or Event of Default has occurred and is continuing and no
Default or Event of Default will occur immediately after giving effect to any
such Restricted Payments.
Section 4.08. Limitation on Other Senior Subordinated Indebtedness.
The Company will not, and will not permit any of the
Guarantors to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Notes and the Guarantees, as the case may be) that
is both (i) subordinated in right of payment to any Senior Indebtedness of the
Company or Guarantor Senior Indebtedness of any of the Guarantors, as the case
may be, and (ii) senior in right of payment to the Notes and the respective
Guarantee of any such Guarantor, as the case may be. For purposes of this
covenant, Indebtedness is deemed to be senior in right of payment to the Notes
or the Guarantees, as the case may be, if it is not explicitly subordinated in
right of payment to Senior Indebtedness or Guarantor Senior Indebtedness, as the
case may be, at least to the same extent as the Notes and the Guarantees, as the
case may be, are subordinated to such Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be.
<PAGE>
-72-
Section 4.09. Limitation on Certain Asset Sales.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless
(1) the Company or such Restricted Subsidiary, as the case may
be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold
or otherwise disposed of (as determined in good faith by the Board of
Directors of the Company, and evidenced by a Board Resolution);
(2) not less than 75% of the consideration received by the
Company or such Restricted Subsidiary, as the case may be, is in the
form of cash or Cash Equivalents and/or a controlling interest in a
Person whose assets are useful to the Company, or any combination
thereof, except to the extent to which the Company is undertaking a
Permitted Asset Swap; provided that the amount of
(a) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the
Company or any of its Restricted Subsidiaries (other than
contingent liabilities and liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee
of any such assets shall be deemed to be cash for purposes of
this clause (2); and
(b) any securities, notes or other obligations
received by the Company or any such Restricted Subsidiary from
such transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of
this clause (2); and
(3) the Asset Sale Proceeds received by the Company or such
Restricted Subsidiary are applied
(a) first, to the extent the Company or any such
Restricted Subsidiary, as the case may be, elects, or is
required, to prepay, repay or purchase indebtedness under any
then existing Senior Indebtedness of the Company or any such
Restricted Subsidiary within 360 days following the receipt of
the Asset Sale Proceeds from any Asset Sale; provided that any
such repayment shall result in a permanent reduction
<PAGE>
-73-
of the commitments thereunder in an amount equal to the
principal amount so repaid;
(b) second, to the extent of the balance of Asset
Sale Proceeds after application as described above, to the
extent the Company elects, to an investment in assets
(including Capital Stock or other securities purchased in
connection with the acquisition of Capital Stock or Property
of another Person) used or useful in businesses reasonably
related, ancillary or complementary to the business of the
Company or any such Restricted Subsidiary as conducted on the
Issue Date; provided that such investment occurs within 360
days following receipt of such Asset Sale Proceeds; and
(c) third, if on such 360th day with respect to any
Asset Sale, the Available Asset Sale Proceeds exceed $10
million, the Company shall apply an amount equal to the
Available Asset Sale Proceeds to an offer to repurchase the
Notes and all other pari passu Indebtedness of the Company
containing provisions substantially similar to those set forth
in this Indenture regarding offers to purchase or redeem with
Asset Sale Proceeds, in each case, at a purchase price in cash
equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date (an "Excess
Proceeds Offer").
If an Excess Proceeds Offer is not fully subscribed, the
Company may retain the portion of the Available Asset Sale Proceeds not required
to repurchase Notes and such pari passu Indebtedness.
Pending the final application of any Asset Sale Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any, or otherwise invest such Asset Sale
Proceeds in Cash Equivalents.
(b) If the Company is required to make an Excess Proceeds
Offer, the Company shall within 45 days following the date specified in
subparagraph (a)(3)(c) above (i) cause a notice of the Excess Proceeds Offer to
be sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) mail a notice of the Excess Proceeds Offer
to the Trustee and the Holders. Such notice shall be sent by first-class mail,
postage prepaid, to the Trustee and
<PAGE>
-74-
to each Noteholder, at the address appearing in the register maintained by the
Registrar of the Notes, and shall state:
(i) that the Excess Proceeds Offer is being made pursuant to
this Section 4.09;
(ii) that such Holders have the right to require the Company
to apply the Available Asset Sale Proceeds to repurchase such Notes at
a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the purchase date which
shall be no earlier than 45 days and not later than 60 days from the
date such notice is mailed (the "Excess Proceeds Payment Date");
(iii) that any Note not tendered or accepted for payment will
continue to accrue interest;
(iv) that any Notes accepted for payment pursuant to the
Excess Proceeds Offer shall cease to accrue interest after the Excess
Proceeds Payment Date;
(v) that Holders accepting the offer to have their Notes
purchased pursuant to an Excess Proceeds Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on
the Business Day preceding the Excess Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their
acceptance of the Excess Proceeds Offer if the Paying Agent receives,
not later than the close of business on the third Business Day
preceding the Excess Proceeds Payment Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(vii) that if the aggregate principal amount of Notes
surrendered by Holders exceeds the amount of Excess Proceeds, Company
shall select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or integral multiples thereof, shall
be purchased);
<PAGE>
-75-
(viii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, provided that each Note purchased and
each such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof;
(ix) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the purchase of such
Notes;
(x) any other procedures that a Holder must follow to accept
an Excess Proceeds Offer or effect withdrawal of such acceptance; and
(xi) the name and address of the Paying Agent.
On the Excess Proceeds Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment, on a pro rata basis to the extent
necessary, Notes or portions thereof validly tendered pursuant to the Excess
Proceeds Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price plus accrued and unpaid interest, if any, on the Notes to be
purchased or portions thereof, (iii) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Issuers in
accordance with the terms of this Section 4.09. The Paying Agent shall promptly
mail to each Holder so accepted payment in an amount equal to the purchase price
for such Notes, and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and make available for delivery to such Holder, a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered;
provided that each such new Note shall be issued in an original principal amount
in denominations of $1,000 and integral multiples thereof. The Issuers will
publicly announce the results of the Excess Proceeds Offer on the Excess
Proceeds Payment Date.
(c) In the event of the transfer of substantially all of the
Property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01 of this
Indenture below but which transaction does not constitute a Change of Control,
the successor Person shall be deemed to have sold the properties and assets of
the Issuers and their Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply
<PAGE>
-76-
with the provisions of this Section 4.09 with respect to such deemed sale as if
it were an Asset Sale.
(d) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to an Excess Proceeds Offer. To the extent
that the provisions of any securities laws or regulations conflict with this
Section 4.09, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.09 by virtue thereof.
Section 4.10. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, Property or
services) with any Affiliate (each an "Affiliate Transaction") or extend, renew,
waive or otherwise modify the terms of any Affiliate Transaction entered into
prior to the Issue Date unless
(1) such Affiliate Transaction is between or among the Company
and its Restricted Subsidiaries; or
(2) the terms of such Affiliate Transaction are at least as
favorable as the terms which could be obtained by the Company or such
Restricted Subsidiary, as the case may be, in a comparable transaction
made on an arm's-length basis between unaffiliated parties.
In any Affiliate Transaction (or any series of related
Affiliate Transactions which are similar or part of a common plan) involving an
amount or having a fair market value in excess of $2.5 million which is not
permitted under clause (1) above, the Company must obtain a Board Resolution of
the Company certifying that such Affiliate Transaction complies with clause (2)
above. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $10 million which is not permitted under
clause (1) above, the Company must obtain a favorable written opinion as to the
fairness of such transaction or transactions, as the case may be, from an
Independent Financial Advisor.
<PAGE>
-77-
(b) The foregoing provisions will not apply to
(1) any Restricted Payment that is not prohibited by the
provisions described under Section 4.07 of this Indenture,
(2) reasonable fees and compensation paid to, and indemnity
provided on behalf of, officers, Directors, employees or consultants of
the Company or any Restricted Subsidiary of the Company as determined
in good faith by the Company's Board of Directors or senior management,
(3) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto
so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date,
(4) transactions effected as part of a Qualified
Securitization Transaction,
(5) any employment agreement entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business,
and advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary
course of business,
(6) the existence of, or the performance by the Company or any
of its Restricted Subsidiaries of its obligations under the terms of,
any securityholders agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party
as of the Issue Date and any similar agreements which it may enter into
thereafter; provided, however, that the existence of, or the
performance by the Company or any of its Restricted Subsidiaries of
obligations under, any future amendment to any such existing agreement
or under any similar agreement entered into after the Issue Date shall
only be permitted by this clause (6) to the extent that the terms of
any such amendment or new agreement are not otherwise disadvantageous
to the Holders in any material respect,
(7) transactions permitted by, and complying with, the
provisions described under Article 5 of this Indenture below,
<PAGE>
-78-
(8) payments of principal and interest on the ABRY
Subordinated Debt in accordance with the terms thereof,
(9) transactions with customers, clients, suppliers, joint
venture partners or purchasers or sellers of goods or services, in each
case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with
the terms of this Indenture which are fair to the Company or its
Restricted Subsidiaries, in the reasonable determination of the Board
of Directors of the Company or the senior management thereof, or are on
terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party,
(10) [RESERVED]
(11) transactions pursuant to the ABRY Management Agreement or
pursuant to the terms of any amendment thereto or restatement thereof
which terms are not more disadvantageous to the Holders in any material
respect than the terms of such agreement as in effect on the Issue Date
as determined in good faith by the Board of Directors of the Company
and evidenced by a Board Resolution, and
(12) with regard to the requirement to obtain the opinion of
an Independent Financial Advisor only, the issuance of Capital Stock of
the Company; provided that said issuance has been approved by the Board
of Directors of the Company and the Board Resolution described in the
immediately preceding paragraph has been delivered to the Trustee.
Section 4.11. Limitations on Liens.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur or otherwise cause or suffer to exist
or become effective any Liens of any kind (other than Permitted Liens) upon any
Property or asset of the Company or any of its Restricted Subsidiaries or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary of the
Company which owns Property or assets, now owned or hereafter acquired, unless
(1) if such Lien secures Indebtedness which is subordinated to
the Notes, any such Lien shall be subordinated to any Lien granted to
the Holders to the same extent as such Indebtedness is subordinated to
the Notes and
<PAGE>
-79-
(2) in all other cases, the Notes are equally and ratably
secured.
Section 4.12. Limitations on Investments
The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any Investment other than
(1) a Permitted Investment or
(2) an Investment that is made after the Issue Date as a
Restricted Payment in compliance with Section 4.07.
Section 4.13. Limitation on Sale and Lease-Back Transactions.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, enter into any Sale and Lease-Back Transaction
unless
(1) the consideration received in such Sale and Lease-Back
Transaction is at least equal to the fair market value of the Property
sold, as determined in good faith by the Board of Directors of the
Company and evidenced by a Board Resolution,
(2) the Company could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with
Section 4.06 and
(3) the transfer of assets in such Sale and Lease-Back
Transaction is permitted by, and the Company or such Restricted
Subsidiary applies the proceeds of such transaction in compliance with
Section 4.09.
Section 4.14. Payments for Consent.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all Holders which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
<PAGE>
-80-
Section 4.15. Corporate Existence.
Subject to Article 5 hereof, each of the Issuers shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate or limited liability company existence, and the
corporate, partnership or limited liability company or other existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and, within thirty
days of the Issue Date, the material rights (charter and statutory), licenses
and franchises of the Issuers and their Subsidiaries except where the failure to
preserve and keep in full force and effect any such rights, licenses and
franchise shall not have a material adverse effect on the financial condition,
business, operations or prospects of the Issuers and their Subsidiaries taken as
a whole; and provided that the Issuers shall not be required to preserve any
such right, license or franchise, or the corporate, limited liability company,
partnership or other existence of any of Subsidiaries, if the Board of Directors
of the applicable Issuer shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Issuers and their
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
Section 4.16. Change of Control.
(a) Upon the occurrence of a Change of Control, the Issuers
shall be obligated to make an offer to purchase (the "Change of Control Offer")
each Holder's outstanding Notes at a purchase price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the Change of Control Payment Date (as defined) in
accordance with the procedures set forth below.
(b) Within 20 days of the occurrence of a Change of Control,
the Issuers shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Noteholder, at the address appearing in the register
maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to
this covenant and that all Notes tendered will be accepted for payment;
<PAGE>
-81-
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days nor later than
60 days from the date such notice is mailed (the "Change of Control
Payment Date"));
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Issuers default in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their acceptance
if the Paying Agent receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Notes delivered for
purchase, and a statement that such Holder is withdrawing his election
to have such Notes purchased;
(7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered;
(8) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to
the extent lawful,
(1) accept for payment Notes or portions thereof properly
tendered pursuant to the Change of Control Offer,
<PAGE>
-82-
(2) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so tendered, and
(3) deliver or cause to be delivered to the Trustee the Notes
so accepted together with an Officers' Certificate stating the Notes or
portions thereof tendered to the Issuers.
The Paying Agent shall promptly mail to each Holder so accepted payment in an
amount equal to the purchase price for such Notes, and the Issuers shall execute
and issue, and the Trustee shall promptly authenticate and mail to such Holder,
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered; provided that each such new Note shall be issued in an original
principal amount in denominations of $1,000 and integral multiples thereof.
(c) If the Senior Credit Facility is in effect, or any amounts
are owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, prior to the mailing of the notice to Holders described in
Section 4.16(b) above, but in any event within 60 days following any Change of
Control, the Issuers covenant to
(1) repay in full all obligations and terminate all
commitments under or in respect of the Senior Credit Facility and all
other Senior Indebtedness the terms of which require repayment upon a
Change of Control or offer to repay in full all obligations and
terminate all commitments under or in respect of the Senior Credit
Facility and all such Senior Indebtedness and repay the Indebtedness
owed to each such lender who has accepted such offer, or
(2) obtain the requisite consents under the Senior Credit
Facility and all such other Senior Indebtedness to permit the
repurchase of the Notes as described above.
The Issuers must first comply with the covenant described in the preceding
sentence before they shall be required to purchase Notes in the event of a
Change of Control; provided that the Issuers' failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (3) under Section 6.01 if not cured within 30 days after the
notice required by such clause.
<PAGE>
-83-
(d) The Issuers will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to a Change of Control Offer. To the
extent that the provisions of any securities laws or regulations conflict with
this Section 4.16, the Issuers shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations under
this Section 4.16 by virtue thereof.
Section 4.17. Maintenance of Office or Agency.
The Issuers shall maintain an office or agency in the Borough
of Manhattan, The City of New York where Notes may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Issuers in respect of the Notes and this
Indenture may be served. The Issuers shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Issuers shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee as set forth in Section 12.02.
The Issuers may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Issuers shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency.
The Issuers hereby initially designate the offices of State
Street Bank and Trust Company, N.A. at 61 Broadway, New York, New York 10006 as
such office of the Issuers.
Section 4.18. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to
<PAGE>
-84-
(1) (a) pay dividends or make any other distributions to the
Company or any Restricted Subsidiary of the Company
(i) on its Capital Stock or
(ii) with respect to any other interest or
participation in, or measured by, its profits or
(b) repay any Indebtedness or any other obligation owed to the
Company or any Restricted Subsidiary of the Company,
(2) make loans or advances or capital contributions to the
Company or any of its Restricted Subsidiaries or
(3) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of
(1) encumbrances or restrictions existing on the Issue Date to
the extent and in the manner such encumbrances and restrictions are in
effect on the Issue Date,
(2) (a) this Indenture, the Notes and the related Guarantees,
(b) the Senior Credit Facility and (c) the indenture governing the
Existing Notes and the related guarantees,
(3) applicable law or applicable rules, regulations or orders,
(4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
Properties or assets of any Person, other than the Person, or the
Property or assets of the Person (including any Subsidiary of the
Person), so acquired,
(5) customary non-assignment provisions in leases or other
agreements entered in the ordinary course of business,
(6) Refinancing Indebtedness; provided that such restrictions
are not materially more restrictive, when taken as a whole, than those
contained in the agreements govern-
<PAGE>
-85-
ing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded,
(7) customary restrictions in security agreements or mortgages
securing Indebtedness of the Issuers or a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the Property subject
to such security agreements and mortgages,
(8) customary restrictions pursuant to an agreement that has
been entered into for the sale or disposition of Capital Stock or
assets permitted under this Indenture,
(9) restrictions on the transfer of assets subject to any Lien
permitted under this Indenture imposed by the holder of such Lien,
(10) any agreement or instrument governing Capital Stock of
any Person that is acquired; provided that no such restriction is
created in contemplation of the acquisition of such Capital Stock,
(11) Indebtedness or other contractual requirements of a
Securitization Entity in connection with a Qualified Securitization
Transaction; provided that such restrictions apply only to such
Securitization Entity,
(12) Purchase Money Indebtedness incurred to acquire Property
in the ordinary course of business which Indebtedness imposes
restrictions regarding transfer of the Property acquired,
(13) the terms of any Indebtedness permitted by this Indenture
to be incurred by any Guarantor,
(14) any agreement or instrument governing Indebtedness
(whether or not outstanding) of Foreign Restricted Subsidiaries of the
Company incurred in reliance on clauses (8) and (16) of the definition
of Permitted Indebtedness, or
(15) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business.
<PAGE>
-86-
Section 4.19. Limitation on Conduct of Business.
The Company and its Restricted Subsidiaries will not engage in
any businesses which are not reasonably similar, ancillary, complementary or
related to the businesses in which the Company and its Restricted Subsidiaries
are engaged in on the Issue Date except to such extent as would not be material
to the Company and its Restricted Subsidiaries, taken as a whole.
Section 4.20. Compliance with Laws.
The Issuers shall comply, and shall cause each of their
respective Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all states
and municipalities thereof, and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as
would not in the aggregate have a material adverse effect on the financial
condition or results of operations of the Issuers and their Subsidiaries taken
as a whole.
Section 4.21. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries
to issue any Preferred Stock (except Preferred Stock issued to the Company or a
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Restricted Subsidiary of the Company) to hold any such Preferred
Stock unless such Restricted Subsidiary would be entitled to incur or assume
Indebtedness under Section 4.06 (other than Permitted Indebtedness) in the
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Section 4.22. Limitation on Creation of Subsidiaries.
The Company will not create or acquire, and will not permit
any of its Restricted Subsidiaries to create or acquire, any Subsidiary other
than
(1) a Restricted Subsidiary existing as of the Issue Date,
<PAGE>
-87-
(2) a Restricted Subsidiary that is acquired or created after
the Issue Date, provided, however, that each Restricted Subsidiary
(other than any Foreign Restricted Subsidiary or Finance Corp.)
acquired or created pursuant to this clause (2) shall have executed a
Guarantee, satisfactory in form and substance to the Trustee (and with
such documentation relating thereto as the Trustee shall require,
including, without limitation a supplement or amendment to this
Indenture and Opinions of Counsel as to the enforceability of such
Guarantee), pursuant to which such Restricted Subsidiary will become a
Guarantor, or
(3) an Unrestricted Subsidiary.
Section 4.23. Maintenance of Properties and Insurance.
(a) Each Issuer shall cause all material properties owned by
or leased by it or any of its Subsidiaries used or useful to the conduct of such
Issuer's business or the business of any of its Subsidiaries to be maintained
and kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 4.23 shall prevent an Issuer or any of its Subsidiaries
from discontinuing the use, operation or maintenance of any of such properties,
or disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Board of Directors of such Issuer or of the Board of Directors
of any Subsidiary of such Issuer concerned, or of an officer (or other agent
employed by such Issuer or of any of its Subsidiaries) of such Issuer or any of
its Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of such Issuer or any Subsidiary of
such Issuer, and if such discontinuance or disposal is not adverse in any
material respect to the Holders.
(b) The Issuers shall maintain, and shall cause their
respective Subsidiaries to maintain, insurance with responsible carriers against
such risks and in such amounts, and with such deductibles, retentions,
self-insured amounts and co-insurance provisions, as are customarily carried by
similar businesses of similar size, including property and casualty loss,
workers' compensation and interruption of business insurance. The Issuers shall
provide, and shall cause their respective Subsidiaries to provide, an Officers'
Certificate as to
<PAGE>
-88-
compliance with the foregoing requirements to the Trustee prior to the
anniversary or renewal date of each such policy, together with satisfactory
evidence of such insurance, which certificate shall expressly state such
expiration date for each policy listed.
Section 4.24. Pending ABRY Equity Contribution.
The Company shall have received the proceeds from the Pending
ABRY Equity Contribution on or before February 10, 2000.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation Merger and Sale of Assets.
The Company will not consolidate with, merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company (as an entirety or substantially
as an entirety in one transaction or a series of related transactions), to any
Person unless:
(1) the Company shall be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which
the Company is merged or to which the Properties and assets of the
Company are sold, assigned, transferred, leased, conveyed or otherwise
disposed of shall be a corporation, partnership, trust or a limited
liability company organized and existing under the laws of the United
States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company under this Indenture and the Notes, and the
obligations thereunder shall remain in full force and effect; provided
that if at any time the Company or such successor Person is a limited
liability company, partnership or trust there shall be a co-issuer of
the Notes that is a Restricted Subsidiary of the Company and that is a
corporation organized and existing under the laws of the United States
or any State thereof or the District of Columbia;
<PAGE>
-89-
(2) immediately before and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred
and be continuing; and
(3) immediately after giving effect to such transaction on a
pro forma basis the Company or such Person could incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under
Section 4.06; provided that the Company may merge into any Guarantor
without complying with this clause (3).
In connection with any consolidation, merger or transfer of
assets contemplated by this Section 5.01, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this provision and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
Notwithstanding the foregoing, the Company may merge or
consolidate with or transfer substantially all of its assets to an Affiliate
that has no significant assets or liabilities and was formed solely for the
purpose of changing the jurisdiction of organization of the Company or the form
of organization of the Company so long as the amount of Indebtedness of the
Company and its Restricted Subsidiaries is not increased thereby and that the
successor assumes all obligations of the Company under this Indenture, the Notes
and the Registration Rights Agreement.
Section 5.02. Successor Person Substituted.
Upon any consolidation, merger, conveyance or any transfer of
all or substantially all of the assets of the Company in accordance with Section
5.01 above, the successor entity formed by such consolidation or into which the
Company is merged or to which such transfer is made shall succeed to, and
<PAGE>
-90-
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor entity had been named
as the Company herein, and thereafter the predecessor entity shall be relieved
of all obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if
(a) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by the provisions of Article 11 hereof or
there is a default in the payment of any conversion fee or cancellation
fee under the Purchase Agreement when the same becomes due and payable
in accordance with the terms and conditions of the Purchase Agreement;
(b) there is a default in the payment of any interest on any
Note when the same becomes due and payable and the default continues
for a period of 30 calendar days, whether or not such payment is
prohibited by the provisions of Article 11 hereof;
(c) there is a default by any Issuer or any Restricted
Subsidiary in the observance or performance of any other covenant in
the Notes or this Indenture for 30 calendar days after written notice
from the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding (except in the case of a
default with respect to Sections 4.16 or 5.01 which shall constitute an
Event of Default with such notice requirement but without such passage
of time requirement);
(d) there is a failure to pay at final maturity (after giving
effect to any applicable grace period) any Indebtedness of the Company
or any Restricted Subsidiary thereof (other than a Securitization
Entity), or the acceleration of any such Indebtedness, which
acceleration shall not be rescinded or annulled within 20 days after
<PAGE>
-91-
written notice to the Company by the Trustee or any Holder, if the
aggregate amount of such Indebtedness, together with the amount of any
other such Indebtedness in default for failure to pay or which has been
accelerated, aggregates $5 million or more at any time;
(e) any final judgment or judgments which can no longer be
appealed for the payment of money in excess of $5 million (excluding
amounts covered by insurance for which coverage is not being challenged
or denied unless the Company is contesting such challenge or denial in
good faith) shall be rendered against the Company or any Restricted
Subsidiary thereof, and shall not be discharged for any period of 60
consecutive calendar days during which a stay of enforcement shall not
be in effect;
(f) any Issuer or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its Property, or
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not able to pay its debts as they
become due;
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against any Issuer or any
Significant Subsidiary in an involuntary case,
(B) appoints a Custodian of any Issuer or any
Significant Subsidiary or for all or substantially all of the
Property of any Issuer or any Significant Subsidiary, or
(C) orders the liquidation of any Issuer or any
Significant Subsidiary,
<PAGE>
-92-
and the order or decree remains unstayed and in effect for 60 days; or
(h) any Guarantee of a Significant Subsidiary ceases to be in
full force and effect or any Guarantee of a Significant Subsidiary is
declared to be null and void and unenforceable or any Guarantee of a
Significant Subsidiary is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of
release of a Guarantor in accordance with the terms of this Indenture).
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
The Trustee may withhold notice to the Holders of any Default
(except in payment of principal or premium, if any, or interest on the Notes) if
the Trustee considers it to be in the best interest of the Holders to do so.
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default of the
type described in Section 6.01(f) or (g)) shall have occurred and be continuing,
then the Trustee or the holders of not less than 25% in aggregate principal
amount of the Notes then outstanding may declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued interest to the date of acceleration and (1) the same shall become
immediately due and payable or (2) if there are any amounts outstanding under
the Senior Credit Facility, shall become immediately due and payable upon the
first to occur of an acceleration under the Senior Credit Facility or five
Business Days after receipt by the Issuers and the representative under the
Senior Credit Facility of a notice of acceleration; provided, however, that
after such acceleration but before a judgment or decree based on acceleration is
obtained by the Trustee, the holders of a majority in aggregate principal amount
of outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if
(1) all Events of Default, other than nonpayment of principal,
premium, if any, or interest that has become due solely because of the
acceleration, have been cured or waived as provided in this Indenture,
<PAGE>
-93-
(2) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of
acceleration, has been paid,
(3) the Issuers have paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses, disbursements
and advances and
(4) in the event of the cure or waiver of an Event of Default
of the type described in Section 6.01(f) or (g) above, the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default of the type described in Section
6.01(f) or (g) above shall occur, the principal, premium and interest amount
with respect to all of the Notes shall be due and payable immediately without
any declaration or other act on the part of the Trustee or the Noteholders.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes, the obligations set forth
in the Guarantees or this Indenture and may take any necessary action requested
of it as Trustee to settle, compromise, adjust or otherwise conclude any
proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.04. Waiver of Past Defaults and Events of
Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of
a majority in principal amount of the Notes then
<PAGE>
-94-
outstanding shall have the right to waive past Defaults under this Indenture
except a Default in the payment of the principal of, or interest or premium, if
any, on any Note, which cannot be waived without the consent of the Holder of
such Notes or in respect of a covenant or a provision which cannot be modified
or amended without the consent of all Holders. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the
outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee by this Indenture. The Trustee,
however, may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines may be unduly prejudicial to the rights
of another Noteholder not taking part in such direction, and the Trustee shall
have the right to decline to follow any such direction if the Trustee, being
advised by counsel, determines that the action so directed may not lawfully be
taken or if the Trustee in good faith shall, by a Trust Officer, determine that
the proceedings so directed may involve it in personal liability; provided that
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, no Holder has any right to
institute any proceeding with respect to this Indenture or any remedy thereunder
unless:
(1) the Holders of at least 25% in aggregate principal amount
of the outstanding Notes make a written request to the Trustee to
pursue the remedy;
(2) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense which may be incurred in compliance with such request;
<PAGE>
-95-
(3) the Trustee fails to institute such proceeding within 60
calendar days after receipt of such notice and the offer of indemnity;
and
(4) the Trustee has not received directions inconsistent with
such written request during such 60-day period by the Holders of a
majority in aggregate principal amount of the outstanding Notes.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of, or premium, if any, or
accrued interest of any Note held by such Holder on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(a), (b) or (c) hereof occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against any or all of the Issuers and the Guarantors for the
whole amount of unpaid principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate then borne by the Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Issuers (or
<PAGE>
-96-
any other obligor upon the Notes), its creditors or its Property and shall be
entitled and empowered to collect and receive any monies or other Property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent that any such charges and
expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan or reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceedings.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07
hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest as to each, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Notes; and
THIRD: to the Issuers or, to the extent the Trustee collects
any amounts from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for
<PAGE>
-97-
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holders
of more than 10% in principal amount of the Notes then outstanding.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default known to the Trustee has occurred
and is continuing, the Trustee shall exercise such rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(b) Except during the continuance of an Event of Default known
to the Trustee:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture but, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
<PAGE>
-98-
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.04 and 6.05 hereof.
(4) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its rights or powers if it
determines in the exercise of its reasonable discretion that repayment
of such funds or adequate indemnity satisfactory to it against such
risk or liability is not reasonably assured to it.
(d) The Trustee is not under any obligation to exercise any of
its rights or powers at the request or direction of any of the Holders unless
such Holders shall have offered to the Trustee indemnity or security
satisfactory to it in its reasonable discretion against any loss, liability,
expense or fee.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
(f) The Trustee shall not be deemed to have knowledge of any
Default or fact or event which might require the Trustee to take any action or
give any notice unless one of its Trust Officers has actual knowledge thereof.
(g) The Trustee is also being appointed, and may serve
contemporaneously with its service hereunder, as Trustee under the Senior
Discount Notes Indenture and shall not be considered to be conflicted in its
duties under either the Senior Discount Notes Indenture or this Indenture by
reason of its acting as trustee under the other. After an Event of Default (as
defined in the respective Indenture) under either the Senior Discount Notes
Indenture or this Indenture, and in order that it might not be conflicted in the
performance of its du-
<PAGE>
-99-
ties under either Indenture, the Trustee shall resign as trustee under one of
the Indentures; provided, however, that until the appointment of a successor
Trustee, the Trustee shall not be considered to have violated the standard set
forth in Section 7.01(a) hereof by continuing to act as Trustee under both the
Senior Discount Notes Indenture and this Indenture if it separates the
performance of its discretionary duties under the Senior Discount Notes
Indenture and this Indenture within its corporate trust department and retains
separate counsel for itself as trustee under each of such Indentures.
(h) Whether or not therein expressly so provided, paragraphs
(a), (b), (c), (d), (e), (f) and (g) of this Section 7.01 shall govern every
provision of this Indenture that in any way relates to the Trustee.
Section 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably believed
by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in
the document.
(2) Before the Trustee acts or refrains from acting with
respect to any matters contemplated by this Indenture or the Notes it
may require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Section 12.05 hereof. The
Trustee shall be protected and shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion.
(3) The Trustee may act through Agents and shall not be
responsible for the misconduct or negligence of any agent so long as
the appointment of such agent was made with due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action
<PAGE>
-100-
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Issuers, or any Affiliates
thereof, with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, shall be subject to
Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Issuers' use of the proceeds from the sale of
Notes or any money paid to the Issuers pursuant to the terms of this Indenture
and it shall not be responsible for any statement in the Notes other than its
certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is known to
the Trustee, the Trustee shall mail to each Noteholder notice of the Default
within 30 days after it occurs. Except in the case of a Default in payment of
the principal of, or premium, if any, or interest on any Note the Trustee may
withhold the notice if and so long as the board of directors of the Trustee, the
executive committee or any trust committee of such board and/or its Trust
Officers in good faith determine(s) that withholding the notice is in the
interests of the Noteholders.
Section 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after May 15
of any year, commencing the May 15 following the date of this Indenture, the
Trustee shall mail to each Noteholder a brief report dated as of such May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c) and TIA Section 313(d).
<PAGE>
-101-
Reports pursuant to this Section 7.06 shall be transmitted by
mail:
(1) to all registered Holders, as the names and addresses of
such Holders appear on the Registrar's books; and
(2) to such Holder as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for
that purpose.
A copy of each report at the time of its mailing to
Noteholders shall be filed with the Commission and each stock exchange on which
the Notes are listed. The Issuers shall promptly notify the Trustee when the
Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time such
compensation as shall be agreed in writing between the Issuers and the Trustee
for its services hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust). The Issuers shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it in connection with
its duties under this Indenture, including the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Issuers shall indemnify each of the Trustee and its
officers, directors, employees and agents and any predecessor Trustee and its
officers, directors, employees and agents for, and hold each of them harmless
against, any and all loss, damage, claim, liability or expense, including taxes
(other than taxes based on the income of the Trustee) incurred by any of them in
connection with the acceptance or performance of its duties under this Indenture
including the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of any of the
powers or duties of the Trustee hereunder (including, without limitation,
settlement costs). The Trustee shall notify the Issuers in writing promptly of
any claim asserted against the Trustee or any such officer, director, employee
or agent for which any of them may seek indemnity. However, the failure by the
Trustee to so notify the Issuers shall not relieve the Issuers of their
obligations hereunder except to the extent the Issuers are prejudiced thereby.
This indemnity shall survive
<PAGE>
-102-
the termination of this Indenture, final payment of the Notes, and resignation
or removal of the Trustee.
Notwithstanding the foregoing, the Issuers need not reimburse
the Trustee or any such officer, director, employee or agent for any expense or
indemnify any of them against any loss or liability incurred by the Trustee or
any such officer, director, employee or agent through its negligence, willful
misconduct or bad faith. To secure the payment obligations of the Issuers in
this Section 7.07, the Trustee shall have a lien prior to the Notes on all money
or Property held or collected by the Trustee except such money or Property held
in trust to pay principal of and interest on particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Issuers in writing.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Issuers' written consent which consent shall not be
unreasonably withheld. The Issuers may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its Property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuers shall promptly appoint a
successor Trustee.
<PAGE>
-103-
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers or the holders of a majority in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuers' obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1).
The provisions of TIA Section 310 shall apply to the Issuers as obligors of the
Notes.
<PAGE>
-104-
Section 7.11. Preferential Collection of Claims Against Issuers.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311 (b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein. The provisions of TIA Section 311 shall apply to the Issuers
as obligors of the Notes.
Section 7.12. Paying Agents.
The Issuers shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
7.12:
(A) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Issuers or by any
obligor on the Notes) in trust for the benefit of Holders or the
Trustee;
(B) that it will at any time during the continuance of any
Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(C) that it will give the Trustee written notice within three
(3) Business Days of any failure of the Issuers (or by any other
obligor on the Notes) in the payment of any installment of the
principal of, premium, if any, or interest on, the Notes when the same
shall be due and payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
The Issuers and the Guarantors, when authorized by a Board
Resolution, and the Trustee may amend or supplement this Indenture or the Notes
without notice to or consent of any Noteholder:
<PAGE>
-105-
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in
place of Certificated Notes;
(3) to comply with any requirements of the Commission under
the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make
any other change that does not, in the opinion of the Trustee,
materially and adversely affect the rights of any Noteholder;
(5) add Guarantors with respect to the Notes; or
(6) release Guarantors when permitted by this Indenture.
The Trustee is hereby authorized to join with the Issuers and
the Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
The Issuers, the Guarantors and the Trustee may modify or
supplement this Indenture or the Notes with the written consent of the Holders
of not less than a majority in principal amount of the outstanding Notes without
notice to any Noteholder. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Issuers and the Guarantors with any provision of this Indenture
or the Notes without notice to any Noteholder. Subject to Section 8.04, without
the consent of each Noteholder affected, however, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to
an amendment, supplement or waiver to this Indenture or the Notes;
<PAGE>
-106-
(2) reduce the rate of or change the time for payment of
interest (including Additional Interest (as defined in the Registration
Rights Agreement)) on any Note;
(3) reduce the principal of, or premium on, or change the
stated maturity, of any Note or change the date on which any Notes may
be subject to redemption or repurchase or reduce the redemption or
repurchase price therefor;
(4) make any Note payable in money other than that stated in
the Note or change the place of payment from New York, New York;
(5) waive a Default in the payment of the principal of, or
interest on, or any redemption payment with respect to, any Note;
(6) make any changes in Sections 6.04 or 6.07 hereof or this
sentence of Section 8.02;
(7) amend, change or modify in any material respect, the
obligation of the Issuers to make and consummate a Change of Control
Offer in the event of a Change of Control or, make and consummate an
Excess Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect
thereto;
(8) modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes
or any Guarantee in a manner which adversely affects the Holders; or
(9) release any Guarantor other than Holdings from any of its
obligations under its Guarantee or this Indenture otherwise than in
accordance with the terms of this Indenture.
After an amendment, supplement or waiver under this Section
8.02 becomes effective, the Issuers shall mail to the Holders a notice briefly
describing the amendment, supplement or waiver.
Upon the request of the Issuers, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of
<PAGE>
-107-
the Noteholders as aforesaid and upon receipt by the Trustee of the documents
described in Section 8.06 hereof, the Trustee shall join with the Issuers and
the Guarantors in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture, in which case the Trustee may in its discretion, but shall
not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder is a continuing consent conclusive and
binding upon such Holder and every subsequent Holder of the same Note or portion
thereof, and of any Note issued upon the transfer thereof or in exchange
therefor or in place thereof, even if notation of the consent is not made on any
such Note. Any such Holder or subsequent Holder, however, may revoke the consent
as to his Note or portion of a Note, if the Trustee receives the notice of
revocation before the date the amendment, supplement, waiver or other action
becomes effective.
The Issuers may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date unless the consent of the requisite number
of Holders has been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless
<PAGE>
-108-
it makes a change described in any of clauses (1) through (9) of Section 8.02
hereof. In that case the amendment, supplement, waiver or other action shall
bind each Holder who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note.
Section 8.05. Notation on or Exchange of Notes.
If an amendment, supplement, or waiver changes the terms of a
Note, the Trustee may request the Holder to deliver it to the Trustee. In such
case, the Trustee shall place an appropriate notation on the Note about the
changed terms and return it to the Holder. Alternatively, if the Issuers or the
Trustee so determine, the Issuers in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms. Failure
to make the appropriate notation or issue a new Note shall not affect the
validity and effect of such amendment supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article 8 if the amendment, supplement or waiver
does not materially adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing or refusing to sign such amendment, supplement or waiver the Trustee
shall be entitled to receive and, subject to Section 7.01 hereof, shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that such amendment, supplement or waiver is authorized or permitted by
this Indenture. The Issuers and each Guarantor may not sign an amendment or
supplement until the Board of Directors of each of the Issuers and each such
Guarantor approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to surviving rights of registration of transfer or exchange of Notes herein
expressly provided for) and the Trustee, on written demand of and at the expense
of the Issuers,
<PAGE>
-109-
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when either:
(a) all Notes theretofore authenticated and delivered (other
than (A) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07 hereof and (B) Notes
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuers and thereafter repaid to
the Issuers or discharged from such trust) have been delivered to the
Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Issuers
have irrevocably deposited or caused to be deposited with the Trustee
in trust for the purpose an amount of U.S. legal tender or U.S.
Government Obligations sufficient to pay and discharge the entire
Indebtedness on such Notes not theretofore delivered to the Trustee for
cancellation, for the principal of, premium, if any, and interest to
the date of such deposit; (ii) the Issuers have paid or caused to be
paid all other sums payable hereunder by the Issuers; and (iii) the
Issuers have delivered to the Trustee (A) irrevocable instructions to
apply the deposited money toward payment of the Notes at the maturity
thereof, and (B) an Officers' Certificate and an Opinion of Counsel
each stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuers to the Trustee under Section 7.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(B) of this
Section 9.01, the obligations of the Trustee under Section 9.05, shall survive.
Section 9.02. Legal Defeasance.
The Issuers may at their option, by Board Resolution, be
discharged from their obligations with respect to the Notes and the Guarantors
discharged from their obligations under the Guarantees (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Issuers
shall be deemed to have paid and discharged the entire indebtedness represented
by the Notes and to have satisfied all of their other obligations under such
Notes and this Indenture insofar as such Notes are concerned (and the Trustee,
at the expense of the Issuers, shall, subject to Section 9.06 hereof, execute
proper
<PAGE>
-110-
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of outstanding Notes to receive solely from the trust funds described in
Section 9.04 hereof and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (B) the Issuers' obligations with respect to such Notes
under Article 2 and Section 4.17 hereof, (C) the rights, powers, trusts, duties,
and immunities of the Trustee hereunder (including claims of, or payments to,
the Trustee under or pursuant to Section 7.07 hereof) and (D) this Article 9.
Subject to compliance with this Article 9, the Issuers may exercise their option
under this Section 9.02 with respect to the Notes notwithstanding the prior
exercise of their option under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
At the option of the Issuers, pursuant to a Board Resolution,
the Issuers and the Guarantors shall be released from their respective
obligations under Sections 4.02, 4.04 through 4.14, 4.16, and 4.18 through 4.23
hereof, and clause (3) of the first paragraph of Section 5.01 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
in Section 9.04 hereof are satisfied (hereinafter, "Covenant Defeasance"). For
this purpose, such Covenant Defeasance means that the Issuers may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such specified Section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
Section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Notes shall be unaffected
thereby.
Section 9.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of
Section 9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Issuers shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Arti-
<PAGE>
-111-
cle 9 applicable to it) as funds in trust for the purpose of making
the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders, (A) U.S. legal tender
in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than the due date
of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and accrued interest on
the outstanding Notes at the maturity date of such principal, premium,
if any, or interest, or on dates for payment and redemption of such
principal, premium, if any, and interest selected in accordance with
the terms of this Indenture and of the Notes; provided, however, that
the Trustee (or other qualifying trustee) shall have received an
irrevocable written order from the Issuers instructing the Trustee (or
other qualifying trustee) to apply such money or the proceeds of such
U.S. Government Obligations to said payments with respect to the Notes;
(2) no Event of Default or Default shall have occurred and no
Event of Default of the type specified in Section 6.01(g) or (h) shall
have occurred and be continuing on the date of such deposit, or shall
have occurred and be continuing at any time during the period ending on
the 91st day after the date of such deposit or, if longer, ending on
the day following the expiration of the longest preference period under
any Bankruptcy Law applicable to the Issuers in respect of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest for purposes of the
TIA with respect to any securities of the Issuers;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute default under any
other material agreement or instrument to which the Issuers or any of
their Subsidiaries are
<PAGE>
-112-
a party or by which any Issuer or any of its Subsidiaries is bound;
(5) the Issuers shall have delivered to the Trustee an Opinion
of Counsel stating that, as a result of such Legal Defeasance or
Covenant Defeasance, neither the trust nor the Trustee will be required
to register as an investment company under the Investment Company Act
of 1940, as amended;
(6) in the case of an election under Section 9.02 above, the
Issuers shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling to the effect that
or (ii) there has been a change in any applicable Federal income tax
law with the effect that, and such opinion shall confirm that, the
Holders of the outstanding Notes or persons in their positions will not
recognize income, gain or loss for Federal income tax purposes solely
as a result of such Legal Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner, including as a
result of prepayment, and at the same times as would have been the case
if such Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.03 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel
describing either a private ruling concerning the Notes or a published
ruling of the Internal Revenue Service to the effect that the Holders
of the outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such Covenant Defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(8) the Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Legal
Defeasance under Section 9.02 above or the Covenant Defeasance under
Section 9.03 hereof (as the case may be) have been complied with;
(9) the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that the deposit under clause (1) was not
made by the Issuers with the intent of preferring the holders of the
Notes over any other credi-
<PAGE>
-113-
tors of the Issuers or with the intent of defeating, hindering,
delaying or defrauding any creditors of the Issuers or others; and
(10) the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that:
(a) the funds deposited in trust will not be subject
to any rights of holders of Senior Indebtedness, including,
without limitation, those arising under this Indenture, and
(b) assuming no intervening event of the type
described in Section 6.01(g) or (h) shall occur and no Holder
is an "insider" (as such term is used under applicable
Bankruptcy Law) of any Issuer after the 91st day after the
date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period
under any Bankruptcy Law applicable to the Issuers in respect
of such deposit, the funds deposited in trust will not be
subject to the effect of any Bankruptcy Law; and
(11) before or after a deposit, the Issuers may make
arrangements satisfactory to the Trustee for the redemption of Notes at
a future date in accordance with Section 3.07(a) hereof.
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.01 or 9.04
hereof in respect of the outstanding Notes shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Notes and this Indenture,
to the payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Notes, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Issuers and the Guarantors shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 9.01 or 9.04 hereof or
the principal,
<PAGE>
-114-
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuers from time to time upon a written
request of the Issuers in the form of an Officers' Certificate any money or U.S.
Government Obligations held by it as provided in Section 9.01 or 9.04 hereof
which, in the opinion of a nationally-recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuers' and each Guarantor's obligations under this
Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 9 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 9.01 hereof; provided, however, that if
the Issuers or the Guarantors have made any payment of principal of, premium, if
any, or accrued interest on any Notes because of the reinstatement of their
obligations, the Issuers and each such Guarantor shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Issuers, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Issuers (or, if such moneys had been deposited by any Guarantor, to such
Guarantor) and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
<PAGE>
-115-
Section 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Issuers or any Guarantor in trust for the payment of the
principal of, or premium, if any, or interest on any Note that are not applied
but remain unclaimed by the Holder of such Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Note shall
have respectively become due and payable shall be repaid to the Issuers (or, if
appropriate, the applicable Guarantor) upon a written request of the Issuers in
the form of an Officers' Certificate, or if such moneys are then held by the
Issuers or any Guarantor in trust, such moneys shall be released from such
trust; and the Holder of such Note entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Issuers and the
Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease.
ARTICLE 10
GUARANTEES
Section 10.01. Guarantees.
Each Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally, to each Holder and to the Trustee on behalf
of the Holders and its successors and assigns (a) the due and punctual payment
of principal of, premium, if any, and interest on the Notes when due, whether at
maturity, by acceleration, by redemption or otherwise, and all other monetary
obligations of the Issuers under this Indenture, the Notes and the Registration
Rights Agreement and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Issuers under this Indenture, the
Notes and the Registration Rights Agreement (all the foregoing being hereinafter
collectively called the "Guaranteed Obligations"). Each Guarantor further agrees
that the Guaranteed Obligations may be extended or renewed, in whole or in part,
without notice or further assent from such Guarantor and that such Guarantor
will remain bound under this Article 10 notwithstanding any extension or renewal
of any Guaranteed Obligation.
Each Guarantor waives diligence, presentment, demand of
payment, filing of claims with a court in the event of in-
<PAGE>
-116-
solvency or bankruptcy of any Issuer, any right to require a proceeding first
against the Issuer, protest, notice and all demands whatsoever. Each Guarantor
waives notice of any default under the Notes or the Guaranteed Obligations. The
obligations of each Guarantor hereunder shall not be affected by (a) the failure
of any Holder or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Company or any other Person under this Indenture,
the Notes or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Notes or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Guaranteed
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations; or (f) except as provided in Section 10.06, any change in the
ownership of such Guarantor.
Except as expressly set forth in Sections 10.02 and 10.06, the
obligations of each Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Notes or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Guaranteed
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
such Guarantor or would otherwise operate as a discharge of such Guarantor as a
matter of law or equity.
Each Guarantor further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of, premium, if any, or interest on
any Guaranteed Obligation is rescinded or must otherwise be restored by any
Holder or the Trustee upon the bankruptcy or reorganization of any Issuer or
otherwise.
<PAGE>
-117-
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of any Issuer to pay the principal
of, premium, if any, or interest on any obligation under the Notes or this
Indenture when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
obligation under the Notes or this Indenture, each Guarantor hereby promises to
and will, upon receipt of written demand by the Trustee, forthwith pay, or cause
to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid amount of such Guaranteed Obligations, (ii) accrued and unpaid
interest on such Guaranteed Obligations (but only to the extent not prohibited
by law) and (iii) all other monetary Guaranteed Obligations of the Issuers to
the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Guaranteed Obligations guaranteed hereby
until payment in full of all Guaranteed Obligations. Each Guarantor further
agrees that, as between it, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the Guaranteed Obligations hereby may be
accelerated as provided in Section 6 for the purposes of such Guarantor's
Guarantee herein, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations under the Notes or
this Indenture guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Section 6, such obligations
(whether or not due and payable) shall forthwith become due and payable by such
Guarantor for the purposes of this Section.
Each Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Article 10.
Section 10.02. Limitation on Liability.
Any term or provision of this Indenture to the contrary
notwithstanding, the maximum aggregate amount of the obligations guaranteed
hereunder by any Guarantor shall not exceed the maximum amount that can be
hereby guaranteed without rendering this Indenture, as it relates to such
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
To effectuate the foregoing intention,
<PAGE>
-118-
the obligations of each Guarantor shall be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations
hereunder, result in the obligations of such Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 10.03. Successors and Assigns.
This Article 10 shall be binding upon each Guarantor and its
successors and assigns and shall enure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Notes shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions of this Indenture.
Section 10.04. No Waiver.
Neither a failure nor a delay on the part of either the
Trustee or the Holders in exercising any right, power or privilege under this
Article 10 shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Trustee and the Holders
herein expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article 10 at law, in
equity, by statute or otherwise.
Section 10.05. Modification.
No modification, amendment or waiver of any provision of this
Article 10, nor the consent to any departure by any
<PAGE>
-119-
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.
Section 10.06. Release of Guarantor.
A Guarantor shall be released from all of its obligations
under its Guarantee if:
(i) the Guarantor has sold all or substantially all of its
assets or the Company and its Restricted Subsidiaries have sold all of
the Capital Stock of the Guarantor owned by them, in each case in a
transaction in compliance with Sections 4.09 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with,
or transfers all or substantially all of its assets to, the Company or
another Guarantor in a transaction in compliance with Section 5.01
hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.07. Execution of Supplemental Indenture for Future Guarantors.
Each Subsidiary which is required to become a Guarantor
pursuant to Section 4.22 shall, and the Issuers shall cause each such Subsidiary
to, promptly execute and deliver to the Trustee a supplemental indenture in the
form of Exhibit F hereto pursuant to which such Subsidiary shall become a
Guarantor under this Section 10 and shall guarantee the obligations of the
Company under the Notes and this Indenture. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall deliver to the
Trustee an Opinion of Counsel to the effect that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors' rights
generally and to the principles of equity, whether considered in a proceeding at
law or in equity, the Guarantee of such Guarantor is a legal, valid and
<PAGE>
-120-
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms.
Section 10.08. Execution and Delivery of Guarantees.
To evidence the Guarantee set forth in this Article 10, each
Guarantor hereby agrees that a notation of such Guarantee substantially in the
form of Exhibit E hereto shall be placed on each Note authenticated and made
available for delivery by the Trustee and that this Guarantee shall be executed
on behalf of each Guarantor by the manual or facsimile signature of two Officers
or an Officer and the Secretary of each Guarantor.
Each Guarantor hereby agrees that the Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on the
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which the Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of each Guarantor.
Section 10.09. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor covenants and agrees, and each Holder, by its
acceptance thereof, likewise covenants and agrees, that to the extent and in the
manner hereinafter set forth in this Article 10, the Indebtedness represented by
the Guarantee and the payment of all Obligations on the Notes pursuant to the
Guarantee by such Guarantor are hereby expressly made subordinate in right of
payment as provided in this Article 10 to the prior indefeasible payment and
satisfaction in full in cash of all Obligations in respect of all Guarantor
Senior Indebtedness of such Guarantor (including post-petition interest
thereon).
This Section 10.09 and the following Sections 10.10 through
10.14 are for the benefit of, and shall be enforceable directly by, the holders
of Guarantor Senior Indebtedness, each holder is made an obligee hereunder, and
each holder of any Guarantor Senior Indebtedness, whether now outstanding or
here-
<PAGE>
-121-
after created, incurred, assumed or guaranteed, shall be deemed to have
acquired such Guarantor Senior Indebtedness in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
Section 10.10. Payment Over of Proceeds upon Dissolution, etc., of a Guarantor.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or (b)
any liquidation, dissolution or other winding-up of any Guarantor, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
or (c) any general assignment for the benefit of creditors or any other
marshaling of assets or liabilities of any Guarantor, then and in any such
event:
(1) the holders of all Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive indefeasible payment and
satisfaction in full in cash, of all amounts due on or in respect of
all such Guarantor Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Guarantor Senior Indebtedness, whether or not an allowed
claim), of such Guarantor before the Holders are entitled to receive or
retain, pursuant to the Guarantee of such Guarantor, any payment or
distribution of any kind or character (other than payment or
distribution from the trust described in Section 9.04) by such
Guarantor on account of any of the Guaranteed Obligations; and
(2) any payment or distribution of assets of such Guarantor of
any kind or character, whether in cash, Property or securities, by
set-off or otherwise, to which the Holders or the Trustee would be
entitled but for the subordination provisions of this Article 10 shall
be paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Guarantor
Senior Indebtedness of such Guarantor or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Guarantor Senior
Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of such Guarantor Senior
Indebtedness held or rep-
<PAGE>
-122-
resented by each, to the extent necessary to make indefeasible payment
in full in cash of all such Guarantor Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Guarantor Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 10.10, the Trustee or any Holder shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, Property or securities, including,
without limitation, by way of set-off or otherwise, in respect of any
of the Guaranteed Obligations before all Guarantor Senior Indebtedness
of such Guarantor is indefeasibly paid in full, then and in such event
such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other Person making payment or distribution of assets of such
Guarantor for application to the payment of all such Guarantor Senior
Indebtedness remaining unpaid, to the extent necessary to pay all of
such Guarantor Senior Indebtedness in full in cash, Cash Equivalents
or, as acceptable to the holders of such Guarantor Senior Indebtedness,
any other manner, after giving effect to any concurrent payment or
distribution to or for the holders of such Guarantor Senior
Indebtedness.
To the extent any payment of Guarantor Senior Indebtedness
(whether by or on behalf of any Issuer, as proceeds of security or enforcement
of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor
Senior Indebtedness or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not occurred.
The consolidation of a Guarantor with, or the merger of a
Guarantor with or into, another Person or the liquidation or dissolution of a
Guarantor following the conveyance, transfer or lease of its properties and
assets substantially as an entirety to another Person upon the terms and
conditions set forth in Article 5 hereof shall not be deemed a dissolution,
<PAGE>
-123-
winding-up, liquidation, reorganization, assignment for the benefit of creditors
or marshaling of assets and liabilities of such Guarantor for the purposes of
this Article 10 if the Person formed by such consolidation or the surviving
entity of such merger or the Person which acquires by conveyance, transfer or
lease such properties and assets substantially as an entirety, as the case may
be, shall, as a part of such consolidation, merger, conveyance, transfer or
lease, comply with the conditions set forth in such Article 5 hereof.
Section 10.11. Suspension of Guaranteed Obligations When Guarantor Senior
Indebtedness in Default.
(a) Unless Section 10.10 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution (other than a payment
or distribution from the trust described in Section 9.04) of any kind or
character (including, without limitation, cash, Property and any payment or
distribution which may be payable or deliverable by reason of the payment of any
other Indebtedness of such Guarantor being subordinated to its Guaranteed
Obligations) may be made by or on behalf of such Guarantor (or any Subsidiary of
such Guarantor), including, without limitation, by way of set-off or otherwise,
for or on account of the Notes or its Guaranteed Obligations, and neither the
Trustee nor any Holder shall take or receive from any Guarantor (or any
Subsidiary of such Guarantor), directly or indirectly in any manner, payment in
respect of all or any portion of the Notes or its Guaranteed Obligations
commencing on the date of the receipt by the Trustee of written notice from the
representative of the holders of Guarantor Senior Indebtedness (the "Guarantor
Representative") of the occurrence of a Payment Default, and in any such event,
such prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist. At such time as the prohibition set forth in the
preceding sentence shall no longer be in effect, subject to the provisions of
the following paragraph (b), such Guarantor shall resume making any and all
required payments in respect of the Guaranteed Obligations.
(b) Unless Section 10.10 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness
of any Guarantor, no payment or distribution (other than a payment or
distribution made from the trust described in Section 9.04) of any assets of
such Guarantor of any kind or character (including, without limitation, cash,
Property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of such Guarantor being
subordinated to its Guar-
<PAGE>
-124-
anteed Obligations) shall be made by such Guarantor, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes or
any of its Guaranteed Obligations or any Obligations under the Notes, the
Registration Rights Agreement or this Indenture, or for or on account of the
purchase, redemption or other acquisition of any Notes and neither the Trustee
nor any Holder shall take or receive from such Guarantor, directly or indirectly
in any manner, payment in respect of all or any portion of the Guaranteed
Obligations or any Obligations under the Notes, the Registration Rights
Agreement or this Indenture, or for or on account of the purchase, redemption or
other acquisition of any Notes for a period (the "Guarantee Payment Blockage
Period") commencing on the date of receipt by the Trustee of written notice from
the Guarantor Representative of such Non-Payment Event of Default, unless and
until (subject to any blockage of payments that may then be in effect under the
preceding paragraph (a)) the earliest to occur of the following events: (w) more
than 179 days shall have elapsed since the date of receipt of such written
notice by the Trustee, (x) such Non-Payment Event of Default shall have been
cured or waived in writing or shall have ceased to exist, (y) such Designated
Senior Indebtedness shall have been indefeasibly paid in full in cash or (z)
such Guarantee Payment Blockage Period shall have been terminated by written
notice to such Guarantor or the Trustee from the Guarantor Representative, after
which, in the case of clause (w), (x), (y) or (z), such Guarantor shall resume
making any and all required payments in respect of the Guaranteed Obligations.
Notwithstanding any other provisions of this Indenture, in no event shall a
Guarantee Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the notice referred to in this Section 10.11(b) or, in
the event of a Non-Payment Event of Default which formed the basis for a Payment
Blockage Period under Section 11.03(b) hereof, 179 days from the date of the
receipt by the Trustee of the notice referred to in Section 11.03(b) (the
"Initial Guarantee Blockage Period"). Any number of additional Guarantee Payment
Blockage Periods may be commenced during the Initial Guarantee Blockage Period;
provided, however, that no such additional Guarantee Payment Blockage Period
shall extend beyond the Initial Guarantee Blockage Period. After the expiration
of the Initial Guarantee Blockage Period, no Guarantee Payment Blockage Period
may be commenced under this Section 10.11(b) and no Payment Blockage Period may
be commenced under Section 11.03(b) hereof until at least 180 consecutive days
have elapsed from the last day of the Initial Guarantee Blockage Period.
Notwithstanding any other provisions of this Indenture, no Non-Payment Event of
Default with respect to Designated Senior Indebtedness which existed or was
<PAGE>
-125-
continuing on the date of the commencement of any Guarantee Payment Blockage
Period initiated by the Guarantor Representative shall be, or be made, the basis
for the commencement of a second Guarantee Payment Blockage Period initiated by
the Guarantor Representative unless such Non-Payment Event of Default shall have
been cured or waived for a period of not less than 90 consecutive days.
Notwithstanding the foregoing, if the obligations of the Issuers under the Notes
have been accelerated pursuant to Article 6 of this Indenture or otherwise, the
Trustee shall be deemed to have received notice from the Guarantor
Representative of a Non-Payment Event of Default relating to such acceleration
as provided for in the first sentence of this clause (b).
(c) In the event that, notwithstanding the foregoing, the
Trustee or any Holder receives any payment or distribution of assets of such
Guarantor of any kind, whether in cash, Property or securities, including,
without limitation, by way of set-off or otherwise, in respect of the Guaranteed
Obligations, before all Guarantor Senior Indebtedness of such Guarantor is
indefeasibly paid and satisfied in full in cash, then such payment or
distribution (other than a payment or distribution from the trust described in
Section 9.04) will be held by the recipient in trust for the benefit of holders
of Guarantor Senior Indebtedness and will be immediately paid over or delivered
to the holders of Guarantor Senior Indebtedness or their representative or
representatives to the extent necessary to make a payment in full of all
Guarantor Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of Guarantor Senior Indebtedness.
Section 10.12. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness.
Upon the payment in full of all amounts payable under or in
respect of all Guarantor Senior Indebtedness of a Guarantor, the Holders shall
be subrogated to the rights of the holders of such Guarantor Senior Indebtedness
to receive payments and distributions of cash, Property and securities of such
Guarantor made on such Guarantor Senior Indebtedness until all amounts due to be
paid under the Guarantee shall be paid in full. For the purposes of such
subrogation, no payments or distributions to holders of Guarantor Senior
Indebtedness of any cash, Property or securities to which Holders or the Trustee
would be entitled except for the provisions of this Article 10, and no payments
over pursuant to the provisions of this Article 10 to holders of Guarantor
Senior Indebtedness by Holders
<PAGE>
-126-
or the Trustee, shall, as among each Guarantor, its creditors other than holders
of Guarantor Senior Indebtedness and the Holders, be deemed to be a payment or
distribution by such Guarantor to or on account of such Guarantor Senior
Indebtedness.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article 10, to the payment
of all amounts payable under Guarantor Senior Indebtedness, then and in such
case, the Holders shall be entitled to receive from the holders of such
Guarantor Senior Indebtedness at the time outstanding any payments or
distributions received by such holders of Guarantor Senior Indebtedness in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Guarantor Senior Indebtedness in full in cash.
Section 10.13. Guarantee Subordination Provisions Solely to Define Relative
Rights.
The subordination provisions of this Article 10 are and are
intended solely for the purpose of defining the relative rights of the Holders
on the one hand and the holders of Guarantor Senior Indebtedness on the other
hand. Nothing contained in this Article 10 or elsewhere in this Indenture or in
the Notes is intended to or shall (a) impair, as among each Guarantor, its
creditors other than holders of its Guarantor Senior Indebtedness and the
Holders, the obligation of such Guarantor, which is absolute and unconditional,
to make payments to the Holders in respect of the Guaranteed Obligations in
accordance with its terms; or (b) affect the relative rights against such
Guarantor of the Holders and creditors of such Guarantor other than the holders
of the Guarantor Senior Indebtedness; or (c) prevent the Trustee or any Holder
from exercising all remedies otherwise permitted by applicable law upon a
Default or an Event of Default under this Indenture, subject to the rights, if
any, under this Article 10 of the holders of Guarantor Senior Indebtedness (1)
in any case, proceeding, dissolution, liquidation or other winding-up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Issuers referred to in Section 10.10 hereof, to receive,
pursuant to and in accordance with such Section, cash, Property and securities
otherwise payable or deliverable to the Trustee or such Holder, or (2) under the
conditions specified in Section 10.11 hereof, to prevent any payment prohibited
by such Section or enforce their rights pursuant to Section 10.11(c) hereof.
<PAGE>
-127-
The failure by any Guarantor to make a payment in respect of
its obligations on its Guarantee by reason of any provision of this Article 10
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 10.14. Application of Certain Article 11 Provisions.
The provisions of Sections 11.04, 11.07, 11.08, 11.09, 11.10,
11.12 and 11.13 hereof shall apply, mutatis mutandis, to each Guarantor and
their respective holders of Guarantor Senior Indebtedness and the rights, duties
and obligations set forth therein shall govern the rights, duties and
obligations of each Guarantor, the holders of Guarantor Senior Indebtedness, the
Holders and the Trustee with respect to the Guarantee and all references therein
to Article 11 hereof shall mean this Article 10.
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness.
The Issuers covenant and agree, and each Holder, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 11, the Indebtedness
represented by the Notes and the payment of all Obligations on the Notes are
hereby expressly made subordinate in right of payment as provided in this
Article 11 to the prior indefeasible payment and satisfaction in full in cash of
all Obligations in respect of all Senior Indebtedness (including post-petition
interest thereon).
The provisions of this Article 11 are for the benefit of, and
shall be enforceable directly by, the holders of Senior Indebtedness of each
Issuer, each holder is made an obligee hereunder, and each holder of Senior
Indebtedness of an Issuer whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness of such Issuer in reliance upon the covenants and provisions
contained in this Indenture and the Notes.
<PAGE>
-128-
Section 11.02. Payment Over of Proceeds upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any Issuer or to its
creditors, as such, or to its assets, whether voluntary or involuntary or (b)
any liquidation, dissolution or other winding-up of any Issuer, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any general assignment for the benefit of creditors or any other
marshalling of assets or liabilities of any Issuer, then and in any such event:
(1) the holders of Senior Indebtedness of such Issuer shall be
entitled to receive indefeasible payment and satisfaction in full in
cash of all amounts due on or in respect of all Senior Indebtedness
(including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Indebtedness, whether or
not an allowed claim), of such Issuer before the Holders are entitled
to receive or retain any payment or distribution of any kind or
character (other than a payment or distribution from the trust
described in Section 9.04) on account of the Notes or any Obligations
on the Notes, the Registration Rights Agreement or this Indenture; and
(2) any payment or distribution of assets of any Issuer of any
kind or character, whether in cash, Property or securities, by set-off
or otherwise, to which the Holders or the Trustee would be entitled but
for the provisions of this Article 11 shall be paid by the liquidating
trustee or agent or other Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make indefeasible
payment in full in cash of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution, to the
holders of such Senior Indebtedness; and
<PAGE>
-129-
(3) in the event that, notwithstanding the foregoing
provisions of this Section 11.02, the Trustee or any Holder shall have
received any payment or distribution of assets of the Issuers of any
kind or character, whether in cash, Property or securities, including,
without limitation, by way of set-off or otherwise, in respect of
principal of, premium, if any, and interest on the Notes before all
Senior Indebtedness is indefeasibly paid in full, then and in such
event such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of the
Issuers for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash, Cash Equivalents or, as acceptable to the
holders of Senior Indebtedness, any other manner, after giving effect
to any concurrent payment or distribution, to or for the holders of
Senior Indebtedness.
To the extent any payment of Senior Indebtedness (whether by
or on behalf of any Issuer, as proceeds of security or enforcement of any right
of setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article 11 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation,
<PAGE>
-130-
merger, conveyance, transfer or lease, comply with the conditions set forth in
such Article 5 hereof.
Section 11.03. Suspension of Payment When Senior Indebtedness in Default.
(a) Unless Section 11.02 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution (other than a payment
or distribution from the trust described in Section 9.04) of any kind or
character (including, without limitation, cash, Property and any payment or
distribution which may be payable or deliverable by reason of the payment of any
other Indebtedness of any Issuer being subordinated to the payment of the Notes
by such Issuer) may be made by or on behalf of such Issuer or any Subsidiary of
such Issuer, including, without limitation, by way of set-off or otherwise, for
or on account of the Notes or of any Obligations under the Notes, the
Registration Rights Agreement or this Indenture, or for or on account of the
purchase, redemption or other acquisition of any Notes, and neither the Trustee
nor any Holder shall take or receive from such Issuer or any Subsidiary of such
Issuer, directly or indirectly in any manner, payment in respect of all or any
portion of Notes or of any Obligations under the Notes, the Registration Rights
Agreement or this Indenture, or for or on account of the purchase, redemption or
other acquisition of any Notes commencing on the date of receipt by the Trustee
of written notice from the representa-tive of the holders of Designated Senior
Indebtedness (the "Representative") of the occurrence of a Payment Default, and
in any such event, such prohibition shall continue until such Payment Default is
cured, waived in writing or ceases to exist. At such time as the prohibition set
forth in the preceding sentence shall no longer be in effect, subject to the
provisions of the following paragraph (b), such Issuer shall resume making any
and all required payments in respect of the Notes, including any missed
payments.
(b) Unless Section 11.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution (other than a payment or distribution from the trust
described in Section 9.04) of any assets of any Issuer of any kind or character
(including, without limitation, cash, Property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of any Issuer being subordinated to the payment of the Notes by
such Issuer) shall be made by any Issuer or any Restricted Subsidiary of such
Issuer, including, without limitation, by way of set-off or oth-
<PAGE>
-131-
erwise, for or on account of the Notes or of any Obligations under the Notes,
the Registration Rights Agreement or this Indenture or on account of the
purchase, redemption or other acquisition of Notes, and neither the Trustee nor
any Holder shall take or receive from such Issuer or Restricted Subsidiary of
such Issuer, directly or indirectly in any manner, payment in respect of all or
any portion of the Notes or any Obligations under the Notes, the Registration
Rights Agreement or the Indenture for a period ("Payment Blockage Period")
commencing on the date of receipt by the Trustee of written notice from the
Representative of such Non-Payment Event of Default unless and until (subject to
any blockage of payments that may then be in effect under the preceding
paragraph (a)) the earliest to occur of the following events: (w) more than 179
days shall have elapsed since the date of receipt of such written notice by the
Trustee, (x) such Non-Payment Event of Default shall have been cured or waived
in writing or shall have ceased to exist, (y) such Designated Senior
Indebtedness shall have been indefeasibly paid in full in cash or (z) such
Payment Blockage Period shall have been terminated by written notice to the
Issuers or the Trustee from the Representative after which, in the case of
clause (w), (x), (y) or (z), such Issuers shall resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding any other provisions of this Indenture, in no event shall a
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Trustee of the notice referred to in this Section 11.03(b) (the "Initial
Blockage Period"). Any number of additional Payment Blockage Periods may be
commenced during the Initial Blockage Period; provided, however, that no such
additional Payment Blockage Period shall extend beyond the Initial Blockage
Period. After the expiration of the Initial Blockage Period, no Payment Blockage
Period may be commenced under this Section 11.03(b) and no Guarantee Payment
Blockage Period may be commenced under Section 10.11(b) hereof until at least
180 consecutive days have elapsed from the last day of the Initial Blockage
Period. Notwithstanding any other provisions of this Indenture, no Non-Payment
Event of Default with respect to Designated Senior Indebtedness which existed or
was continuing on the date of the commencement of any Payment Blockage Period
initiated by the Representative shall be, or be made, the basis for the
commencement of a second Payment Blockage Period initiated by the Representative
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days. Notwithstanding the foregoing, if the obligations
of the Issuers under the Notes have been accelerated pursuant to Article 6 of
this Indenture or otherwise, the Trustee shall be deemed to have received notice
from the Representative
<PAGE>
-132-
of a Non-Payment Event of Default relating to such acceleration as provided for
in the first sentence of this clause (b).
(c) In the event that, notwithstanding the foregoing, the
Trustee or any Holder receives any payment or distribution of assets of such
Issuer of any kind, whether in cash, Property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes or any
Obligations under the Notes, the Registration Rights Agreement or the Indenture,
before all Senior Indebtedness of such Issuer is indefeasibly paid and satisfied
in full in cash, then such payment or distribution (other than a payment or
distribution from the trust described in Section 9.04) will be held by the
recipient in trust for the benefit of holders of Senior Indebtedness and will be
immediately paid over or delivered to the holders of Senior Indebtedness or
their representative or representatives to the extent necessary to make payment
in full of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness.
Section 11.04. Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article 11, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the
Trustee shall not be liable to any holder of Senior Indebtedness (other than for
its willful misconduct or negligence) if it shall mistakenly pay over or deliver
to Holders, any Issuer or any other Person moneys or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article 11 or
otherwise. Nothing in this Section 11.04 shall affect the obligation of any
other such Person receiving such payment or distribution from the Trustee or any
other Agent to hold such payment for the benefit of, and to pay such payment
over to, the holders of Senior Indebtedness.
Section 11.05. Subrogation of Rights of Holders of Senior Indebtedness.
Upon the payment in full of all Senior Indebtedness, the
Holders shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, Property and
securities applicable to the Senior In-
<PAGE>
-133-
debtedness until the principal of, premium, if any and interest on the Notes
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash, Property or
securities to which the Holders or the Trustee would be entitled except for the
provisions of this Article 11, and no payments over pursuant to the provisions
of this Article 11 to the holders of Senior Indebtedness by Holders or the
Trustee, shall, as among any Issuer, its creditors other than holders of Senior
Indebtedness and the Holders, be deemed to be a payment or distribution by such
Issuer to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article 11 shall
have been applied, pursuant to the provisions of this Article 11, to the payment
of all amounts payable under the Senior Indebtedness of any Issuer, then and in
such case the Holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of such Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full in cash.
Section 11.06. Provisions Solely to Define Relative Rights.
The provisions of this Article 11 are and are intended solely
for the purpose of defining the relative rights of the Holders on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article 11 or elsewhere in this Indenture or in the Notes is intended to or
shall (a) impair, as among any Issuer, its creditors other than holders of
Senior Indebtedness and the Holders, the obligation of the Issuers, which is
absolute and unconditional, to pay to the Holders the principal of, premium, if
any, and interest on the Notes as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Issuers of the Holders and creditors of the Issuers other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon a Default or an Event of
Default under this Indenture, subject to the rights, if any, under this Article
11 of the holders of Senior Indebtedness (1) in any case, proceeding,
dissolution, liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Issuers referred
to in Section 11.02 hereof,
<PAGE>
-134-
to receive, pursuant to and in accordance with such Section, cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder, or
(2) under the conditions specified in Section 11.03, to prevent any payment
prohibited by such Section or enforce their rights pursuant to Section 11.03(c)
hereof.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Notes by reason of any provision of this
Article 11 shall not be construed as preventing the occurrence of a Default or
an Event of Default hereunder.
Section 11.07. Trustee to Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Issuer whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of any Issuer owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness, or any Representative, is
hereby authorized to have the right to file such a claim for and on behalf of
the Holders, and the Trustee shall, upon written request, supply such holders
and Representative all information and copies of documents within the Trustee's
possession and relating to the Notes or the Issuers which such holders or
Representatives reasonably request in order to file such claims.
Section 11.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Issuer or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by any Issuer with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
<PAGE>
-135-
(b) Without limiting the generality of subsection (a) of this
Section 11.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article 11 or the obligations hereunder of the
Holders to the holders of Senior Indebtedness, do any one or more of the
following: (1) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness or otherwise amend or
supplement in any manner Senior Indebtedness of any Issuer or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (2) sell, exchange, release or otherwise deal with any Property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Issuers and any other Person; provided, however, that in no event shall any such
actions limit the right of the Holders to take any action to accelerate the
maturity of the Notes pursuant to Article 6 hereof or to pursue any rights or
remedies hereunder or under applicable laws if the taking of such action does
not otherwise violate the terms of this Indenture.
Section 11.09. Notice to Trustee.
(a) The Issuers shall give prompt written notice to the
Trustee of any fact known to the Issuers which would prohibit the making of any
payment to or by the Trustee at its Corporate Trust Office in respect of the
Notes. Notwithstanding the provisions of this Article 11 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof from the Issuers or a holder of Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
this Section 11.09, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 11.09 in accordance with Section 12.02 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose under this Indenture (including,
without limitation, the payment of the principal of, premium, if any, or
interest on any Note), then, anything herein contained to the contrary
notwithstanding
<PAGE>
-136-
but without limiting the rights and remedies of the holders of
Senior Indebtedness or any trustee, fiduciary or agent therefor, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be affected by
any notice in accordance with Section 12.02 to the contrary which may be
received by it within two Business Days prior to such date; nor shall the
Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and until
the Trustee shall have received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the
Trustee shall be entitled to rely on the delivery to it of a written notice to
the Trustee and the Issuers by a Person representing itself to be a holder of
Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish
that such notice has been given by a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor); provided, however, that failure to give
such notice to the Issuers shall not affect in any way the ability of the
Trustee to rely on such notice. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 11, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 11, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Issuers
referred to in this Article 11, the Trustee, subject to the provisions of
Section 7.01 hereof, and the Holders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
de-
<PAGE>
-137-
livered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of any Issuer, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 11; provided that the foregoing shall
apply only if such court has been fully apprised of the provisions of this
Article 11.
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article 11 with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall deprive
the Trustee of any of its rights as such holder. Nothing in this Article 11
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
Section 11.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Issuers and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 11 in addition to or in place of the Trustee.
Section 11.13. No Suspension of Remedies.
Nothing contained in this Article 11 shall limit the right of
the Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Article 6 or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article 11 of
the holders, from time to time, of Senior Indebtedness.
Section 11.14. Acceleration of Payment of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of Senior
Indebtedness of any Issuer or the Representative of such holders of the
acceleration (in the case
<PAGE>
-138-
of the Trustee, only to the extent of its actual knowledge of such holders or
the Representative of such holders). Such notice is in addition to, and not in
lieu of, any notice that may be required to be delivered under Section 6.02
prior to the effectiveness of any such acceleration.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 12.02. Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to the Issuers or any Guarantor:
c/o Muzak LLC
2901 Third Avenue
Suite 400
Seattle, Washington 98121
Attention: Brad Bodenman
Tel: (206) 633-3000
Fax: (206) 633-6210
Copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Laurie Gunther, Esq.
Tel: (312) 861-2000
Fax: (312) 861-2200
<PAGE>
-139-
Copy to:
ABRY Partners, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Attention: Peni Garber
Tel: (617) 859-2959
Fax: (617) 859-8797
If to the Trustee:
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111
Attention: Corporate Trust Department
/Ref: Muzak Senior Subordinated
Floating Rate Notes due 2009
Fax: (617) 662-1460
The Issuers, any Guarantor or the Trustee by written notice to
the others may designate additional or different addresses for subsequent
notices or communications. Any notice or communication to the Issuers, any
Guarantor and the Trustee, shall be deemed to have been given or made as of the
date so delivered if personally delivered; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and five (5) calendar days after mailing
if sent by registered or certified mail, postage prepaid (except that a notice
of change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication to a Noteholder is mailed in the
manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
<PAGE>
-140-
Section 12.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or the
Notes. The Issuers, the Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or any
Guarantor to the Trustee to take any action under this Indenture, the Issuers or
such Guarantor, as the case may be, shall furnish to the Trustee if and to the
extent reasonably requested by the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05 below) stating that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel (which shall include the statements
set forth in Section 11.05 below) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he
has made such examination or investigation as is necessary to enable it
or him to express an informed opin-
<PAGE>
-141-
ion as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 12.06. When Treasury Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Issuers, any Guarantor or any other obligor on the Notes or
by any Affiliate of any of them shall be disregarded, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes which the Trustee actually knows
are so owned shall be so disregarded. Notes so owned which have been pledged in
good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to the
Notes and that the pledgee is not an Issuer, any Guarantor or any other obligor
upon the Notes or any Affiliate of any of them.
Section 12.07. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at
meetings of Noteholders. The Registrar and Paying Agent may make reasonable
rules for their functions.
Section 12.08. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A
"Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day
on which banking institutions are not required to be open in the State of New
York. If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 12.09. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE
<PAGE>
-142-
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of any Issuer or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.11. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as
such, of any Issuer or any Guarantor shall not have any liability for any
obligations of any Issuer or any Guarantor under the Notes, the Guarantees or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Noteholder by accepting a Note waives and
releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Notes.
Section 12.12. Successors.
All agreements of each of the Issuers and each Guarantor in
this Indenture and the Notes shall bind their respective successors. All
agreements of the Trustee, any additional trustee and any Paying Agents in this
Indenture shall bind its successor.
Section 12.13. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
-143-
Section 12.15. Separability.
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed all as of the date and year first written above.
MUZAK LLC
By: /s/ Robert P. MacInnis
-----------------------
Name: Robert MacInnis
Title: Vice President
MUZAK FINANCE CORP.
By: /s/ Robert P. MacInnis
-----------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
Guarantors:
MUZAK HOLDINGS LLC, a Delaware
limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MLP ENVIRONMENTAL MUSIC, LLC, a
Washington limited liability
company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
BUSINESS SOUND INC., an Ohio
corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
AUDIO ENVIRONMENTS, INC., a
California corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
BI ACQUISITION, L.L.C., a
Delaware limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
BACKGROUND MUSIC BROADCASTERS,
INC., a California corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
Trustee:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Jacqueline A. Bonhomme
------------------------------
Name: Jacqueline A. Bonhomme
Title: Assistant Vice President
<PAGE>
EXHIBIT A
---------
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER AGREES THAT (1) IT WILL NOT PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS NOTE AND THE LAST DATE ON WHICH ANY ISSUER, OR ANY AFFILIATE OF ANY ISSUER,
WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE), RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO ANY ISSUER OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, IF THE
PROPOSED TRANSFER IS BEING MADE PURSUANT TO CLAUSE (C) OR (E) ABOVE, PRIOR TO
SUCH TRANSFER, THE HOLDER WILL BE REQUIRED TO FURNISH TO THE TRUSTEE AND THE
ISSUERS SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS ANY OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
No. 1 $12,000,000
MUZAK LLC
MUZAK FINANCE CORP.
Senior Subordinated Floating Rate Notes due 2009
Muzak LLC, a Delaware limited liability company and Muzak
Finance Corp., a Delaware corporation (collectively, the "Issuers", which term
includes any successor entities), for value received promise to pay to CIBC INC.
or registered assigns the principal sum of TWELVE MILLION DOLLARS, on March 15,
2009.
Interest Payment Dates: March 15, June 15, September 15 and
December 15 commencing March 15, 2000
Record Dates: March 1, June 1, September 1 and December 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Note to be
signed manually or by facsimile by their duly authorized officers.
MUZAK LLC
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
MUZAK FINANCE CORP.
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
A-3
<PAGE>
Certificate of Authentication:
This is one of the Senior Subordinated Floating Rate Notes due 2009 referred to
in the within-mentioned Indenture
Dated: February 2, 2000
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
--------------------------
Authorized Signatory
A-4
<PAGE>
(REVERSE SIDE)
MUZAK LLC
MUZAK FINANCE CORP.
Senior Subordinated Floating Rate Notes due 2009
1. INTEREST.
Muzak, LLC, a Delaware limited liability company (the
"Company"), and Muzak Finance Corp., a Delaware corporation ("Finance Corp." and
together with the Company, the "Issuers"), promise to pay interest on the
principal amount of this Note from the date of original issuance hereof at the
rate per annum, determined as of each Interest Rate Determination Date (as
defined below), equal to (i) from the period commencing on the Issue Date and
through and including July 31, 2000, LIBOR (as defined below) plus 5.00%; (ii)
from the period commencing on August 1, 2000 through and including October 31,
2000, LIBOR (as defined below) plus 7.50%; and (iii) from the period commencing
on November 1, 2000 and through and including the Maturity Date, a fixed rate of
interest equal to the greater of (x) LIBOR (as defined below) plus 7.50% and (y)
the Yield to Worst on the Existing Notes (as determined as of November 1, 2000,
or if such date is not a Business Day the next preceding Business Day) plus
2.50%, in each case as determined by the Calculation Agent. If this Note is
issued on any date other than an Interest Rate Determination Date, this Note
shall, until the immediately succeeding Interest Rate Determination Date, bear
interest at a rate per annum calculated as of the Interest Rate Determination
Date immediately preceding the date of original issuance of this Note. Interest
on this Note will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from the date of original issuance of
this Note. The Issuers will pay interest quarterly in arrears on each March 15,
June 15, September 15 and December 15 and at stated maturity (each, an "Interest
Payment Date"), commencing March 15, 2000, for the period commencing on and
including the immediately preceding Interest Payment Date and ending on and
including the day next preceding the Interest Payment Date (an "Interest
Period"), with the exception that the first Interest Period shall commence on
and include the date of the original issuance of this Note and end on and
include March 14, 2000.
The Issuers shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by this Note (without regard to any applicable grace periods) to the extent
lawful.
A-5
<PAGE>
"Determination Date," with respect to an Interest Rate
Determination Date, will be the second London Banking Day preceding the Interest
Rate Determination Date.
"Interest Rate Determination Date" means the first day of each
calendar month in each period described in clauses (i), (ii) and (iii) of the
first sentence of this Paragraph 1; provided that the first Interest Rate
Determination Date shall be the Issue Date; and provided, further, that, with
respect to the period described in clause (iii) of the first sentence of this
Paragraph 1, the "Interest Rate Determination Date" shall be November 1, 2000.
"LIBOR", with respect to any Interest Rate Determination Date,
shall be the rate (expressed as a percentage per annum) for deposits in United
States dollars for a three-month period beginning on the second London Banking
Day (as defined) after the Determination Date (as defined) that appears on
Telerate Page 3750 (as defined) as of 11:00 a.m., London time, on the
Determination Date. If Telerate Page 3750 does not include such a rate or is
unavailable on a Determination Date, LIBOR as of the Interest Rate Determination
Date shall be the arithmetic mean of the rates (expressed as a percentage per
annum) for deposits in a Representative Amount (as defined) in United States
dollars for a three-month period beginning on the second London Banking Day
after the Determination Date that appear on Reuters Screen LIBO Page (as
defined) as of 11:00 a.m., London time, on the Determination Date. If Reuters
Screen LIBO Page does not include two or more rates or is unavailable on a
Determination Date, the Calculation Agent will request the principal London
office of each of four major banks in the London interbank market, as selected
by the Calculation Agent, to provide such bank's offered quotation (expressed as
a percentage per annum), as of approximately 11:00 a.m., London time, on such
Determination Date, to prime banks in the London interbank market for deposits
in a Representative Amount in United States dollars for a three-month period
beginning on the second London Banking Day after the Determination Date. If at
least two such offered quotations are so provided, LIBOR as of the Interest Rate
Determination Date will be the arithmetic mean of such quotations. If fewer than
two such quotations are so provided, the Calculation Agent will request each of
three major banks in New York City, as selected by the Calculation Agent, to
provide such bank's rate (expressed as a percentage per annum), as of
approximately 11:00 a.m., New York City time, on such Determination Date, for
loans in a Representative Amount in United States dollars to leading European
banks for a three-month period beginning on the second London Banking Day after
the Determination Date. If at least two such rates are so provided, LIBOR as of
the Interest Rate Determination Date will be the
A-6
<PAGE>
arithmetic mean of such rates. If fewer than two such rates are so provided,
then LIBOR as of the Interest Rate Determination Date will be LIBOR in effect
with respect to the immediately preceding Interest Rate Determination Date.
"London Banking Day" is any day in which dealings in United
States dollars are transacted or, with respect to any future date, are expected
to be transacted in the London interbank market.
"Representative Amount" means a principal amount of not less
than U.S. $1,000,000 for a single transaction in the relevant market at the
relevant time.
"Reuters Screen LIBO Page" means the display designated as
page "LIBO" on The Reuters Monitor Money Rates Service (or such other page as
may replace the LIBO page on that service).
"Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service (or such other page as may replace Page
3750 on that service).
"Yield to Worst" means, as of the date of determination, (i)
if the trading price of the Existing Notes exceeds 100% of the principal amount
thereof, the yield to March 15, 2004, and (ii) if the trading price of the
Existing Notes equals or is less than 100% of the principal amount thereof, the
yield to the stated maturity date of the Existing Notes.
The amount of interest for each day that this Note is
outstanding (the "Daily Interest Amount") will be calculated by dividing the
interest rate in effect for such day by 360 and multiplying the result by the
principal amount of this Note. The amount of interest to be paid on this Note
for each Interest Period will be calculated by adding the Daily Interest Amounts
for each day in the Interest Period.
All percentages resulting from any of the above calculations
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upwards
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The interest rate on this Note will in no event be higher than
16.00% per annum (before giving effect to any obligation to pay Additional
Interest (as defined in the Registra-
A-7
<PAGE>
tion Rights Agreement), if any) with a maximum cash interest rate of 14.00% per
annum. Any interest in excess of 14.00% (and only such interest in excess of
14.00% per annum) shall be payable by the Issuers through the issuance of
Additional Notes in a principal amount equal to the amount of such interest in
excess of 14.00%; provided that Additional Interest (as defined in the
Registration Rights Agreement) may only be paid in cash and not through the
issuance of Additional Notes.
The Calculation Agent will, upon the request of the holder of
any Note, provide the interest rate then in effect with respect to this Note.
All calculations made by the Calculation Agent in the absence of manifest error
shall be conclusive for all purposes and binding on the Company and the Holders
of this Note.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the March 1, June 1,
September 1 and December 1 preceding the Interest Payment Date (whether or not
such day is a Business Day). The Holder must surrender this Note to a Paying
Agent to collect principal payments. The Issuers will pay principal, premium, if
any, and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts; provided, however, that
the Issuers may pay principal, premium, if any, and interest by check payable in
such money or in Additional Notes pursuant to Paragraph 1 hereof. The Issuers
may mail an interest check to the Holder's registered address.
3. PAYING AGENT, REGISTRAR AND CALCULATION AGENT.
Initially, State Street Bank and Trust Company, a
Massachusetts banking corporation (the "Trustee"), will act as Paying Agent,
Registrar and Calculation Agent. The Issuers may change any Paying Agent,
Registrar or Calculation Agent without notice to the Holders. Neither the
Issuers nor any of its Subsidiaries or Affiliates may act as Paying Agent or
Calculation Agent but may act as Registrar or co-Registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of
February 2, 2000 (the "Indenture") among the Issuers, the Guarantors and the
Trustee. The terms of this Note include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.
A-8
<PAGE>
Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. This Note
is subject to all such terms, and the Holder of this Note is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Note, unless otherwise defined, have the meanings assigned to them
by the Indenture.
The Notes are general unsecured obligations of the Issuers
limited to $50,000,000 aggregate principal amount (excluding any Additional
Notes), $12,000,000 of which were issued on the Issue Date. The Indenture
imposes certain restrictions on, among other things, the incurrence of
indebtedness, the incurrence of liens, the making of certain investments,
mergers and sale of assets, the payments of dividends on or the repurchase of,
capital stock of the Issuers, certain other restricted payments by the Issuers
and their Subsidiaries, certain transactions with, and investments in, their
Affiliates, the creation of Subsidiaries, the issuance of capital stock by
Subsidiaries, the types of businesses which the Issuers and their Subsidiaries
may engage in, the creation of dividend and other payment restrictions affecting
Subsidiaries, certain sale-leaseback transactions and a provision regarding
change-of-control transactions.
5. REDEMPTION.
(a) Optional Redemption. The Issuers may redeem the Notes that
are redeemable at their option, in whole at any time or in part from time to
time (i) from and including the Issue Date through to and including July 31,
2000 at a redemption price of 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to the Redemption Date, (ii) from and including
August 1, 2000 through to and including October 31, 2000 at a redemption price
of 101.50% of the principal amount thereof plus accrued and unpaid interest, if
any, to the Redemption Date and (iii) (A) from and including March 15, 2004
through to and including March 14, 2005 at a redemption price equal to 100% of
the principal amount thereof plus a premium equal to one-half of the interest
rate then borne by the Notes, (B) from and including March 15, 2005 through to
and including March 14, 2006 at a redemption price equal to 100% of the
principal amount thereof plus a premium equal to one-third of the interest rate
then borne by Notes, and (C) from and including March 15, 2006 through to and
including March 14, 2007 at a redemption price equal to 100% of the principal
amount thereof plus a premium equal to one-sixth of the interest rate then borne
by the Notes and (D) from and including March 15, 2007 through to and including
the Maturity Date at a redemption price equal to 100% of the principal amount
thereof, in each
A-9
<PAGE>
case plus accrued and unpaid interest, if any, to the Redemption Date.
Except as set forth in subparagraph (b) of this Paragraph 5,
the Issuers may not redeem the Notes at their option on from and including
November 1, 2000 through to and including March 14, 2004.
(b) Redemption with Net Cash Proceeds of Equity Offerings. The
Issuers may redeem up to 35% of the principal amount of the Notes originally
issued under the Indenture, at any time and from time to time from and after
November 1, 2000 but prior to March 15, 2002, at a redemption price equal to
100% of the aggregate principal amount so redeemed plus a premium equal to the
interest rate then borne by the Notes, plus accrued and unpaid interest, if any,
to the Redemption Date out of the net cash proceeds of one or more Equity
Offerings; provided, that at least 65% of the principal amount of the Notes
originally issued under the Indenture remains outstanding immediately after any
such redemption (it being expressly agreed that for purposes of determining
whether this condition is satisfied, Notes owned by the Issuers or any of its
Affiliates shall be deemed not to be outstanding). In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Issuers shall
make such redemption not more than 60 days following the closing of any such
Equity Offering.
(c) Mandatory Redemption. Subject to compliance with the terms
of the Senior Credit Facility (provided that no amendment to the Senior Credit
Facility which is entered into after the Issue Date and on or before October 31,
2000 shall have terms which are materially more restrictive with respect to the
rights of Holders under this Paragraph 5(c) than the terms of the Senior Credit
Facility as in effect on the Issue Date), if on or before October 31, 2000 any
Issuer or any of its Subsidiaries receives cash proceeds from (x) the issuance
of Capital Stock (other than (A) proceeds of Capital Stock issued to any Issuer
or any Restricted Subsidiary of any Issuer, (B) proceeds from the issuance to
any employee of any Issuer or any Restricted Subsidiary of any Issuer of Common
Stock or options to purchase Common Stock of an Issuer or any Restricted
Subsidiary pursuant to employee stock options and incentive plans in existence
on the Issue Date, (C) the issuance of Capital Stock as consideration for the
acquisition of any Person or any property or assets of any Person in compliance
with the other terms of the Indenture and (D) proceeds from the issuance of
Capital Stock by the Company to any holder of the Company's Capital Stock as of
the Issue Date and from any contribution to the common equity of the Company by
any holder of the Company's Capital Stock as of the Issue Date, not to exceed
$5,000,000 in
A-10
<PAGE>
the aggregate) or (y) the incurrence of any Indebtedness (other than (A)
Permitted Indebtedness, (B) the Attributable Indebtedness in respect of any Sale
and Lease-Back Transaction, (C) any Indebtedness of any Person assumed by the
Issuer or any of its Subsidiaries in connection with the acquisitions of such
Person or its property or assets and (D) any Indebtedness issued to the
transferor of any Person, property or assets as consideration for the
acquisition by any Issuer or its Subsidiaries of such Person, property or
assets), the Issuers shall promptly redeem that principal amount of Notes
redeemable with such net proceeds received at the redemption prices set forth
below (expressed as a percentage of the principal amount thereof) plus accrued
and unpaid interest, if any, to the Redemption Date, if redeemed during the
period indicated below:
Period Percentage
- ------ ----------
Issue Date through to and including July 31, 2000 100.000%
August 1, 2000 through to and including October 31, 2000 101.500%
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at
least 30 days but not more than 60 days prior to the Redemption Date to each
Holder to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Issuers shall fail to redeem any such Note.
7. SUBORDINATION.
The Indebtedness evidenced by the Notes and the payment of
principal of, premium, if any, and interest on the Notes are, to the extent and
in the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provisions. Each Holder
of this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose.
A-11
<PAGE>
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales
be used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Issuers are also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the
Issuers, the Guarantors and CIBC Inc., as purchaser of the Notes, the Issuers
and the Guarantors will be obligated to consummate an exchange offer pursuant to
which the Holder of this Note shall have the right to exchange this Note for
Notes of a separate series issued under the Indenture (or a trust indenture
substantially identical to the Indenture in accordance with the terms of the
Registration Rights Agreement) which have been registered under the Securities
Act, in like principal amount and having substantially identical terms as the
Notes. The Holders shall be entitled to receive certain additional interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Holder may register
the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Note selected for redemption or register the transfer of or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner
of it for all purposes.
A-12
<PAGE>
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on
any Note remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Issuers at its request. After that, Holders entitled to
money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be modified, amended or supplemented by the Issuers, the Guarantors and the
Trustee with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding and any existing Default or compliance with
any provision may be waived in a particular instance with the consent of the
Holders of a majority in principal amount of the Notes then outstanding. Without
the consent of Holders, the Issuers, and the Trustee may amend the Indenture or
the Notes or supplement the Indenture for certain specified purposes including
providing for uncertificated Notes in addition to certificated Notes, and curing
any ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any Holder.
14. SUCCESSOR ENTITY.
When a successor entity assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor entity will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event
of Default (other than an Event of Default pursuant to Section 6.01(g) or (h) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
by notice to the Company, or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, may declare to be immediately
due and payable the entire principal amount of all the Notes then outstanding
plus accrued but unpaid interest to the date of acceleration; provided, however,
that after such acceleration but before judgment or decree based on such
acceleration is obtained by the Trustee, the Holders of a majority in aggregate
principal amount of the outstanding Notes may, under certain circumstances,
rescind and annul such acceleration and its consequences if all existing Events
of Default, other
A-13
<PAGE>
than the nonpayment of principal, premium or interest that has become due solely
because of the acceleration, have been cured or waived and if the rescission
would not conflict with any judgment or decree. No such rescission shall affect
any subsequent Default or impair any right consequent thereto. In case an Event
of Default specified in Section 6.01(g) or (h) of the Indenture occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE ISSUERS.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuers, and may otherwise deal with the Issuers, as if it were not
Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any Guarantor shall not have
any liability for any obligations of the Issuers or the Guarantors under the
Notes, the Guarantees or the Indenture or for any claim based on, in respect or
by reason of, such obligations or their creation. The Holder of this Note by
accepting this Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Issuers with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (joint tenants with right of survivorship and not as tenants
in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Securities Identification Procedures, the Issuers have caused CUSIP
Numbers to be printed on the Notes and
A-14
<PAGE>
have directed the Trustee to use CUSIP numbers in notices of redemption as
convenience to Holders of the Notes. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
21. GOVERNING LAW.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES TO THE INDENTURE HAS AGREED TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
MUZAK LLC, 2901 Third Avenue, Suite 400, Seattle, Washington 98121, Attention:
Brad Bodenman.
A-15
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
A-16
<PAGE>
Date: Your Signature:
--------------- -----------------------
--------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
-------------------------------------------
A-17
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Issuers pursuant to Section 4.09 or Section 4.16 of the
Indenture, check the appropriate box:
[ ] Section 4.09 [ ] Section 4.16
If you want to have only part of the Note purchased by the
Issuers pursuant to Section 4.09 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
-----------------
Date:
-----------------
Your Signature:
-----------------------
(Sign exactly as your name appears on
the face of this Note)
- ---------------------------
Signature Guaranteed
A-18
<PAGE>
EXHIBIT B
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE
FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY
OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS
NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY
A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION)
("DTC") TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE>
EXHIBIT C
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
------------------------------------
Re: Senior Subordinated Floating Rate Notes
due 2009 (the "Notes") of Muzak LLC and
Muzak Finance Corp.
---------------------------------------
This Certificate relates to $_______ principal amount of Notes
held in the form of* ___ a beneficial interest in a Global Note or* _______
Certificated Notes by ______ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Note held by the Depository a
Certificated Note or Certificated Notes in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Note (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order to exchange or
register the transfer of a Certificated Note or Certificated Notes.
In connection with such request and in respect of each such
Note, the Transferor does hereby certify that the Transferor is familiar with
the Indenture relating to the above captioned Notes and the restrictions on
transfers thereof as provided in Section 2.06 of such Indenture, and that the
transfer of this Note does not require registration under the Securities Act of
1933, as amended (the "Securities Act"), because*:
[ ] Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06 of the Indenture).
[ ] Such Note is being transferred to a Qualified Institutional Buyer
(as defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
[ ] Such Note is being transferred in reliance on Regulation S under
the Securities Act and a Transferor Certificate substantially in the form of
Exhibit D-1 to the Indenture accompanies this Certificate.
C-1
<PAGE>
[ ] Such Note is being transferred in reliance on Rule 144 under the
Securities Act.
[ ] Such Note is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act other
than Rule 144A or Rule 144 or Regulation S under the Securities Act to a person
other than an institutional "accredited investor." An opinion of counsel to the
effect that such transfer does not require registration under the Securities Act
accompanies this Certificate.
[ ] Such Note is being transferred to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities
Act), who has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment in the Notes,
and it and any accounts for which it is acting are each able to bear the
economic risk of their investment. An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act and a Transferee
Certificate substantially in the form of Exhibit D-2 to the Indenture
accompanies this Certificate.
------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------
[Authorized Signatory]
Date:
-----------------------------
*Check applicable box.
C-2
<PAGE>
EXHIBIT D-1
-----------
Form of Certificate to Be
Delivered in Connection
with Regulation S Transfers
---------------------------
Re: Senior Subordinated Floating Rate Notes due
2009 (the "Notes") of Muzak LLC
(the "Company") and Muzak Finance Corp.
(together with the Company, the "Issuers")
--------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $____________
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
You and the Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the mat-
D-1-1
<PAGE>
ters covered hereby. Defined terms used herein without definition have the
respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------
[Authorized Signatory]
D-1-2
<PAGE>
EXHIBIT D-2
-----------
Accredited Investor Transferee Certificate
------------------------------------------
Muzak LLC
Muzak Finance Corp.
State Street Bank and Trust Company
c/o State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate
principal amount of the Senior Subordinated Floating Rate Notes due 2009 (the
"Notes") of Muzak LLC (the "Company") and Muzak Finance Corp. (together with the
Company, the "Issuers"), we confirm that:
1. We understand that none of the Notes has been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and, unless so registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing any Notes to offer, sell
or otherwise transfer any such Notes prior to the date the "Resale
Restriction Termination Date") that is two years after the later of the
original issuance of this Note and the last date on which any Issuer,
or any Affiliate of any Issuer, was the owner of this Note (or any
predecessor of this Note) except (A) to any Issuer or any subsidiary
thereof, (B) inside the United States to a Qualified Institutional
Buyer in compliance with Rule 144A under the Securities Act, (C) inside
the United States to an Institutional Accredited Investor within the
meaning of subparagraph (a)(1),(2),(3) or (7) of Rule 501 under the
Securities Act that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee a
signed letter substantially in the form of this letter, (D) outside the
United States in an offshore transaction in compliance with Rule 904
under the Securities Act, (E) pursuant to any other available exemption
from the registration requirements of the Securities Act or (F)
pursuant to an effective Registration Statement under the Securities
Act. Each purchaser acknowledges that the Issuers and the Trustee
reserve the right prior to any
D-2-1
<PAGE>
offer, sale or other transfer prior to the Resale Restriction
Termination Date of the applicable Notes pursuant to clause (c) or (e)
above to require the delivery of an opinion of counsel, certification
and/or other information satisfactory to the Issuers and the Trustee.
2. We are an Institutional Accredited Investor purchasing such
Notes for our own account or for the account of one or more
Institutional Accredited Investors, and we are acquiring such Notes for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act or
the securities laws of any state of the United States and we have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in such
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment in such Notes for an
indefinite period.
3. We acknowledge that we have had access to such financial
and other information, and have been afforded the opportunity to ask
such questions of representatives of the Issuers and receive answers
thereto, as we deem necessary.
We understand that the Trustee will not be required to accept
for registration of transfer any Notes acquired by us, except upon presentation
of evidence satisfactory to the Issuers and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that any
Notes purchased by us will be in the form of definitive physical certificates
and that such certificates will bear a legend reflecting the substance of this
paragraph 1 of this letter. We further agree to provide to any person acquiring
any of the Notes from us a notice advising such person that transfers of such
Notes are restricted as stated herein and that certificates representing such
Notes will bear a legend to that effect.
We represent that the Issuers and the Trustee and others are
entitled to rely upon the truth and accuracy of our acknowledgments,
representations and agreements set forth herein, and we agree to notify you
promptly in writing if any of our acknowledgments, representations or agreements
herein cease to be accurate and complete. You are also irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
D-2-2
<PAGE>
We represent to you that we have full power to make the
foregoing acknowledgments, representations and agreements on our own behalf and
on behalf of any investor account for which we are acting as fiduciary agent.
As used herein, the terms "offshore transaction," "United
States" and "U.S. person" have the respective meanings given to them in
Regulation S under the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
(Name of Purchaser)
By:
--------------------------
Date:
-------------------------
Upon transfer, the Notes would be registered in the name of
the new beneficial owner as follows:
Name:
-------------------------
Address:
----------------------
D-2-3
<PAGE>
EXHIBIT E
---------
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
---------
Each Guarantor (the "Guarantor", which term includes any
successor Person under the Indenture) has unconditionally guaranteed, on a
senior subordinated basis, jointly and severally, to the extent set forth in the
Indenture and subject to the provisions of the Indenture, (a) the due an
punctual payment of the principal of and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other Obligations of the Issuers to the
Noteholders or the Trustee all in accordance with the terms set forth in Article
10 of the Indenture, and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other Obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the undersigned to the Holders of Notes and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article 10 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
E-1
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to
be duly executed.
GUARANTORS:
[ ]
By:
-------------------------------
Name:
Title:
[ ]
By:
---------------------------------
Name:
Title:
E-2
<PAGE>
EXHIBIT F
---------
FORM OF SUPPLEMENTAL INDENTURE
------------------------------
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of _______________, among [ ] (the "New Guarantor"), a subsidiary of Muzak,
LLC (or its successor), a Delaware limited liability company (the "Company"),
Muzak Finance Corp., a Delaware corporation ("Finance Corp.", and together with
the Company, the "Issuers"), the Guarantors (the "Existing Guarantors") under
the Indenture referred to below, and State Street Bank and Trust Company, as
trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS the Issuers have has heretofore executed and delivered
to the Trustee an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of February 2, 2000, providing for the issuance of up to
an aggregate principal amount of $50,000,000 of Senior Subordinated Floating
Rate Notes due 2009 (the "Notes");
WHEREAS Section 4.22 of the Indenture provides that under
certain circumstances the Issuers is required to cause the New Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Guarantor shall unconditionally guarantee all of the Issuers'
obligations under the Notes pursuant to a Guarantee on the terms and conditions
set forth herein; and
WHEREAS pursuant to Section 8.01 of the Indenture, the
Trustee, the Issuers and Existing Guarantors are authorized to execute and
deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Guarantor, the Issuers, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the Noteholders as
follows:
1. Definitions. (a) Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
F-1
<PAGE>
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
2. Agreement to Guarantee. The New Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Issuers'
obligations under the Notes on the terms and subject to the conditions set forth
in Article 10 of the Indenture and to be bound by all other applicable
provisions of the Indenture. From and after the date hereof, the New Guarantor
shall be a Guarantor for all purposes under the Indenture and the Notes.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Noteholder heretofore or
hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction thereof.
F-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR]
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
MUZAK LLC
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
MUZAK FINANCE CORP.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
F-3
<PAGE>
EXISTING GUARANTORS:
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
-------------------------------
Name:
Title:
F-4
Exhibit 4.7
MUZAK LLC
MUZAK FINANCE CORP.
Up to $50,000,000
Senior Subordinated Floating Rate Notes due 2009
PURCHASE AGREEMENT
------------------
February 2, 2000
CIBC INC.
425 Lexington Avenue
3rd Floor
New York, New York 10017
Ladies and Gentlemen:
Muzak LLC, a Delaware limited liability company (the
"Company"), Muzak Finance Corp., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Finance Corp." and, together with the Company, the
"Notes Issuers"), the Company's other subsidiaries listed in Exhibit A-1 hereto
and Muzak Holdings LLC, a Delaware limited liability company and the parent
company of the Company ("Holdings") (each of such subsidiary, Holdings and any
other subsidiary required to guarantee the Notes in accordance with the terms of
the Indenture (as defined herein) a "Guarantor" and, collectively, the
"Guarantors"), hereby confirm their agreement with you (the "Purchaser"), as set
forth below.
1. The Transactions. Subject to the terms and conditions
herein contained, the Notes Issuers propose to issue and sell to the Purchaser
in multiple transactions but no later than July 31, 2000 up to $50,000,000
aggregate principal amount of their Senior Subordinated Floating Rate Notes due
2009 (the "Notes"). The obligations of the Notes Issuers under the Indenture (as
defined herein) and the Notes will be unconditionally guaranteed (the
"Guarantees"), on a joint and several basis, by each Guarantor. The Notes and
the Guarantees are to be issued pursuant to the Indenture (the "Indenture"),
dated as of February 2, 2000, among the Notes Issuers, the Guarantors and State
Street Bank and Trust Company, a Massachusetts banking corporation, as trustee
(the "Trustee"). The Notes and the Guarantees are hereinafter referred to
collectively as the "Securities." The Notes Issuers and the Guarantors are
herein collectively referred to as the "Issuers."
<PAGE>
-2-
The sale of the Securities to the Purchaser will be made
without registration of the Securities under the Securities Act of 1933, as
amended (together with the rules and regulations of the Securities and Exchange
Commission (the "Commission") promulgated thereunder, the "Securities Act"), in
reliance upon the exemption therefrom provided by Section 4(2) of the Securities
Act.
The Purchaser and its direct and indirect transferees of the
Notes will be entitled to the benefits of the Registration Rights Agreement
dated as of February 2, 2000 among the parties hereto (the "Registration Rights
Agreement") pursuant to which the Issuers will agree, among other things, to
file (i) a registration statement (the "Registration Statement") with the
Commission registering the Notes or the Exchange Notes (as defined in the
Registration Rights Agreement) under the Securities Act or (ii) a shelf
registration statement pursuant to Rule 415 under the Securities Act relating to
the resale of the Notes by holders thereof or, if applicable, relating to the
resale of Private Exchange Notes (as defined in the Registration Rights
Agreement) by the Purchasers pursuant to an exchange of the Notes for Private
Exchange Notes.
Except as otherwise permitted hereby, the Notes Issuers will
use the proceeds from the issuances and sales of the Securities to the Purchaser
solely as consideration for the acquisition of the assets of each Mountain West
Audio, Inc., a Utah corporation, General Communications Corporation, an Indiana
corporation (d/b/a On-Hold America), Texas Sound Co. Ltd., an Ohio limited
liability company and Quincy Broadcasting Company, a Delaware corporation, on
the Initial Closing Date (as defined herein) (each an "Initial Acquisition") and
subsequent acquisitions on each Subsequent Closing Date (as defined herein)
(each a "Subsequent Acquisition" and, together with the Initial Acquisition, the
"Acquisitions"). This Agreement, the Securities, the Exchange Notes, the Private
Exchange Notes, the Registration Rights Agreement and the Indenture are herein
collectively referred to as the "Transaction Documents."
2. Representations and Warranties of the Issuers. In order to
induce the Purchaser to enter into this Agreement and to purchase the
Securities, each of the Issuers jointly and severally makes the following
representations, warranties and agreements, all of which shall survive the
execution and delivery of this Agreement and the issuances and deliveries of the
Securities, with each issuance of Securities pursuant to this Agreement being
deemed to constitute a representation and war-
<PAGE>
-3-
ranty that the matters specified in this Section 2 are true and correct on and
as of the date of such issuance and delivery:
(a) Each of the Notes Issuers and each of its subsidiaries
(the "Subsidiaries") (Exhibit A-2 hereto sets forth each Subsidiary of
the Notes Issuers in existence as of the Initial Closing Date) has been
duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization and has the power and authority to
carry on its business as conducted on such Closing Date and as
contemplated to be conducted on such Closing Date and to own and
operate the properties and assets now owned and being operated by it on
such Closing Date. Each of the Issuers is duly qualified to do business
as a foreign entity and is in good standing in each jurisdiction in
which such qualification is necessary under the applicable law as a
result of the conduct of its business or the ownership of its
properties, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
general affairs, management, business, condition (financial or other),
properties, prospects or results of operations of the Issuers, taken as
a whole (any such event, a "Material Adverse Effect").
(b) All of the outstanding capital stock of Finance Corp. is
owned and held by the Company.
(c) (i) All of the issued and outstanding shares of capital
stock of or membership interests in, as the case may be, the Issuers
are duly authorized and validly issued and fully paid and
non-assessable and none of them have been issued in violation of any
preemptive or other right; and (ii) no holder of securities of any
Issuer is entitled to have such securities registered under the
Registration Statement.
(d) Each of the Notes Issuers has the required corporate or
limited liability company power and authority to execute, deliver and
perform its obligations under the Notes, the Exchange Notes and the
Private Exchange Notes. The Notes, the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by each of
the Notes Issuers for issuance and, when executed by the Notes Issuers
and authenticated by the Trustee in accordance with the provisions of
the Indenture and, in the case of the Notes, when delivered to and paid
for by the Purchaser in accordance with the terms hereof, will have
<PAGE>
-4-
been duly executed, issued and delivered and will constitute valid and
legally binding obligations of the Notes Issuers, entitled to the
benefits of the Indenture and enforceable against the Notes Issuers in
accordance with their terms except that the enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding
at law or in equity) and the discretion of the court before which any
proceeding with respect thereto may be brought (the "Enforceability
Exceptions"); the Guarantees to be endorsed on the Notes and the
guarantees to be endorsed on the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by the
Guarantors and, when the Notes are executed by the Notes Issuers and
authenticated by the Trustee in accordance with the provisions of the
Indenture, and delivered to and paid for by the Purchaser in accordance
with the terms hereof, and when the Guarantees have been endorsed on
the Notes in accordance with the terms of the Indenture, such
Guarantees will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Guarantors,
entitled to the benefits of the Indenture and enforceable against the
Guarantors in accordance with their terms except that the enforcement
thereof may be limited by the Enforceability Exceptions. The Securities
to be issued on such Closing Date are in the form contemplated by the
Indenture.
(e) Each of the Issuers has the requisite corporate or limited
liability company power and authority to execute, deliver and perform
its obligations under the Indenture. The Indenture has been duly and
validly authorized by the Issuers and meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"TIA"), and, when executed and delivered by the Issuers (assuming the
due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms except
that the enforcement thereof may be limited by the Enforceability
Exceptions.
(f) Each of the Issuers has the requisite corporate or limited
liability company power and authority to execute, deliver and perform
its obligations under the Regis-
<PAGE>
-5-
tration Rights Agreement. The Registration Rights Agreement has been
duly and validly authorized by the Issuers and, when executed and
delivered by the Issuers (assuming the due authorization, execution and
delivery by the Purchaser), will constitute a valid and legally binding
agreement of the Issuers, enforceable against the Issuers in accordance
with its terms except (i) that the enforcement thereof may be limited
by the Enforceability Exceptions and (ii) as any rights to indemnity or
contribution thereunder may be limited by federal and state securities
laws and public policy considerations.
(g) Each of the Issuers has the requisite corporate or limited
liability power and authority to execute, deliver and perform its
obligations under this Agreement. This Agreement has been duly and
validly authorized by the Issuers and, when executed and delivered by
each Issuer (assuming due authorization, execution and delivery by the
Purchaser), will constitute a valid and legally binding agreement of
such Issuer, enforceable against such Issuer in accordance with its
terms except (i) that the enforcement thereof may be limited by the
Enforceability Exceptions and (ii) as any rights to indemnity or
contribution hereunder may be limited by federal and state securities
laws and public policy considerations.
(h) No consent, approval, authorization or order of any court
or governmental agency or body is required for the performance of any
of the Transaction Documents by the Issuers, to the extent each is or
will be a party thereto, or for the consummation by the Issuers of any
of the transactions contemplated thereby or in connection with any
Acquisition to be completed on such Closing Date, except for such
consents, approvals, authorizations or orders as have been obtained or
made or as may be required under the Securities Act and the TIA (with
respect to the transactions contemplated by the Registration Rights
Agreement) or as may be required under state securities or "Blue Sky"
laws in connection with the purchase of the Securities by the Purchaser
or such that the failure to obtain would not reasonably be expected to
have a Material Adverse Effect; and none of the Issuers or the
Subsidiaries is (i) in violation of its respective certificate of
incorporation, organizational documents, limited liability company
agreement, partnership agreement or bylaws, (ii) in violation of any
statute, judgment, decree, order, rule or regulation applicable to it
or any of its properties or assets, which violation would, individually
or in
<PAGE>
-6-
the aggregate, have a Material Adverse Effect, or (iii) in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any of the Transaction Documents or any other
contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate or agreement
or instrument to which it is a party or to which it is subject, which
default would, individually or in the aggregate, have a Material
Adverse Effect.
(i) The execution, delivery and performance by the Issuers of
each of the Transaction Documents to which any of them is a party, and
the consummation of the transactions contemplated hereby and thereby
and by the Acquisitions to be completed on such Closing Date and the
fulfillment of the terms hereof and thereof, will not violate, conflict
with or constitute or result in a breach of or a default under (or an
event that, with notice or lapse of time, or both, would constitute a
breach of or a default under) any of (a) the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement, or agreement or instrument to which any
of them is a party or to which any of their respective properties or
assets are subject (each as in effect on such Closing Date), which
violation, conflict, breach or default would, individually or in the
aggregate, have a Material Adverse Effect, (b) the certificate of
incorporation, organizational documents, limited liability company
agreement, partnership agreement or by-laws of any of them or (c)
(assuming compliance with all applicable Federal and state securities
and "Blue Sky" laws and the accuracy of the representations and
warranties of the Purchaser in Section 8 hereof) any statute, judgment,
decree, order, rule or regulation of any court or governmental agency
or other body applicable to any of them or any of their respective
properties or assets, which violation, conflict, breach or default
would, individually or in the aggregate, have a Material Adverse
Effect.
(j) The audited historical financial statements of the Company
as of December 31, 1998 and for the year ended December 31, 1998
present fairly in all material respects the financial position, results
of operations and cash flows of the Company at the dates and for the
periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis,
except as otherwise stated therein; the
<PAGE>
-7-
unaudited historical financial statements of the Company as of
September 30, 1999 and for the nine-month period ended September 30,
1999 included in the Company's quarterly report on Form 10-Q filed with
the Commission present fairly in all material respects the financial
position and results of operations of the Company at the dates and for
the periods to which they relate and have been prepared in accordance
with generally accounting principles applied on a consistent basis
except as otherwise stated therein, subject to normal and customary
year-end adjustments which would not, individually or in the aggregate,
have a Material Adverse Effect; and PricewaterhouseCoopers LLP, which
has examined such audited financial statements and reviewed such
unaudited financial statements, is an independent public accounting
firm within the meaning of Rule 101 of the Code of Professional Conduct
of the American Institute of Certified Public Accountants and its
interpretations and rulings.
(k) The pro forma financial statements and other pro forma
financial information (including the notes thereto) provided to the
Purchasers by the Issuers have been properly computed on the bases
described therein; and the assumptions used in the preparation of the
pro forma financial statements and other pro forma financial
information provided to the Purchaser by the Issuers are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(l) The financial projections entitled "Muzak Quarterly 1.6
Model" furnished to the Purchaser by the Issuers, were prepared by or
under the direction of an officer of the Issuers and were prepared in
good faith on the basis of information and assumptions that the Issuers
believe to be fair and reasonable as of the date of such projections;
provided that such projections are not to be viewed as facts and that
actual results during the period or periods covered by such projections
may differ from such projections and that the differences may be
material. All other factual information heretofore or contemporaneously
furnished in writing by or on behalf of any Issuer to the Purchaser for
purposes of or in connection with the Transaction Documents is complete
and accurate in all material respects. No fact is known, no condition
exists nor has any event occurred which has not been disclosed herein
or in any other document, certificate or statement furnished to the
Purchaser for use in the transactions
<PAGE>
-8-
contemplated hereby which, individually or in the aggregate, would have
a Material Adverse Effect.
(m) The Issuers have filed with the Commission certain
registration statements and reports, including the Company's Quarterly
Report on Form 10-Q for the nine month period ended September 30, 1999
(including exhibits, annexes and any amendments thereto) (collectively,
including any such reports filed subsequent to the date hereof and as
amended, the "Company Reports"). As of their respective dates (or, if
amended, as of the date of such amendment) the Company Reports did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they
were made, not misleading.
(n) Except as disclosed in the Company's Registration
Statement on Form S-4 (Registration No. 333-78571) (as amended to the
Initial Closing Date) under the heading "Business-Legal Proceedings,"
there is not pending or, to the best knowledge of the Notes Issuers,
threatened any action, suit, proceeding, inquiry or investigation,
governmental or otherwise, to which any of the Issuers is a party, or
to which their respective properties or assets are subject, before or
brought by any court, arbitrator or governmental agency or body, that,
if determined adversely to the Issuers would, individually or in the
aggregate, have a Material Adverse Effect, or that seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance
or sale of the Securities to be sold hereunder or any Acquisition.
(o) None of the Issuers has, and, after giving effect to the
issuance and sale of the Securities or any Acquisition to be completed
on such Closing Date, none of the Issuers will have, any liability for
any prohibited transaction or funding deficiency or any complete or
partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which any of them
makes or ever has made a contribution and in which any employee of any
of them is or has ever been a participant. With respect to such plans,
the Issuers are, and, to the best knowledge of the Issuers, after
giving effect to the issuance and sale of the Securities and each
Acquisition to be completed on
<PAGE>
-9-
such Closing Date, the Issuers will be, in compliance in all material
respects with all provisions of ERISA.
(p) The Issuers own or possess adequate licenses or other
rights to use all patents, trademarks, service marks, trade names,
copyrights and know-how that are necessary to conduct their business,
except where the failure to own or possess would not individually or in
the aggregate have a Material Adverse Effect. None of the Issuers has
received any notice of infringement of or conflict with (or knows of
any such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names,
copyrights or know-how that, if such assertion of infringement or
conflict were sustained, would, individually or in the aggregate, have
a Material Adverse Effect.
(q) Each of the Issuers possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals presently required or
necessary to own or lease, as the case may be, and to operate its
respective properties and to carry on its respective businesses as
conducted or proposed to be conducted on such Closing Date ("Permits"),
except where the failure to obtain such Permits would not, individually
or in the aggregate, have a Material Adverse Effect; each of the
Issuers has fulfilled and performed all of its obligations with respect
to such Permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of
any such Permit, except for nonperformance or events or revocations or
terminations that would not, individually or in the aggregate, have a
Material Adverse Effect; and none of the Issuers has received any
notice of any proceeding relating to revocation or modification of any
such Permit, except where such revocation or modification would not,
individually or in the aggregate, have a Material Adverse Effect.
(r) Subsequent to the date of the most recent unaudited
consolidated balance sheet of the Company provided to the Purchaser as
described in the first sentence of Section 2(j), none of the Issuers
has sustained any material loss or interference with its business from
fire, ex-
<PAGE>
-10-
plosion, flood, earthquake or other calamity, whether or not covered by
insurance, except in each case as would not have a Material Adverse
Effect.
(s) None of the Issuers has taken or will take any action that
would cause this Agreement or the issuance or sale of the Securities to
violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System, in each case as in effect or as the same may hereafter
be in effect, on such Closing Date.
(t) Each of the Issuers has good and marketable title to all
real property owned by it and good and marketable title to the
leasehold estate in the real property leased by it, free and clear of
all liens, charges, encumbrances or restrictions, except as would not,
individually or in the aggregate, have a Material Adverse Effect.
(u) Each of the Issuers has filed all necessary federal, state
and foreign income and franchise tax returns, except where the failure
to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and, other than taxes due thereon or
tax deficiencies which any Issuer reasonably believes that it has
provided adequate reserves, has paid all taxes due thereon and there is
no tax deficiency that has been asserted against any Issuer or that
would, individually or in the aggregate, have a Material Adverse
Effect.
(v) (i) Immediately after the consummation of the transactions
contemplated by the Transaction Documents and each Acquisition to be
completed on such Closing Date, the fair value and present fair
saleable value of the assets of the Issuers will exceed the sum of
their stated liabilities and identified contingent liabilities; and
(ii) the Issuers are not, nor will they be, after giving effect to the
execution, delivery and performance of the Transaction Documents and
the consummation of the transactions contemplated thereby, (a) left
with unreasonably small capital with which to carry on their businesses
as is proposed to be conducted, (b) unable to pay their debts
(contingent or otherwise) as they mature or (c) insolvent.
(w) Except as would not individually or in the aggregate have
a Material Adverse Effect, (A) each of the Issuers is in compliance
with all applicable Environmental Laws, (B) each of the Issuers has
made all filings and provided all notices required under any applicable
Envi-
<PAGE>
-11-
ronmental Law, and has all permits, authorizations and approvals
required under any applicable Environmental Laws and is in compliance
with their requirements, (C) there are no pending or, to the best
knowledge of the Issuers, after due inquiry, threatened Environmental
Claims against any of the Issuers and (D) none of the Issuers has
knowledge of any circumstances with respect to any of their respective
properties or operations that could reasonably be anticipated to form
the basis of an Environmental Claim against any of them or any of their
subsidiaries or any of their respective properties or operations and
the business operations relating thereto.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any federal, state,
local or municipal statute, law, rule, regulation, ordinance, code or
rule and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment binding on any of the Issuers relating to pollution or
protection of the environment or health or safety or any chemical,
material or substance that is subject to regulation thereunder.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, written
notices of responsibility, information requests, liens, written notices
of noncompliance or violation, investigations or proceedings relating
in any way to any Environmental Law.
(x) None of the Issuers or any of their respective Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act)
directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of any "security" (as
defined in the Securities Act) which is or could be integrated with the
sale of the Securities in a manner that would require the registration
under the Securities Act of the Securities or (ii) engaged in any form
of general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) in connection with the
offering of the Securities or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act. Assuming the
accuracy of the Purchaser's representations and warranties set forth in
Section 8 hereof, the offer and sale of the Securities to the Purchaser
in the manner contemplated by this Agreement does not require
registration under the Securities
<PAGE>
-12-
Act and the Indenture does not require qualification under the TIA.
(y) No securities of any Issuer are (i) of the same class
(within the meaning of Rule 144A under the Securities Act) as the
Securities and (ii) listed on a national securities exchange registered
under Section 6 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or quoted in a U.S. automated interdealer quotation
system.
(z) None of the Issuers or, any of their respective Affiliates
or any person acting on their behalf, has engaged in any directed
selling efforts (as that term is defined in Regulation S under the
Securities Act ("Regulation S")) with respect to the Securities; and
the Issuers, their respective Affiliates and any person acting on their
behalf have acted in accordance with the offering restrictions
requirements of Regulation S.
(aa) None of the Issuers is required to register as an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(bb) None of the Issuers, or any of their respective
directors, officers or controlling persons, has taken, directly or
indirectly, any action designed, or that might reasonably be expected,
to cause or result, under the Act or otherwise, in, or that has
constituted, stabilization or manipulation of the price of any security
of any Issuer to facilitate the sale or resale of the Securities (it
being understood that no representation or warranty is made as to any
actions by the Purchaser).
(cc) There is no strike, labor dispute, slowdown or work
stoppage with the employees of any of the Issuers which is pending or,
to the best knowledge of the Issuers, threatened that would have a
Material Adverse Effect.
(dd) Each of the Issuers carries insurance (including
self-insurance) in such amounts and covering such risks as in its
reasonable determination is adequate for the conduct of its business
and the value of its properties.
(ee) Each of the Issuers (i) makes and keeps accurate books
and records and (ii) maintains internal accounting controls which
provide reasonable assurance that
<PAGE>
-13-
(A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(ff) Since the date of the most recent balance sheet provided
to the Purchaser prior to the Initial Closing Date, the Company has
received a contribution to its common equity capital from its existing
stockholders of at least $4.336 million (the "New ABRY Equity
Contribution") and shall have requested that its existing stockholders
contribute an additional $6.3 million to the Company's common equity
capital.
Any certificate signed by any officer of any Issuer and
delivered to the Purchaser or to counsel for the Purchaser shall be deemed a
joint and several representation and warranty by the Issuers to the Purchaser as
to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities.
(a) The Note Issuers hereby agree to issue and sell to the
Purchaser, and the Purchaser agrees, subject to and upon the terms and
conditions set forth herein, to purchase from the Note Issuers, at a price equal
to 100% of the principal amount thereof, from time to time during the period
commencing on the Initial Closing Date (as defined herein) and ending at 5:00
p.m. New York time on July 31, 2000, Securities in an aggregate principal amount
not to exceed $50,000,000. On the Initial Closing Date the Purchaser agrees to
purchase from the Notes Issuers $12,000,000 aggregate principal amount of the
Securities. On each Subsequent Closing Date the Purchaser agrees to purchase
from the Notes Issuers the aggregate principal amount of Securities specified in
the Notice of Purchase (as defined herein) and otherwise subject to and upon the
terms and conditions set forth herein. Notwithstanding the foregoing (i) the
Purchaser shall not be obligated to purchase any Securities after 5:00 p.m. New
York time on July 31, 2000, (ii) the Purchaser shall not be required to purchase
any Securities if at the time of such purchase any Default (as defined in the
Indenture) or Event of Default (as defined in the Indenture) shall have occurred
and be continuing under the Indenture with respect to any outstanding
Securities, (iii) the aggregate prin-
<PAGE>
-14-
cipal amount of Securities purchased on each Closing Date shall be at least
$2,500,000 or, if greater, an increment of $1,000,000 (i.e. $3,000,000,
$4,000,000, etc.) and (iv) the Purchaser shall not be required to purchase in
excess of $50,000,000 in aggregate principal amount of Securities pursuant to
this Agreement.
(b) The purchase by the Purchaser of Securities hereunder
shall occur substantially contemporaneously with the consummation of the
Acquisition which is to occur on such Closing Date and shall be made, subject to
the terms of this Agreement, in such principal amounts and at such times as the
Notes Issuers may designate in a written notice (the "Notice of Purchase")
(except for the purchase of Securities made pursuant to this Agreement on the
date hereof (the "Initial Closing Date") for which no such notice shall be
necessary) with respect thereto delivered to the Purchaser at least three
Business Days prior to the issue and sale thereof, provided that such notice
shall be deemed to have been given on a certain day only if given before 12:00
noon (New York time) on such day. For purposes of this Agreement, "Business Day"
means any day that is not a Legal Holiday and "Legal Holiday" means a Saturday,
a Sunday, a federally recognized holiday or a day on which banking institutions
are not required to be open in the State of New York.
Each Notice of Purchase shall be irrevocable and shall be
substantially in the form of Exhibit B hereto and shall be signed by the Chief
Executive Officer and the Chief Financial Officer of the Company, appropriately
completed to specify (i) the aggregate principal amount of the Securities to be
purchased pursuant to such Notice of Purchase (which shall be an amount not to
exceed the cash consideration to be paid to consummate the Acquisition to be
consummated on such Closing Date rounded upward to the nearest increment of
$1,000,000 (i.e. $3,000,000, $4,000,000, etc.)), (ii) the date and time of such
purchase (which shall occur during regular banking hours on a Business Day not
less than three nor greater than five Business Days from the date of delivery of
the Notice of Purchase) (each such date a "Subsequent Closing Date" and,
together with the Initial Closing Date, each a "Closing Date"), (iii) the
Acquisition which is to be consummated, (iv) the type(s) and amount(s) of
consideration to be delivered by the Company or its Subsidiaries to the
seller(s) of the business assets to be acquired in the applicable Acquisition
and (v) that the proceeds from the issuance and sale of the Securities will be
used solely as consideration for the Acquisitions contemplated by this Agreement
and to pay related costs actu-
<PAGE>
-15-
ally incurred by the Company (except to the extent of any proceeds from
Securities issued in order to round up as provided in clause (i) of this
paragraph).
One or more certificates in definitive form for the Securities
that the Purchaser has agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as each Purchaser requests
upon notice to the Company at least 48 hours prior to a Closing Date, shall be
delivered by or on behalf of the Issuers, against payment by or on behalf of the
Purchaser of the purchase price therefor by wire transfer of immediately
available funds to the account of the Company previously designated by it in
writing. Such delivery of and payment for Securities issued on the Initial
Closing Date shall be made at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, at 9:00 a.m., New York time, on February 2,
2000, or at such date as the Purchaser and the Company may agree upon. Such
delivery of and payment for Securities issued on a Subsequent Closing Date shall
be made at such date, place and time as the Purchaser and the Company may agree
upon. The Company will make such certificate or certificates for the Securities
to be purchased available for inspection by the Purchaser at the offices in New
York, New York of Cahill Gordon & Reindel at least 24 hours prior to each
Closing Date.
4. Certain Covenants. The Issuers, jointly and severally,
covenant and agree with the Purchaser that from and after the Initial Closing
Date and until the Securities and all obligations incurred hereunder and
thereunder are paid in full:
(a) The Issuers will cooperate with the Purchaser in arranging
for the qualification of the Securities for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Purchaser
may designate and will continue such qualifications in effect for as
long as may be necessary to complete the resale of the Securities by
the Purchaser; provided, however, that in connection therewith none of
the Issuers shall be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction or
to take any other action that would subject it to general service of
process or to taxation in respect of doing business in any jurisdiction
in which it is not otherwise subject.
(b) During the period of five years from the Closing Date, the
Issuers will furnish to the Purchaser (a) as soon as available, a copy
of each report and other commu-
<PAGE>
-16-
nication (financial or otherwise) of any Issuer mailed to the Trustee
or the holders of the Securities, stockholders or any national
securities exchange on which any class of securities of any Issuer may
be listed other than materials filed with the Commission and (b) from
time to time such other information concerning the Issuers as the
Purchaser may reasonably request.
(c) If this Agreement shall terminate or shall be terminated
after execution because of any failure or refusal on the part of the
Issuers to comply with the terms or fulfill any of the conditions of
this Agreement, the Issuers agree to reimburse the Purchaser for all
reasonable out-of-pocket expenses (including fees and expenses of
counsel for the Purchaser) incurred by you in connection herewith.
(d) The Issuers will apply the net proceeds from each sale of
the Securities as set forth as provided herein or in the applicable
Notice of Purchase, as the case may be.
(e) Prior to each Closing Date, the Company will furnish to
the Purchaser, as soon as they have been prepared, a copy of any
interim financial statements of the Company, if any, for any period
subsequent to the period covered by the most recent financial
statements previously delivered to the Purchaser.
(f) None of the Issuers or any of their respective Affiliates
will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Securities
Act) which could be integrated with the sale of the Securities in a
manner which would require the registration under the Securities Act of
the Securities.
(g) For so long as the Securities constitute "restricted"
securities within the meaning of Rule 144(a)(3) under the Securities
Act, the Issuers will not, and will not permit any of the Subsidiaries
to, solicit any offer to buy or offer to sell the Securities by means
of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2)
of the Securities Act, except in connection with the exchange offer
contemplated by the Registration Rights Agreement.
<PAGE>
-17-
(h) For so long as any of the Securities remain outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act and not able to be sold in their entirety
under Rule 144 under the Securities Act (or any successor provision),
the Issuers will make available, upon request, to any seller of such
Securities the information specified in Rule 144A(d)(4) under the
Securities Act, unless the Issuers are then subject to Section 13 or
15(d) of the Exchange Act.
(i) If requested by the Purchaser, the Issuers will use their
best efforts to (i) permit the Securities to be included for quotation
on the PORTAL Market and (ii) permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company ("DTC").
(j) The Issuers will use their best efforts to do and perform
all things required to be done and performed by them under this
Agreement and the other Transaction Documents prior to or after each
Closing Date and to satisfy all conditions precedent on their part to
the obligations of the Purchaser to purchase and accept delivery of the
Securities.
(k) The Issuers who are a party to this Agreement as of the
Initial Closing Date shall cause each Subsidiary of the Company formed
or acquired after the Initial Closing Date which is required to
Guarantee the Notes to become a party to this Agreement.
5. Expenses; Fees. (a) Notwithstanding any termination of this
Agreement (pursuant to Section 10 or otherwise), the Issuers jointly and
severally agree to pay the following costs and expenses and all other costs and
expenses incident to the performance by the Issuers of their obligations
hereunder: (i) the negotiation, preparation, printing, typing, reproduction,
execution and delivery of this Agreement and of the other Transaction Documents,
any amendment or supplement to or modification of any of the foregoing and any
and all other documents furnished pursuant hereto or thereto or in connection
herewith or therewith; (ii) the preparation, printing, authentication, issuance
and delivery of certificates for the Notes and the related Guarantees, including
any stamp taxes in connection with the original issuance and sale of the
Securities and trustees' fees; (iii) the reproduction and delivery of this
Agreement and the other Transaction Documents and all other agreements or
documents reproduced and delivered in connection
<PAGE>
-18-
with the offering of the Securities; (iv) the registration or qualification of
the Securities for offer and sale under the securities or Blue Sky laws of the
several states (including filing fees and the reasonable fees, expenses and
disbursements of Cahill Gordon & Reindel, counsel to the Purchaser, relating to
such registration and qualification not to exceed $10,000); (v) the fees,
expenses and disbursements of Cahill Gordon & Reindel, counsel to the Purchaser,
incurred in connection with the matters contemplated by the Transaction
Documents; (vi) the fees and expenses of the Company's accountants and the fees
and expenses of counsel (including local and special counsel) for the Issuers;
(vii) fees and expenses of the Trustee including fees and expenses of its
counsel; (viii) all expenses and listing fees incurred in connection with the
application for quotation of the Securities on the PORTAL Market; (ix) any fees
charged by investment rating agencies for the rating of the Securities; and (x)
the reasonable out-of-pocket expenses of the Purchaser incurred in connection
with the matters contemplated by the Transaction Documents.
(b) The Issuers hereby agree to pay to the Purchaser the
following fees: (i) a commitment fee equal to 0.75% of the maximum aggregate
principal amount of Securities which the Purchaser has agreed to purchase
pursuant to the terms and conditions of this Agreement which amount shall be
earned upon execution of this Agreement and which commitment fee shall be due
and payable upon execution of this Agreement; and (ii) a purchase fee equal to
1.50% of the aggregate principal amount of Securities which the Purchaser
purchases on each Closing Date which amount shall be earned upon each such
Closing Date and which shall be due and payable on each such Closing Date. In
addition, (i) in the event that any Securities remain outstanding as of November
1, 2000 (the "Conversion Date"), the Issuers hereby agree to pay to the
Purchaser on the Conversion Date a conversion fee equal 2.75% of the aggregate
principal amount of Securities outstanding as of the Conversion Date and (ii)
the Issuers hereby agree to pay on the Cancellation Date (as defined) to the
Purchaser a cancellation fee (the "Cancellation Fee") equal to 2.75% of the
aggregate principal amount of Securities redeemed or otherwise repurchased prior
to November 1, 2000 (the date of such redemption or repurchase the "Cancellation
Date"); provided, that any Cancellation Fee paid to the Purchaser shall be
credited against any fee, discount or commission paid to the Purchaser or any of
its affiliates in connection with an offering of securities or the issuance of
bank indebtedness by any Issuer to the extent the proceeds from such issuance
are utilized concurrently with such issuance to redeem or repurchase Securities
from the Purchaser; provided,
<PAGE>
-19-
however, that in no event shall the amount of any Cancellation Fee credited
against any such fees, discounts and commissions exceed the amount of such fees,
discounts and commissions; provided, further, that no Cancellation Fee shall be
payable to the extent the Securities are redeemed or repurchased with the
proceeds of the issuance of preferred stock of the Company to ABRY Broadcast
Partners II, L.P., ABRY Broadcast Partners III, L.P. or any of their respective
affiliates (the "ABRY Preferred Stock"). The Issuers hereby authorize the
Purchaser to withhold from the consideration to be paid to the Notes Issuers on
each Closing Date an amount equal to the fees due and payable to the Purchaser
on such Closing Date and to withhold from any other amounts that may be due and
owing to any Note Issuer an amount equal to any other fees which may be due and
payable hereunder.
6. Conditions of the Purchaser's Obligations. The obligation
of the Purchaser to purchase and pay for the Securities on each Closing Date are
subject to the accuracy of the representations and warranties contained herein,
to the performance by the Issuers of their respective covenants and agreements
hereunder and to the following additional conditions unless waived in writing by
the Purchaser:
(i) On the Initial Closing Date, the Purchaser shall have
received an opinion of counsel in form and substance satisfactory to
the Purchaser and Cahill Gordon & Reindel, counsel to the Purchaser,
dated such Closing Date, of Kirkland & Ellis, counsel to the Issuers,
substantially in the form of Exhibit C hereto. In rendering such
opinions, such counsel shall have received and may rely upon such
certificates and other documents and information, including one or more
opinions of local counsel reasonably acceptable to the Purchaser and
Cahill Gordon & Reindel, counsel to the Purchaser, as it may reasonably
request to pass upon such matters.
(ii) On the Initial Closing Date, the Purchaser shall have
received an opinion, dated such Closing Date, of Cahill Gordon &
Reindel, counsel to the Purchaser, with respect to the sufficiency of
certain legal matters relating to this Agreement and such other related
matters as the Purchasers may require. In rendering such opinion,
Cahill Gordon & Reindel, counsel to the Purchaser, shall have received
and may rely upon such certificates and other documents and information
as it may reasonably request to pass upon such matters. In addition, in
rendering their opinion, Cahill Gordon & Reindel, counsel to the
Purchaser,
<PAGE>
-20-
may state that their opinion is limited to matters of New York,
Delaware corporate and federal law.
(iii) The representations and warranties of the Issuers
contained in this Agreement shall be true and correct on and as of such
Closing Date; the Issuers shall have complied in all material respects
with all agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to such Closing Date.
(iv) None of the issuance and sale of the Securities pursuant
to this Agreement, any Acquisition to be completed as of such Closing
Date or any of the transactions contemplated by the Transaction
Documents shall be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued; and
there shall not have been any legal action, order, decree or other
administrative proceeding instituted or threatened against any of the
Issuers or against the Purchaser relating to the issuance of the
Securities or, any Acquisition to be completed as of such Closing Date
or the Purchaser's activities in connection therewith or any other
transactions contemplated by this Agreement or the Transaction
Documents.
(v) Subsequent to the date of the most recent financial
statements provided to the Purchaser prior to the Initial Closing Date
(exclusive of any amendment or supplement thereto after the date
hereof), there shall not have occurred any change, or any development
involving a prospective change, in or affecting the general affairs,
management, business, condition (financial or other), properties,
prospects or results of operations of the Issuers taken as a whole that
would have or would be reasonably likely to have a Material Adverse
Effect.
(vi) The Purchaser shall have received certificates, dated
each Closing Date and signed by the chief executive officer and the
chief financial officer of each Issuer (in their capacities as such),
to the effect that:
a. All of the representations and warranties
of such Issuer set forth in this Agreement are true and
correct on and as of such Closing Date and such Issuer has
complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or
satisfied at or prior to such Closing Date.
<PAGE>
-21-
b. At such Closing Date and after giving
effect to the consummation of the transactions contemplated by
the Transaction Documents (including, without limitation, any
Acquisition), there exists no Default or Event of Default
(each as defined in the Indenture).
(vii) Each of the Transaction Documents and each other
agreement or instrument executed in connection with the transactions
contemplated thereby shall be reasonably satisfactory in form and
substance to the Purchaser and shall have been executed and delivered
by all the respective parties thereto and shall be in full force and
effect.
(viii) All proceedings taken in connection with the issuance of
the Securities and the transactions contemplated by this Agreement and
the Transaction Documents and all documents and papers relating thereto
shall be reasonably satisfactory to the Purchaser and counsel to the
Purchaser. The Purchaser and counsel to the Purchaser shall have
received copies of such papers and documents as they may reasonably
request in connection therewith, all in form and substance reasonably
satisfactory to them.
(ix) On or before the Initial Closing Date, the Purchaser
shall have received the Registration Rights Agreement executed by the
Issuers and such agreement shall be in full force and effect at all
times from and after the Initial Closing Date.
(x) The Purchaser shall have received a summary description
of the terms and business of each Acquisition to occur on such Closing
Date and, promptly following the consummation of each such Acquisition,
the Purchaser shall receive a copy of each executed agreement, document
and instrument delivered in connection with the Acquisition to occur on
such Closing Date, and there shall have been no material amendments,
alterations, modifications or waivers of any of the terms listed in the
summary description of terms received by the Purchaser prior to such
Closing Date (collectively, the "Acquisition Agreements"). Each of the
Acquisition Agreements and each other agreement or instrument executed
in connection with such Acquisition shall have been executed and
delivered by all the respective parties thereto and shall be in full
force and effect. The Purchaser shall have completed its due diligence
<PAGE>
-22-
review of the business or assets to be acquired on such Closing Date,
as the case may be, and such due diligence review shall have been
completed to the satisfaction of the Purchaser in its sole discretion.
Such Acquisition shall occur substantially contemporaneously with the
consummation of the issuance and sale of the Securities on such Closing
Date.
(xi) Prior to each Subsequent Closing Date, the Purchaser
shall have received from the Issuers a Notice of Purchase in accordance
with the provisions of Section 3(b).
(xii) The Issuers shall apply the proceeds from each issuance
and sale of the Securities to consummate the Acquisitions to be
consummated on such Closing Date as provided in this Agreement.
(xiii) Since the date of this Agreement, there shall not have
been any announcement by any "nationally recognized statistical rating
organization," as defined for purposes of Rule 436(g) under the
Securities Act, that (A) it is downgrading its rating assigned to any
debt securities of any Issuer, or (B) it is reviewing its rating
assigned to any debt securities of any Issuer with a view to possible
downgrading, or with negative implications, or direction not
determined.
(xiv) On or before the Initial Closing Date, the Purchaser
shall have received the Engagement Letter dated as of the date hereof
(the "Engagement Letter") by and among the Notes Issuers and the
Purchaser and executed by the Notes Issuers and such agreement shall be
in full force and effect at all times from and after the Initial
Closing Date.
(xv) At such Closing Date and after giving effect to the
consummation of the Acquisitions to be completed on such Closing Date
and transactions contemplated by the Transaction Documents, there shall
exist no Default or Event of Default (each as defined in the
Indenture).
(xvi) The Purchaser shall have been furnished with evidence
satisfactory to it that the New ABRY Equity Contribution shall have
been consummated.
(xvii) The Issuers shall have furnished or caused to be
furnished to the Purchaser such further certificates and documents as
the Purchaser shall have reasonably requested.
<PAGE>
-23-
All such opinions, certificates, letters, schedules, documents
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Purchaser and counsel to the Purchaser. The Issuers shall
furnish to the Purchaser such conformed copies of such opinions, certificates,
letters, schedules, documents and instruments in such quantities as the
Purchaser shall reasonably request.
The acceptance of the proceeds of each issuance of Securities
shall constitute a representation and warranty by each of the Issuers to the
Purchaser that all the conditions specified in this Section 6 were satisfied as
of such Closing Date (unless otherwise waived by the Purchaser).
7. Indemnification and Contribution. (a) Each Issuer jointly
and severally agrees to indemnify and hold harmless the Purchaser, each
director, officer, employee or agent of the Purchaser and each person, if any,
who controls the Purchaser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Purchaser or such director, officer,
employee, agent or controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based:
(i) in whole or in part upon any inaccuracy of any of the
representations and warranties of the Issuers contained herein; or
(ii) upon the failure of the Issuers to perform their
respective agreements or obligations hereunder or under any other
Transaction Document,
and will reimburse, promptly after demand, the Purchaser and each such director,
officer, employee, agent or controlling person for any legal or other expenses
reasonably incurred by the Purchaser or such director, officer, employee, agent
or controlling person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability, expense or action. This indemnity agreement will be in
addition to any liability that the Issuers may otherwise have to the indemnified
parties. The Issuers further agree that the indemnification, contribution and
reimbursement commitments set forth in this
<PAGE>
-24-
Section 7 shall apply whether or not the Purchaser is a formal party to any such
lawsuits, claims or other proceedings.
(b) The Purchaser will indemnify and hold harmless the
Issuers, their respective directors, officers, employees and agents and each
person, if any, who controls any of the Issuers within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which any of the Issuers or any such director,
officer, employee, agent or controlling person may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any inaccuracy of any of the Purchaser's
representations and warranties contained herein and will reimburse, promptly
after request, any legal or other expenses reasonably incurred by any of the
Issuers or any such director, officer, employee, agent or controlling person in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any liability
that the Purchaser may otherwise have to the indemnified parties.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party except to the extent
that such omission results in the forfeiture by the indemnifying party of
substantial rights and defenses. In case any such action is brought against any
indemnified party, and such indemnified party notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the named
parties in any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties that are different from or additional to
those available to any such indemnifying party, and a conflict of interest may
exist between an indemnified party and the indemnifying party and the
representation of both would be inappropriate, then the indem-
<PAGE>
-25-
nifying parties shall not have the right to direct the defense of such action on
behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses, other than reasonable
out-of-pocket costs of investigation, incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the immediately
preceding sentence (it being understood, however, that in connection with such
action the indemnifying party shall not be liable for the expenses of more than
one separate counsel (in addition to local counsel) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, representing the indemnified
parties under such paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions); (ii) the indemnifying party has authorized
in writing the employment of counsel for the indemnified party at the expense of
the indemnifying parties; or (iii) the indemnifying party shall have failed to
assume the defense or retain counsel reasonably satisfactory to the indemnified
party. After such notice from the indemnifying parties to such indemnified party
(so long as the indemnified party shall have informed the indemnifying parties
of such action in accordance with this Section 7 on a timely basis prior to the
indemnified party seeking indemnification hereunder), the indemnifying parties
will not be liable under this Section 7 for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party, unless such indemnified party waived its rights under
this Section 7, in which case the indemnified party may effect such a settlement
without such consent. No indemnifying party will, without the prior written
consent of the indemnified party (which shall not be unreasonably withheld or
delayed), settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification by an indemnified party may be sought hereunder (whether or not
the indemnified party or any person who controls any indemnified party within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indem-
<PAGE>
-26-
nified party and each such director, officer, employee, agent or controlling
person from all liability arising out of such claim, action, suit or proceeding
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act as to any such person.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 7 is unavailable or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
expenses or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect (i) the relative benefits
received by the Issuers on the one hand and the Purchaser on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities (or actions in respect thereof). The
relative benefits received by the Issuers on the one hand and the Purchaser on
the other shall be deemed to be in the same proportion as the total proceeds
from the offering of the Securities (before deducting expenses) received by the
Issuers bear to the total fees received by the Purchaser. The relative fault of
the parties shall be determined by reference to, among other things, whether the
inaccuracy or failure relates to the Issuers on the one hand or the Purchaser on
the other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such inaccuracy or failure, and any other
equitable considerations appropriate in the circumstances. The amount paid or
payable by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with investigating or defending any such
claim. The Issuers and the Purchaser agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per capita allocation
(even if the Issuers on the one hand and the Purchaser on the other hand were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to in the
first sentence of this paragraph (d). Notwithstanding any other provision of
<PAGE>
-27-
this paragraph (d), the Purchaser shall not be obligated to make contributions
hereunder that in the aggregate exceed the total fees received by the Purchaser
under this Agreement, less the aggregate amount of any damages that the
Purchaser has otherwise been required to pay hereunder, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (d),
each director, officer, employee or agent of and each person, if any, who
controls the Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Purchaser, and each director, officer, employee and agent of any of the Issuers
and each person, if any, who controls any of the Issuers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Issuers.
(e) Notwithstanding anything to the contrary in this Section
7, the indemnification and contribution provisions of the Registration Rights
Agreement and the Engagement Letter shall govern any claim with respect thereto.
8. Offering of Securities; Restrictions on Transfer. The
Purchaser represents and warrants (i) that it is a QIB, (ii) that the Notes
Issuers have (x) made available to the Purchaser or its representatives all
agreements, documents, records and books that the Purchaser has requested
relating to an investment in the Securities, (y) the Purchaser has had an
opportunity to ask questions of, and receive answers from, Persons acting on
behalf of the Issuers concerning the terms and conditions of this investment and
(z) the Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the risks and merits of its investments
in the Securities, (iii) that it has the requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
Registration Rights Agreement and (iv) that this Agreement and the Registration
Rights Agreement have been duly and validly authorized by the Purchaser and when
executed and delivered by the Purchaser (assuming due authorization execution
and delivery by the Issuers), will each constitute a valid and legally binding
agreement of the Purchaser, enforceable against the Purchaser in accordance with
its terms except (a) that the enforcement thereof may be limited by the
Enforceability Exceptions and (b) as any rights to indemnity or contribution
hereunder may be limited by federal and state securities laws and public policy
considera-
<PAGE>
-28-
tions. The Purchaser agrees with the Issuers that (i) it has not and will not
solicit offers for, or offer or sell, the Securities by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; and (ii) the Securities may
be transferred by the Purchaser only if a subsequent disposition thereof is
registered or qualified under the Securities Act and applicable state securities
laws or is exempt from such registration or qualification.
9. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Issuers, their respective officers and the Purchasers set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Issuers, any of their respective
officers or directors, the Purchaser or any controlling person referred to in
Section 7 hereof and (ii) delivery of and payment for the Securities, and shall
be binding upon and shall inure to the benefit of, any successors, assigns,
heirs, personal representatives of the Issuers, the Purchaser and indemnified
parties referred to in Section 7 hereof. The respective agreements, covenants,
indemnities and other statements set forth in Sections 4, 5 and 7 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
10. Termination. (a) This Agreement may be terminated (i) in
the sole discretion of the Purchaser by notice to the Issuers given in the event
that the Issuers shall have failed, refused or been unable to satisfy all
conditions on their part to be performed or satisfied hereunder on or prior to
such Closing Date, (ii) in the sole discretion of the Company by notice to the
Purchaser or, (iii) in the sole discretion of the Purchaser by notice to the
Issuers if at or prior to any Closing Date:
(A) any of the Issuers shall have sustained any loss
or interference with respect to their respective businesses or
properties from fire, flood, hurricane, earthquake, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding, which loss or
interference has had or has a Material Adverse Effect or there shall
have been any material adverse change, or any development involving a
prospective material adverse change (including
<PAGE>
-29-
without limitation a change in management or control of the Notes
Issuers), in the general affairs, management, business, condition
(financial or other), properties, prospects or results of operations of
the Issuers;
(B) trading in securities generally on the New York,
American Stock Exchange or the Nasdaq National Market shall have been
suspended or minimum or maximum prices shall have been established on
any such exchange;
(C) a banking moratorium shall have been declared by
New York or United States authorities;
(D) there shall have been (X) an outbreak or
escalation of hostilities between the United States and any foreign
power, (Y) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or (Z) any material change in the
financial markets of the United States that, in the sole judgment of
the Purchaser, makes it impracticable or inadvisable to proceed with
the offering or the delivery of the Securities as contemplated by this
Agreement; or
(E) any securities of the Issuers shall have been
downgraded or placed on any "watch list" for possible downgrading by
any nationally recognized statistical rating organization.
(b) This Agreement shall terminate automatically upon the
first to occur of (i) the issuance of $50,000,000 in aggregate principal amount
of Securities pursuant to this Agreement and (ii) 5:00 p.m. New York time on
July 31, 2000.
(c) Termination of this Agreement pursuant to this Section 10
shall be without liability of any party to any other party except as provided in
Section 9 hereof.
11. Notices. All communications hereunder shall be in writing
and, if sent to the Purchaser, shall be hand delivered, mailed by first-class
mail, couriered by next-day air courier or telecopied and confirmed in writing
to the Purchaser c/o CIBC Inc., 425 Lexington Avenue, 3rd Floor, New York, New
York 10017, Attention: David Frechette, and with a copy to Cahill Gordon &
Reindel, 80 Pine Street, New York, New York 10005, Attention: John A. Tripodoro,
Esq. If sent to the Issuers, shall be delivered, mailed, couriered or telecopied
and confirmed in writing, to Muzak LLC, 2901 Third Avenue, Suite 400, Seattle,
Washington 98121, Attention: Brad D. Bodenman
<PAGE>
-30-
and with a copy to Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois
60601, Attention: Laurie Gunther, Esq., and a copy to ABRY Partners, Inc., 18
Newbury Street, Boston, Massachusetts 02116, Attention: Peni Garber.
12. Successors. This Agreement shall inure to the benefit of
and be binding upon the Purchaser and each of the Issuers and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuers contained in Section 7 of this Agreement shall
also be for the benefit of any person or persons who control the Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Purchaser contained in Section 7 of this
Agreement shall also be for the benefit of the directors of the Issuers, their
respective officers, employees and agents and any person or persons who controls
any Issuer within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act. No purchaser of Securities from the Purchaser will be deemed a
successor because of such purchase.
13. No Waiver; Modifications in Writing. No failure or delay
on the part of any Issuer or the Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any Issuer or the Purchaser at law or in
equity or otherwise. No waiver of or consent to any departure by any Issuer or
Purchaser from any provision of this Agreement shall be effective unless signed
in writing by the party entitled to the benefit thereof, provided that notice of
any such waiver shall be given to each party hereto as set forth below. Except
as otherwise provided herein, no amendment, modification or termination of any
provision of this Agreement shall be effective unless signed in writing by or on
behalf of each of the Issuers and the Purchaser. Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by the Issuers or
the Purchaser from the terms of any provision of this
<PAGE>
-31-
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Issuers in any case shall entitle
the Issuers to any other or further notice or demand in similar or other
circumstances.
14. Joint and Several Obligations. All of the obligations of
the Issuers hereunder shall be joint and several obligations of each of them.
15. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof.
16. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
17. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
-32-
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among the
Issuers and the Purchaser.
Very truly yours,
MUZAK LLC,
a Delaware limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK FINANCE CORP., a Delaware corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK CAPITAL CORPORATION, a Delaware
corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MLP ENVIRONMENTAL MUSIC, LLC, a
Washington limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
BUSINESS SOUND, INC., an Ohio corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK HOLDINGS LLC, a Delaware limited
liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
AUDIO ENVIRONMENTS, INC., a California
corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
BI ACQUISITION, L.L.C., a Delaware
limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
BACKGROUND MUSIC BROADCASTERS, INC., a
California corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
CIBC INC.
By: /s/ Michael Capatides
-------------------------
Name:
Title:
<PAGE>
Exhibit A-1
-----------
Subsidiary Guarantors
- ---------------------
Muzak Capital Corporation
MLP Environmental Music, LLC
Business Sound, Inc.
Audio Environments, Inc.
BI Acquisition, L.L.C.
Background Music Broadcasters, Inc.
<PAGE>
Exhibit A-2
-----------
Initial Closing Date Subsidiaries
- ---------------------------------
Muzak Capital Corporation
MLP Environmental Music, LLC
Business Sound, Inc.
Electro Systems Corporation
Audio Environments, Inc.
BI Acquisition, L.L.C.
Background Music Broadcasters, Inc.
Muzak Heart and Soul Foundation
<PAGE>
Exhibit B
---------
FORM OF NOTICE OF PURCHASE
[ ]
CIBC Inc.
425 Lexington Avenue
3rd Floor
New York, New York 10017
Ladies and Gentlemen:
The undersigned, Muzak LLC and Muzak Finance Corp. (the "Notes
Issuers"), refer to the Purchase Agreement dated as of February 2, 2000, as
amended, supplemented or restated from time to time (the "Purchase Agreement",
the terms defined therein being used herein as therein defined) among the Notes
Issuers, the Guarantors named therein, and yourselves, and hereby gives you
notice pursuant to Section 3(b) of the Purchase Agreement that the Notes Issuers
wish to issue to you Securities under the Indenture and, in that connection, set
forth below the information relating to such issuance (the "Proposed Purchase")
as required by Section 3(b) of the Purchase Agreement:
(i) The aggregate amount of the Proposed Purchase is $ .
(ii) The date and time of the Proposed Purchase, being a Business Day, is
___________ (New York City time) on ____________.
(iii) The proceeds from the Proposed Purchase will be used to consummate the
acquisition of ______________ (the "Acquisition") substantially
contemporaneously with the issuance of the securities referred to in
this Notice of Purchase (except for $___________, which represents a
rounding up to $__________ the nearest increment of $1,000,000).
<PAGE>
-2-
(iv) The type and amount of consideration to be delivered in connection with
such Acquisition consist of ___________.
(v) We hereby represent to you that the proceeds of the issuance of the
Securities referred to in this Notice of Purchase will be used solely
in connection with such Acquisition.
Yours truly,
MUZAK LLC
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
MUZAK FINANCE CORP.
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
<PAGE>
Exhibit C
---------
Form of Opinion of Kirkland & Ellis
-----------------------------------
<PAGE>
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
(212) 446-4800
Facsimile
(212) 446-4900
February 2, 2000
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as special legal counsel to Muzak LLC, formerly known as
Audio Communications Network, LLC, a Delaware limited liability company
(the "Company") and Muzak Finance Corp., a Delaware corporation ("Finance Corp."
and, together with the Company, the "Notes Issuers"). This letter is being
provided in response to the requirement in Section 6(i) of the Purchase
Agreement dated February 2, 2000 (the "Purchase Agreement"), by and among the
Notes Issuers, the subsidiaries named therein and CIBC Inc. (the "Purchaser")
relating to the purchase from time to time by the Purchaser of up to $50,000,000
in principal amount of notes (the "Notes") issued by the Notes Issuers. All
capitalized terms used herein and not defined herein shall have the meanings
given to such terms in the Purchase Agreement. Together, the Purchase Agreement,
the Indenture, the Registration Rights Agreement, the Notes, the Muzak Capital
Guarantee, the BI Guarantee and the Holdings Guarantee (each as defined below)
are referred to herein as the "Transaction Documents."
In connection with the preparation of this letter, we have among other
things read:
(a) an executed original of the Purchase Agreement;
(b) executed originals of the Indenture and the Notes to be delivered on
the date hereof, the Guarantee of the Notes (the "Muzak Capital
Guarantee") by Muzak Capital Corporation, a Delaware corporation
("Muzak Capital"), the Guarantee of the Notes (the "BI Guarantee") by
BI Acquisition, L.L.C., a Delaware limited liability company ("BI
Acquisition") and the Guarantee of the Notes (the "Holdings
Guarantee") by Muzak Holdings LLC ("Holdings" and, together with
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 2
Muzak Capital, BI Acquisition and the Notes Issuers, the "Issuers"),
the sole member of the Company;
(c) an executed original of the Registration Rights Agreement;
(d) copies of all certificates and other documents delivered on the date
hereof in connection with the sale of the Notes on the date hereof and
the consummation of the other transactions contemplated by the
Purchase Agreement; and
(e) such other records, certificates and documents as we have deemed
necessary or appropriate in order to deliver the opinions set forth
herein
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in Schedule B to this letter and upon:
(i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Purchase
Agreement and the other Transaction Documents; (iii) factual information
provided to us in the Support Certificate signed by the Notes Issuers and
attached hereto, and (iv) factual information we have obtained from such other
sources as we have deemed reasonable. We have assumed without investigation that
there has been no relevant change or development between the dates as of which
the information cited in the preceding sentence was given and the date of this
letter and that the information upon which we have relied is accurate and does
not omit disclosures necessary to prevent such information from being
misleading. For purposes of each opinion in paragraph 1, we have relied
exclusively upon certificates issued by a governmental authority in each
relevant jurisdiction, and such opinion is not intended to provide any
conclusion or assurance beyond that conveyed by that certificate.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based or to obtain information about which
this letter advises you, we confirm that we do not have any actual knowledge
which has caused us to conclude that our reliance and assumptions cited in the
preceding paragraph are unwarranted or that any information supplied in this
letter is wrong. The term "actual knowledge" whenever it is used in this letter
with respect to our firm means conscious awareness at the time this letter is
delivered on the date it bears by the following Kirkland & Ellis lawyers, who
constitute all of the Kirkland & Ellis lawyers who have devoted a significant
amount of time to the negotiation or preparation of the Transaction Documents,
and the due diligence associated therewith (herein called "our Designated
Transaction Lawyers"): Laurie T. Gunther and Lisa M. Anastos.
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached
to this letter, we advise you that:
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 3
1. Each of the Company, BI Acquisition and Holdings is a limited liability
company existing and in good standing under the Delaware Limited Liability
Company Act, and each of Finance Corp. and Muzak Capital is a corporation
existing and in good standing under the General Corporation Law of the
State of Delaware.
2. All of the membership interests in the Company are owned by Holdings, and
Finance Corp. has authorized 1,000 shares of common stock, and has issued
100 shares of capital stock to the Company.
3. Each of the Company, BI Acquisition and Holdings has the limited liability
company power to enter into and perform its obligations under the
Transaction Documents to which it is a party, including without limitation
in the case of the Company the power to issue, sell and deliver the Notes
as contemplated by the Purchase Agreement. The Sole Manager of the
Company has adopted the resolutions necessary to authorize the execution,
delivery and performance by the Company of the Transaction Documents. The
Sole Manager of BI Acquisition has adopted the resolutions necessary to
authorize BI Acquisition's execution, delivery and performance of the
Transaction Documents to which it is a party. The Board of Directors of
Holdings has adopted by requisite vote the resolutions necessary to
authorize Holdings' execution, delivery and performance of the Transaction
Documents to which it is a party.
4. Each of Finance Corp. and Muzak Capital has the corporate power to enter
into and perform its obligations under the Transaction Documents to which
it is a party, including without limitation in the case of Finance Corp.
the power to issue, sell and deliver the Notes as contemplated by the
Purchase Agreement. The Board of Directors of Finance Corp., or a duly
authorized committee thereof, has adopted by requisite vote the resolutions
necessary to authorize Finance Corp.'s execution, delivery and performance
of the Transaction Documents to which it is a party. The Board of
Directors of Muzak Capital has adopted by requisite vote the resolutions
necessary to authorize Muzak Capital's execution, delivery and performance
of the Transaction Documents to which it is a party.
5. Each of Finance Corp., Muzak Capital, BI Acquisition, Holdings, and the
Company has duly executed and delivered the Transaction Documents to be
delivered on the date hereof to which it is a party.
6. Each of the Transaction Documents to be delivered on the date hereof is a
valid and binding obligation of each of the Issuers (to the extent each is
a party thereto) and (assuming the due authorization, execution and
delivery thereof by the other parties
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 4
thereto) is enforceable against each of them (to the extent each is a
party thereto) in accordance with its terms.
7. When the Notes are issued and paid for by the Purchaser in accordance with
the terms of the Purchase Agreement (assuming the due authorization,
execution and delivery of the Indenture by the Trustee and due
authentication and delivery of such Notes by the Trustee in accordance with
the Indenture), such Notes and the Guarantees will constitute the valid
and binding obligations of the Issuers (to the extent each is a party
thereto), enforceable against each of them (to the extent each is a party
thereto) in accordance with their terms and entitled to the benefits of
the Indenture. The Notes to be delivered on the date hereof are in the
form contemplated by the Indenture.
8. When the Exchange Notes and the Private Exchange Notes have been duly
executed and delivered by the Notes Issuers in accordance with the terms
of the Registration Rights Agreement, the Exchange Offer (as defined in the
Registration Rights Agreement) and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee, the
due authentication and delivery of the Exchange Notes and the Private
Exchange Notes by the Trustee in accordance with the Indenture, and the due
authorization, execution and delivery of the Registration Rights Agreement
by the Purchaser), the Exchange Notes and the Private Exchange Notes and
the Guarantees thereof will constitute the valid and binding obligations of
each of the Issuers (to the extent each is a party thereto), enforceable
against each of them (to the extent each is a party thereto) in accordance
with their respective terms and entitled to the benefits of the Indenture.
9. When notes issued as pay-in-kind interest on outstanding Notes (the
"Additional Notes") have been duly executed and delivered by the Notes
Issuers in accordance with the terms of the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee and
due authentication and delivery of such Additional Notes by the Trustee in
accordance with the Indenture), such Additional Notes and the guarantees
thereon will constitute the valid and binding obligations of the Issuers
(to the extent each is a party thereto), enforceable against each of them
(to the extent each is a party thereto) in accordance with their terms and
entitled to the benefits of the Indenture.
10. The execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby (including,
without limitation, the issuance and sale of the Notes to the Purchaser)
do not and will not conflict with or constitute or result in a breach
or default under (or an event which with notice or the passage of time or
both would constitute a default under) or violation of any of, (i) the
Limited Liability Company Agreement of the Company, BI Acquisition or
Holdings, (ii) the certificate of
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 5
incorporation or bylaws of Finance Corp. or Muzak Capital, (iii) any
statute or governmental rule or regulation which, in our experience, is
normally applicable both to general business corporations that are not
engaged in regulated business activities and to transactions of the type
contemplated by the Purchase Agreement (but without our having made any
special investigation as to other laws and provided that we express no
opinion in this paragraph with respect to (a) any laws, rules or
regulations to which the Company or Muzak Capital may be subject as a
result of the Purchaser's legal or regulatory status or the involvement of
the Purchaser in such transactions, (b) any laws, rules or regulations
relating to disclosure, misrepresentations or fraud, (c) the Act, the
Exchange Act or the Trust Indenture Act of 1939 ("TIA") or (d) regulatory
issues (other than those relating to federal securities laws) that may be
applicable to the Notes Issuers by virtue of the nature of their business)
or (iv) with the exception of the payment of additional interest on the
Notes provided for in Section 4 of the Registration Rights Agreement, the
terms or provisions of any contract set forth on Schedule C attached
hereto, except for any such conflict, breach, violations, default or event
which would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect and except for any such conflict, breach,
violation or default which has been waived by the party or parties with
the power to waive such conflict, breach, violation or default.
11. To our actual knowledge, no consent, waiver, approval, authorization or
order of any court or governmental authority is required for the issuance
and sale by the Company or Finance Corp. of the Notes to the Purchaser, the
issuance of the Muzak Capital Guarantee by Muzak Capital, the issuance of
the BI Guarantee by BI Acquisition, the issuance of the Holdings Guarantee
by Holdings or the consummation by the Issuers of the other transactions
contemplated by the Transaction Documents, except such as may be required
under the Act, the Exchange Act, the TIA, the securities or Blue Sky laws
of the various states (and the rules and regulations thereunder), and
authority that may be applicable to the Notes Issuers by virtue of the
nature of their business, as to which we express no opinion in this
paragraph.
12. To our actual knowledge, no legal or governmental proceedings are pending
to which the Company of Finance Corp. is a party or to which the property
or assets of the Company or Finance Corp. is subject which seek to
restrain, enjoin or prevent the consummation of or otherwise challenge the
issuance or sale of the Notes to be sold to the Purchaser or the
consummation of the other transactions contemplated by the Transaction
Documents.
13. No registration under the Act of the Notes is required in connection with
the sale of the Notes to the Purchaser in the manner contemplated by the
Purchase Agreement and prior to the commencement of the Exchange Offer or
the effectiveness of the Shelf Registration Statement (as defined in the
Registration Rights Agreement), the Indenture is not required
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 6
to be qualified under the TIA, in each case assuming the accuracy and
completeness of the Purchaser's representations in Section 8 and those
of the Issuers contained in the Purchase Agreement regarding the absence
of a general solicitation in connection with the sale of such Notes to
the Purchaser.
14. As of the date hereof, the Notes are not of the same class (within the
meaning of Rule 144A under the Act) as securities of the Company or Finance
Corp. that are listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system.
15. Neither the Company nor Finance Corp. is, or immediately after the sale of
the Notes to the Purchaser will be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
16. Neither the sale, issuance, execution or delivery of the Notes will
contravene Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part
221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of New York or the federal law of the United
States except that certain of the opinions in paragraphs 1 through 5, the first
clause of paragraph 7, and paragraph 10 are based on the Delaware Limited
Liability Company Act (in the case of the Company, BI Acquisition and Holdings)
and the Delaware General Corporation Law (in the case of Finance Corp. and Muzak
Capital). Issues addressed by this letter may be governed in whole or in part by
other laws, but we express no opinion as to whether any relevant difference
exists between the laws upon which our opinions are based and any other laws
which may actually govern. Our opinions are subject to all qualifications in
Schedule A and do not cover or otherwise address any provision in the Purchase
Agreement or any of the other Transaction Documents of any type identified in
Schedule E. Furthermore, our opinion expressed in paragraph 10 does not cover
or otherwise address any law or legal issue which is identified in the attached
Schedule D. Provisions in the Transaction Documents which are not excluded by
Schedule E or any other part of this letter or its attachments are called the
"Relevant Agreement Terms."
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 7
the case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future. It is possible that some Relevant
Agreement Terms may not prove enforceable for reasons other than those cited in
this letter should an actual enforcement action be brought, but (subject to all
the exceptions, qualifications, exclusions and other limitations contained in
this letter) such unenforceabilty would not in our opinion prevent you from
realizing the principal benefits purported to be provided by the Relevant
Agreement Terms.
For purposes of rendering our opinions set forth in paragraph 9 above, we
have assumed that at the time of the issuance and delivery of the Additional
Notes (x) the authorization of the Additional Notes by the Issuers (to the
extent each is a party thereto) will not have been modified or rescinded, and
there will not have occurred any change in law affecting the validity, legally
binding character or enforceability of the Additional Notes and (y) the issuance
and delivery of the Additional Notes, the terms of the Additional Notes, the
terms of any agreement, any supplemental indenture to the Indenture, and
compliance by the Issuers to the extent each is a party thereto) with the terms
of the Additional Notes and the terms of any such agreement or indenture will
not violate any applicable law, any agreement or instrument then binding upon
the Issuers (to the extent each is a party thereto) or any restriction imposed
by any court or governmental body having jurisdiction over the Issuers (to the
extent each is a party thereto).
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which our Designated Transaction Lawyers did
not have actual knowledge at that time, by reason of any change subsequent to
that time in any law covered by any of our opinions, or for any other reason.
The attached schedules are an integral part of this letter, and any term
defined in this letter or any schedule has that defined meaning wherever it is
used in this letter or in any schedule to this letter.
<PAGE>
KIRKLAND & ELLIS
CIBC Inc.
February 2, 2000
Page 8
You may rely upon this letter only for the purpose served by the provision
in the Purchase Agreement cited in the initial paragraph of this letter in
response to which it has been delivered. Without our written consent: (i) no
person other than you may rely on this letter for any purpose; (ii) this letter
may not be cited or quoted in any financial statement, prospectus, private
placement memorandum or other similar document; (iii) this letter may not be
cited or quoted in any other document or communication which might encourage
reliance upon this letter by any person or for any purpose excluded by the
restrictions in this paragraph; and (iv) copies of this letter may not be
furnished to anyone for purposes of encouraging such reliance; except that the
trustee under the Indenture may rely upon this letter to the same extent as if
it were an addressee hereof.
Sincerely,
Kirkland & Ellis
<PAGE>
Schedule A
General Qualifications
All of our opinions ("our opinions") in the letter to which this Schedule
is attached ("our letter") are subject to each of the qualifications set forth
in this Schedule.
1. Bankruptcy and Insolvency Exception. Each of our opinions is subject to the
effect of:
a. all Federal and state bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws that affect the rights of
creditors generally or that have reference to or affect only creditors
of specific types of debtors (which comprehends, among others, matters
of turn-over, automatic stay, avoiding powers, preference, discharge,
conversion of a non-recourse obligation into a recourse claim,
limitations on IPSO FACTO and anti-assignment clauses and the coverage
of pre-petition security agreements applicable to property acquired
after a petition is filed);
b. fraudulent transfer and conveyance laws; and
c. judicially developed doctrines in this area, such as substantive
consolidation of entities and equitable subordination.
2. Equitable Principles Limitation. Each of our opinions is subject to the
effect of general principles of equity, whether applied by a court of law
or equity. This limitation includes principles:
a. governing the availability of specific performance, injunctive relief
or other equitable remedies, which generally place the award of such
remedies, subject to certain guidelines, in the discretion of the
court to which application for such relief is made;
b. affording equitable defenses (e.g., waiver, laches and estoppel)
against a party seeking enforcement;
c. requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
d. requiring reasonableness in the performance and enforcement of an
agreement by the party seeking enforcement of the contract;
e. requiring consideration of the materiality of (i) a breach and (ii)
the consequences of the breach to the party seeking enforcement;
A-1
<PAGE>
f. requiring consideration of the impracticability or impossibility of
performance at the time of attempted enforcement; and
g. affording defenses based upon the unconscionability of the enforcing
party's conduct after the parties have entered into the contract.
3. Other Common Qualifications. Each of our opinions is subject to the effect
of rules of law that:
a. limit the availability of a remedy under certain circumstances where
another remedy has been elected;
b. provide a time limitation after which a remedy may not be enforced;
c. limit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party for,
liability for its own action or inaction, to the extent the action or
inaction involves negligence, violation of public policy or litigation
against another party determined adversely to such party;
d. may, where less than all of a contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in
which the unenforceable portion is not an essential part of the agreed
exchange;
e. govern and afford judicial discretion regarding the determination of
damages and entitlement to attorneys' fees and other costs;
f. may permit a party that has materially failed to render or offer
performance required by the contract to cure that failure unless (i)
permitting a cure would unreasonably hinder the aggrieved party from
making substitute arrangements for performance, or (ii) it was
important in the circumstances to the aggrieved party that performance
occur by the date stated in the contract; and
g. may render waivers of suretyship defenses ineffective under certain
circumstances.
4. Referenced Provision Qualification. In addition, our opinions, insofar as
they relate to the validity, binding effect or enforceability of a
provision in any of the Transaction Documents requiring any Issuer to
perform its obligations under, or to cause any other person to perform its
obligations under, any provision (a "Referenced Provision") of such
Transaction Document or of any of the other Transaction Documents or
stating that any
A-2
<PAGE>
action will be taken as provided in or in accordance with any provision
(also a "Referenced Provision") of any other Transaction Document, are
subject to the same qualifications as the corresponding opinion in this
letter relating to the validity, binding effect and enforceability of such
Referenced Provision. Requirements in the Transaction Documents that
provisions therein may only be waived or amended in writing may not be
enforceable to the extent that an oral agreement or an implied agreement
by trade practice or course of conduct has been created modifying any
such provision.
5. Cross-Default Provisions. With respect to our opinion in paragraph 10
above, we express no opinion with respect to violations under cross-default
provisions referring to or based upon agreements that are not included on
Schedule C or with respect to compliance with financial covenants or tests
contained in any agreement listed on Schedule C. For purposes of the
preceding sentence, agreements which are attached as exhibits, schedules
or attachments to or are otherwise referred to in agreements listed on
Schedule C, but are not directly listed on Schedule C, shall not be deemed
to be included on Schedule C.
A-3
<PAGE>
Schedule B
Assumptions
For purposes of our letter, we have relied, without investigation, upon
each of the following assumptions:
1. The Purchaser has purchased and will purchase the Notes pursuant to the
Purchase Agreement and has paid and will pay the consideration therefor to
the Note Issuers.
2. With respect to the enforceability of any Transaction Document by any party
other than the Issuers, such other party or parties, as the case may be,
has satisfied those legal requirements that are applicable to each to the
extent necessary to entitle each such person to enforce the Transaction
Documents to which it is a party against the Issuers.
3. Each document submitted to us for review is accurate and complete, each
such document that is an original is authentic, each such document that is
a copy conforms to an authentic original, and all signatures (other than
those of or on behalf of the Issuers) on each such document are genuine.
4. There has not been any mutual mistake of fact or misunderstanding, fraud,
duress or undue influence.
5. There are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course or prior dealing among the
parties that would, in either case, define, supplement or qualify the terms
of the Purchase Agreement or any of the other Transaction Documents.
6. All agreements (if any) (other than the Transaction Documents) with respect
to which we have provided advice in our letter or reviewed in connection
with our letter would be enforced as written.
7. All information required to be disclosed in connection with any consent or
approval by the Board of Directors or Sole Manager of any Issuer and all
other information required to be disclosed in connection with any issue
relevant to our opinions has in fact been fully and fairly disclosed to all
persons to whom it is required to be disclosed.
B-1
<PAGE>
8. Each person who has taken any action relevant to any of our opinions in the
capacity of director or officer was duly elected to that director or
officer position and held that position when such action was taken.
B-2
<PAGE>
Schedule C
Specified Contracts
1. Amended and Restated Limited Liability Company Agreement of Muzak LLC,
dated as of March 18, 1999 (as amended from time to time).
2. Management and Consulting Services Agreement, dated as of October 6, 1998,
between ABRY Partners, Inc. and ACN Operating, LLC (now known as Muzak LLC)
and First Amendment to the Management Consulting Services Agreement, dated
as of January 11, 1999, between ABRY Partners, Inc. and Audio
Communications Network, LLC.
3. Indenture, dated March 18, 1999, among Muzak LLC, Muzak Holdings LLC, Muzak
Finance Corp., the other subsidiaries of Muzak LLC named therein and State
Street Bank and Trust, as Trustee, relating to the Notes Issuers 9% Senior
Subordinated Notes due 2009 (as supplemented from time to time).
4. Credit Agreement, dated as of March 18, 1999 (as amended from time to time)
among the Company, Holdings, certain subsidiaries of the Company, various
lenders, Goldman Sachs Credit Partners L.P., as Syndication Agent and
Co-Lead Arranger and Canadian Imperial Bank of Commerce, as Administrative
Agent and Co-Lead Arranger.
5. Registration Rights Agreement, dated March 18, 1999, among Muzak LLC, Muzak
Finance Corp., Holdings, certain subsidiaries of Muzak LLC named therein,
CIBC Oppenheimer Corp., and Goldman, Sachs & Co.
6. Amended and Restated Limited Liability Company Agreement of Muzak Holdings
LLC, dated as of March 18, 1999 (as amended from time to time).
7. Indenture, dated as of October 2, 1996 among the Issuers and U.S. Bank
Trust National Association, as Trustee, as supplemented pursuant to the
Supplemental Indenture, dated as of December 30, 1998, among the Issuers,
MLP Environmental Music, LLC and U.S. Bank Trust National Association, as
further supplemented pursuant to the Second Supplemental Indenture, dated
as of March 17, 1999, among the Issuers, MLP Environmental Music, LLC,
Audio Communications Network, LLC and U.S. Bank Trust National Association.
8. Indenture, dated as of February 2, 2000, among the Muzak LLC, Muzak
Holdings LLC, Muzak Finance Corp., the other subsidiaries of Muzak LLC
named therein and State Street Bank and Trust, as Trustee, relating to the
Notes.
C-1
<PAGE>
9. Registration Rights Agreement, dated as of February 2, 2000, among Muzak
LLC, Muzak Finance Corp., Muzak Holdings LLC, certain subsidiaries of
Muzak LLC named therein and CIBC Inc.
C-2
<PAGE>
Schedule D
Excluded Law and Legal Issues
In addition to the limitations and exclusions otherwise set forth in
paragraph 10, none of the opinions or advice set forth in paragraph 10 of our
letter covers or otherwise addresses any of the following laws, regulations or
other governmental requirements or legal issues:
1. State "Blue Sky" laws and regulations, and laws and regulations relating to
commodity (and other) futures and indices and other similar instruments,
2. pension and employee benefit laws and regulations (e.g., ERISA);
3. compliance with fiduciary duty requirements;
4. laws, rules, regulations, statues and judicial decisions that may be
applicable to the Company as a result of the nature of its business;
5. the statutes and ordinances, the administrative decisions and the rules
and regulations of counties, towns, municipalities and special political
subdivisions (whether created or enabled through legislative action at the
Federal, state or regional level) and judicial decisions to the extent that
they deal with any of the foregoing; and
6. other Federal and state statutes of general application to the extent they
provide for criminal prosecution (e.g., mail fraud and wire fraud statutes)
We have not undertaken any research for purposes of determining whether the
Company, Finance Corp. or any of the transactions which may occur in connection
with the Purchase Agreement or any of the other Transaction Documents is subject
to any law or other governmental requirement other than to those laws and
requirements which in our experience would generally be recognized as
applicable, and none of our opinions covers any such law or other requirement
unless (i) one of our Designated Transaction Lawyers had actual knowledge of its
applicability at the time our letter was delivered on the date it bears and (ii)
it is not excluded from coverage by other provisions in our letter or in any
Schedule to our letter.
D-1
<PAGE>
Schedule E
Excluded Provisions
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which
may be contained in the Transaction Documents:
1. Provisions mandating contribution towards judgements or settlements among
various parties.
2. Indemnification for negligence, willful misconduct or otherwise wrongdoing
or any indemnification for liabilities arising under securities laws.
3. Waivers of benefits and rights to the extent they cannot be waived under
applicable law.
4. Provisions providing for liquidated damages, late charges and prepayment
charges, in each case if deemed to constitute penalties.
5. Provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
6. Provisions that provide for the appointment of a receiver.
7. Provisions in any of the Transaction Documents requiring the Company or
Finance Corp. to perform its obligations under, or to cause any other
person to perform its obligations under, or stating that any action will be
taken as provided in or in accordance with, any agreement or other document
that is not a Transaction Document.
8. Provisions which might require indemnification or contribution with respect
to a violation of general principles of equity or public policy, including,
without limitation, indemnification or contribution obligations which arise
out of the failure to comply with applicable state or federal securities
laws.
9. Requirements in the Transaction Documents specifying that provisions
thereof may only be waived in writing (these provisions may not be valid,
binding or enforceable to the extent that an oral agreement or an implied
agreement by trade practice or course of conduct has been created modifying
any provision of such documents).
E-1
<PAGE>
MUZAK LLC
MUZAK FINANCE CORP.
MUZAK HOLDINGS LLC
MUZAK CAPITAL CORPORATION
BI ACQUISITION, L.L.C.
CERTIFICATE SUPPORTING KIRKLAND & ELLIS OPINION
Muzak LLC (the "Company"), Muzak Finance Corp. ("Finance Corp.", and
together with the Company, the "Notes Issuers"), Muzak Holdings LLC
("Holdings"), BI Acquisition, L.L.C. ("BI Acquisition") and Muzak Capital
Corporation ("Muzak Capital" and, together with BI Acquisition and Holdings,
the "Guarantors") hereby certify and agree as follows. The Notes Issuers and
the Guarantors are collectively referred to herein as the "Issuers."
1. Introduction. Kirkland & Ellis has acted as legal counsel to the Notes
Issuers in connection with the negotiation and preparation of that certain
Purchase Agreement (the "Purchase Agreement") dated as of February ____,
2000, by and among the Notes Issuers, Holdings, the subsidiaries of the
Company named therein, and CIBC Inc. Section 6(i) of the Purchase
Agreement provides that as a condition to closing Kirkland & Ellis must
deliver an opinion letter to CIBC Inc. (the "Opinion Recipients"). The term
"Kirkland Opinion" whenever it is used in this certificate means the
opinion letter which Kirkland & Ellis will actually deliver at the closing
in response to that closing condition. As used herein, the term
"Transaction Documents" has the meanings ascribed to it in the Kirkland
Opinion. All other capitalized terms used herein but not defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
2. Purpose. The Issuers have provided this certificate in order to provide
Kirkland & Ellis with factual information needed by Kirkland & Ellis in
order to issue the Kirkland Opinion. The Issuers have made inquiries and
investigations reasonably calculated to assure that the information
provided in this certificate is accurate and complete, including (i)
inquiries of appropriate personnel responsible for legal matters, financial
matters and compliance with governmental requirements and (ii)
identification and review of relevant documents. The Issuers intend and
agree that Kirkland & Ellis and the Opinion Recipients may rely upon this
certificate and all information provided in this certificate.
3. Certificate of Formation; Limited Liability Company Agreement. The copy of
the Certificates of Formation of the Company, BI Acquisition and of
Holdings in the versions certified by the responsible governmental office
in the Company's, BI Acquisition's and Holdings' state of formation and
delivered to the Opinion Recipients in connection with the closing is
accurate and complete and represents the terms of the Company's, BI
Acquisition's and Holdings' Certificates of Formation as constituted at
all times since the date of the latest amendment thereto indicated in each
certificate. The copy of each of the Limited Liability Company Agreement
of the Company (the "LLC Agreement"), the Limited Liability
2
<PAGE>
Company Agreement of BI Acquisitions (the "BI LLC Agreement") and the
Limited Liability Company Agreement of Holdings (the "Holdings LLC
Agreement") in the version delivered to the Opinion Recipients in
connection with the closing is accurate and complete and represents the
terms of each such agreement as constituted at all times since the date of
the latest amendment thereto indicated in that version.
4. Charters. The copy of Finance Corp.'s Certificate of Incorporation in the
version certified by the responsible governmental office in Finance Corp.'s
state of incorporation and delivered to the Opinion Recipients in
connection with the closing is accurate and complete and represents the
terms of Finance Corp.'s Certificate of Incorporation as constituted at all
times since the date of the latest amendment thereto indicated in that
certificate. The copy of the Certificate of Incorporation of Muzak Capital
and in the version certified by the responsible governmental office in
Muzak Capital's state of incorporation and delivered to the Opinion
Recipients in connection with the closing is accurate and complete and
represents the terms of Muzak Capital's Certificate of Incorporation as
constituted at all times since the date of the latest amendment thereto
indicated in that certificate.
5. By-laws. The copy of Finance Corp.'s By-laws in the version delivered to
the Opinion Recipients at the closing is accurate and complete and
represents the terms of Finance Corp.'s By-laws as constituted at all times
since the date of the latest amendment thereto indicated in such version.
The copy of Muzak Capital's By-laws in the version delivered to the Opinion
Recipients at the closing is accurate and complete and represents the terms
of Muzak Capital's By-laws as constituted at all times since the date of
the latest amendment thereto indicated in such version. The undersigned is
not aware of any existing violations of Finance Corp.'s or Muzak Capital's
By-laws.
6. Good Standing. Neither the Company, Finance Corp., Holdings, BI Acquisition
nor Muzak Capital has any reason to believe that it is not in existence or
good standing in its respective state of formation or incorporation or that
it is not in good standing as a foreign limited liability company or
corporation (as the case may be) or other entity in any state in which it
is so qualified as a foreign limited liability company or corporation (as
the case may be)
7. Foreign Qualifications. The Company, BI Acquisition and Finance Corp. are
qualified in or are taking steps to qualify as a foreign limited liability
company or corporation (as the case may be) or other entity in any state in
which such qualification is required.
8. Corporate Resolutions.
a. The copies of the resolution of the Board of Directors of the Company,
the Board of Directors of Finance Corp., the Board of Directors of Muzak
Capital, the Board of Directors of BI Acquisition and the Board of
Directors of Holdings delivered in connection with the consummation of the
transactions contemplated by the Transactions Documents authorizing the
execution, delivery and performance of the various agreements contemplated
thereby set forth duly adopted resolutions which remain in full
2
<PAGE>
force and effect without amendment or modification.
b. Neither the Board of Directors of the Company, the Board of Directors of
Finance Corp., the Board of Directors of Muzak Capital, Board of Directors
of BI Acquisitions nor the Board of Directors of Holdings have taken any
actions or adopted any other resolutions which (i) restrict the Issuers'
authority to enter into any the Transaction Documents or to engage in any
actions to be taken under or by reason of the Transaction Documents or (ii)
restrict such Board's authority to approve any such action or activity or
(iii) otherwise relate to the Issuers' execution or delivery of any of the
Transaction Documents or any activity to be taken under or by reason of the
Transaction Documents.
9. Intentions Regarding Creditors. None of the Issuers have any intent (actual
or otherwise) in connection with the transactions contemplated by the
Purchase Agreement or otherwise to hinder, delay or defraud any present or
future creditor. In addition, none of the Issuers (a) is insolvent or will
be rendered insolvent as a result of such transactions, (b) is engaged or
will be engaged or expects to engage in the reasonably foreseeable future
in any business or transaction with unreasonably small capital, or (c)
intends to incur, or expects or believes it will incur, debts that would
be beyond its ability to pay as they mature.
10. Use of Proceeds. None of the Issuers owns or intends to purchase or carry
any "margin stock" within the meanings of Regulations T, U and X of the
Board of Governors of the Federal Reserve System.
11. Capitalization. As of the Effective Time, all of the membership interests
in the Company are owned by Holdings and all of the issued and outstanding
common stock of Finance Corp., which is 100 shares of common stock, is held
by the Company.
12. No Violations. The execution and delivery of the Transaction Documents, and
the consummation of the transactions contemplated thereby (including,
without limitation, the issuance and sale of the Notes to the Initial
Purchaser) do not and will not conflict with or constitute or result in a
breach or default under (or an event which with notice or the passage of
time or both would constitute a default under) or violation of any of, (i)
the Limited Liability Company Agreement of the Company, BI Acquisition or
Holdings, (ii) the certificate of incorporation or bylaws of Finance Corp.
or Muzak Capital, (iii) the any statute or governmental rule or regulation
or (vi) with the exception of the payment of additional interest on the
Notes provided for in Section 4 of the Registration Rights Agreement, the
terms or provisions of any contract set forth on Schedule C to the
Kirkland Opinion, except for any such conflict, breach, violation, default
or event which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect and expect for any such
conflict, breach, violation or default which has been waived by the party
or parties with the power to waive such conflict, breach, violation or
default.
3
<PAGE>
13. No Regulation.
a. The Company does not engage in any banking, insurance, common carriers,
broadcasting (except for local broadcast transmission), utility or other
regulated activities to a degree which requires it to obtain approval from any
governmental authority as a condition to executing or delivering any of the
Transaction Documents or to performing any of its obligations under the
Transaction Documents. The Company is not aware of any filing required to be
made or any governmental permit or authorization required to be obtained in
connection with the execution or delivery of any of the Transaction Agreements
or the performance of any of the Company's obligations under those agreements
which has not been made or obtained on or prior to the date hereof.
b. Neither the Company nor any of its subsidiaries: (a) owns or operates
equipment or facilities of the type used, or engages in any other activity in
the nature of those conducted, by a public utility, including without limitation
any business or activity relating to garbage or sewage disposal or water
production or transmission; (b) accepts deposits or engages in any other
business activity reserved exclusively to banks, or engages in any trust or
insurance business; (c) is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing, reinvesting, or
trading in securities, or is engaged or proposes to engage in the business of
issuing face-amount certificates of the installment type (i.e., securities which
represent an obligation on the part of their issuer to pay a stated or
determinable sum or sums at a fixed or determinable date or dates more than
twenty-four (24) months after the date of issuance, in consideration of the
payment of periodic installments of a stated or determinable amount) or has been
engaged in such business and has any such certificate outstanding, or owns or
proposes to acquire "investment securities," as defined in the Investment
Company Act of 1940, as amended, having a value exceeding forty percent (40%) of
the value of its total assets (exclusive of "Government securities," as defined
in said Act, and cash items) on an unconsolidated basis; (d) is (i) a common
carrier by air, railroad or otherwise or a sleeping-car company subject to the
Interstate Commerce Act, as amended, (ii) engaged in transportation by air,
railroad or otherwise, or (iii) a person authorized by the federal government
to acquire control of any carrier, common or contract carrier by motor vehicle,
or corporation or other entity organized for the purpose of engaging in
transportation as such a carrier, (e) is a licensee under the Federal Power Act,
as amended, or engaged in the production or transmission of electric energy or
in the sale of electric energy or the production, transmission or sale of any
other form of energy (including oil and natural gas); (f) is engaged in any
business relating to television, radio, telephone or other telecommunications
activity (except for local broadcast transmission); or (g) is engaged in the
business of the treatment, storage, production, processing, transportation or
disposal of any toxic or hazardous waste or other regulated substance, except
that the Company may engage in activities cited in this clause (g) incident to
its principal business activities and not as a separate service provided to
customers.
4
<PAGE>
14. No Litigation. No legal or governmental proceedings are pending to which
either of the Issuers are a party or to which the property or assets of either
of the Issuers is subject which seek to restrain, enjoin or prevent the
consummation of or otherwise challenge the issuance or sale of the Notes to be
sold to the Purchaser or the consummation of the other transactions contemplated
by the Transaction Documents.
15. No Consent. Except for the Registration Statements (as defined in the
Registration Rights Agreement) and any amendments, supplements or exhibits
thereto, to the actual knowledge of each of the undersigned, no action by, or
filing with, any governmental or public body, or authority is presently required
to be obtained or made by the Issuers to authorize, or is presently required in
connection with, the execution and delivery of the Purchase Agreement the
Registration Rights Agreement and the Indenture by the Issuers, the Muzak
Capital Guarantee by Muzak Capital, the BI Guarantee by BI Acquisition, or the
Holdings Guarantee by Holdings, or the performance by the Issuers, Muzak Capital
and Holdings of their respective obligations thereunder.
16. Not an Investment Company. None of the Issuers (a) is or holds itself out as
being engaged primarily, or proposes to engage primarily, in the business of
investing, reinvesting, or trading in securities or (b) is engaged or proposes
to engage in the business of investing, reinvesting, owning, holding, or trading
securities, and owns or proposes to acquire investment securities having a value
exceeding 40 per centum of the value of such company's total assets (exclusive
of Government securities and cash items) on an unconsolidated basis.
17. Authorized Officers. Each individual who has executed any of the Transaction
Documents or other document delivered at closing on behalf of the Issuers was
validly appointed to the officership position or other position with the Issuers
indicated in connection with such execution and held that office at the time of
such person's execution and delivery of the relevant Transaction Agreement(s)
and/or other documents(s) and all signatures on each such document are genuine.
18. No Registered Securities. Neither the Company nor Finance Corp. have any
securities that are listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
****
5
<PAGE>
IN WITNESS WHEREOF, I have executed this Support Certificate this __th day
of February, 2000.
MUZAK LLC.
By: ____________________________
Name: Robert MacInnis
Title: Vice President
MUZAK FINANCE CORP.
By: ____________________________
Name: Robert MacInnis
Title: Vice President
MUZAK HOLDINGS LLC
By: ____________________________
Name: Robert MacInnis
Title: Vice President
MUZAK CAPITAL CORPORATION
By: ____________________________
Name: Robert MacInnis
Title: Vice President
<PAGE>
BI ACQUISITION, L.L.C
By: ____________________________
Name: Robert MacInnis
Title: Vice President
<PAGE>
MUZAK LLC
MUZAK FINANCE CORP.
MUZAK HOLDINGS LLC
MUZAK CAPITAL CORPORATION
BI ACQUISITION, L.L.C.
CERTIFICATE SUPPORTING KIRKLAND & ELLIS OPINION
Muzak LLC (the "Company"), Muzak Finance Corp. "Finance Corp.", and
together with the Company, the "Notes Issuers"), Muzak Holdings LLC
("Holdings"), BI Acquisition, L.L.C. ("BI ACQUISITION") and Muzak Capital
Corporation ("Muzak Capital" and, together with BI Acquisition and Holdings,
the "Guarantors") hereby certify and agree as follows. The Notes Issuers and
the Guarantors are collectively referred to herein as the "Issuers."
1. Introduction. Kirkland & Ellis has acted as legal counsel to the Notes
Issuers in connection with the negotiation and preparation of that certain
Purchase Agreement (the "Purchase Agreement") dated as of February 2, 2000, by
and among the Notes Issuers, Holdings, the subsidiaries of the Company named
therein, and CIBC Inc. Section 6(i) of the Purchase Agreement provides that as
a condition to closing Kirkland & Ellis must deliver an opinion letter to CIBC
Inc. (the "Opinion Recipients"). The term "Kirkland Opinion" whenever it is used
in this certificate means the opinion letter which Kirkland & Ellis will
actually deliver at the closing in response to that closing condition. As used
herein, the term "Transaction Documents" has the meanings ascribed to it in the
Kirkland Opinion. All other capitalized terms used herein but not defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
2. Purpose. The Issuers have provided this certificate in order to provide
Kirkland & Ellis with factual information needed by Kirkland & Ellis in order to
issue the Kirkland Opinion. The Issuers have made inquiries and investigations
reasonably calculated to assure that the information provided in this
certificate is accurate and complete, including (i) inquiries of appropriate
personnel responsible for legal matters, financial matters and compliance with
government requirements and (ii) identification and review of relevant
documents. The Issuers intend and agree that Kirkland & Ellis and the Opinion
Recipients may rely upon this certificate and all information provided in this
certificate.
3. Certificate of Formation; Limited Liability Company Agreement. The copy of
the Certificates of Formation of the Company, BI Acquisition and of Holdings in
the versions certified by the responsible governmental office in the Company's,
BI Acquisition's and Holdings' state of formation and delivered to the Opinion
Recipients in connection with the closing is accurate and complete and
represents the terms of the Company's, BI Acquisition's and Holdings'
Certificates of Formation as constituted at all times since the date of the
latest amendment thereto indicated in each certificate. The copy of each of the
Limited Liability Company Agreement of the Company (the "LLC Agreement"), the
Limited Liability
<PAGE>
Company Agreement of BI Acquisition (the "BI LLC Agreement") and the Limited
Liability Company Agreement of Holdings (the "Holdings LLC Agreement") in the
version delivered to the Opinion recipients in connection with the closing is
accurate and complete and represents the terms of each such agreement as
constituted at all times since the date of the latest amendment thereto
indicated in that version.
4. Charters. The copy of Finance Corp.'s Certificate of Incorporation in the
version certified by the responsible governmental office in Finance Corp.'s
state of incorporation and delivered to the Opinion Recipients in connection
with the closing is accurate and complete and represents the terms of Finance
Corp.'s Certificate of Incorporation as constituted at all times since the date
of the latest amendment thereto indicated in that certificate. The copy of the
Certificate of Incorporation of Muzak Capital and in the version certified by
the responsible governmental office in Muzak Capital's state of incorporation
and delivered to the Opinion Recipients in connection with the closing is
accurate and complete and represents the terms of Muzak Capital's Certificate of
Incorporation as constituted at all times since the date of the latest amendment
thereto indicated in that certificate.
5. By-laws. The copy of Finance Corp.'s By-laws in the version delivered to the
Opinion Recipients at the closing is accurate and complete and represents the
terms of Finance Corp.'s By-laws as constituted at all times since the date of
the latest amendment thereto indicated in such version. The copy of Muzak
Capital's By-laws in the version delivered to the Opinion Recipients at the
closing is accurate and complete and represents the terms of Muzak Capital's
By-laws as constituted at all times since the date of the latest amendment
thereto indicated in such version. The undersigned is not aware of any existing
violations of Finance Corp.'s or Muzak; Capital's By-laws.
6. Good Standing. Neither the Company, Finance Corp., Holdings, BI Acquisition
nor Muzak Capital has any reason to believe that it is not in existence or good
standing in its respective state of formation or incorporation or that it is not
in good standing as a foreign limited liability company or corporation (as the
case may be) or other entity in any state in which it is so qualified as a
foreign limited liability company or corporation (as the case may be)
7. Foreign Qualifications. The Company, BI Acquisition and Finance Corp. are
qualified in or are taking steps to qualify as a foreign limited liability
company or corporation (as the case may be) or other entity in any state in
which such qualification is required.
8. Corporate Resolutions.
a. The copies of the resolutions of the Board of Directors of the Company,
the Board of Directors of Finance Corp., the Board of Directors of Muzak
Capital, the Board of Directors of BI Acquisition and the Board of Directors
of Holdings delivered in connection with the consummation of the transactions
contemplated by the Transactions Documents authorizing the execution,
delivery and performance of the various agreements contemplated thereby set
forth duly adopted resolutions which remain in full
2
<PAGE>
force and effect without amendment or modification.
b. Neither the Board of Directors of the Company, the Board of Directors of
Finance Corp., the Board of Directors of Muzak Capital, Board of Directors of
BI Acquisition nor the Board of Directors of Holdings have taken any actions
or adopted any other resolutions which (i) restrict the Issuers' authority to
enter into any the Transaction Documents or to engage in any actions to be
taken under or by reason of the Transaction Documents or (ii) restrict such
Board's authority to approve any such action or activity or (iii) otherwise
relate to the Issuers' execution or delivery of any of the Transaction
Documents or any activity to be taken under or by reason of the Transaction
Documents.
9. Intentions Regarding Creditors. None of the Issuers have any intent (actual
or otherwise) in connection with the transaction contemplated by the Purchase
Agreement or otherwise to hinder, delay or defraud any present or future
creditor. In addition, none of the Issuers (a) is insolvent or will be rendered
insolvent as a result of such transactions, (b) is engaged or will be engaged or
expects to engage in the reasonably foreseeable future in any business or
transaction with unreasonably small capital, or (c) intends to incur, or expects
or believes it will incur, debts that would be beyond its ability to pay as they
mature.
10. Use of Proceeds. None of the Issuers owns or intends to purchase or carry
any "margin stock" within the meanings of Regulations T, U and X of the Board of
Governors of the Federal Reserve System.
11. Capitalization. As of the Effective Time, all of the membership interests
in the Company are owned by Holdings and all of the issued and outstanding
common stock of Finance Corp., which is 100 shares of common stock, is held by
the Company.
12. No Violations. The execution and delivery of the Transaction Documents, and
the consummation of the transactions contemplated thereby (including, without
limitation, the issuance and sale of the Notes to the Initial Purchaser) do not
and will not conflict with or constitute or result in a breach or default under
(or an event which with notice or the passage of time or both would constitute a
default under) or violation of any of, (i) the Limited Liability Company
Agreement of the Company, BI Acquisition or Holdings, (ii) the certificate of
incorporation or bylaws of Finance Corp. or Muzak Capital, (iii) the any statute
or governmental rule or regulation or (vi) with the exception of the payment of
additional interest on the Notes provided for in Section 4 of the Registration
Rights Agreement, the terms or provisions of any contract set forth on Schedule
C to the Kirkland Opinion, except for any such conflict, breach, violation,
default or event which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect and except for any such conflict,
breach, violation or default which has been waived by the party or parties with
the power to waive such conflict, breach, violation or default.
3
<PAGE>
13. No Regulation.
a. The Company does not engage in any banking, insurance, common carrier,
broadcasting (except for local broadcast transmission), utility or other
regulated activities to a degree which requires it to obtain approval from any
governmental authority as a condition to executing or delivering any of the
Transaction Documents or to performing any of its obligations under the
Transaction Documents. The Company is not aware of any filing required to be
made or any governmental permit or authorization required to be obtained in
connection with the execution or delivery of any of the Transaction Agreements
or the performance of any of the Company's obligations under those agreements
which has not been made or obtained on or prior to the date hereof.
b. Neither the Company nor any of its subsidiaries: (a) owns or operates
equipment or facilities of the type used, or engages in any other activity in
the nature of those conducted, by a public utility, including without limitation
any business or activity relating to garbage or sewage disposal or water
production or transmission; (b) accepts deposits or engages in any other
business activity reserved exclusively to banks, or engages in any trust or
insurance business; (c) is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing, reinvesting, or
trading in securities, or is engaged or proposes to engage in the business of
issuing face-amount certificates of the installment type (i.e., securities
which represent an obligation on the part of their issuer to pay a stated or
determinable sum or sums at a fixed or determinable date or dates more than
twenty-four (24) months after the date of issuance, in consideration of the
payment of periodic installments of a stated or determinable amount) or has been
engaged in such business and has any such certificate outstanding, or owns or
proposes to acquire "investment securities," as defined in the Investment
Company Act of 1940, as amended, having a value exceeding forty percent (40%)
of the value of its total assets (exclusive of "Government securities," as
defined in said Act, and cash items) on an unconsolidated basis; (d) is (i) a
common carrier by air, railroad or otherwise or a sleeping-car company subject
to the Interstate Commerce Act, as amended, (ii) engaged in transportation by
air, railroad or otherwise, or (iii) a person authorized by the federal
government to acquire control of any carrier, common or contract carrier by
motor vehicle, or corporation or other entity organized for the purpose of
engaging in transportation as such a carrier, (e) is a licensee under the
Federal Power Act, as amended, or engaged in the production or transmission of
electric energy or in the sale of electric energy or the production,
transmission or sale of any other form of energy (including oil and natural
gas); (f) is engaged in any business relating to television, radio, telephone or
other telecommunications activity (except for local broadcast transmission); or
(g) is engaged in the business of the treatment, storage, production,
processing, transportation or disposal of any toxic or hazardous waste or other
regulated substance, except that the Company may engage in activities cited in
this clause (g) incident to its principal business activities and not as a
separate service provided to customers.
4
<PAGE>
14. No Litigation. No legal or governmental proceedings are pending to
which either of the Issuers are a party or to which the property or
assets of either of the Issuers is subject which seek to restrain,
enjoin or prevent the consummation of or otherwise challenge the
issuance or sale of the Notes to be sold to the Purchaser or the
consummation of the other transactions contemplated by the Transaction
Documents.
15. No Consent. Except for the Registration Statements (as defined in the
Registration Rights Agreement) and any amendments, supplements or
exhibits thereto, to the actual knowledge of each of the undersigned,
no action by, or filing with, any governmental or public body or
authority is presently required to be obtained or made by the Issuers
to authorize, or is presently required in connection with, the
execution and delivery of the Purchase Agreement, the Registration
Rights Agreement and the Indenture by the Issuers, the Muzak Capital
Guarantee by Muzak Capital, the BI Guarantee by BI Acquisition, or the
Holdings Guarantee by Holdings, or the performance by the Issuers,
Muzak Capital and Holdings of their respective obligations thereunder.
16. Not an Investment Company. None of the Issuers (a) is or holds itself
out as being engaged primarily, or proposes to engage primarily, in the
business of investing, reinvesting, or trading in securities or (b) is
engaged or proposes to engage in the business of investing.
reinvesting, owning, holding, or trading securities, and owns or
proposes to acquire investment securities having a value exceeding 40
per centum of the value of such company's total assets (exclusive of
Government securities and cash items) on an unconsolidated basis.
17. Authorized Officers. Each individual who has executed any of the
Transaction Documents or other document delivered at closing on behalf
of the Issuers was validly appointed to the officership position or
other position with the Issuers indicated in connection with such
execution and held that office at the time of such person's execution
and delivery of the relevant Transaction Agreement(s) and/or other
documents(s) and all signatures on each such document are genuine.
18. No Registered Securities. Neither the Company nor Finance Corp. have
any securities that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a
United States automated inter-dealer quotation system.
* * * *
5
<PAGE>
IN WITNESS WHEREOF, I have executed this Support Certificate this __th day
of January, 2000.
MUZAK LLC
By: /s/ Robert MacInnis
____________________________
Name: Robert MacInnis
Title: Vice President
MUZAK FINANCE CORP.
By: /s/ Robert MacInnis
____________________________
Name: Robert MacInnis
Title: Vice President
MUZAK HOLDINGS LLC
By: /s/ Robert MacInnis
____________________________
Name: Robert MacInnis
Title: Vice President
MUZAK CAPITAL CORPORATION
By: /s/ Robert MacInnis
____________________________
Name: Robert MacInnis
Title: Vice President
<PAGE>
BI ACQUISITION, L.L.C
By: ___________________________
Name: Robert MacInnis
Title: Vice President
Exhibit 4.8
REGISTRATION RIGHTS AGREEMENT
Dated as of February 2, 2000
by and among
MUZAK LLC,
MUZAK FINANCE CORP.,
THE GUARANTORS
named herein
and
CIBC INC.
as Purchaser
--------------------------
Up to $50,000,000
SENIOR SUBORDINATED FLOATING RATE NOTES DUE 2009
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions.......................................................................................1
2. Exchange Offer....................................................................................6
3. Shelf Registration...............................................................................10
4. Additional Interest..............................................................................12
5. Registration Procedures..........................................................................15
6. Registration Expenses............................................................................26
7. Indemnification..................................................................................28
8. Rules 144 and 144A...............................................................................32
9. Underwritten Registrations.......................................................................32
10. Miscellaneous....................................................................................33
(a) Remedies.....................................................................................33
(b) No Inconsistent Agreements...................................................................33
(c) Adjustments Affecting Registrable Notes......................................................33
(d) Amendments and Waivers.......................................................................34
(e) Notices..................................................................................... 34
(f) Successors and Assigns.......................................................................36
(g) Counterparts.................................................................................36
(h) Headings.....................................................................................36
(i) Governing Law................................................................................36
(j) Severability.................................................................................37
(k) Notes Held by any Issuer or Its Affiliates...................................................37
(l) Third Party Beneficiaries....................................................................37
(m) Entire Agreement.............................................................................37
(n) Joint and Several Obligations................................................................38
(o) PIK Notes....................................................................................38
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of February 2, 2000, by and among Muzak LLC, a Delaware
limited liability company (the "Company"), Muzak Finance Corp., a Delaware
corporation (together with the Company, the "Notes Issuers"), the Guarantors (as
defined) and CIBC Inc. (the "Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated the date hereof, by and among the Notes Issuers, the Guarantors
and the Purchaser (the "Purchase Agreement") relating to the sale by the Notes
Issuers to the Purchaser of up to $50,000,000 aggregate principal amount of the
Notes Issuers' Senior Subordinated Floating Rate Notes due 2009 and any notes
issued as pay-in-kind interest on such Senior Subordinated Notes due 2009
pursuant to the terms thereof (collectively, the "Notes") and the unconditional
guarantee thereof by the Guarantors on a joint and several, senior subordinated
basis (the "Guarantee"). In order to induce the Purchaser to enter into the
Purchase Agreement, the Issuers (as defined) have agreed to provide the
registration rights set forth in this Agreement for the benefit of the holders
of Registrable Notes (as defined), including, without limitation, the Purchaser.
The execution and delivery of this Agreement is a condition to the Purchaser's
obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this
Agreement.
Applicable Period: See Section 2(b).
<PAGE>
-2-
Business Day: A day that is not a Saturday, a Sunday, or a day
on which banking institutions in New York, New York are required to be closed.
Conversion Date: November 1, 2000.
Commission: The Securities and Exchange Commission.
Company: See the first introductory paragraph to this
Agreement.
Effectiveness Date: The 210th day after the Conversion Date,
in the case of the Exchange Registration Statement, and the 210th day after the
delivery of the Shelf Notice, in the case of the Initial Shelf Registration.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 150th day after the Conversion Date
(regardless of whether the actual filing precedes such date).
Guarantee: See the second introductory paragraph to this
Agreement.
Guarantors: Each of Business Sound, Inc., an Ohio Corporation,
Muzak Capital Corporation, a Delaware corporation, MLP Environmental Music, LLC,
a Washington limited liability company, Muzak Holdings LLC, a Delaware limited
liability company, Audio Environments, Inc., a California corporation, BI
Acquisition, L.L.C., a Delaware limited liability company, and Background Music
Broadcasters, Inc., a California corporation.
<PAGE>
-3-
Holder: Any registered holder of Registrable Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of February 2, 2000, by and
among the Notes Issuers, the Guarantors and State Street Bank and Trust Company,
as trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issuers: The Notes Issuers and the Guarantors, collectively.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this
Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: Any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
PIK Notes: See Section 10(o).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A
<PAGE>
-4-
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchaser: See the first introductory paragraph to this
Agreement.
Purchase Agreement: See the second introductory paragraph to
this Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance thereof
and at all times subsequent thereto, each Exchange Note as to which Section
2(c)(iv) hereof is applicable upon original issuance thereof and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until, in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) a Registration Statement (other than, with respect to any Exchange
Note as to which Section 2(c)(iv) hereof is applicable) covering such Note,
Exchange Note or Private Exchange Note, as the case may be, has been declared
effective by the Commission and such Note, Exchange Note or Private Exchange
Note, as the case may be, has been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, is sold in compliance with Rule 144, (iii) in the case of
any Note, such Note has been exchanged pursuant to the Exchange Offer for an
Exchange Note or Exchange Notes which may be resold without restriction under
federal securities laws, or (iv) such Note, Exchange Note or Private Exchange
Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
Registration Statement: Any registration statement of any of
the Issuers, including, but not limited to, the Exchange Registration Statement,
that covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all ex-
<PAGE>
-5-
hibits, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.
Rule 415: Rule 415 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.
2. Exchange Offer
(a) Each of the Issuers agrees to file with the Commission no
later than the Filing Date, an offer to exchange
<PAGE>
-6-
(the "Exchange Offer") any and all of the Registrable Notes (other than Private
Exchange Notes, if any) for a like aggregate principal amount of debt securities
of the Notes Issuers which are identical in all material respects to the Notes
(the "Exchange Notes") (and which are entitled to the benefits of the Indenture
or a trust indenture which is identical in all material respects to the
Indenture (other than such changes to the Indenture or any such identical trust
indenture as are necessary to comply with any requirements of the Commission to
effect or maintain the qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA and which shall also be entitled to the
benefits of the Guarantees of the Guarantors), except that the Exchange Notes
shall have been registered pursuant to an effective Registration Statement under
the Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Registration Statement") and shall comply with all applicable tender
offer rules and regulations under the Exchange Act. Each of the Issuers agrees
to use its reasonable best efforts to (x) cause the Exchange Registration
Statement to be declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or
longer if required by applicable law) after the date that notice of the Exchange
Offer is first mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 60th day following the date on which the Exchange Registration
Statement is declared effective. If after such Exchange Registration Statement
is initially declared effective by the Commission, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or any other
governmental agency or court, such Exchange Registration Statement shall be
deemed not to have become effective for purposes of this Agreement. Each Holder
who participates in the Exchange Offer will be required to represent that any
Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes, that such Holder is not an affiliate of any
Issuer within the meaning of the Securities Act, and any additional
representations that in the written opinion of counsel to the Issuers are
necessary under then-existing interpretations of
<PAGE>
-7-
the Commission in order for the Exchange Registration Statement to be declared
effective. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Issuers
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 of this Agreement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Purchaser, which shall contain a
summary statement of the positions taken or policies made by the Staff of the
Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the Staff of the Commission or such positions or
policies, in the reasonable judgment of the Purchaser, represent the prevailing
views of the Staff of the Commission. Such "Plan of Distribution" section shall
also allow, to the extent permitted by applicable policies and regulations of
the Commission, the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including, to the extent
so permitted, all Participating Broker-Dealers, and include a statement
describing the manner in which Participating Broker-Dealers may resell the
Exchange Notes.
Each of the Issuers shall use its reasonable best efforts to
keep the Exchange Registration Statement effective and to amend and supplement
the Prospectus contained therein, in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time, not to exceed 180
days from the date the Exchange Offer is consummated, as such Persons must
comply with such requirements in connection with offers and sales of the
Exchange Notes (the "Applicable Period").
<PAGE>
-8-
If, upon consummation of the Exchange Offer, the Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
an initial distribution, the Issuers upon the request of the Purchaser shall,
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to the Purchaser, in exchange (the "Private Exchange") for the
Notes held by the Purchaser, a like principal amount of debt securities of the
Notes Issuers that are identical in all material respects to the Exchange Notes
except for the existence of restrictions on transfer thereof under the
Securities Act and securities laws of the several states of the U.S. (the
"Private Exchange Notes") (and which are issued pursuant to the same indenture
as the Exchange Notes and which will have the Guarantees of the Guarantors). The
Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and Private Exchange Notes will accrue from the
last interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
dates of original issuance of the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes at
any time prior to the close of business, New York time, on the last
Business Day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Issuers shall:
<PAGE>
-9-
(1) accept for exchange all Registrable Notes validly
tendered and not validly withdrawn pursuant to the Exchange Offer or
the Private Exchange;
(2) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly
to each Holder tendering such Registrable Notes, Exchange Notes or
Private Exchange Notes, as the case may be, equal in principal amount
to the Notes of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event will provide that the Exchange
Notes will not be subject to the transfer restrictions set forth in the
Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes,
if any, will vote and consent together on all matters as one class and that none
of the Exchange Notes, the Private Exchange Notes or the Notes, if any, will
have the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the Commission, the Notes Issuers are
not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
consummated within 270 days of the Conversion Date, (iii) any holder of Private
Exchange Notes so requests in writing to the Company or (iv) in the case of any
Holder that participates in the Exchange Offer (and tenders its Registrable
Notes prior to the expiration thereof), such Holder does not receive Exchange
Notes on the date of the exchange that may be sold without restriction under
federal securities laws (other than due solely to the status of such Holder as
an affiliate of any Issuer within the meaning of the Securities Act) and so
notifies the Company within 30 days following the consummation of the Exchange
Offer (and providing a reasonable basis for its conclusions), in the case of
each of clauses (i)-(iv), then the Issuers shall promptly deliver to the Holders
and the Trustee written notice thereof (the "Shelf Notice") and shall file a
Shelf Registration pursuant to Section 3.
<PAGE>
-10-
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) Shelf Registration. The Issuers shall as promptly as
reasonably practicable file with the Commission a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Initial Shelf Registration"). If the Issuers shall
not have yet filed the Exchange Registration Statement, each of the Issuers
shall use its reasonable best efforts to file with the Commission the Initial
Shelf Registration on or prior to the Filing Date and shall use its reasonable
best efforts to cause such Initial Shelf Registration to be declared effective
under the Securities Act on or prior to the Effectiveness Date applicable to the
Exchange Registration Statement. Otherwise, each of the Issuers shall file with
the Commission the Initial Shelf Registration within 150 days of the delivery of
the Shelf Notice and shall use its reasonable best efforts to cause such Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers shall not
permit any securities other than the Registrable Notes to be included in any
Shelf Registration. Each of the Issuers shall use its reasonable best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date which is 24 months from the effective date of such Initial
Shelf Registration (or, if Rule 144(k) under the Securities Act is amended to
permit unlimited resales by non-affiliates within a lesser period, such lesser
period) (subject to extension pursuant to the last paragraph of Section 5
hereof) (the "Effectiveness Period") or such shorter period ending when (i) all
Registrable Notes covered by the Initial Shelf Registration have been sold in
the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes has
been declared effective under the Securities Act.
<PAGE>
-11-
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), each of the Issuers shall
use its reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Shelf Registration in a manner to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, each of the Issuers shall use its reasonable best
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Subsequent Shelf
Registration continuously effective for a period equal to the number of days in
the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registrations was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. Each of the Issuers shall
promptly supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Shelf Registration or by any underwriter of
such Registrable Notes, in each case, with each Issuer's consent, which consent
shall not be unreasonably withheld or delayed.
4. Additional Interest
(a) The Issuers and the Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
each of the Issuers agrees to pay, as liquidated damages, additional interest on
the Registrable Notes ("Additional Interest") under
<PAGE>
-12-
the circumstances and to the extent set forth below (each of which shall be
given independent effect):
(i) if (A) neither the Exchange Registration Statement nor
the Initial Shelf Registration has been filed on or prior to the Filing
Date or (B) notwithstanding that the Issuers have consummated or will
consummate an Exchange Offer, the Issuers are required to file a Shelf
Registration and such Shelf Registration is not filed on or prior to
the 150th day after delivery of the Shelf Notice, then, in the case of
subclause (A), commencing on the day after the Filing Date or, in the
case of subclause (B), commencing on the 151st day following delivery
of the Shelf Notice, Additional Interest shall accrue on the
Registrable Notes over and above the stated interest at a rate of 0.50%
per annum for the first 90 days immediately following the Filing Date
or such 150th day, as the case may be, such Additional Interest rate
increasing by an additional 0.25% per annum at the beginning of each
subsequent 90-day period;
(ii) if (A) neither the Exchange Registration Statement nor
the Initial Shelf Registration is declared effective on or prior to the
Effectiveness Date applicable thereto or (B) notwithstanding that the
Issuers have consummated or will consummate an Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf
Registration is not declared effective by the Commission on or prior to
the Effectiveness Date, then, commencing on the day after such
applicable Effectiveness Date, Additional Interest shall accrue on the
Registrable Notes over and above the stated interest at a rate of 0.50%
per annum for the first 90 days immediately following the day after the
applicable Effectiveness Date, such Additional Interest rate increasing
by an additional 0.25% per annum at the beginning of each subsequent
90-day period; and
(iii) if (A) the Issuers have not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to 35 days after the date on which the Exchange
Registration Statement was declared effective, (B) the Exchange
Registration Statement ceases to be effective prior to consummation of
the Exchange Offer or (C) if applicable, a Shelf Registration has been
declared effective and such Shelf Registra-
<PAGE>
-13-
tion ceases to be effective at any time during the Effectiveness
Period, then Additional Interest shall accrue on the Registrable Notes
over and above the stated interest at a rate of 0.50% per annum for the
first 90 days commencing on the (x) 36th day after such effective date
in the case of (A) above or (y) the day such Exchange Registration
Statement or Shelf Registration ceases to be effective in the case of
(B) and (C) above, such Additional Interest rate increasing by an
additional 0.25% per annum at the beginning of each such subsequent
90-day period;
provided, however, that the Additional Interest rate on the Registrable Notes
may not exceed in the aggregate 2.0% per annum; provided further that (1) upon
the filing of the Exchange Registration Statement or each Shelf Registration (in
the case of (i) above), (2) upon the effectiveness of the Exchange Registration
Statement or each Shelf Registration, as the case may be (in the case of (ii)
above), or (3) upon the exchange of Exchange Notes for all Registrable Notes
validly tendered (in the case of (iii)(A) above) or upon the effectiveness of an
Exchange Registration Statement or Shelf Registration which had ceased to remain
effective (in the case of (iii)(B) and (C) above), Additional Interest on any
Registrable Notes then accruing Additional Interest as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash quarterly on each regular interest payment date
specified in the Indenture (to the Holders of Registrable Notes of record on the
regular record date therefor (as specified in the Indenture) immediately
preceding such dates), commencing with the first such regular interest payment
date occurring after any such Additional Interest commences to accrue. The
amount of Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the Notes subject thereto,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year and the actual days
<PAGE>
-14-
elapsed occurring in the period for which payable) and the denominator of which
is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, each Issuer shall effect such registrations
to permit the sale of such securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by each Issuer hereunder, each
Issuer shall:
(a) Prepare and file with the Commission prior to the Filing
Date, the Exchange Registration Statement or if the Exchange Registration
Statement is not filed or is unavailable, a Shelf Registration as prescribed by
Section 2 or 3, and use its reasonable best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided that, if (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period and has advised the Company that it is a Participating
Broker-Dealer, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Issuers shall, if requested, furnish to
and afford the Holders of the Registrable Notes to be registered pursuant to
such Shelf Registration or each such Participating Broker-Dealer, as the case
may be, covered by such Registration Statement, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case, to the
extent practicable at least five Business Days prior to such filing). The
Issuers shall not file any such Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably object.
<PAGE>
-15-
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Shelf Registration or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the provisions of the Securities Act and the
Exchange Act applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such Prospectus. The
Issuers shall be deemed not to have used their reasonable best efforts to keep a
Registration Statement effective during the Applicable Period if they
voluntarily take any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless such action is required by applicable
law, rule or regulation or unless the Issuers comply with this Agreement,
including, without limitation, the provisions of paragraph 5(k) hereof and the
last paragraph of Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period from whom the Issuers have received written notice that it
will be a Participating Broker-Dealer, notify the selling Holders of Registrable
Notes, and each such Participating Broker-Dealer, their counsel and the managing
underwriters, if any, promptly (but in any event within two Business Days), and
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective (including in such notice a written statement that any Holder may,
upon request, obtain, without charge, one conformed copy of such Registration
Statement or post-effective
<PAGE>
-16-
amendment including financial statements and schedules, documents incorporated
or deemed to be incorporated by reference and exhibits), (ii) of the issuance by
the Commission of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes the representations and
warranties of any Issuer contained in any agreement (including any underwriting
agreement contemplated by Section 5(n) hereof) cease to be true and correct in
any material respect, (iv) of the receipt by any Issuer of any notification with
respect to the suspension of the qualification or exemption from qualification
of a Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in, or amendments or supplements to,
such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Issuers' reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a
<PAGE>
-17-
Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriters, if any, or the Holders of a majority
in aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering, (i) as promptly as practicable incorporate in a
prospectus supplement or post-effective amendment such information or revisions
to information therein relating to such underwriters or selling Holders as the
managing underwriters, if any, or such Holders or their counsel reasonably
request to be included or made therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as practicable
after the Issuers have received notification of the matters to be incorporated
in such prospectus supplement or post-effective amendment, and (iii) supplement
or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, furnish to each selling Holder of Registrable Notes and to
each such Participating Broker-Dealer who so requests and to counsel and each
managing underwriter, if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer, deliver to each selling Holder of Registrable
<PAGE>
-18-
Notes or each such Participating Broker-Dealer, as the case may be, their
respective counsel, and the underwriters, if any, without charge, as many copies
of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, the Issuers hereby consent to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders of Registrable Notes and each Participating Broker-Dealer,
and the underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its reasonable best efforts to register or qualify, and
cooperate with the selling Holders of Registrable Notes and each such
Participating Broker-Dealer, the underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Notes or Exchange Notes,
as the case may be, for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters, if any, reasonably
request in writing; provided that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered pursuant to an underwritten
offering, counsel to the underwriters shall, at the reasonable cost and expense
of the Issuers, perform the Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided that no Issuer shall be required to (A) qualify generally to
do business in any
<PAGE>
-19-
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes, any Participating
Broker-Dealer and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Notes to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request.
(j) Use its reasonable best efforts to cause the Registrable
Notes covered by the Registration Statement to be registered with or approved by
such governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Notes, in which case the Issuers will cooperate
in all reasonable respects with the filing of such Registration Statement and
the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) hereof, as promptly as reasonably practicable prepare and
(subject to Section 5(a) hereof) file with the Commission, at the Issuers' sole
expense, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
<PAGE>
-20-
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its reasonable best efforts to cause the Registrable
Notes covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration Statement or
the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
printed certificates for the Registrable Notes in a form eligible for deposit
with The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the Notes
and take all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the registration
or the disposition of such Registrable Notes and, in such connection, (i) make
such reasonable representations and warranties to the underwriters, with respect
to the business of the Issuers and their subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same in writing if and when requested; (ii) obtain
the opinion of counsel to the Issuers and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings of debt securities similar to the Notes and
such other matters as may be reasonably requested by underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the independent
certified public accountants
<PAGE>
-21-
of the Issuers (and, if necessary, any other independent certified public
accountants of any subsidiary of any Issuer or of any business acquired by any
Issuer (including Muzak Limited Partnership, a Delaware limited partnership) for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings of debt securities similar to the Notes and such other matters as
reasonably requested by the managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or agents)
with respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or as and
to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, and each Participating Broker-Dealer, any
underwriter participating in any such disposition of Registrable Notes, if any,
and any attorney, accountant or other agent retained by any such selling Holder,
each Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of each Issuer and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of each Issuer and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement. Records which an Issuer determines, in good faith, to be confidential
and any
<PAGE>
-22-
Records which it notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in such Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or (iii) the information in such Records
has been made generally available to the public other than as a result of a
disclosure or failure to safeguard by such Inspector. Each selling Holder of
such Registrable Notes and each Participating Broker-Dealer will be required to
agree that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of any Issuer unless and until such is made
generally available to the public. Each Inspector, each selling Holder of such
Registrable Notes and each Participating Broker-Dealer will be required to
further agree that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction pursuant to clause (ii) of the
previous sentence or otherwise, give notice to the Issuers and allow the Issuers
to undertake appropriate action to obtain a protective order or otherwise
prevent disclosure of the Records deemed confidential at its expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer or the
first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the Commission to enable
such indenture to be so qualified in a timely manner.
(q) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its
securityholders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder (or any similar rule promulgated
<PAGE>
-23-
under the Securities Act) no later than 90 days after the end of any 12-month
period (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the effective
date of a Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or the Private Exchange
Notes, as the case may be, the Guarantees and the related indenture constitute
legally valid and binding obligations of the Issuers, enforceable against the
Issuers in accordance with their respective terms.
(s) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Issuers
(or to such other Person as directed by the Company) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers
shall mark, or caused to be marked, on such Registrable Notes that such
Registrable Notes are being canceled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the NASD.
(u) Use its reasonable best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable Notes covered
by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Issuers such
information regarding such seller and the
<PAGE>
-24-
distribution of such Registrable Notes as the Issuers may, from time to time,
reasonably request. The Issuers may exclude from such registration the
Registrable Notes of any seller who fails to furnish such information within a
reasonable time after receiving such request. Each seller as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Issuers all information required to be disclosed in order to make the
information previously furnished to the Issuers by such seller not materially
misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Issuers of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, and, in each case,
dissemination of such Prospectus until such Holder's or Participating
Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Issuers shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Notes covered by such Registration
Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
All reasonable fees and expenses incident to the performance
of or compliance with this Agreement by the Issuers shall be borne by the
Issuers whether or not the Exchange Offer or a Shelf Registration is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an
<PAGE>
-25-
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, or by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or by any Participating Broker-Dealer, as the case may be, (iii)
reasonable messenger, telephone and delivery expenses incurred in connection
with the Exchange Registration Statement and any Shelf Registration, (iv) fees
and disbursements of counsel for the Issuers and fees and disbursements of
special counsel for the Purchaser and the sellers of Registrable Notes, (v) fees
and disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(vi) rating agency fees, (vii) Securities Act liability insurance, if any Issuer
desires such insurance, (viii) fees and expenses of all other Persons retained
by the Issuers, (ix) internal expenses of the Issuers (including, without
limitation, all salaries and expenses of officers and employees of the Issuers
performing legal or accounting duties), (x) the expense of any annual or special
audit, (xi) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange, (xii) the fees and
disbursements of underwriters, if any, customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of the Registrable Notes which
discounts, commissions or taxes shall be paid by Holders of such Registrable
Notes) and (xiii) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agree-
<PAGE>
-26-
ments, indentures and any other documents necessary in order to comply with this
Agreement.
7. Indemnification
(a) Each of the Issuers jointly and severally agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer, the officers, directors, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other reasonable expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or Prospectus (as amended or
supplemented if the Issuers shall have furnished any amendments or supplements
thereto) or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Issuers in writing
by or on behalf of such Participant expressly for use therein; provided,
however, that the Issuers shall not be liable if such untrue statement or
omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and the Issuers shall have furnished the Prospectus or an
amendment or supplement thereto in compliance with Section 5 of this Agreement.
(b) Each Participant will be required to agree, severally and
not jointly, to indemnify and hold harmless each Issuer, its directors and
officers and each Person who controls each Issuer within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Participant
<PAGE>
-27-
furnished to the Issuers in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes giving rise to such
obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise except to the extent it has been materially
prejudiced by such failure. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed promptly upon demand. Any such separate firm for the Participants
and such control Persons of Participants shall be designated in writing by
Participants who
<PAGE>
-28-
sold a majority in interest of Registrable Notes sold by all such Participants
and any such separate firm for each Issuer, its directors, officers and such
control Persons of each Issuer shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final non-appealable judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. No Indemnifying Person
shall, without the prior written consent (which consent shall not be
unreasonably withheld) of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
release of such Indemnified Person, in form and substance satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions (or alleged statements or omissions) that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers on the one hand
or by the Participants or such other Indemnified Person, as the case may be, on
the other, the parties' relative
<PAGE>
-29-
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission and any other equitable considerations appropriate
under the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Commission thereunder in a timely manner
and, if at any time it is not required to file such reports, it will, upon the
request of any Holder of Registrable Notes, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 and Rule
144A under the Securities Act. Each of the Issuers further covenants, for so
long as any Registrable
<PAGE>
-30-
Notes remain outstanding, to make available to any Holder or beneficial owner of
Registrable Notes in connection with any sale thereof and any prospective
purchaser of such Registrable Notes from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and reasonably acceptable to the
Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by any Issuer of any of
its obligations under this Agreement, each Holder of Registrable Notes and each
Participating Broker-Dealer holding Exchange Notes, in addition to being
entitled to exercise all rights provided herein, in the Indenture or, in the
case of the Purchaser, in the Purchase Agreement, or granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. Each Issuer agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. None of the Issuers has
entered, as of the date hereof, and none of the Issuers
<PAGE>
-31-
shall enter, after the date of this Agreement, into any agreement with respect
to any of its securities that is inconsistent with the rights granted to the
Holders of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. None of the Issuers has entered and none of the Issuers shall
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back rights with respect to a Registration Statement.
(c) Adjustments Affecting Registrable Notes. None of the
Issuers shall, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.
(d) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of (A) the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes and (B) in
circumstances that would adversely affect Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being tendered pursuant to the
Exchange Offer or sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being tendered or being sold
by such Holders pursuant to such Registration Statement.
(e) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address of
<PAGE>
-32-
such Holder or Participating Broker-Dealer, as the case may be, set
forth on the records of the registrar under the Indenture, with a copy
in like manner to the Purchaser as follows:
CIBC Inc.
425 Lexington Avenue
3rd Floor
New York, New York 10017
Facsimile No.: (212) 885-4998
Attention: Corporate Finance
ssDepartment
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: John A. Tripodoro, Esq.
2. if to the Purchaser, at the address specified in Section
10(e)(1);
3. if to the Issuers, as follows:
Muzak LLC
2901 Third Avenue
Suite 900
Seattle, Washington 98121
Facsimile No.: (206) 633-6210
Attention: Brad D. Bodenman
with copies to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile No.: (312) 861-2200
Attention: Laurie Gunther, Esq.
and to:
<PAGE>
-33-
ABRY Partners, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Facsimile No.: (617) 859-8797
Attention: Peni Garber
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the addressee, if
telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto and the Holders; provided, however, that this Agreement shall not inure
to the benefit of or be binding upon a successor or assign of a Holder unless
and to the extent such successor or assign holds Registrable Notes.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
-34-
(j) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Notes Held by any Issuer or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by any Issuer or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(l) Third Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(m) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda among the Purchaser
on the one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
(n) Joint and Several Obligations. All of the obligations of
the Issuers hereunder shall be joint and several obligations of each of them.
<PAGE>
-35-
(o) PIK Notes. If the issuance of any Notes as interest on
outstanding Notes ("PIK Notes") requires registration under the Securities Act
and any such issuance shall not have been effectively registered under the
Securities Act then, prior to any issuance of PIK Notes, the Issuers shall file
with the Commission and cause to become effective a registration statement
registering the issuance of such PIK Notes.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
MUZAK LLC
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK FINANCE CORP.
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK CAPITAL CORPORATION, a
Delaware corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MLP ENVIRONMENTAL MUSIC, LLC, a
Washington limited liability
company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
BUSINESS SOUND INC., an Ohio
corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
MUZAK HOLDINGS LLC, a Delaware
limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
AUDIO ENVIRONMENTS, INC., a
California corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
BI ACQUISITIONS, L.L.C., a
Delaware limited liability company
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
BACKGROUND MUSIC BROADCASTERS,
INC., a California corporation
By: /s/ Robert P. MacInnis
--------------------------
Name: Robert MacInnis
Title: Vice President
<PAGE>
CIBC INC.
By: /s/ Michael Capatides
-------------------------
Name:
Title:
THIS JUNIOR SUBORDINATED UNSECURED PROMISSORY NOTE (THIS "SUBORDINATED NOTE")
WAS ORIGINALLY ISSUED ON JULY 1, 1999, AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, OTHERWISE DISPOSED OF OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE OR OTHER SECURITIES LAW OR AN EXEMPTION FROM SUCH REGISTRATION
AND EXCEPT IN COMPLIANCE WITH SECTION 11 HEREOF.
MUZAK LLC
15% JUNIOR SUBORDINATED UNSECURED PROMISSORY NOTE DUE 2007
July 1, 1999 $3,000,000
MUZAK LLC, a Delaware limited liability company (the
"Company"), for value received, hereby promises to pay, in immediately available
funds, to the Subordinated Payee (as defined herein), the principal amount of
Three Million Dollars ($3,000,000) (such amount, the "Original Principal
Amount"), on June 30, 2007 (the "Maturity Date") together with interest thereon
calculated from the date hereof in accordance with the provisions contained
herein. The initial Subordinated Payee is MEM Holdings, LLC.
I. PAYMENT OF PRINCIPAL. Subject to the provisions of Section 10:
A. SCHEDULED PAYMENT. The Company will pay the entire unpaid principal amount of
this Subordinated Note on the Maturity Date.
A. OPTIONAL PREPAYMENT. The Company may prepay the principal amount of this
Subordinated Note, in whole or in part (together with all interest accrued
thereon), at any time and from time to time, without premium or penalty.
I. INTEREST. Subject to the provisions of Section 10, interest will accrue at
the rate of fifteen percent (15%) per annum (computed on the basis of a 360-day
year and the actual number of days elapsed in any year) on the unpaid principal
amount of this Subordinated Note outstanding from time to time during the
applicable
<PAGE>
period, and will be payable on the Maturity Date. Prior to the Maturity Date,
any accrued interest which is not paid as of any March 31, June 30, September 30
or December 31 (each, an "Interest Accumulation Date") will thereafter bear
interest at the rate of fifteen percent (15%) per annum (computed on the basis
of a 365/366-day year and the actual number of days elapsed in any year) until
such interest is paid or extinguished.
I. EVENTS OF DEFAULT.
A. DEFINITION. An "Event of Default" will be deemed to have occurred if:
1. the Company fails to pay any amount of the principal of this Subordinated
Note within ten Business Days after the date such principal amount becomes due
and payable pursuant to the terms of this Subordinated Note, whether or not such
payment shall be prohibited by Section 10; or
1. the Company makes an assignment for the benefit of creditors; or an order,
judgment or decree is entered by a court of competent jurisdiction adjudicating
the Company bankrupt or insolvent; or the Company petitions or applies to any
tribunal for the appointment of a custodian, trustee, receiver or liquidator of
the Company; or any such petition or application is filed against the Company
and such petition or application is not dismissed within 90 days.
A. CONSEQUENCES OF EVENTS OF DEFAULT.
1. Except as provided in (b)(ii) below, and subject to the provisions of Section
10, if any Event of Default has occurred and is continuing, then, at any time
after the Subordinated Payee has given five days prior written notice to any
holder of Senior Indebtedness (as herein defined), the Subordinated Payee may
declare (by written notice delivered to the Company) all or any portion of the
outstanding principal amount of this Subordinated Note (together with all
accrued interest thereon) to be immediately due and payable and may demand
immediate payment of all or any portion of the outstanding principal amount of
this Subordinated Note and interest thereon.
1. If an Event of Default under (a)(ii) above has occurred, the outstanding
principal amount of this Subordinated Note (together with all accrued interest
thereon) shall become due and payable without any action by the Subordinated
Payee, and, subject to the provisions of Section 10, the Subordinated Payee may
demand immediate payment of the outstanding principal amount of this
Subordinated Note and interest thereon.
I. DEFINITIONS. For purposes of this Subordinated Note, the following
capitalized terms have the following meaning.
"Business Day" means any day other than a Saturday, Sunday or
a legal holiday under the laws of the State of New York.
<PAGE>
"Credit Agreement" means that certain Credit and Guaranty
Agreement, dated as of March 18, 1999, among the Company, Muzak Holdings LLC,
certain subsidiaries of the Company, various lenders from time to time party
thereto, Goldman Sachs Credit Partners L.P. ("GSCP"), as syndication agent,
Canadian Imperial Bank of Commerce, as administrative agent, and GSCP and CIBC
Oppenheimer Corp., as co-lead arrangers, as well as any related notes,
guarantees, security or pledge agreements, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
restated, supplemented, modified, renewed, refunded, restructured, replaced or
refinanced (whether in one or more credit agreements, loan agreements or similar
agreements providing for loans or advances to the Company or any of its
subsidiaries), in whole or in part, from time to time, whether or not with the
same lenders or agents and irrespective of any changes in the terms and
conditions thereof, including, without limitation, changes in the borrowers or
guarantors.
"Credit Party" has the meaning specified in the Credit
Agreement.
"Distribution of Assets" means any distribution of assets of
the Company of any kind or character, including without limitation (a) a
payment, purchase or other acquisition or retirement for cash, property or
securities or (b) by way of cancellation, forgiveness or offset of the
indebtedness evidenced by this Subordinated Note against any indebtedness owed
by the Subordinated Payee of this Subordinated Note to the Company or (c)
payable or deliverable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of this Subordinated Note.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Senior Indebtedness" means all principal, premium (if any),
interest (including interest accruing on or after the filing of any Proceeding
(as defined herein) relating to the Company or any Credit Party whether or not a
claim for post-filing interest is allowed or allowable in any such Proceedings),
fees, commissions, charges, expenses (including but not limited to expenses in
connection with claims and litigation), damages, penalties, claims,
reimbursement or indemnity obligations, guarantees and all other amounts or
obligations payable (collectively, "Obligations") (i) under or in respect of the
Credit Agreement including, without limitation, all obligations of the Company
or any Credit Party in respect of interest rate agreements and hedging
obligations with any lender party to the Credit Agreement (or any affiliate of
any such lender), or (ii) any Obligations of the Company or its subsidiaries
which is not expressly PARI PASSU with or subordinated to this Subordinated
Note, and, in each case, all renewals, extensions or refinancings thereof.
"Subordinated Payee" means MEM Holdings, LLC, or any Permitted
Transferee (as defined herein); provided, that any Subordinated Payee shall
cease to be a
<PAGE>
Subordinated Payee once such Subordinated Payee ceases to own any right to any
principal amount of this Subordinated Note.
A "distribution" may consist of cash, securities or other
property, by set-off or otherwise.
I. CANCELLATION. After all principal and accrued interest at any time owed on
this Subordinated Note have been paid in full, this Subordinated Note will be
surrendered to the Company for cancellation and will not be reissued.
I. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the several
Sections of this Subordinated Note are inserted for convenience only and do not
constitute a part of this Subordinated Note. This Subordinated Note will be
governed by the internal law of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of law of
any jurisdiction other than the State of New York.
I. BUSINESS DAYS. If any payment is due, or any time period for giving notice or
taking action expires, on a day which is not a Business Day, then the payment
will be due and payable on, and the time period will automatically be extended
to, the next Business Day immediately following such day which is not a Business
Day, and interest will continue to accrue at the required rate under this
Subordinated Note until any such payment is made.
I. GENERAL. This Subordinated Note and the Credit Agreement constitute the
entire agreement among the parties with respect to the subject matter hereof;
supersede any and all prior understandings relating to such subject matter; and
will be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
I. WAIVER OF JURY TRIAL. THE COMPANY (AND, BY ITS ACCEPTANCE OF THIS
SUBORDINATED NOTE, THE SUBORDINATED PAYEE HEREOF) HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SUBORDINATED NOTE OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
<PAGE>
I. SUBORDINATION.
A. EXTENT OF SUBORDINATION. The Company covenants and agrees, and the
Subordinated Payee by accepting this Subordinated Note covenants and agrees,
that (1) the indebtedness evidenced by this Subordinated Note, including, but
not limited to, the payment of principal of, premium, if any, and interest on,
this Subordinated Note, and any other payment Obligation of the Company in
respect of this Subordinated Note (including any obligation to repurchase this
Subordinated Note), is subordinated and junior in right of payment, to the
extent and in the manner provided in this Section 10, to the prior indefeasible
payment and satisfaction in full in cash of all Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed) and (2) the subordination is for the benefit of and shall be
enforceable by all holders of Senior Indebtedness. Until the Senior Indebtedness
shall have been indefeasibly paid in full in cash, (A) no payment or
distribution on account of principal of, or premium or interest on, or any other
Obligation with respect to, this Subordinated Note or any judgment with respect
hereto (and no payment or distribution on account of the purchase or redemption
or other acquisition of this Subordinated Note) shall be made by or on behalf of
the Company or any other Credit Party and (B) the Subordinated Payee may not (x)
demand, collect or receive any payment or distribution on account of principal
of, or premium or interest on, or any other Obligation with respect to, this
Subordinated Note, (y) accelerate the Maturity Date or the maturity of all or
any portion of the subordinated indebtedness or other Obligations owed pursuant
to this Subordinated Note or (z) seek any other remedy allowed at law or in
equity to collect or enforce on all or any portion of the subordinated
indebtedness or other Obligations owed pursuant to this Subordinated Note.
1. In the event that the Subordinated Payee receives any payment or distribution
with respect to this Subordinated Note at a time when such payment or
distribution is prohibited by this Section 10, such payment or distribution
shall be held by the Subordinated Payee, in trust for the benefit of, and shall
be immediately paid forthwith over or delivered and transferred to, the holders
of Senior Indebtedness (PRO RATA to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their representative as
their respective interests may appear to the extent necessary to pay all Senior
Indebtedness in full, in cash. In the event of the failure of the Subordinated
Payee to endorse or assign such payment or distribution, each holder of Senior
Indebtedness is hereby irrevocably authorized to endorse or assign the same.
1. Upon any Distribution of Assets of the Company or upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization, arrangement or receivership proceedings or other
similar proceeding, or upon any assignment for the benefit of creditors or any
other marshaling of the assets and liabilities of the Company, whether voluntary
or involuntary or otherwise (each, a "Proceeding"):
<PAGE>
(i) holders of Senior Indebtedness shall first be entitled to receive
indefeasible payment in full in cash of such Senior Indebtedness (whenever
arising and including interest after the commencement of any such Proceeding at
the rate specified in the Senior Indebtedness, whether or not a claim for such
interest would be allowed in such Proceeding) before the Subordinated Payee
shall be entitled to receive any payment on account of any Obligation with
respect to this Subordinated Note, whether as principal, interest or otherwise;
and
(i) any payment by, or on behalf of, or Distribution of Assets of, the Company
of any kind or character, whether in cash, property or securities, to which the
Subordinated Payee would be entitled except for the provisions of this Section
10 shall be paid or delivered by the Person making such payment or distribution
(whether the Company, a trustee in bankruptcy, a receiver, custodian or
liquidating trustee or other Person) directly to holders of Senior Indebtedness
as their interests may appear, until the indefeasible payment in full in cash of
all Senior Indebtedness.
1. The Company will not give, or permit to be given, and the Subordinated Payee
will not receive, accept or demand, (i) any security of any nature whatsoever
for any indebtedness evidenced by this Subordinated Note, whether principal or
interest, on any property or assets, whether now existing or hereafter acquired,
of the Company or any subsidiary thereof or (ii) any guarantee, of any nature
whatsoever, by the Company or any subsidiary thereof, of any indebtedness
evidenced by of this Subordinated Note, whether principal or interest.
1. The Subordinated Payee agrees not to file, or to join with any other
creditors of the Company or any Credit Party in filing, any petition commencing
any Proceeding. The Subordinated Payee further agrees, to the fullest extent
permitted under applicable law, that it will not cause the Company or any Credit
Party to file any petition commencing any Proceeding until all Senior
Indebtedness has been indefeasibly paid in full in cash.
1. To the extent any payment of or distribution in respect of Senior
Indebtedness (whether by or on behalf of the Company or any Credit Party, as
proceeds of security or enforcement of any right of setoff or otherwise) is
declared to be fraudulent or preferential, set aside or required to be paid to
any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then if such payment or distribution is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Indebtedness or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay the Senior Indebtedness
is declared to be fraudulent, invalid or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
the obligation so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation not
been so affected) shall be deemed to be
<PAGE>
reinstated and outstanding as Senior Indebtedness for all purposes hereof as if
such declaration, invalidity or setting aside had not occurred.
1. The holders of the Senior Indebtedness shall be entitled pro rata in
accordance with the priorities then existing among such holders to vote all
claims of the Subordinated Payee in respect of this Subordinated Note in
connection with a Proceeding. Notwithstanding the foregoing, in the event that
the holders of the Senior Indebtedness shall allow the Subordinated Payee to
retain the right to vote and otherwise act in a Proceeding (including, without
limitation, the right to vote to accept or reject any plan of partial or
complete liquidation, reorganization, arrangement, composition or extension),
the Subordinated Payee shall not vote with respect to any such plan or take any
other action in any way so as to contest (x) the validity of any liens or
security interests granted to, or for the benefit of, the holders of the Senior
Indebtedness, (y) the relative rights and duties of the holders of the Senior
Indebtedness established in the Credit Agreement with respect to such liens and
security interests or (z) the enforceability of the Credit Agreement or these
subordination provisions.
1. In connection with any Proceeding, the Subordinated Payee irrevocably
authorizes the holders of the Senior Indebtedness or any of them, to demand, sue
for, collect and receive all payments and distributions to the extent required
in this Section 10(a), to give acquittance therefor and to take such other
actions as such holders of the Senior Indebtedness may deem necessary or
advisable for the enforcement of these subordination provisions. The
Subordinated Payee further agrees duly and promptly to take such action as may
be requested at any time or from time to time by the holders of the Senior
Indebtedness, to file appropriate proofs of claim in respect of the Subordinated
Note and to execute and deliver such powers of attorney, assignments or proofs
of claim or other instruments as may be requested by the holders of the Senior
Indebtedness, all as may be necessary or advisable to enable such holders of the
Senior Indebtedness to enforce any and all claims upon or in respect of this
Subordinated Note and to receive any and all payments or distributions to the
extent required in this Section 10(a).
<PAGE>
A. WAIVERS AND CONSENTS.
1. The Subordinated Payee waives the right to compel that any collateral or any
other property of the Company or the property of any guarantor of any Senior
Indebtedness or any other Person be applied in any particular order to discharge
such Senior Indebtedness. The Subordinated Payee expressly waives the right to
require holders of Senior Indebtedness to proceed against the Company, any
collateral or any guarantor of any Senior Indebtedness or any other Person, or
to pursue any other remedy in any such holder's power which the Subordinated
Payee cannot pursue and which would lighten the Subordinated Payee's burden,
notwithstanding that the failure of any holder of Senior Indebtedness to do so
may thereby prejudice the Subordinated Payee. The Subordinated Payee agrees that
it shall not be discharged, exonerated or have its obligations hereunder to any
holder of Senior Indebtedness reduced by any such holder's delay in proceeding
against or enforcing any remedy against the Company, any collateral or any
guarantor of any Senior Indebtedness or any other Person; by any holder of
Senior Indebtedness releasing the Company, any collateral or any guarantor of
any Senior Indebtedness or any other Person from all or any part of such Senior
Indebtedness; or by the discharge of the Company, any collateral or any
guarantor of any Senior Indebtedness or any other Person by operation of law or
otherwise, with or without the intervention or omission of a holder of Senior
Indebtedness. Any holder's of Senior Indebtedness vote to accept or reject any
plan of reorganization relating to the Company, any collateral, or any guarantor
of such Senior Indebtedness or any other Person, or any holder's of Senior
Indebtedness receipt on account of all or part of any Senior Indebtedness of any
cash, property or securities distributed in any Proceeding, shall not discharge,
exonerate or reduce the obligations of the Subordinated Payee hereunder to any
holder of Senior Indebtedness.
2. The rights under these subordination provisions of the holders of any Senior
Indebtedness as against the Subordinated Payee shall remain in full force and
effect without regard to, and shall not be impaired or affected by: (A) any act
or failure to act on the part of the Company; (B) any extension, renewal or
indulgence in respect of any payment or prepayment of Senior Indebtedness or any
part thereof or in respect of any other amount payable to any holder of Senior
Indebtedness; (C) any amendment, modification or waiver of, or addition or
supplement to, or deletion from, or compromise, release, consent or other action
in respect of, any of the terms of Senior Indebtedness or any other agreement
which may be made relating to Senior Indebtedness; (D) any exercise or
non-exercise by the holders of Senior Indebtedness of any right, power,
privilege or remedy under or in respect of the Senior Indebtedness or these
subordination provisions or any waiver of any such right, power, privilege or
remedy or of any default in respect of the Senior Indebtedness or these
subordination provisions, or any receipt by the holders of Senior Indebtedness
of any security, or any failure by such holder to perfect a security interest
in, or any release by such holder of, any security for the payment of the Senior
Indebtedness; (E) any merger or consolidation of the Company or any of its
subsidiaries into or with any other Person, or any sale, lease or transfer of
any or all of the assets of the Company or any of its subsidiaries to any other
Person; or (F) or
<PAGE>
absence of any notice to, or knowledge by, the Subordinated Payee of the
existence or occurrence of any of the foregoing matters or events.
1. The Subordinated Payee waives all rights and defenses arising out of an
election of remedies by any holder of Senior Indebtedness, even though that
election of remedies, including without limitation any nonjudicial foreclosure
with respect to security for such Senior Indebtedness, has impaired the value of
the Subordinated Payee's rights of subrogation, reimbursement or contribution
against the Company or any guarantor of any Senior Indebtedness or any other
Person. The Subordinated Payee expressly waives any rights or defenses it may
have by reason of protection afforded to the Company or any guarantor of any
Senior Indebtedness or any other Person with respect to such Senior Indebtedness
pursuant to any anti-deficiency laws or other laws of similar import which limit
or discharge the principal debtor's indebtedness upon judicial or nonjudicial
foreclosure of real property or personal property collateral for any Senior
Indebtedness.
1. The Subordinated Payee agrees that, without the necessity of any reservation
of rights against it, and without notice to or further assent by it, any demand
for payment of any Senior Indebtedness made by a holder thereof may be rescinded
in whole or in part by such holder, and any Senior Indebtedness may be
continued, and such Senior Indebtedness, or the liability of the Company or any
of its subsidiaries or any other guarantor or any other party upon or for any
part thereof, or any collateral or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, waived, surrendered or released by
the holders of such Senior Indebtedness, in each case without notice to or
further assent by the Subordinated Payee and without impairing, abridging,
releasing or affecting the subordination provided for herein.
2. The Subordinated Payee waives any and all notice of the creation, renewal,
extension or accrual of any Senior Indebtedness and notice of or proof of
reliance by any holder of Senior Indebtedness upon the provisions of this
Section 10. Any Senior Indebtedness shall be deemed conclusively to have been
created, contracted or incurred and the consent given to create the obligations
of the Company in respect of this Subordinated Note in reliance upon the
provisions of this Section 10, and all dealings between the Company and any
holder of Senior Indebtedness shall be deemed to have been consummated in
reliance upon the provisions of this Section 10. The Subordinated Payee waives
notice of or proof of reliance on the provisions of this Section 10 and protest,
demand for payment and notice of default.
<PAGE>
A. WAIVER OF CLAIMS.
1. To the maximum extent permitted by law, the Subordinated Payee waives any
claim it might have against any holder of Senior Indebtedness with respect to,
or arising out of, any action or failure to act or any requirement of diligence
on the part of any holder of Senior Indebtedness or any requirement on the part
of any holder of Senior Indebtedness to mitigate damages resulting from any
default under such Senior Indebtedness or any error of judgment, negligence or
mistake or oversight whatsoever on the part of any holder of Senior Indebtedness
or its directors, officers, employees or agents with respect to any exercise of
rights or remedies under the agreements governing or relating to such Senior
Indebtedness.
1. The Subordinated Payee, for itself and on behalf of its successors and
assigns, hereby waives any and all now existing or hereafter arising rights it
may have to require any holder of Senior Indebtedness to marshal assets for the
benefit of the Subordinated Payee, or to otherwise direct or receive notice of
the timing, order or manner of any sale, collection or other enforcement of any
collateral. The holders of Senior Indebtedness are under no duty or obligation,
and the Subordinated Payee hereby waives any right it may have to compel any
holder of Senior Indebtedness, to pursue any guarantor or other Person who may
be liable for such Senior Indebtedness, or to enforce any lien or security
interest in any collateral.
1. The Subordinated Payee hereby waives and releases all rights which a
guarantor or surety with respect to any Senior Indebtedness could exercise.
1. The Subordinated Payee hereby waives any duty on the part of any holder of
Senior Indebtedness to disclose to it any fact known or hereafter known by such
holder relating to the operation or financial condition of the Company or any
guarantor of such Senior Indebtedness or their respective businesses.
1. The Subordinated Payee unconditionally waives (A) notice of any of the
matters referred to in Section 10(b) and this Section 10(c), (B) to the extent
permitted by law, all notices which may be required, whether by statute, rule of
law or otherwise, to preserve intact any rights of any holder of any Senior
Indebtedness against the Company, including, without limitation, any demand,
presentment and protest, proof of notice of nonpayment under any Senior
Indebtedness and notice of any failure on the part of the Company to perform and
comply with any covenant, agreement, term or condition of the Senior
Indebtedness, (C) any right to the enforcement, assertion or exercise by any
holder of any Senior Indebtedness of any right, power, privilege or remedy
conferred in such Senior Indebtedness or otherwise, and (D) any notice of any
sale, transfer or other disposition of any Senior Indebtedness by any holder
thereof.
<PAGE>
A. RELATIVE RIGHTS. This Section 10 defines the relative rights of the
Subordinated Payee and holders of Senior Indebtedness. Nothing in this
Subordinated Note shall: (i) impair, as between the Company and the Subordinated
Payee, the obligation of the Company which is absolute and unconditional, to pay
principal of, premium, if any, and interest on this Subordinated Note in
accordance with its terms; or (ii) affect the relative rights of the
Subordinated Payee and creditors of the Company other than their rights in
relation to holders of Senior Indebtedness.
A. SUBROGATION. The Subordinated Payee shall not have any subrogation or other
rights as the holder of Senior Indebtedness, and the Subordinated Payee hereby
waives all such rights of subrogation and all rights of reimbursement or
indemnity whatsoever and all rights of recourse to any security for any Senior
Indebtedness, until such time as all the Senior Indebtedness shall be
indefeasibly paid in full in cash and all of the Obligations of the Credit
Parties under the Senior Indebtedness shall have been duly performed. From and
after the time at which all Senior Indebtedness has been indefeasibly paid in
full in cash, the rights of the Subordinated Payee shall be subrogated to all
rights of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the subordinated
amounts due pursuant to the Subordinated Note shall have been indefeasibly paid
in full in cash, and for the purposes of such subrogation, no payment or
distribution received by the holders of Senior Indebtedness of cash, securities
or other property to which the Subordinated Payee would have been entitled
except for these subordination provisions shall, as between the Company and its
creditors other than the holders of Senior Indebtedness, on the one hand, and
the Subordinated Payee, on the other, be deemed to be a payment or distribution
by the Company to or on account of the Senior Indebtedness.
A. AUTHORIZATION TO EFFECT SUBORDINATION. The Subordinated Payee by its
acceptance of this Subordinated Note authorizes and directs the holders of
Senior Indebtedness to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Section (including, without
limitation, to demand, sue for, collect and receive all payments and
distributions), and appoints the holders of Senior Indebtedness to act as their
attorney-in-fact for any and all such purposes, including, upon the occurrence
of any Proceeding as set forth in Section 10(a).
I. TRANSFERABILITY AND ASSIGNMENT. A Subordinated Payee may not transfer, sell,
pledge, convey, assign or otherwise dispose of ("Transfer") this Subordinated
Note to any other Person without (a) the prior written consent of the Company's
Board of Directors, (b) first delivering to the Company (i) an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel must be reasonably acceptable to the Company) that registration under
the Securities Act, or any state or other securities law is not required in
connection with such Transfer and (ii) a written joinder to this Subordinated
Note by the proposed transferee pursuant to which such proposed transferee shall
agree to be bound by the provisions of this Subordinated Note, including Section
10 and (c) so long as any Senior Indebtedness remains outstanding, the prior
written consent of the holders of Senior Indebtedness or
<PAGE>
any representative of such holders authorized to give a consent to such joinder
and such transferee. Any transferee executing and delivering such a joinder and
thereafter acquiring this Subordinated Note in accordance with the preceding
sentence shall be referred to herein as a "Permitted Transferee". Any Transfer
or attempted Transfer of this Subordinated Note in violation of any provision of
this Subordinated Note shall be null and void, and the Company shall not record
such Transfer on its books or treat any purported transferee of this
Subordinated Note as the owner of this Subordinated Note for any purpose.
I. COUNTERPARTS. This Subordinated Note may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
I. USURY LAWS. It is the intention of the Company and the Subordinated Payee to
conform strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Subordinated Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Subordinated Note is
accelerated by reason of an election by the holder hereof resulting from an
Event of Default, voluntary prepayment by the Company or otherwise, then earned
interest may never include more than the maximum amount permitted by law,
computed from the date hereof until payment, and any interest in excess of the
maximum amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the option of the Subordinated Payee either be
rebated to the Company or credited on the principal amount of this Subordinated
Note, or if this Subordinated Note has been paid, then the excess shall be
rebated to the Company. The aggregate of all interest (whether designated as
interest, service charges, points or otherwise) contracted for, chargeable, or
receivable under this Subordinated Note shall under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of this Subordinated Note
remaining unpaid from time to time. If such interest does exceed the maximum
legal rate, it shall be deemed a mistake and such excess shall be canceled
automatically and, if theretofore paid, rebated to the Company or credited on
the principal amount of this Subordinated Note, or if this Subordinated Note has
been repaid, then such excess shall be rebated to the Company.
I. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
I. AMENDMENTS; WAIVERS. So long as any Senior Indebtedness remains outstanding,
no amendment or modification to or waiver of any provisions of, or the
definitions of any terms appearing in, Section 10, or to or of any other
provision of this Subordinated Note may be made that affects the rights of any
<PAGE>
holder of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness, or any representative of such holders authorized to give a
consent, consent to such amendment, modification or waiver; provided, however,
that this Subordinated Note may be amended to increase the Original Principal
Amount by an additional amount not to exceed $5,000,000 without the consent of
the holders of Senior Indebtedness.
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this Junior
Subordinated Unsecured Promissory Note on the date specified above.
MUZAK LLC
----------------------------
By:
-------------------------
Name: Royce Yudkoff
Title: Vice President
Accepted and Agreed to:
MEM HOLDINGS, LLC
By:
Name: Peni Garber
Title: Executive Vice President
EXECUTION COPY
THIS JUNIOR SUBORDINATED UNSECURED CONVERTIBLE PROMISSORY NOTE (THIS
"SUBORDINATED NOTE") WAS ORIGINALLY ISSUED ON NOVEMBER 8, 1999, AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OTHERWISE DISPOSED OF OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE OR OTHER SECURITIES LAW OR AN EXEMPTION FROM SUCH
REGISTRATION AND EXCEPT IN COMPLIANCE WITH SECTION 11 HEREOF.
MUZAK LLC
15% JUNIOR SUBORDINATED UNSECURED CONVERTIBLE
PROMISSORY NOTE DUE 2007
November 8, 1999 $20,000,000
MUZAK LLC, a Delaware limited liability company (the
"Company"), for value received, hereby promises to pay, in immediately available
funds, to the Subordinated Payee (as defined herein), the principal amount of
Twenty Million Dollars ($20,000,000) (such amount, the "Original Principal
Amount"), on June 30, 2007 (the "Maturity Date") together with interest thereon
calculated from the date hereof in accordance with the provisions contained
herein. The initial Subordinated Payee is MEM Holdings, LLC.
I. PAYMENT OF PRINCIPAL. Subject to the provisions of Section 10:
A. Scheduled Payment. The Company will pay the entire unpaid principal amount of
this Subordinated Note on the Maturity Date.
A. Optional Prepayment. The Company may prepay the principal amount of this
Subordinated Note, in whole or in part (together with all interest accrued
thereon), at any time and from time to time, without premium or penalty.
I. INTEREST. Subject to the provisions of Section 10, interest will accrue at
the rate of fifteen percent (15%) per annum (computed on the basis of a
365/366-day year and the actual number of days elapsed in any year) on the
unpaid
<PAGE>
principal amount of this Subordinated Note outstanding from time to time
during the applicable period, and will be payable on the Maturity Date.
<PAGE>
Prior to the Maturity Date or the conversion of this Subordinated Note pursuant
to Section 16 hereof, any accrued interest which is not paid as of any March 31,
June 30, September 30 or December 31 (each, an "Interest Accumulation Date")
will thereafter bear interest at the rate of fifteen percent (15%) per annum
(computed on the basis of a 365/366-day year and the actual number of days
elapsed in any year) until such interest is paid or extinguished.
I. EVENTS OF DEFAULT.
A. Definition. An "Event of Default" will be deemed to have occurred if:
1. the Company fails to pay any amount of the principal of this Subordinated
Note within ten Business Days after the date such principal amount becomes due
and payable pursuant to the terms of this Subordinated Note, whether or not such
payment shall be prohibited by Section 10; or
1. the Company makes an assignment for the benefit of creditors; or an order,
judgment or decree is entered by a court of competent jurisdiction adjudicating
the Company bankrupt or insolvent; or the Company petitions or applies to any
tribunal for the appointment of a custodian, trustee, receiver or liquidator of
the Company; or any such petition or application is filed against the Company
and such petition or application is not dismissed within 90 days.
A. Consequences of Events of Default.
1. Except as provided in (b)(ii) below, and subject to the provisions of Section
10, if any Event of Default has occurred and is continuing, then, at any time
after the Subordinated Payee has given five days prior written notice to any
holder of Senior Indebtedness (as herein defined), the Subordinated Payee may
declare (by written notice delivered to the Company) all or any portion of the
outstanding principal amount of this Subordinated Note (together with all
accrued interest thereon) to be immediately due and payable and may demand
immediate payment of all or any portion of the outstanding principal amount of
this Subordinated Note and interest thereon.
1. If an Event of Default under (a)(ii) above has occurred, the outstanding
principal amount of this Subordinated Note (together with all accrued interest
thereon) shall become due and payable without any action by the Subordinated
Payee, and, subject to the provisions of Section 10, the Subordinated Payee may
demand immediate payment of the outstanding principal amount of this
Subordinated Note and interest thereon.
I. DEFINITIONS. For purposes of this Subordinated Note, the following
capitalized terms have the following meanings:
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or
a legal holiday under the laws of the State of New York.
"Class A Units" means Holdings' Class A Units (as such term is
defined in the LLC Agreement).
"Credit Party" means each Person (other than any agent or
lender or any other representative thereof) from time to time party to the
Senior Credit Agreement.
"distribution" (a) means any distribution of any kind or
character, including, without limitation, (i) a payment, purchase, redemption or
other acquisition or retirement for cash, property or securities, (ii) by way of
cancellation, forgiveness or offset of the indebtedness evidenced by this
Subordinated Note against any indebtedness owed by the Subordinated Payee to the
Company or (iii) payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of this
Subordinated Note, except a conversion of this Subordinated Note pursuant to
Section 16 hereof, and (b) may consist of cash, securities, or other property.
"Holdings" means Muzak Holdings LLC, a Delaware limited
liability company, and, as of the date hereof, the owner of all of the issued
and outstanding equity securities of the Company.
"indefeasible payment and satisfaction in full" or similar
words mean (i) all amounts due or to become due on or in respect of the Senior
Indebtedness shall have been previously paid in full in cash and shall not be
subject to avoidance under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, (ii) all commitments to lend under the Senior
Indebtedness shall have been terminated, (iii) all letters of credit shall have
been cancelled or otherwise terminated, (iv) all guarantees constituting Senior
Indebtedness shall have been terminated and (v) all lender guarantees
constituting Senior Indebtedness shall have been permanently reduced to zero.
"LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of Holdings, dated as of March 18, 1999, as amended
from time to time.
"Obligations" means all obligations for principal, premium,
interest (including, but not limited to, interest accruing at the legal rate on
or after the filing of any Bankruptcy Proceeding (as herein defined), and any
additional interest that would have accrued thereon but for the commencement of
such proceeding, whether or not a claim for such is allowed in any such
proceeding), penalties, charges, fees, fees and expenses of counsel (including,
without limitation, any expenses in connection with claims and litigation),
commissions, indemnitees, reimbursement obligations, damages, rescission costs,
guarantees, claims and other amounts and liabilities payable under the
documentation governing any indebtedness, secured or unsecured, contingent or
otherwise, or otherwise arising in respect of such indebtedness.
<PAGE>
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
subsidiaries under generally accepted accounting principles as in effect in the
United States from time to time.
"Senior Agent" means Canadian Imperial Bank of Commerce, as
Administrative Agent for the Lenders, the Lender Counterparties and the
Indemnitees under the Senior Credit Agreement, and its successors in such
capacity, or if there is then no acting Administrative Agent under any Senior
Credit Agreement, the holders of a majority in principal amount of the
outstanding Senior Indebtedness.
"Senior Credit Agreement" means one or more credit agreements,
loan agreements or similar agreements providing for working capital advances,
term loans, letter of credit facilities or similar advances, loans, or
facilities to the Company or any of its subsidiaries, including the Credit and
Guaranty Agreement, dated as of March 18, 1999, by and among the Company,
Holdings and certain subsidiaries of the Company, various lenders from time to
time party thereto, Goldman Sachs Credit Partners L.P. ("GSCP"), as syndication
agent, Canadian Imperial Bank of Commerce, as administrative agent, and GSCP and
CIBC Oppenheimer Corp., as co-lead arrangers, as amended by (i) the First
Amendment, Consent and Waiver, dated as of July 1, 1999, and (ii) the Second
Amendment and Consent dated as of October 30, 1999, initially providing for term
loan and revolving credit facilities and including any related notes,
guarantees, security or pledge agreements, collateral documents, instruments and
agreements executed in connection therewith, in each case as such credit
facilities and/or related documents may be further amended, restated,
supplemented, renewed, refunded, refinanced, replaced, restructured, in whole or
in part, or otherwise modified from time to time, whether or not with the same
agents, trustee, representative lenders or group of lenders or holders, and
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Agreement"
shall include agreements in respect of interest rate agreements and hedging
obligations with lenders party to any Senior Credit Agreement and their
affiliates and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Senior
Credit Agreement and any and all refundings, refinancings (in whole or in part)
and replacements of any Senior Credit Agreement, whether by the same or any
other agents, trustee, representative lenders or group of lenders or holders and
irrespective of any changes in the terms and conditions thereof, including one
or more agreements (i) extending the maturity of, or increasing the amount of,
any indebtedness incurred thereunder or contemplated thereby, or (ii) adding or
deleting borrowers or guarantors thereunder, so long as borrowers and issuers
include one or more of the Company and its subsidiaries and their respective
successors and assigns.
<PAGE>
"Senior Indebtedness" means (i) the indebtedness outstanding
or arising under the Senior Credit Agreement, (ii) all Obligations incurred by
or owing to the Senior Agent, the holders of such indebtedness or any other
agent or representative thereof outstanding or arising under any Senior Credit
Agreement, whether now or hereafter incurred, made or created, whether absolute
or contingent, liquidated or unliquidated, whether due or not due, including,
without limitation, and (iii) all obligations of the Company or any other Credit
Party in respect of all interest rate agreements and hedging obligations arising
in connection therewith with any party to the Senior Credit Agreement or any of
its affiliates.
"Sub Debt Default" shall have the meaning given to the term
"Default" in the Sub Debt Indenture.
"Sub Debt Event of Default" shall have the meaning given to
the term "Event of Default" in the Sub Debt Indenture.
"Sub Debt Indebtedness" means all Obligations under or in
respect of the Sub Debt Indenture.
"Sub Debt Indenture" means the indenture, dated as of March
18, 1999, pursuant to which the Sub Debt Notes are issued, as the same may from
time to time be amended, renewed, supplemented or otherwise modified.
"Sub Debt Notes" means the $115,000,000 in aggregate principal
amount of 9-7/8% Senior Subordinated Notes due 2009 of the Company and Muzak
Finance Corp. issued pursuant to the Sub Debt Indenture.
"Subordinated Payee" means MEM Holdings, LLC, or any Permitted
Transferee (as defined herein); provided, that any Subordinated Payee shall
cease to be a Subordinated Payee once such Subordinated Payee ceases to own any
right to any principal amount of this Subordinated Note.
I. CANCELLATION. After all principal and accrued interest at any time owed on
this Subordinated Note have been paid in full, this Subordinated Note will be
surrendered to the Company for cancellation and will not be reissued.
I. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the several
Sections of this Subordinated Note are inserted for convenience only and do not
constitute a part of this Subordinated Note. This Subordinated Note will be
governed by the internal law of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of law of
any jurisdiction other than the State of New York.
I. BUSINESS DAYS. If any payment is due, or any time period for giving notice or
taking action expires, on a day which is not a Business Day, then the
<PAGE>
payment will be due and payable on, and the time period will automatically be
extended to, the next Business Day immediately following such day which is not a
Business Day, and interest will continue to accrue at the required rate under
this Subordinated Note until any such payment is made.
I. GENERAL. This Subordinated Note, the Sub Debt Indenture and the Senior Credit
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof; supersede any and all prior understandings relating to
such subject matter; and will be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
I. WAIVER OF JURY TRIAL. THE COMPANY (AND, BY ITS ACCEPTANCE OF THIS
SUBORDINATED NOTE, THE SUBORDINATED PAYEE HEREOF) HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SUBORDINATED NOTE OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF.
I. SUBORDINATION.
A. Extent of Subordination to Senior Indebtedness. The Company covenants and
agrees, and the Subordinated Payee, by accepting this Subordinated Note,
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Section 10, the indebtedness represented by this Subordinated
Note, whether for principal of, premium, if any, interest on, this Subordinated
Note, and any other Obligation under or in respect hereof and all rights or
claims arising out of or associated with such indebtedness (collectively, the
"Subordinated Obligations"), are hereby expressly made junior and subordinate in
right of payment as provided in this Section 10 to the prior indefeasible
payment and satisfaction in full in cash of all Obligations in respect of all
Senior Indebtedness (including post-petition interest thereon).
Any provision of this Subordinated Note to the contrary
notwithstanding, the Company shall not make and the Subordinated Payee shall not
accept, any distribution or payment of any kind whatsoever with respect to the
Subordinated Obligations at any time when any of the Senior Indebtedness remains
outstanding. In no event shall the Subordinated Payee commence any action or
proceeding to contest or otherwise contest the enforceability of the provisions
of this Subordinated Note, the validity, perfection or priority of any security
interests or other liens granted to secure the Senior Indebtedness by the
Company or any other Person, the rights of the Senior Agent or any holders of
Senior Indebtedness or the enforceability of the Senior Credit Agreement.
The Company will not give, or permit to be given, and the
Subordinated Payee will not receive, accept or demand, (i) any security of any
nature whatsoever for
<PAGE>
any Subordinated Obligations, on any property or assets, whether now existing or
hereafter acquired, of the Company or any other Credit Party or (ii) any
guarantee, of any nature whatsoever, by the Company or any other Credit Party,
of any Subordinated Obligations.
The Subordinated Payee acknowledges and agrees that the
subordination provisions herein are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of this
Subordinated Note, to acquire and continue to hold, or to continue to hold such
Senior Indebtedness.
To the extent that any payment of or distribution in respect
of Senior Indebtedness (whether by or on behalf of the Company , as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then if such payment or distribution is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent that the obligation to repay the Senior
Indebtedness is declared to be fraudulent, invalid or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
A. Distributions and Liquidation, Dissolution, Bankruptcy. In the event of (i)
any distribution of assets of the Company, (ii) any insolvency, or bankruptcy,
case or proceeding, or any receivership, liquidation, reorganization,
arrangement, adjustment, action for the relief of debtors, or other similar case
or proceeding in connection therewith, relative to the Company, its debts, its
operations or to its creditors, as such, or to its assets, or (iii) any
liquidation, dissolution or other winding-up of the Company and whether or not
involving insolvency or bankruptcy, or (iv) any assignment for the benefit of
creditors or any other marshaling of assets or liabilities of the Company, in
each case whether voluntary or involuntary, including, without limitation, the
filing of any petition or the taking of any action to commence any of the
foregoing under any law, foreign or domestic, federal or state (clauses (ii)
through (iv) are referred to as a "Bankruptcy Proceeding"), then and in any such
event:
(i) The Senior Agent and the holders of Senior Indebtedness
shall be entitled to receive indefeasible payment and satisfaction in
full in cash of all amounts due on or in respect of all Senior
Indebtedness (including, but not limited to, interest accruing at the
legal rate on or after the filing of any Bankruptcy Proceeding, and any
additional interest that would have accrued thereon but for
<PAGE>
the commencement of such proceeding, whether or not a claim for such is
allowed in such proceeding), before the Subordinated Payee is entitled
to receive or retain any payment or distribution of any kind or
character on account of this Subordinated Note or any Subordinated
Obligations on this Subordinated Note;
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Subordinated Payee would be entitled
but for the provisions of this Section 10 shall be paid by the Company,
a liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the Senior Agent or the
holders of Senior Indebtedness, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each to the extent necessary to make indefeasible
payment and satisfaction in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the Senior Agent or the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 10(b), the Subordinated Payee shall have
received any payment or distribution of assets of the Company of any
kind or character, whether in cash, or property or securities,
including, without limitation, by way of set-off or otherwise, in
respect of principal of, premium, if any, interest or any Subordinated
Obligations on this Subordinated Note before all Senior Indebtedness is
indefeasibly paid in full in cash, then and in such event payment or
distribution shall be held in trust for the benefit of and shall be
paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid,
to the extent necessary to indefeasibly pay and satisfy all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of the Senior
Indebtedness.
<PAGE>
A. No Payments with Respect to Subordinated Obligations.
1. Unless Section 10(b) shall be applicable, no payment or distribution of any
kind or character (including, without limitation, cash, property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of this
Subordinated Note) may be made by or on behalf of the Company or accepted by the
Subordinated Payee, including, without limitation, by way of set-off or
otherwise, for or on account of this Subordinated Note or of any Subordinated
Obligations under this Subordinated Note, or for or on account of the purchase,
redemption or other acquisition of this Subordinated Note, and the Subordinated
Payee shall not take or receive from the Company, directly or indirectly in any
manner, payment in respect of all or any portion of this Subordinated Note or of
any Subordinated Obligations under this Subordinated Note, or for or on account
of the purchase, redemption or other acquisition of this Subordinated Note until
the indefeasible payment and satisfaction in full in cash of all Senior
Indebtedness.
A. When Distribution Must Be Paid Over. In the event that notwithstanding these
provisions, the Subordinated Payee receives any payment or distribution of
assets of the Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in respect of
this Subordinated Note or any Subordinated Obligations under this Subordinated
Note, that the Subordinated Payee is not entitled to receive or retain under the
provisions of this Subordinated Note, then such payment or distribution shall be
held by the Subordinated Payee in trust for the benefit of the Senior Agent and
the Subordinated Payees of Senior Indebtedness, (segregated from other assets
held by the Subordinated Payee) and shall be immediately paid over or delivered
to the Senior Agent in the form received (with any necessary endorsement) to the
extent necessary to make indefeasible payment and satisfaction in full in cash
of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
In the event of the failure of the Subordinated Payee to endorse or assign any
such payment or distribution, the Senior Agent is hereby irrevocably authorized
to endorse or assign the same.
A. Exercise of Remedies. Until the indefeasible payment and satisfaction in full
in cash of all Senior Indebtedness, the Subordinated Payee (solely in its
capacity as a holder of this Subordinated Note) shall not exercise any rights or
remedies with respect to this Subordinated Note, including, without limitation,
any administrative, legal, equitable or other action (i) to demand or sue for
collection of amounts payable hereunder, (ii) to accelerate the principal of
this Subordinated Note, (iii) to commence or join with any other creditor in
commencing any proceeding in connection with or premised on the occurrence of a
Bankruptcy Proceeding, or (iv) to take, obtain or hold (or to permit anyone
acting on its behalf to take, obtain or hold) any assets of the Company.
<PAGE>
A. Rights. The provisions of this Section 10 are for the benefit of, and shall
be enforceable directly by, the Senior Agent and the holders of Senior
Indebtedness (and their successors and assigns), the Senior Agent and each
holder of Senior Indebtedness is made an obligee hereunder, and the Senior Agent
and each holder of Senior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed, or guaranteed shall be deemed conclusively to have
acquired or to continue to hold such Senior Indebtedness in reliance upon the
covenants and provisions contained in this Subordinated Note. The Subordinated
Payee acknowledges and agrees that any breach of the provisions of this Section
10 will cause irreparable harm of which the payment of monetary damages may be
inadequate. For this reason, the Subordinated Payee agrees that, in addition to
any remedies at law or in equity to which the Senior Agent or a Subordinated
Payee of the Senior Indebtedness may be entitled, the Senior Agent or a holder
of the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section 10 and to compel
specific performance of such provisions.
The provisions of this Section 10 are and are intended solely
for the purpose of defining the relative rights of the Subordinated Payee on the
one hand and the Senior Agent and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Section 10 or elsewhere in this
Subordinated Note is intended to or shall impair, as among the Company its
creditors other than the holders of Senior Indebtedness and the Subordinated
Payee, the obligation of the Company, which is absolute and unconditional, to
pay to the Subordinated Payee the principal of, premium, if any, and interest on
this Subordinated Note as and when the same shall become due and payable in
accordance with its terms.
A. Acceleration of Payment of Subordinated Note. If this Subordinated Note is
declared due and payable prior to the Maturity Date, no direct or indirect
payment that is due solely by reason of such declaration shall be made, nor
shall application be made of any distribution of assets of the Company to the
payment, purchase or other acquisition or retirement of this Subordinated Note,
unless, in either case, all Senior Indebtedness shall have been previously
indefeasibly paid and satisfied in full in cash.
A. Voting Rights; Authorization to Effect Subordination. The Senior Agent shall
be entitled to file and prove all claims and to exercise any right to vote of
the Subordinated Payee in respect of this Subordinated Note in connection with a
Bankruptcy Proceeding. Notwithstanding the foregoing, in the event that the
Senior Agent shall allow the Subordinated Payee to retain the right to vote and
otherwise act in a Bankruptcy Proceeding (including, without limitation, the
right to vote to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension), the Subordinated Payee
shall not vote with respect to any such plan or take any other action in any way
so as to contest (x) the validity of any liens or security interests granted to
the Senior Agent, (y) the relative rights and duties of the Senior Agent or the
holders of the Senior Indebtedness established in the Senior Credit Agreement
with respect to such liens and security interests or (z) the enforceability of
the Senior Credit Agreement or these subordination provisions.
<PAGE>
The Subordinated Payee hereby irrevocably authorizes , directs
and empowers the Senior Agent, and hereby appoints the Senior Agent to act as
its attorney-in-fact, for any and all of the following purposes, (i) to demand,
sue for, collect and receive all payments and distributions under the terms of
this Subordinated Note, (ii) to file and prove all claims and to exercise any
right to vote in any Bankruptcy Proceeding as set forth above, and (iii) to take
any and all other actions in the name of the Subordinated Payee (solely in its
capacity as a holder of this Subordinated Note), as the Senior Agent determines
in its sole discretion to be necessary or appropriate for the enforcement of the
subordination provisions in this Section 10. The Subordinated Payee further
agrees duly and promptly to take such action as may be requested at any time or
from time to time by the Senior Agent, including, without limitation, executing
and delivering any additional powers of attorney, assignments or proofs of
claims or other instruments and supplying any information and documents, to
enable the Senior Agent to take any of the foregoing actions.
Each right, power and remedy of the Senior Agent provided for
in this Subordinated Note or the Senior Credit Agreement, whether now existing
or hereafter available at law or in equity or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Senior Agent
of any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise of all other such rights, powers or remedies, and
no course of dealing or failure or delay on the part of any party hereto in
exercising any such right, power, or remedy shall operate as a waiver thereof or
otherwise prejudice its rights, powers or remedies.
A. Subrogation. Upon the indefeasible payment and satisfaction in full in cash
of all Senior Indebtedness, the Subordinated Payee shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of, premium, if any, and interest on this
Subordinated Note shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Subordinated Payee would be entitled except
for the provisions of this Section 10, and no payments over pursuant to the
provisions of this Section 10 to the Senior Agent or the holders of Senior
Indebtedness by the Subordinated Payee shall, as among the Company, its
creditors other than the Senior Agent or the holders of Senior Indebtedness, and
the Subordinated Payee be deemed to be a payment or distribution by the Company
to or on account of the Senior Indebtedness.
If any payment or distribution to which the Subordinated Payee
would otherwise have been entitled but for the provisions of this Section 10
shall have been applied, pursuant to the provisions of this Section 10, to the
payment of all amounts payable under the Senior Indebtedness, then and in such
case the Subordinated Payee shall be entitled to receive from the Senior Agent
or the holders of such Senior Indebtedness at the time outstanding any payments
or distributions received by such
<PAGE>
holders of such Senior Indebtedness in excess of the amount sufficient to
indefeasibly pay and satisfy all amounts payable under or in respect of such
Senior Indebtedness in full in cash.
A. Waivers and Consents. The Subordinated Payee waives the right to compel that
any collateral or any other property of the Company or the property of any
guarantor of any Senior Indebtedness or any other Person to be applied in any
particular order to discharge such Senior Indebtedness. The Subordinated Payee
expressly waives the right to require the Senior Agent or the holders of Senior
Indebtedness to proceed against the Company, any collateral or any guarantor of
any Senior Indebtedness or any other Person, or to pursue any other remedy in
the power of the Senior Agent or any such holder which the Subordinated Payee
cannot pursue and which would lighten the Subordinated Payee's burden,
notwithstanding that the failure of any holder of Senior Indebtedness to do so
may thereby prejudice the Subordinated Payee. The Subordinated Payee agrees that
it shall not be discharged, exonerated or have its obligations hereunder to any
holder of Senior Indebtedness reduced by (i) holder's delay in proceeding
against or enforcing any remedy against the Company, any collateral or any
guarantor of any Senior Indebtedness or any other Person by the Senior Agent or
any holder of Senior Indebtedness; (ii) the Senior Agent or any holder of Senior
Indebtedness releasing the Company, any collateral or any guarantor of any
Senior Indebtedness or any other Person from all or any part of such Senior
Indebtedness; or (iii) the discharge of the Company, any collateral or any
guarantor of any Senior Indebtedness or any other Person by operation of law or
otherwise, with or without the intervention or omission of the Senior Agent or
any holder of Senior Indebtedness. Any vote by the Senior Agent or any holder of
Senior Indebtedness to accept or reject any plan of reorganization relating to
the Company, any collateral or any guarantor of such Senior Indebtedness or any
other Person, or any receipt by the Senior Agent or any holder of Senior
Indebtedness receipt on account of all or part of any Senior Indebtedness of any
cash, property or securities distributed in any Bankruptcy Proceeding, shall not
discharge, exonerate or reduce the obligations of the Subordinated Payee
hereunder to the Senior Agent and the holders of Senior Indebtedness.
No right of the Senior Agent or any present or future holder
of any Senior Indebtedness to enforce the provisions herein shall at any time in
any way be prejudiced or impaired or affected by (i) any act or failure to act
on the part of the Company or by any act or failure to act by the Senior Agent
or any such holder, (ii) any non-compliance by the Company with the terms,
provisions and covenants of this Subordinated Note or the Senior Credit
Agreement, or (iii) any merger or consolidation of the Company or any of its
subsidiaries into or with any other Person, or any sale, lease or transfer of
any or all of the assets of the Company or any of its subsidiaries to any other
Person, regardless in any case of any knowledge thereof of the Senior Agent or
any such holder may have or be otherwise charged with.
Without limiting the generality of the foregoing, the Senior
Agent and the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to or knowledge of the Subordinated
Payee, without incurring
<PAGE>
responsibility to the Subordinated Payee and without impairing or releasing the
provisions herein or the obligations hereunder of the Subordinated Payee to the
Senior Agent and the holders of Senior Indebtedness , do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew, alter, compromise or waive any Senior Indebtedness or
otherwise amend, modify or supplement in any manner any Senior Indebtedness or
any instrument evidencing the same or any agreement under which any Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing any Senior Indebtedness;
(iii) release any Person liable in any manner for the collection or payment of
any Senior Indebtedness; (iv) exercise or refrain from exercising any rights
against the Company or any other Person; and (v) fail to perfect a security
interest in any collateral for the payment of the Senior Indebtedness.
The Subordinated Payee waives all rights and defenses arising
out of an election of remedies by the Senior Agent or any holder of Senior
Indebtedness, even though that election of remedies, including, without
limitation, any nonjudicial foreclosure with respect to collateral for such
Senior Indebtedness, has impaired the value of the Subordinated Payee's rights
of subrogation, reimbursement or contribution against the Company, any guarantor
of any Senior Indebtedness or any other Person. The Subordinated Payee expressly
waives any rights or defenses it may have by reason of protection afforded to
the Company or any guarantor of any Senior Indebtedness or any other Person with
respect to such Senior Indebtedness pursuant to any anti-deficiency laws or
other laws of similar import which limit or discharge the principal debtor's
indebtedness upon judicial or nonjudicial foreclosure of real property or
personal property collateral for any Senior Indebtedness.
The Subordinated Payee agrees that, without the necessity of
any reservation of rights against it, and without notice to or further assent by
it, any demand for payment of any Senior Indebtedness made by the Senior Agent
or any holder of Senior Indebtedness may be rescinded in whole or in part by the
Senior Agent or any such holder, and any Senior Indebtedness may be continued,
and such Senior Indebtedness, or the liability of the Company or any of its
subsidiaries or any other guarantor or any other Person upon or for any part
thereof, or any collateral or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, waived, surrendered or released by the
Senior Agent or any holder of such Senior Indebtedness, in each case without
notice to or further assent by the Subordinated Payee and without impairing,
abridging, releasing or affecting the subordination provided for herein.
The Subordinated Payee waives any and all notice of the
creation, renewal, extension or accrual of any Senior Indebtedness and notice of
or proof of reliance by the Senior Agent or any holder of Senior Indebtedness
upon the provisions of this Section 10. The Subordinated Payee waives
presentment, protest and demand for payment.
<PAGE>
To the maximum extent permitted by law, the Subordinated Payee
waives any claim it might have against the Senior Agent or any holder of Senior
Indebtedness with respect to, or arising out of, any action or failure to act or
any requirement of diligence on the part of the Senior Agent or any such holder
of Senior Indebtedness or any requirement on the part of the Senior Agent or any
such holder of Senior Indebtedness to mitigate damages resulting from any
default under such Senior Indebtedness, any error of judgment, negligence or
mistake or oversight whatsoever on the part of the Senior Agent or any such
holder of Senior Indebtedness or its respective directors, officers, employees
or agents with respect to any exercise of rights or remedies under the
agreements governing or relating to such Senior Indebtedness.
The Subordinated Payee, for itself and on behalf of its
successors and assigns, hereby waives any and all now existing or hereafter
arising rights it may have to require the Senior Agent or any holder of Senior
Indebtedness to marshal assets for the benefit of the Subordinated Payee, or to
otherwise direct or receive notice of the timing, order or manner of any sale,
collection or other enforcement of any collateral. Neither the Senior Agent nor
any holder of Senior Indebtedness is under any duty or obligation, and the
Subordinated Payee hereby waives any right it may have to compel the Senior
Agent or any holder of Senior Indebtedness, to pursue any guarantor or other
Person who may be liable for such Senior Indebtedness, or to enforce any lien or
security interest in any collateral.
The Subordinated Payee hereby waives and releases all rights
which a guarantor or surety with respect to any Senior Indebtedness could
exercise.
The Subordinated Payee hereby waives any duty on the part of
the Senior Agent or any holder of Senior Indebtedness to disclose to it any fact
known or hereafter known by it relating to the operation or financial condition
of the Company or any guarantor of such Senior Indebtedness or their respective
businesses or assets.
The Subordinated Payee unconditionally waives (i) notice of
any of the matters referred to in this Section 10, (ii) to the extent permitted
by law, all notices which may be required, whether by statute, rule of law or
otherwise, to preserve intact any rights of the Senior Agent or any holder of
any Senior Indebtedness against the Company, including, without limitation, any
demand, presentment, protest and default, proof of notice of nonpayment under
any Senior Indebtedness and notice of any failure on the part of the Company or
any other Credit Party to perform and comply with any covenant, agreement, term
or condition of the Senior Indebtedness, (iii) any right to the enforcement,
assertion or exercise by the Senior Agent or any holder of any Senior
Indebtedness of any right, power, privilege or remedy conferred in such Senior
Indebtedness or otherwise, and (iv) any notice of any sale, transfer or other
disposition of any Senior Indebtedness by any holder thereof.
A. Subordination to the Sub Debt Indebtedness. The Company covenants and agrees,
and the Subordination Payee by accepting this Subordinated Note covenants and
agrees, that so long as any Sub Debt Default or Sub Debt Event of Default
<PAGE>
shall have occurred and be continuing, no payment of principal of (and premium,
if any) or interest on, or any other payment obligations with respect to, this
Subordinated Note or any judgment with respect hereto shall be made by or on
behalf of the Company or any other Credit Party.
A. Conversion of this Subordinated Note. Notwithstanding anything contained
herein to the contrary, nothing contained in this Section 10 shall prevent any
conversion of this Subordinated Note in accordance with the provisions of
Section 16 hereof.
I. TRANSFERABILITY AND ASSIGNMENT. A Subordinated Payee may not transfer, sell,
pledge, convey, assign or otherwise dispose of ("Transfer") this Subordinated
Note to any other Person without (a) the prior written consent of the Company's
Board of Directors, (b) first delivering to the Company (i) an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel must be reasonably acceptable to the Company) that registration under
the Securities Act, or any state or other securities law is not required in
connection with such Transfer and (ii) a written joinder to this Subordinated
Note by the proposed transferee pursuant to which such proposed transferee shall
agree to be bound by the provisions of this Subordinated Note, including Section
10 and (c) so long as any Senior Indebtedness remains outstanding, the prior
written consent of the holders of Senior Indebtedness or any representative of
such holders authorized to give a consent to such joinder and such transferee.
Any transferee executing and delivering such a joinder and thereafter acquiring
this Subordinated Note in accordance with the preceding sentence shall be
referred to herein as a "Permitted Transferee". Any Transfer or attempted
Transfer of this Subordinated Note in violation of any provision of this
Subordinated Note shall be null and void, and the Company shall not record such
Transfer on its books or treat any purported transferee of this Subordinated
Note as the owner of this Subordinated Note for any purpose.
I. COUNTERPARTS. This Subordinated Note may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
I. USURY LAWS. It is the intention of the Company and the Subordinated Payee to
conform strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Subordinated Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Subordinated Note is
accelerated by reason of an election by the holder hereof resulting from an
Event of Default, voluntary prepayment by the Company or otherwise, then earned
interest may never include more than the maximum amount permitted by law,
computed from the date hereof until payment, and any interest in excess of the
maximum amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the option of the Subordinated Payee either be
rebated to the Company or credited on the principal amount of this
<PAGE>
Subordinated Note, or if this Subordinated Note has been paid, then the excess
shall be rebated to the Company. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Subordinated Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal balance of
this Subordinated Note remaining unpaid from time to time. If such interest does
exceed the maximum legal rate, it shall be deemed a mistake and such excess
shall be canceled automatically and, if theretofore paid, rebated to the Company
or credited on the principal amount of this Subordinated Note, or if this
Subordinated Note has been repaid, then such excess shall be rebated to the
Company.
I. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
I. AMENDMENTS; WAIVERS. So long as any Senior Indebtedness remains outstanding,
no amendment or modification to or waiver of any provisions of, or the
definitions of any terms appearing in, Section 10, or to or of any other
provision of this Subordinated Note may be made that affects the rights of any
holder of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness, or any representative of such holders authorized to give a
consent, consent to such amendment, modification or waiver.
I. CONVERSION.
A. Conversion Procedure.
1. Voluntary Conversion; Automatic Conversion. At any time after the date hereof
and prior to the payment of this Subordinated Note in full, the then
Subordinated Payee may convert this Subordinated Note into a number of Class A
Units determined by dividing (x) the then Convertible Amount (as herein defined)
by (y) $1,000 (the "Conversion Price"). Notwithstanding anything contained
herein to the contrary, if as of May 8, 2001, this Subordinated Note has not
been paid in full, then this Subordinated Note shall automatically be converted
into a number of Class A Units in accordance with the formula contained in the
first sentence of this Section 16(a)(i). If the Subordinated Payee is not a
Member (as such term is defined in the LLC Agreement) at the time of a
conversion of this Subordinated Note, then, at the time of such conversion of
this Subordinated Note, such Subordinated Payee agrees to deliver to the
Secretary of Holdings an executed joinder to the LLC Agreement and any other
documentation necessary in accordance with the requirements of the LLC Agreement
or any of the Related Agreements (as such term is defined in the LLC Agreement).
For purposes of this Subordinated Note, the "Convertible Amount" at any time
shall equal (x) the then outstanding principal amount of this Subordinated Note
plus (y) the interest which has
<PAGE>
then accrued in accordance with the provisions contained herein and which is
then unpaid, in each case, at such time.
1. Effect of Conversion. A conversion of this Subordinated Note will be deemed
to have been effected as of the close of business on the date on which this
Subordinated Note has been surrendered for conversion by the then Subordinated
Payee to the Secretary of Holdings; provided, that in the event of an automatic
conversion of this Subordinated Note, such automatic conversion will be deemed
to have been effected as of the close of business on the date of such automatic
conversion. At such time as such conversion has been effected, the rights of the
then Subordinated Payee (as well as any and all prior Subordinated Payees and
any other former or current holder of this Subordinated Note) under this
Subordinated Note will cease, the Company shall thereafter have no obligation to
make any principal, interest or other payments under this Subordinated Note and
such Subordinated Payee shall be deemed to be the record holder of the
applicable Class A Units which this Subordinated Note shall have then been
converted into. If this Subordinated Note is converted pursuant to this Section
16, no principal amount of, accrued interest on or any other amount pursuant to
this Subordinated Note will be payable at any time as of or after such
conversion.
A. Subdivision or Combination of Class A Units. If Holdings at any time
subdivides (by any unit split, unit distribution or otherwise) the Class A Units
into a greater number of units, then the Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. If Holdings at any
time combines (by reverse unit split or otherwise) the Class A Units into a
smaller number of units, then the Conversion Price in effect immediately prior
to such combination will be proportionately increased.
A. Organic Change.
1. Organic Change Defined. Any recapitalization, reorganization,
reclassification, consolidation or merger of Holdings, which in each case is
effected in such a manner that holders of the Class A Units are entitled to
receive stock or any other securities or property with respect to or in exchange
for such Class A Units is referred to herein as an "Organic Change."
1. Provisions for Organic Change. Prior to the consummation of any Organic
Change, Holdings' Board of Directors will, in good faith, make lawful and
adequate provision to insure that the Subordinated Payee will thereafter have
the right to acquire and receive, in lieu of or addition to (as the case may be)
the Class A Units immediately theretofore acquirable and receivable upon the
conversion of this Subordinated Note, such shares of stock and/or such
securities or property as may be issued or payable with respect to or in
exchange for the Class A Units immediately theretofore acquirable and receivable
upon conversion of this Subordinated Note had such Organic Change not taken
place.
<PAGE>
A. Pre-Emptive Rights. The Company and the Subordinated Payee acknowledge and
agree to comply with the pre-emptive rights, if any, of Joseph Koff, CMS
Diversified Partners, L.P., CMS Co-Investment Subpartnership and CBC Acquisition
Company, Inc. in connection with any conversion of this Note pursuant to this
Section 16.
I. SEVERABILITY. If the provisions of this Subordinated Note, or the application
of such provision to any Person or circumstance, shall be held invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions in this Subordinated Note, or the application of
such provision in jurisdictions or to Persons or circumstances other than to
those to which it is held invalid, illegal or unenforceable shall not be
affected thereby.
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this Junior
Subordinated Unsecured Convertible Promissory Note on the date specified above.
MUZAK LLC
-------------------------
By:
----------------------
Name: Royce Yudkoff
Title: Vice President
Muzak Holdings LLC hereby agrees to comply with the provisions of Section 16
hereof:
MUZAK HOLDINGS LLC
By:
Name: Royce Yudkoff
Title: Vice President
Accepted and Agreed to:
MEM HOLDINGS, LLC
By:
Name: Peni Garber
Title: Executive Vice President
EXECUTION COPY
THIS JUNIOR SUBORDINATED UNSECURED CONVERTIBLE PROMISSORY NOTE (THIS
"SUBORDINATED NOTE") WAS ORIGINALLY ISSUED ON NOVEMBER 24, 1999, AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OTHERWISE DISPOSED OF OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE OR OTHER SECURITIES LAW OR AN EXEMPTION
FROM SUCH REGISTRATION AND EXCEPT IN COMPLIANCE WITH SECTION 11 HEREOF.
MUZAK LLC
15% JUNIOR SUBORDINATED UNSECURED CONVERTIBLE
PROMISSORY NOTE DUE 2007
November 24, 1999 $7,000,000
MUZAK LLC, a Delaware limited liability company (the
"Company"), for value received, hereby promises to pay, in immediately available
funds, to the Subordinated Payee (as defined herein), the principal amount of
Seven Million Dollars ($7,000,000) (such amount, the "Original Principal
Amount"), on June 30, 2007 (the "Maturity Date") together with interest thereon
calculated from the date hereof in accordance with the provisions contained
herein. The initial Subordinated Payee is MEM Holdings, LLC.
I. PAYMENT OF PRINCIPAL. Subject to the provisions of Section 10:
A. Scheduled Payment. The Company will pay the entire unpaid principal amount of
this Subordinated Note on the Maturity Date.
A. Optional Prepayment. The Company may prepay the principal amount of this
Subordinated Note, in whole or in part (together with all interest accrued
thereon), at any time and from time to time, without premium or penalty.
I. INTEREST. Subject to the provisions of Section 10, interest will accrue at
the rate of fifteen percent (15%) per annum (computed on the basis of a
365/366-day year and the actual number of days elapsed in any year) on the
unpaid principal amount of this Subordinated Note outstanding from time to time
during the applicable period, and will be payable on the Maturity Date.
<PAGE>
Prior to the Maturity Date or the conversion of this Subordinated Note pursuant
to Section 16 hereof, any accrued interest which is not paid as of any March 31,
June 30, September 30 or December 31 (each, an "Interest Accumulation Date")
will thereafter bear interest at the rate of fifteen percent (15%) per annum
(computed on the basis of a 365/366-day year and the actual number of days
elapsed in any year) until such interest is paid or extinguished.
I. EVENTS OF DEFAULT.
A. Definition. An "Event of Default" will be deemed to have occurred if:
1. the Company fails to pay any amount of the principal of this Subordinated
Note within ten Business Days after the date such principal amount becomes due
and payable pursuant to the terms of this Subordinated Note, whether or not such
payment shall be prohibited by Section 10; or
1. the Company makes an assignment for the benefit of creditors; or an order,
judgment or decree is entered by a court of competent jurisdiction adjudicating
the Company bankrupt or insolvent; or the Company petitions or applies to any
tribunal for the appointment of a custodian, trustee, receiver or liquidator of
the Company; or any such petition or application is filed against the Company
and such petition or application is not dismissed within 90 days.
A. Consequences of Events of Default.
1. Except as provided in (b)(ii) below, and subject to the provisions of Section
10, if any Event of Default has occurred and is continuing, then, at any time
after the Subordinated Payee has given five days prior written notice to any
holder of Senior Indebtedness (as herein defined), the Subordinated Payee may
declare (by written notice delivered to the Company) all or any portion of the
outstanding principal amount of this Subordinated Note (together with all
accrued interest thereon) to be immediately due and payable and may demand
immediate payment of all or any portion of the outstanding principal amount of
this Subordinated Note and interest thereon.
1. If an Event of Default under (a)(ii) above has occurred, the outstanding
principal amount of this Subordinated Note (together with all accrued interest
thereon) shall become due and payable without any action by the Subordinated
Payee, and, subject to the provisions of Section 10, the Subordinated Payee may
demand immediate payment of the outstanding principal amount of this
Subordinated Note and interest thereon.
I. DEFINITIONS. For purposes of this Subordinated Note, the following
capitalized terms have the following meanings:
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or
a legal holiday under the laws of the State of New York.
"Class A Units" means Holdings' Class A Units (as such term is
defined in the LLC Agreement).
"Credit Party" means each Person (other than any agent or
lender or any other representative thereof) from time to time party to the
Senior Credit Agreement.
"distribution" (a) means any distribution of any kind or
character, including, without limitation, (i) a payment, purchase, redemption or
other acquisition or retirement for cash, property or securities, (ii) by way of
cancellation, forgiveness or offset of the indebtedness evidenced by this
Subordinated Note against any indebtedness owed by the Subordinated Payee to the
Company or (iii) payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of this
Subordinated Note, except a conversion of this Subordinated Note pursuant to
Section 16 hereof, and (b) may consist of cash, securities, or other property.
"Holdings" means Muzak Holdings LLC, a Delaware limited
liability company, and, as of the date hereof, the owner of all of the issued
and outstanding equity securities of the Company.
"indefeasible payment and satisfaction in full" or similar
words mean (i) all amounts due or to become due on or in respect of the Senior
Indebtedness shall have been previously paid in full in cash and shall not be
subject to avoidance under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, (ii) all commitments to lend under the Senior
Indebtedness shall have been terminated, (iii) all letters of credit shall have
been cancelled or otherwise terminated, (iv) all guarantees constituting Senior
Indebtedness shall have been terminated and (v) all lender guarantees
constituting Senior Indebtedness shall have been permanently reduced to zero.
"LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of Holdings, dated as of March 18, 1999, as amended
from time to time.
"Obligations" means all obligations for principal, premium,
interest (including, but not limited to, interest accruing at the legal rate on
or after the filing of any Bankruptcy Proceeding (as herein defined), and any
additional interest that would have accrued thereon but for the commencement of
such proceeding, whether or not a claim for such is allowed in any such
proceeding), penalties, charges, fees, fees and expenses of counsel (including,
without limitation, any expenses in connection with claims and litigation),
commissions, indemnitees, reimbursement obligations, damages, rescission costs,
guarantees, claims and other amounts and liabilities payable under the
documentation governing any indebtedness, secured or unsecured, contingent or
otherwise, or otherwise arising in respect of such indebtedness.
<PAGE>
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
subsidiaries under generally accepted accounting principles as in effect in the
United States from time to time.
"Senior Agent" means Canadian Imperial Bank of Commerce, as
Administrative Agent for the Lenders, the Lender Counterparties and the
Indemnitees under the Senior Credit Agreement, and its successors in such
capacity, or if there is then no acting Administrative Agent under any Senior
Credit Agreement, the holders of a majority in principal amount of the
outstanding Senior Indebtedness.
"Senior Credit Agreement" means one or more credit agreements,
loan agreements or similar agreements providing for working capital advances,
term loans, letter of credit facilities or similar advances, loans, or
facilities to the Company or any of its subsidiaries, including the Credit and
Guaranty Agreement, dated as of March 18, 1999, by and among the Company,
Holdings and certain subsidiaries of the Company, various lenders from time to
time party thereto, Goldman Sachs Credit Partners L.P. ("GSCP"), as syndication
agent, Canadian Imperial Bank of Commerce, as administrative agent, and GSCP and
CIBC Oppenheimer Corp., as co-lead arrangers, as amended by (i) the First
Amendment, Consent and Waiver, dated as of July 1, 1999, and (ii) the Second
Amendment and Consent dated as of October 30, 1999, initially providing for term
loan and revolving credit facilities and including any related notes,
guarantees, security or pledge agreements, collateral documents, instruments and
agreements executed in connection therewith, in each case as such credit
facilities and/or related documents may be further amended, restated,
supplemented, renewed, refunded, refinanced, replaced, restructured, in whole or
in part, or otherwise modified from time to time, whether or not with the same
agents, trustee, representative lenders or group of lenders or holders, and
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Agreement"
shall include agreements in respect of interest rate agreements and hedging
obligations with lenders party to any Senior Credit Agreement and their
affiliates and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Senior
Credit Agreement and any and all refundings, refinancings (in whole or in part)
and replacements of any Senior Credit Agreement, whether by the same or any
other agents, trustee, representative lenders or group of lenders or holders and
irrespective of any changes in the terms and conditions thereof, including one
or more agreements (i) extending the maturity of, or increasing the amount of,
any indebtedness incurred thereunder or contemplated thereby, or (ii) adding or
deleting borrowers or guarantors thereunder, so long as borrowers and issuers
include one or more of the Company and its subsidiaries and their respective
successors and assigns.
<PAGE>
"Senior Indebtedness" means (i) the indebtedness outstanding
or arising under the Senior Credit Agreement, (ii) all Obligations incurred by
or owing to the Senior Agent, the holders of such indebtedness or any other
agent or representative thereof outstanding or arising under any Senior Credit
Agreement, whether now or hereafter incurred, made or created, whether absolute
or contingent, liquidated or unliquidated, whether due or not due, including,
without limitation, and (iii) all obligations of the Company or any other Credit
Party in respect of all interest rate agreements and hedging obligations arising
in connection therewith with any party to the Senior Credit Agreement or any of
its affiliates.
"Sub Debt Default" shall have the meaning given to the term
"Default" in the Sub Debt Indenture.
"Sub Debt Event of Default" shall have the meaning given to
the term "Event of Default" in the Sub Debt Indenture.
"Sub Debt Indebtedness" means all Obligations under or in
respect of the Sub Debt Indenture.
"Sub Debt Indenture" means the indenture, dated as of March
18, 1999, pursuant to which the Sub Debt Notes are issued, as the same may from
time to time be amended, renewed, supplemented or otherwise modified.
"Sub Debt Notes" means the $115,000,000 in aggregate principal
amount of 9-7/8% Senior Subordinated Notes due 2009 of the Company and Muzak
Finance Corp. issued pursuant to the Sub Debt Indenture.
"Subordinated Payee" means MEM Holdings, LLC, or any Permitted
Transferee (as defined herein); provided, that any Subordinated Payee shall
cease to be a Subordinated Payee once such Subordinated Payee ceases to own any
right to any principal amount of this Subordinated Note.
I. CANCELLATION. After all principal and accrued interest at any time owed on
this Subordinated Note have been paid in full, this Subordinated Note will be
surrendered to the Company for cancellation and will not be reissued.
I. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the several
Sections of this Subordinated Note are inserted for convenience only and do not
constitute a part of this Subordinated Note. This Subordinated Note will be
governed by the internal law of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of law of
any jurisdiction other than the State of New York.
I. BUSINESS DAYS. If any payment is due, or any time period for giving notice or
taking action expires, on a day which is not a Business Day, then the
<PAGE>
payment will be due and payable on, and the time period will automatically be
extended to, the next Business Day immediately following such day which is not a
Business Day, and interest will continue to accrue at the required rate under
this Subordinated Note until any such payment is made.
I. GENERAL. This Subordinated Note, the Sub Debt Indenture and the Senior Credit
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof; supersede any and all prior understandings relating to
such subject matter; and will be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
I. WAIVER OF JURY TRIAL. THE COMPANY (AND, BY ITS ACCEPTANCE OF THIS
SUBORDINATED NOTE, THE SUBORDINATED PAYEE HEREOF) HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SUBORDINATED NOTE OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF.
I. SUBORDINATION.
A. Extent of Subordination to Senior Indebtedness. The Company covenants and
agrees, and the Subordinated Payee, by accepting this Subordinated Note,
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Section 10, the indebtedness represented by this Subordinated
Note, whether for principal of, premium, if any, interest on, this Subordinated
Note, and any other Obligation under or in respect hereof and all rights or
claims arising out of or associated with such indebtedness (collectively, the
"Subordinated Obligations"), are hereby expressly made junior and subordinate in
right of payment as provided in this Section 10 to the prior indefeasible
payment and satisfaction in full in cash of all Obligations in respect of all
Senior Indebtedness (including post-petition interest thereon).
Any provision of this Subordinated Note to the contrary
notwithstanding, the Company shall not make and the Subordinated Payee shall not
accept, any distribution or payment of any kind whatsoever with respect to the
Subordinated Obligations at any time when any of the Senior Indebtedness remains
outstanding. In no event shall the Subordinated Payee commence any action or
proceeding to contest or otherwise contest the enforceability of the provisions
of this Subordinated Note, the validity, perfection or priority of any security
interests or other liens granted to secure the Senior Indebtedness by the
Company or any other Person, the rights of the Senior Agent or any holders of
Senior Indebtedness or the enforceability of the Senior Credit Agreement.
The Company will not give, or permit to be given, and the
Subordinated Payee will not receive, accept or demand, (i) any security of any
nature whatsoever for
<PAGE>
any Subordinated Obligations, on any property or assets, whether now existing or
hereafter acquired, of the Company or any other Credit Party or (ii) any
guarantee, of any nature whatsoever, by the Company or any other Credit Party,
of any Subordinated Obligations.
The Subordinated Payee acknowledges and agrees that the
subordination provisions herein are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of this
Subordinated Note, to acquire and continue to hold, or to continue to hold such
Senior Indebtedness.
To the extent that any payment of or distribution in respect
of Senior Indebtedness (whether by or on behalf of the Company , as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then if such payment or distribution is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent that the obligation to repay the Senior
Indebtedness is declared to be fraudulent, invalid or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
A. Distributions and Liquidation, Dissolution, Bankruptcy. In the event of (i)
any distribution of assets of the Company, (ii) any insolvency, or bankruptcy,
case or proceeding, or any receivership, liquidation, reorganization,
arrangement, adjustment, action for the relief of debtors, or other similar case
or proceeding in connection therewith, relative to the Company, its debts, its
operations or to its creditors, as such, or to its assets, or (iii) any
liquidation, dissolution or other winding-up of the Company and whether or not
involving insolvency or bankruptcy, or (iv) any assignment for the benefit of
creditors or any other marshaling of assets or liabilities of the Company, in
each case whether voluntary or involuntary, including, without limitation, the
filing of any petition or the taking of any action to commence any of the
foregoing under any law, foreign or domestic, federal or state (clauses (ii)
through (iv) are referred to as a "Bankruptcy Proceeding"), then and in any such
event:
(i) The Senior Agent and the holders of Senior Indebtedness
shall be entitled to receive indefeasible payment and satisfaction in
full in cash of all amounts due on or in respect of all Senior
Indebtedness (including, but not limited to, interest accruing at the
legal rate on or after the filing of any Bankruptcy Proceeding, and any
additional interest that would have accrued thereon but for
<PAGE>
the commencement of such proceeding, whether or not a claim for such is
allowed in such proceeding), before the Subordinated Payee is entitled
to receive or retain any payment or distribution of any kind or
character on account of this Subordinated Note or any Subordinated
Obligations on this Subordinated Note;
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Subordinated Payee would be entitled
but for the provisions of this Section 10 shall be paid by the Company,
a liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the Senior Agent or the
holders of Senior Indebtedness, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each to the extent necessary to make indefeasible
payment and satisfaction in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the Senior Agent or the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 10(b), the Subordinated Payee shall have
received any payment or distribution of assets of the Company of any
kind or character, whether in cash, or property or securities,
including, without limitation, by way of set-off or otherwise, in
respect of principal of, premium, if any, interest or any Subordinated
Obligations on this Subordinated Note before all Senior Indebtedness is
indefeasibly paid in full in cash, then and in such event payment or
distribution shall be held in trust for the benefit of and shall be
paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid,
to the extent necessary to indefeasibly pay and satisfy all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of the Senior
Indebtedness.
<PAGE>
A. No Payments with Respect to Subordinated Obligations.
1. Unless Section 10(b) shall be applicable, no payment or distribution of any
kind or character (including, without limitation, cash, property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of this
Subordinated Note) may be made by or on behalf of the Company or accepted by the
Subordinated Payee, including, without limitation, by way of set-off or
otherwise, for or on account of this Subordinated Note or of any Subordinated
Obligations under this Subordinated Note, or for or on account of the purchase,
redemption or other acquisition of this Subordinated Note, and the Subordinated
Payee shall not take or receive from the Company, directly or indirectly in any
manner, payment in respect of all or any portion of this Subordinated Note or of
any Subordinated Obligations under this Subordinated Note, or for or on account
of the purchase, redemption or other acquisition of this Subordinated Note until
the indefeasible payment and satisfaction in full in cash of all Senior
Indebtedness.
A. When Distribution Must Be Paid Over. In the event that notwithstanding these
provisions, the Subordinated Payee receives any payment or distribution of
assets of the Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in respect of
this Subordinated Note or any Subordinated Obligations under this Subordinated
Note, that the Subordinated Payee is not entitled to receive or retain under the
provisions of this Subordinated Note, then such payment or distribution shall be
held by the Subordinated Payee in trust for the benefit of the Senior Agent and
the Subordinated Payees of Senior Indebtedness, (segregated from other assets
held by the Subordinated Payee) and shall be immediately paid over or delivered
to the Senior Agent in the form received (with any necessary endorsement) to the
extent necessary to make indefeasible payment and satisfaction in full in cash
of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
In the event of the failure of the Subordinated Payee to endorse or assign any
such payment or distribution, the Senior Agent is hereby irrevocably authorized
to endorse or assign the same.
A. Exercise of Remedies. Until the indefeasible payment and satisfaction in full
in cash of all Senior Indebtedness, the Subordinated Payee (solely in its
capacity as a holder of this Subordinated Note) shall not exercise any rights or
remedies with respect to this Subordinated Note, including, without limitation,
any administrative, legal, equitable or other action (i) to demand or sue for
collection of amounts payable hereunder, (ii) to accelerate the principal of
this Subordinated Note, (iii) to commence or join with any other creditor in
commencing any proceeding in connection with or premised on the occurrence of a
Bankruptcy Proceeding, or (iv) to take, obtain or hold (or to permit anyone
acting on its behalf to take, obtain or hold) any assets of the Company.
<PAGE>
A. Rights. The provisions of this Section 10 are for the benefit of, and shall
be enforceable directly by, the Senior Agent and the holders of Senior
Indebtedness (and their successors and assigns), the Senior Agent and each
holder of Senior Indebtedness is made an obligee hereunder, and the Senior Agent
and each holder of Senior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed, or guaranteed shall be deemed conclusively to have
acquired or to continue to hold such Senior Indebtedness in reliance upon the
covenants and provisions contained in this Subordinated Note. The Subordinated
Payee acknowledges and agrees that any breach of the provisions of this Section
10 will cause irreparable harm of which the payment of monetary damages may be
inadequate. For this reason, the Subordinated Payee agrees that, in addition to
any remedies at law or in equity to which the Senior Agent or a Subordinated
Payee of the Senior Indebtedness may be entitled, the Senior Agent or a holder
of the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section 10 and to compel
specific performance of such provisions.
The provisions of this Section 10 are and are intended solely
for the purpose of defining the relative rights of the Subordinated Payee on the
one hand and the Senior Agent and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Section 10 or elsewhere in this
Subordinated Note is intended to or shall impair, as among the Company its
creditors other than the holders of Senior Indebtedness and the Subordinated
Payee, the obligation of the Company, which is absolute and unconditional, to
pay to the Subordinated Payee the principal of, premium, if any, and interest on
this Subordinated Note as and when the same shall become due and payable in
accordance with its terms.
A. Acceleration of Payment of Subordinated Note. If this Subordinated Note is
declared due and payable prior to the Maturity Date, no direct or indirect
payment that is due solely by reason of such declaration shall be made, nor
shall application be made of any distribution of assets of the Company to the
payment, purchase or other acquisition or retirement of this Subordinated Note,
unless, in either case, all Senior Indebtedness shall have been previously
indefeasibly paid and satisfied in full in cash.
A. Voting Rights; Authorization to Effect Subordination. The Senior Agent shall
be entitled to file and prove all claims and to exercise any right to vote of
the Subordinated Payee in respect of this Subordinated Note in connection with a
Bankruptcy Proceeding. Notwithstanding the foregoing, in the event that the
Senior Agent shall allow the Subordinated Payee to retain the right to vote and
otherwise act in a Bankruptcy Proceeding (including, without limitation, the
right to vote to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension), the Subordinated Payee
shall not vote with respect to any such plan or take any other action in any way
so as to contest (x) the validity of any liens or security interests granted to
the Senior Agent, (y) the relative rights and duties of the Senior Agent or the
holders of the Senior Indebtedness established in the Senior Credit Agreement
with respect to such liens and security interests or (z) the enforceability of
the Senior Credit Agreement or these subordination provisions.
<PAGE>
The Subordinated Payee hereby irrevocably authorizes , directs
and empowers the Senior Agent, and hereby appoints the Senior Agent to act as
its attorney-in-fact, for any and all of the following purposes, (i) to demand,
sue for, collect and receive all payments and distributions under the terms of
this Subordinated Note, (ii) to file and prove all claims and to exercise any
right to vote in any Bankruptcy Proceeding as set forth above, and (iii) to take
any and all other actions in the name of the Subordinated Payee (solely in its
capacity as a holder of this Subordinated Note), as the Senior Agent determines
in its sole discretion to be necessary or appropriate for the enforcement of the
subordination provisions in this Section 10. The Subordinated Payee further
agrees duly and promptly to take such action as may be requested at any time or
from time to time by the Senior Agent, including, without limitation, executing
and delivering any additional powers of attorney, assignments or proofs of
claims or other instruments and supplying any information and documents, to
enable the Senior Agent to take any of the foregoing actions.
Each right, power and remedy of the Senior Agent provided for
in this Subordinated Note or the Senior Credit Agreement, whether now existing
or hereafter available at law or in equity or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Senior Agent
of any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise of all other such rights, powers or remedies, and
no course of dealing or failure or delay on the part of any party hereto in
exercising any such right, power, or remedy shall operate as a waiver thereof or
otherwise prejudice its rights, powers or remedies.
A. Subrogation. Upon the indefeasible payment and satisfaction in full in cash
of all Senior Indebtedness, the Subordinated Payee shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of, premium, if any, and interest on this
Subordinated Note shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Subordinated Payee would be entitled except
for the provisions of this Section 10, and no payments over pursuant to the
provisions of this Section 10 to the Senior Agent or the holders of Senior
Indebtedness by the Subordinated Payee shall, as among the Company, its
creditors other than the Senior Agent or the holders of Senior Indebtedness, and
the Subordinated Payee be deemed to be a payment or distribution by the Company
to or on account of the Senior Indebtedness.
If any payment or distribution to which the Subordinated Payee
would otherwise have been entitled but for the provisions of this Section 10
shall have been applied, pursuant to the provisions of this Section 10, to the
payment of all amounts payable under the Senior Indebtedness, then and in such
case the Subordinated Payee shall be entitled to receive from the Senior Agent
or the holders of such Senior Indebtedness at the time outstanding any payments
or distributions received by such
<PAGE>
holders of such Senior Indebtedness in excess of the amount sufficient to
indefeasibly pay and satisfy all amounts payable under or in respect of such
Senior Indebtedness in full in cash.
A. Waivers and Consents. The Subordinated Payee waives the right to compel that
any collateral or any other property of the Company or the property of any
guarantor of any Senior Indebtedness or any other Person to be applied in any
particular order to discharge such Senior Indebtedness. The Subordinated Payee
expressly waives the right to require the Senior Agent or the holders of Senior
Indebtedness to proceed against the Company, any collateral or any guarantor of
any Senior Indebtedness or any other Person, or to pursue any other remedy in
the power of the Senior Agent or any such holder which the Subordinated Payee
cannot pursue and which would lighten the Subordinated Payee's burden,
notwithstanding that the failure of any holder of Senior Indebtedness to do so
may thereby prejudice the Subordinated Payee. The Subordinated Payee agrees that
it shall not be discharged, exonerated or have its obligations hereunder to any
holder of Senior Indebtedness reduced by (i) holder's delay in proceeding
against or enforcing any remedy against the Company, any collateral or any
guarantor of any Senior Indebtedness or any other Person by the Senior Agent or
any holder of Senior Indebtedness; (ii) the Senior Agent or any holder of Senior
Indebtedness releasing the Company, any collateral or any guarantor of any
Senior Indebtedness or any other Person from all or any part of such Senior
Indebtedness; or (iii) the discharge of the Company, any collateral or any
guarantor of any Senior Indebtedness or any other Person by operation of law or
otherwise, with or without the intervention or omission of the Senior Agent or
any holder of Senior Indebtedness. Any vote by the Senior Agent or any holder of
Senior Indebtedness to accept or reject any plan of reorganization relating to
the Company, any collateral or any guarantor of such Senior Indebtedness or any
other Person, or any receipt by the Senior Agent or any holder of Senior
Indebtedness receipt on account of all or part of any Senior Indebtedness of any
cash, property or securities distributed in any Bankruptcy Proceeding, shall not
discharge, exonerate or reduce the obligations of the Subordinated Payee
hereunder to the Senior Agent and the holders of Senior Indebtedness.
No right of the Senior Agent or any present or future holder
of any Senior Indebtedness to enforce the provisions herein shall at any time in
any way be prejudiced or impaired or affected by (i) any act or failure to act
on the part of the Company or by any act or failure to act by the Senior Agent
or any such holder, (ii) any non-compliance by the Company with the terms,
provisions and covenants of this Subordinated Note or the Senior Credit
Agreement, or (iii) any merger or consolidation of the Company or any of its
subsidiaries into or with any other Person, or any sale, lease or transfer of
any or all of the assets of the Company or any of its subsidiaries to any other
Person, regardless in any case of any knowledge thereof of the Senior Agent or
any such holder may have or be otherwise charged with.
Without limiting the generality of the foregoing, the Senior
Agent and the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to or knowledge of the Subordinated
Payee, without incurring
<PAGE>
responsibility to the Subordinated Payee and without impairing or releasing the
provisions herein or the obligations hereunder of the Subordinated Payee to the
Senior Agent and the holders of Senior Indebtedness , do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew, alter, compromise or waive any Senior Indebtedness or
otherwise amend, modify or supplement in any manner any Senior Indebtedness or
any instrument evidencing the same or any agreement under which any Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing any Senior Indebtedness;
(iii) release any Person liable in any manner for the collection or payment of
any Senior Indebtedness; (iv) exercise or refrain from exercising any rights
against the Company or any other Person; and (v) fail to perfect a security
interest in any collateral for the payment of the Senior Indebtedness.
The Subordinated Payee waives all rights and defenses arising
out of an election of remedies by the Senior Agent or any holder of Senior
Indebtedness, even though that election of remedies, including, without
limitation, any nonjudicial foreclosure with respect to collateral for such
Senior Indebtedness, has impaired the value of the Subordinated Payee's rights
of subrogation, reimbursement or contribution against the Company, any guarantor
of any Senior Indebtedness or any other Person. The Subordinated Payee expressly
waives any rights or defenses it may have by reason of protection afforded to
the Company or any guarantor of any Senior Indebtedness or any other Person with
respect to such Senior Indebtedness pursuant to any anti-deficiency laws or
other laws of similar import which limit or discharge the principal debtor's
indebtedness upon judicial or nonjudicial foreclosure of real property or
personal property collateral for any Senior Indebtedness.
The Subordinated Payee agrees that, without the necessity of
any reservation of rights against it, and without notice to or further assent by
it, any demand for payment of any Senior Indebtedness made by the Senior Agent
or any holder of Senior Indebtedness may be rescinded in whole or in part by the
Senior Agent or any such holder, and any Senior Indebtedness may be continued,
and such Senior Indebtedness, or the liability of the Company or any of its
subsidiaries or any other guarantor or any other Person upon or for any part
thereof, or any collateral or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, waived, surrendered or released by the
Senior Agent or any holder of such Senior Indebtedness, in each case without
notice to or further assent by the Subordinated Payee and without impairing,
abridging, releasing or affecting the subordination provided for herein.
The Subordinated Payee waives any and all notice of the
creation, renewal, extension or accrual of any Senior Indebtedness and notice of
or proof of reliance by the Senior Agent or any holder of Senior Indebtedness
upon the provisions of this Section 10. The Subordinated Payee waives
presentment, protest and demand for payment.
<PAGE>
To the maximum extent permitted by law, the Subordinated Payee
waives any claim it might have against the Senior Agent or any holder of Senior
Indebtedness with respect to, or arising out of, any action or failure to act or
any requirement of diligence on the part of the Senior Agent or any such holder
of Senior Indebtedness or any requirement on the part of the Senior Agent or any
such holder of Senior Indebtedness to mitigate damages resulting from any
default under such Senior Indebtedness, any error of judgment, negligence or
mistake or oversight whatsoever on the part of the Senior Agent or any such
holder of Senior Indebtedness or its respective directors, officers, employees
or agents with respect to any exercise of rights or remedies under the
agreements governing or relating to such Senior Indebtedness.
The Subordinated Payee, for itself and on behalf of its
successors and assigns, hereby waives any and all now existing or hereafter
arising rights it may have to require the Senior Agent or any holder of Senior
Indebtedness to marshal assets for the benefit of the Subordinated Payee, or to
otherwise direct or receive notice of the timing, order or manner of any sale,
collection or other enforcement of any collateral. Neither the Senior Agent nor
any holder of Senior Indebtedness is under any duty or obligation, and the
Subordinated Payee hereby waives any right it may have to compel the Senior
Agent or any holder of Senior Indebtedness, to pursue any guarantor or other
Person who may be liable for such Senior Indebtedness, or to enforce any lien or
security interest in any collateral.
The Subordinated Payee hereby waives and releases all rights
which a guarantor or surety with respect to any Senior Indebtedness could
exercise.
The Subordinated Payee hereby waives any duty on the part of
the Senior Agent or any holder of Senior Indebtedness to disclose to it any fact
known or hereafter known by it relating to the operation or financial condition
of the Company or any guarantor of such Senior Indebtedness or their respective
businesses or assets.
The Subordinated Payee unconditionally waives (i) notice of
any of the matters referred to in this Section 10, (ii) to the extent permitted
by law, all notices which may be required, whether by statute, rule of law or
otherwise, to preserve intact any rights of the Senior Agent or any holder of
any Senior Indebtedness against the Company, including, without limitation, any
demand, presentment, protest and default, proof of notice of nonpayment under
any Senior Indebtedness and notice of any failure on the part of the Company or
any other Credit Party to perform and comply with any covenant, agreement, term
or condition of the Senior Indebtedness, (iii) any right to the enforcement,
assertion or exercise by the Senior Agent or any holder of any Senior
Indebtedness of any right, power, privilege or remedy conferred in such Senior
Indebtedness or otherwise, and (iv) any notice of any sale, transfer or other
disposition of any Senior Indebtedness by any holder thereof.
A. Subordination to the Sub Debt Indebtedness. The Company covenants and agrees,
and the Subordination Payee by accepting this Subordinated Note covenants and
agrees, that so long as any Sub Debt Default or Sub Debt Event of Default
<PAGE>
shall have occurred and be continuing, no payment of principal of (and premium,
if any) or interest on, or any other payment obligations with respect to, this
Subordinated Note or any judgment with respect hereto shall be made by or on
behalf of the Company or any other Credit Party.
A. Conversion of this Subordinated Note. Notwithstanding anything contained
herein to the contrary, nothing contained in this Section 10 shall prevent any
conversion of this Subordinated Note in accordance with the provisions of
Section 16 hereof.
I. TRANSFERABILITY AND ASSIGNMENT. A Subordinated Payee may not transfer, sell,
pledge, convey, assign or otherwise dispose of ("Transfer") this Subordinated
Note to any other Person without (a) the prior written consent of the Company's
Board of Directors, (b) first delivering to the Company (i) an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel must be reasonably acceptable to the Company) that registration under
the Securities Act, or any state or other securities law is not required in
connection with such Transfer and (ii) a written joinder to this Subordinated
Note by the proposed transferee pursuant to which such proposed transferee shall
agree to be bound by the provisions of this Subordinated Note, including Section
10 and (c) so long as any Senior Indebtedness remains outstanding, the prior
written consent of the holders of Senior Indebtedness or any representative of
such holders authorized to give a consent to such joinder and such transferee.
Any transferee executing and delivering such a joinder and thereafter acquiring
this Subordinated Note in accordance with the preceding sentence shall be
referred to herein as a "Permitted Transferee". Any Transfer or attempted
Transfer of this Subordinated Note in violation of any provision of this
Subordinated Note shall be null and void, and the Company shall not record such
Transfer on its books or treat any purported transferee of this Subordinated
Note as the owner of this Subordinated Note for any purpose.
I. COUNTERPARTS. This Subordinated Note may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
I. USURY LAWS. It is the intention of the Company and the Subordinated Payee to
conform strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Subordinated Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Subordinated Note is
accelerated by reason of an election by the holder hereof resulting from an
Event of Default, voluntary prepayment by the Company or otherwise, then earned
interest may never include more than the maximum amount permitted by law,
computed from the date hereof until payment, and any interest in excess of the
maximum amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the option of the Subordinated Payee either be
rebated to the Company or credited on the principal amount of this Subordinated
Note, or if this
<PAGE>
Subordinated Note has been paid, then the excess shall be rebated to the
Company. The aggregate of all interest (whether designated as interest, service
charges, points or otherwise) contracted for, chargeable, or receivable under
this Subordinated Note shall under no circumstances exceed the maximum legal
rate upon the unpaid principal balance of this Subordinated Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically
and, if theretofore paid, rebated to the Company or credited on the principal
amount of this Subordinated Note, or if this Subordinated Note has been repaid,
then such excess shall be rebated to the Company.
I. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
I. AMENDMENTS; WAIVERS. So long as any Senior Indebtedness remains outstanding,
no amendment or modification to or waiver of any provisions of, or the
definitions of any terms appearing in, Section 10, or to or of any other
provision of this Subordinated Note may be made that affects the rights of any
holder of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness, or any representative of such holders authorized to give a
consent, consent to such amendment, modification or waiver.
I. CONVERSION.
A. Conversion Procedure.
1. Voluntary Conversion; Automatic Conversion. At any time after the date hereof
and prior to the payment of this Subordinated Note in full, the then
Subordinated Payee may convert this Subordinated Note into a number of Class A
Units determined by dividing (x) the then Convertible Amount (as herein defined)
by (y) $1,000 (the "Conversion Price"). Notwithstanding anything contained
herein to the contrary, if as of May 24, 2001, this Subordinated Note has not
been paid in full, then this Subordinated Note shall automatically be converted
into a number of Class A Units in accordance with the formula contained in the
first sentence of this Section 16(a)(i). If the Subordinated Payee is not a
Member (as such term is defined in the LLC Agreement) at the time of a
conversion of this Subordinated Note, then, at the time of such conversion of
this Subordinated Note, such Subordinated Payee agrees to deliver to the
Secretary of Holdings an executed joinder to the LLC Agreement and any other
documentation necessary in accordance with the requirements of the LLC Agreement
or any of the Related Agreements (as such term is defined in the LLC Agreement).
For purposes of this Subordinated Note, the "Convertible Amount" at any time
shall equal (x) the then outstanding principal amount of this Subordinated Note
plus (y) the interest which has
<PAGE>
then accrued in accordance with the provisions contained herein and which is
then unpaid, in each case, at such time.
1. Effect of Conversion. A conversion of this Subordinated Note will be deemed
to have been effected as of the close of business on the date on which this
Subordinated Note has been surrendered for conversion by the then Subordinated
Payee to the Secretary of Holdings; provided, that in the event of an automatic
conversion of this Subordinated Note, such automatic conversion will be deemed
to have been effected as of the close of business on the date of such automatic
conversion. At such time as such conversion has been effected, the rights of the
then Subordinated Payee (as well as any and all prior Subordinated Payees and
any other former or current holder of this Subordinated Note) under this
Subordinated Note will cease, the Company shall thereafter have no obligation to
make any principal, interest or other payments under this Subordinated Note and
such Subordinated Payee shall be deemed to be the record holder of the
applicable Class A Units which this Subordinated Note shall have then been
converted into. If this Subordinated Note is converted pursuant to this Section
16, no principal amount of, accrued interest on or any other amount pursuant to
this Subordinated Note will be payable at any time as of or after such
conversion.
A. Subdivision or Combination of Class A Units. If Holdings at any time
subdivides (by any unit split, unit distribution or otherwise) the Class A Units
into a greater number of units, then the Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. If Holdings at any
time combines (by reverse unit split or otherwise) the Class A Units into a
smaller number of units, then the Conversion Price in effect immediately prior
to such combination will be proportionately increased.
A. Organic Change.
1. Organic Change Defined. Any recapitalization, reorganization,
reclassification, consolidation or merger of Holdings, which in each case is
effected in such a manner that holders of the Class A Units are entitled to
receive stock or any other securities or property with respect to or in exchange
for such Class A Units is referred to herein as an "Organic Change."
1. Provisions for Organic Change. Prior to the consummation of any Organic
Change, Holdings' Board of Directors will, in good faith, make lawful and
adequate provision to insure that the Subordinated Payee will thereafter have
the right to acquire and receive, in lieu of or addition to (as the case may be)
the Class A Units immediately theretofore acquirable and receivable upon the
conversion of this Subordinated Note, such shares of stock and/or such
securities or property as may be issued or payable with respect to or in
exchange for the Class A Units immediately theretofore acquirable and receivable
upon conversion of this Subordinated Note had such Organic Change not taken
place.
<PAGE>
A. Pre-Emptive Rights. The Company and the Subordinated Payee acknowledge and
agree to comply with the pre-emptive rights, if any, of Joseph Koff, CMS
Diversified Partners, L.P., CMS Co-Investment Subpartnership and CBC Acquisition
Company, Inc. in connection with any conversion of this Note pursuant to this
Section 16.
I. SEVERABILITY. If the provisions of this Subordinated Note, or the application
of such provision to any Person or circumstance, shall be held invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions in this Subordinated Note, or the application of
such provision in jurisdictions or to Persons or circumstances other than to
those to which it is held invalid, illegal or unenforceable shall not be
affected thereby.
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this Junior
Subordinated Unsecured Convertible Promissory Note on the date specified above.
MUZAK LLC
By:
Name: Royce Yudkoff
Title: Vice President
Muzak Holdings LLC
hereby agrees to comply with the
provisions of Section 16 hereof:
MUZAK HOLDINGS LLC
By:
Name: Royce Yudkoff
Title: Vice President
Accepted and Agreed to:
MEM HOLDINGS, LLC
By:
Name: Peni Garber
Title: Executive Vice President
THIRD AMENDMENT
---------------
THIRD AMENDMENT (this "AMENDMENT"), dated as of January 14,
2000, to the Credit and Guaranty Agreement, dated as of March 18, 1999, as
amended by the First Amendment and Consent, dated as of July 1, 1999, and the
Second Amendment and Consent, dated as of October 26, 1999 (as the same may be
further amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Muzak LLC, formerly known as Audio Communications
Network, LLC (the "Borrower"), Muzak Holdings LLC ("Holdings") and certain
Subsidiaries of the Borrower (the "Guarantors"), various Lenders from time to
time party thereto, Goldman Sachs Credit Partners L.P. ("GSCP"), as Syndication
Agent, Canadian Imperial Bank of Commerce, as Administrative Agent (the
"Administrative Agent"), and GSCP and CIBC Oppenheimer Corp., as Co-Lead
Arrangers.
RECITALS
--------
1. Capitalized terms used herein which are not herein defined shall
have the meanings ascribed thereto by the Credit Agreement.
2. The Borrower has requested that it be permitted to issue senior
subordinated notes in an aggregate amount of up to $50,000,000, the terms of
which shall be substantially as set forth on Annex A attached hereto (the
"Floating Rate Subordinated Notes"). The Borrower intends to redeem the Floating
Rate Subordinated Notes with the proceeds of Additional Senior Subordinated
Notes, subject to the successful completion of an offering of Additional Senior
Subordinated Notes.
THEREFORE, in consideration of the foregoing and the covenants
and conditions hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Borrower, the Co-Agents, the Issuing Bank and the Lenders signatory hereto,
hereby agree as follows:
1. Amendments to Credit Agreement.
------------------------------
(1) Section 1.1 of the Credit Agreement is hereby amended by inserting
the following in alphabetical order thereof:
"'NET FLOATING RATE NOTES PROCEEDS' means, with respect to the
issuance of the Floating Rate Subordinated Notes, an amount equal to the
Cash proceeds received from such issuance, minus any bona fide direct costs
incurred in connection with such issuance."
"'FLOATING RATE SUBORDINATED NOTE AGREEMENT' means the
agreement pursuant to which the Floating Rate Subordinated Notes are to be
<PAGE>
issued, as amended, restated, supplemented or otherwise modified from time
to time to the extent permitted under Section 6.13."
"'FLOATING RATE SUBORDINATED NOTE RELATED DOCUMENTS' means any
or all of, as the context may require, (i) the Floating Rate Subordinated
Notes, (ii) the Floating Rate Subordinated Note Agreement and (iii) any
other agreements which are related to the Floating Rate Subordinated Notes
or the Floating Rate Subordinated Note Agreement."
"'FLOATING RATE SUBORDINATED NOTES' means notes due 2009 or
thereafter of Borrower and Muzak Finance to be issued pursuant to the
Floating Rate Subordinated Note Agreement."
(2) The definition of "Additional Related Agreements" in Section 1.1 of
the Credit Agreement is hereby amended by (i) replacing the "and" at the end of
clause (iii) thereof with a comma, (ii) inserting the following as new clause
(iv) thereof: "(iv) the Floating Rate Subordinated Note Related Documents and"
and (iii) changing clause (iv) thereof to become clause (v) thereof.
(3) The definition of "Additional Senior Subordinated Note Indenture"
in Section 1.1 of the Credit Agreement is hereby amended in its entirety as
follows:
"'ADDITIONAL SENIOR SUBORDINATED NOTE INDENTURE' means the
indenture or indentures pursuant to which the Additional Senior
Subordinated Notes are to be issued, which may include the Senior
Subordinated Note Indenture, as amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under Section
6.13."
(4) The definition of "Additional Senior Subordinated Notes" in Section
1.1 of the Credit Agreement is hereby amended by replacing "due 2009" with "due
December 31, 2007".
(5) Clause (iii) of the definition of "Change of Control" in Section
1.1 of the Credit Agreement is hereby amended by inserting "the Floating Rate
Subordinated Note Related Documents" before the words "or any documentation"
therein.
(6) The definition of "Consolidated Senior Debt" in Section 1.1 of the
Credit Agreement is hereby amended by inserting ", any Floating Rate
Subordinated Notes" before the words "and any unsecured" therein.
(7) The definition of "Collateral Documents" in Section 1.1 of the
Credit Agreement is hereby amended by inserting ", as any such document may be
amended, supplemented or otherwise modified from time to time" at the end
thereof.
2
<PAGE>
(8) The definition of "Credit Document" in Section 1.1 of the Credit
Agreement is hereby amended by inserting ", as any such document may be amended,
supplemented or otherwise modified from time to time" at the end thereof.
(9) The definition of "Excess Net Additional Proceeds" in Section 1.1
of the Credit Agreement is hereby amended in its entirety as follows:
"'EXCESS NET ADDITIONAL PROCEEDS' means any remaining Net
Additional Proceeds in excess of the sum of (i) the aggregate amount of
mandatory prepayments required pursuant to Section 2.12(d)(ii)(A), (ii) the
aggregate amount of any payments in connection with the redemption of the
Floating Rate Subordinated Notes permitted to be made with Net Additional
Proceeds pursuant to Section 6.4(a)(xiv), (iii) the aggregate amount of any
repayments of Permitted Sponsor Subordinated Debt permitted to be made with
Net Additional Proceeds pursuant to Section 6.4(a)(x), and (iv) $20,000,000
(such $20,000,000 amount, or any lesser amount of Net Additional Proceeds
remaining after application of the amounts referred to in clauses (i)
through (iii), shall hereafter be referred to as the 'FIRST ACQUISITION
BASKET')."
(10) The definition of "Securities Account Agreement" in Section 1.1 of
the Credit Agreement is hereby amended by inserting ", as it may be amended,
supplemented or otherwise modified from time to time" at the end thereof.
(11) The definition of "Subordinated Indebtedness" in Section 1.1 of
the Credit Agreement is hereby amended in its entirety as follows:
"'SUBORDINATED INDEBTEDNESS'" means (i) Indebtedness of any
Credit Party under the Senior Subordinated Note Related Documents, (ii)
Indebtedness of any Credit Party under any Permitted Sponsor Debt
Agreement, (iii) Indebtedness of any Credit Party under the Additional
Senior Subordinated Note Related Documents, (iv) Indebtedness of any Credit
Party constituting unsecured Permitted Seller Debt, (v) Indebtedness of any
Credit Party under the Floating Rate Subordinated Note Related Documents
and (vi) any other subordinated Indebtedness of any Credit Party of any
type."
(12) The definition of "Subordinated Indentures" in Section 1.1 of the
Credit Agreement is hereby amended by inserting ", the Floating Rate
Subordinated Note Agreement" before the words "and the Additional" therein.
(13) Section 2.2(a)(ii) of the Credit Agreement is hereby amended by
inserting "or Floating Rate Subordinated Notes" after the words "Additional
Senior Subordinated Notes" in clause (A)(x) of the proviso to the first sentence
thereof.
(14) Section 2.12(d) of the Credit Agreement is hereby amended by
inserting the following as new paragraph (iii) thereof:
3
<PAGE>
"(iii) Borrower shall have the option, directly or through one or more
of its Included Subsidiaries, to make Permitted Acquisitions within 90 days of
each receipt of any Net Floating Rate Notes Proceeds with such Net Floating Rate
Notes Proceeds. Upon the expiration of such 90 days, Borrower shall prepay the
Loans as set forth in Section 2.13 in an aggregate amount equal to the excess,
if any, of (x) the total Net Floating Rate Notes Proceeds received from the
issuance of Floating Rate Subordinated Notes 90 days prior thereto over (y) the
amount of such Net Floating Rate Notes Proceeds that were actually used to
finance Permitted Acquisitions during such 90-day period."
(15) Section 2.13(b)(iv) of the Credit Agreement is hereby amended by
inserting "or Section 2.12(d)(iii)" after "Section 2.12(d)(ii)" in the second
line thereof.
(16) Section 4.2 of the Credit Agreement is hereby amended by adding
the following as a new paragraph (f) thereof:
"(f) Borrower has the limited liability company power and
authority to issue the Floating Rate Subordinated Notes. The Floating Rate
Subordinated Notes, when issued and paid for, will be the legally valid and
binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability. The subordination provisions of the Floating Rate
Subordinated Notes will be enforceable against the holders thereof and the
Loans and all other monetary Obligations hereunder are and will be within
the definition of 'Senior Indebtedness' included in such provisions. The
Floating Rate Subordinated Notes, when issued and sold, will either have
been registered or qualified under applicable federal and state securities
laws or be exempt therefrom."
(17) Section 6.1 of the Credit Agreement is hereby amended by (i)
inserting ", the Floating Rate Subordinated Notes" before the words "the
Additional Senior Subordinated Notes" in paragraph (i) thereof and (ii)
replacing clause (i) of paragraph (q) thereof in its entirety with the
following:
"(i) such Indebtedness (A) shall be unsecured and subordinated
to the Obligations of Borrower hereunder on terms and conditions
substantially the same as (and no less favorable to Lenders than) those
applicable to the Senior Subordinated Notes, and such terms and conditions
shall be otherwise reasonably satisfactory to Co-Agents, (B) shall mature
no earlier than December 31, 2007, (C) shall contain other terms and
conditions substantially the same as (and no less favorable to Lenders
than) those applicable to the Senior Subordinated Notes, other than with
respect to the interest rate thereon and the maturity thereof, and
4
<PAGE>
such terms and conditions shall be otherwise reasonably satisfactory to
Co-Agents and (D) shall be issued simultaneously as part of one
transaction,".
(18) Section 6.1 of the Credit Agreement is further amended by
replacing clause (iv) of paragraph (q) thereof in its entirety with the
following:
"(iv) the Net Additional Proceeds shall be applied as follows:
(A) first, Borrower shall make all mandatory prepayments required pursuant
to Section 2.12(d)(ii)(A), (B) next, Borrower may redeem the Floating Rate
Subordinated Notes to the extent permitted pursuant to Section 6.4(a)(xiv),
(C) next, Borrower may repay Permitted Sponsor Subordinated Debt to the
extent permitted pursuant to Section 6.4(a)(x), (D) next, Borrower may use
up to $20,000,000 to make Permitted Acquisitions over a 180-day period (as
such period may be extended by 60 days as set forth in Section 2.12(d)(ii),
(E) next, Borrower shall make any mandatory prepayments required pursuant
to Section 2.12(d)(ii)(B), (F) next, Borrower may use any remaining Net
Additional Proceeds to make Permitted Acquisitions over a 180-day period
(as such period may be extended by 60 days as set forth in Section
2.12(d)(ii)), and (G) finally, to the extent that Borrower does not make
Permitted Acquisitions as permitted during such 180-day period (as such
period may be extended by 60 days as set forth in Section 2.12(d)(ii)),
Borrower shall make the mandatory prepayments required pursuant to the last
sentence of Section 2.12(d)(ii),".
(19) Section 6.1 of the Credit Agreement is further amended by (i)
deleting the "and" at the end of paragraph (q) thereof, (ii) adding the word
"and" at the end of paragraph (r) thereof, and (iii) adding the following as new
paragraph (s) thereof:
"(s) Indebtedness of Borrower and Muzak Finance in respect of
the Floating Rate Subordinated Notes in an aggregate original principal
amount of up to $50,000,000, plus the principal amount of any additional
Floating Rate Subordinated Notes issued as interest in the manner set forth
in the term sheet which is attached hereto as Exhibit M, provided (i) such
Indebtedness (A) shall be unsecured and subordinated to the Obligations of
Borrower hereunder on terms and conditions substantially the same as (and
no less favorable to Lenders than) those applicable to the Senior
Subordinated Notes and such terms and conditions shall be otherwise
reasonably satisfactory to Co-Agents and (B) shall be on substantially the
same terms and conditions as set forth in the term sheet which is attached
hereto as Exhibit M and such other terms and conditions as shall be
reasonably satisfactory to Co-Agents, (ii) Borrower and its Subsidiaries
shall be in compliance with Section 6.6 after giving effect to the proposed
issuance of the Floating Rate Subordinated Notes on a Pro Forma Basis as of
the most recently ended Fiscal Quarter for which a Compliance Certificate
has been delivered pursuant to Section 5.1(d), (iii) the terms and
conditions of the Floating Rate Subordinated Note Agreement shall be
substantially the same as (and no less favorable to Lenders than) those of
the Senior Subordinated Note Indenture and
5
<PAGE>
such terms and conditions shall be otherwise reasonably acceptable to
Co-Agents, (iv) the Net Floating Rate Notes Proceeds shall be used to make
Permitted Acquisitions over a 90-day period from the date of each issuance
of Floating Rate Subordinated Notes; provided to the extent that Borrower
does not make Permitted Acquisitions as permitted during such 90-day
period, Borrower shall make the mandatory prepayments required pursuant to
the last sentence of Section 2.12(d)(iii), (v) no Default or Event of
Default shall have occurred or be continuing or would result from any such
issuance, (vi) Borrower shall provide Co-Agents with no less than five
Business Days' prior written notice of each proposed issuance of Floating
Rate Subordinated Notes, which notice may be included in the draft proposed
acquisition Compliance Certificate required to be delivered pursuant to
clause (v) of the definition of Permitted Acquisition, and such notice
shall set forth (A) the aggregate outstanding principal amount of Floating
Rate Subordinated Notes, after giving effect to such proposed issuance, and
(B) if such notice is included in a draft proposed acquisition Compliance
Certificate, the amount of Net Floating Rate Notes Proceeds to be used to
finance such proposed acquisition, as well any other source of financing
for such proposed acquisition, (vii) commencing no less than ten Business
Days in advance of each proposed issuance of Floating Rate Subordinated
Notes, Borrower shall provide Co-Agents with drafts of all proposed
Floating Rate Subordinated Note Related Documents not previously provided
to Co-Agents and information in connection with such proposed issuance, and
each such proposed Floating Rate Subordinated Note Related Document shall
be in form and substance reasonably satisfactory to Co-Agents and (viii)
Borrower shall deliver to Co-Agents execution copies of each Floating Rate
Subordinated Note Related Document and all exhibits and schedules thereto
prior to or as of the date of execution thereof (including, without
limitation, copies of any opinions of counsel delivered to the parties in
connection with such transaction, accompanied by a letter from each such
counsel authorizing Lenders to rely upon such opinion to the same extent as
though it were addressed to Lenders, except in the case of any such legal
opinion rendered by counsel to any Person other than a Credit Party to the
extent such counsel has refused to deliver such a letter on the basis that
it is inconsistent with such counsel's internal policies);"
(20) Section 6.4(a)(ii) of the Credit Agreement is hereby amended in
its entirety as follows:
"(ii) Borrower may make regularly scheduled payments of
interest (which may include the payment of interest in additional notes in
lieu of cash) in respect of the Senior Subordinated Notes, the Additional
Senior Subordinated Notes and the Floating Rate Subordinated Notes in
accordance with the terms of, and only to the extent required by, and
subject to the subordination provisions contained in, each of the Senior
Subordinated Note Indenture, the Additional Senior Subordinated Note
Indenture and the Floating Rate Subordinated Note Agreement, as each such
Indenture or Agreement may be amended from time to time to the extent
permitted under Section 6.13;"
6
<PAGE>
(21) Section 6.4(a)(x) is hereby amended by replacing the "$50,000,000"
in clause (A) thereof with "the greater of (1) $50,000,000 and (2) the amount
required to (x) make all mandatory prepayments of Revolving Loans required
pursuant to Section 2.12(d)(ii)(A) and (y) redeem in full the outstanding
aggregate principal amount of Floating Rate Subordinated Notes, together with
all accrued and unpaid interest thereon".
(22) Section 6.4(a) is hereby amended by (i) deleting the word "and" at
the end of clauses (ix) and (xii) thereof, (ii) replacing the period at the end
of clause (xiii) thereof with "; and" and (iii) inserting the following as new
clause (xiv) thereof:
"(xiv) Borrower may use Net Additional Proceeds to redeem the
outstanding Floating Rate Subordinated Notes in an aggregate principal
amount of up to $50,000,000, plus the principal amount of any additional
Floating Rate Subordinated Notes issued as interest in the manner set forth
in the term sheet which is attached hereto as Exhibit M, together with any
accrued and unpaid cash interest thereon, provided that immediately prior
thereto Borrower shall have made all mandatory prepayments of Revolving
Loans required pursuant to Section 2.12(d)(ii)(A) in connection with such
issuance of Additional Senior Subordinated Notes and Borrower shall have
also made any prepayments required pursuant to Section 2.12(d)(iii) in
connection with any issuance of Floating Rate Subordinated Notes."
(23) Section 6.7(f) of the Credit Agreement is hereby amended by
replacing "then the consideration for all such acquisitions" in clauses (i) and
(ii) thereof with "then the cash consideration paid for all such acquisitions".
(24) Section 6.7(f)(iii) of the Credit Agreement is hereby amended in
its entirety as follows:
"(iii) in any fiscal year after 1999, the aggregate
consideration for all acquisitions in such fiscal year shall constitute no
more than an amount equal to the sum of (A) $25,000,000, (B) an amount
equal to the Net Floating Rate Notes Proceeds in connection with any
issuance of Floating Rate Subordinated Notes during such fiscal year, (C)
an amount equal to the Net Additional Proceeds in connection with any
issuance of Additional Senior Subordinated Notes during such fiscal year
less an amount equal to the sum of (x) the amount of any repayment of
Permitted Sponsor Subordinated Debt made with such proceeds during such
fiscal year and (y) an amount equal to the aggregate Net Floating Rate
Notes Proceeds in connection with any issuance of Floating Rate
Subordinated Notes, (D) an amount equal to the net proceeds of any New
Tranche B Term Loans made to Borrower during such fiscal year, (E) an
amount equal to the net proceeds of any Permitted Sponsor Subordinated Debt
issued to Borrower or
7
<PAGE>
Holdings during such fiscal year and (F) an amount equal to the Preferred
Stock Proceeds in connection with any issuance of Holdings Preferred Stock
during such fiscal year less the amount of any repayment of Permitted
Sponsor Subordinated Debt made with such proceeds during such fiscal year,
and"
(25) Section 6.13(c) of the Credit Agreement is hereby amended in its
entirety as follows:
"(c) Borrower shall not designate any Indebtedness as
"DESIGNATED SENIOR INDEBTEDNESS" or its equivalent (as defined or used in
the Senior Subordinated Note Indenture, the Additional Senior Subordinated
Note Indenture or the Floating Rate Subordinated Note Agreement) for
purposes of any of the Senior Subordinated Note Agreement, the Additional
Senior Subordinated Note Indenture or the Floating Rate Subordinated Note
Agreement, in any such case, without the prior written consent of Requisite
Lenders."
(26) Section 6.15 of the Credit Agreement is hereby amended by
inserting the following in the parenthetical phrase in clause (e) thereof ", any
Floating Rate Subordinated Note Related Documents" before the words "and any
Additional Senior Subordinated Note Related Documents".
(a) The Credit Agreement is hereby amended by adding the term sheet
which is attached hereto as Annex A as Exhibit M to the Credit Agreement.
2. Effectiveness. This Amendment shall not be effective until such time
as (a) the Credit Parties, Administrative Agent, Issuing Bank and as many
Lenders as may be necessary to comprise the Third Amendment Requisite Lenders
(as hereafter defined) shall have indicated their consent by the execution and
delivery of the signature pages hereof to Administrative Agent and (b) Borrower
shall have paid all accrued costs, fees and expenses of each Agent in connection
with this Amendment, including, without limitation, all accrued fees and
expenses of counsel to Agents. The "Third Amendment Requisite Lenders" shall
mean the following Lenders: (i) Requisite Lenders and (ii) Requisite Class
Lenders having more than 50% of the sum of the aggregate Revolving Exposure and
the aggregate Tranche A Term Loan Exposure of all Lenders.
3. Representations and Warranties of Each Credit Party. Each Credit
Party hereby represents and warrants to the Administrative Agent and the Lenders
that:
(1) the execution, delivery and performance of this Amendment have been
duly authorized by all necessary action on the part of each Credit Party. The
execution, delivery and performance by each Credit Party of this Amendment and
the consummation of the transactions contemplated by this Amendment do not and
will not (a) violate any provision of any law or governmental rule or regulation
applicable to such Credit Party, the Organizational Documents of such Credit
Party, or any order, judgment or decree of any court or other agency of
governmental binding on any Credit Party, (b)
8
<PAGE>
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of any Credit Party
(including, without limitation, the Senior Subordinated Note Indenture), (c)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of any Credit Party or any of its Subsidiaries, or (d)
require the approval of members of any Credit Party or any approval or consent
of any Person under any Contractual Obligation, except for such approvals or
consents which will be obtained on or before the date hereof and disclosed in
writing to the Lenders and except for any such approvals or consents the failure
of which to obtain will not have a Material Adverse Effect;
(2) this Amendment and each Credit Document has been duly executed and
delivered by each Credit Party and is the legally valid and binding obligation
of such Credit Party, enforceable against such Credit Party in accordance with
its respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability;
(3) on or as of the date hereof, and both before and after giving
effect to this Amendment and the transactions contemplated hereunder, no Default
or Event of Default has occurred and is continuing; and
(4) the representations and warranties of each Credit Party contained
in the Credit Agreement and the Credit Documents are true and correct on and as
of the date hereof as if made on and as of the date hereof, except to the extent
such representations and warranties expressly relate to a specific date.
4. Acknowledgments and Covenants of Each Credit Party. Each Credit
Party hereby (a) reaffirms and admits the validity and enforceability of the
Credit Agreement and the other Credit Documents and all of its obligations
thereunder, (b) agrees and admits that it has no defenses to or offsets against
any of its obligations to the Administrative Agent or any Lender under the
Credit Documents, and (c) agrees to pay all of expenses of the Co-Agents
(including counsel fees and disbursements) incurred in connection with the
preparation, negotiation and completion of this Amendment.
5. Status of Credit Documents. This Amendment is limited solely for the
purposes and to the extent expressly set forth herein, and, except as expressly
modified hereby, the terms, provisions and conditions of the Credit Documents
and the Liens granted thereunder shall continue in full force and effect and are
hereby ratified and confirmed in all respects.
6. Counterparts. This Amendment may be executed in any number of
counterparts all of which, taken together, shall constitute one Amendment. In
making proof of this Amendment, it shall only be necessary to produce the
counterpart executed and delivered by the party to be charged.
9
<PAGE>
7. Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES THEREOF.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment and Consent to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first written above.
MUZAK LLC
By:_____________________________
Name:___________________________
Title:____________________________
S-1
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent and a Lender
By:_____________________________
Name:___________________________
Title:____________________________
S-2
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent and a Lender
By:_____________________________
Name:___________________________
Title:____________________________
S-3
<PAGE>
BANKBOSTON, N.A., as Issuing Bank
and a Lender
By:_____________________________
Name:___________________________
Title:____________________________
S-4
<PAGE>
MAGNETITE ASSET INVESTORS LLC
By:_____________________________
Name:___________________________
Title:____________________________
S-5
<PAGE>
COAST BUSINESS CREDIT, a division of
SOUTHERN PACIFIC BANK
By:_____________________________
Name:___________________________
Title:____________________________
S-6
<PAGE>
KZH CNC LLC
By:_____________________________
Name:___________________________
Title:____________________________
S-7
<PAGE>
NORTH AMERICAN SENIOR FLOATING RATE
FUND
By: CypressTree Investment
Management Company, Inc. as
Portfolio Manager
By:_____________________________
Name:___________________________
Title:____________________________
S-8
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE
FUND
By: CypressTree Investment
Management Company, Inc. as
Portfolio Manager
By:_____________________________
Name:___________________________
Title:____________________________
S-9
<PAGE>
KZH CYPRESSTREE-1 LLC
By:_____________________________
Name:___________________________
Title:____________________________
S-10
<PAGE>
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment Management
Company, Inc. its Managing Member
By:_____________________________
Name:___________________________
Title:____________________________
S-11
<PAGE>
CYPRESSTREE INVESTMENT PARTNERS I,
LTD.
By: CypressTree Investment
Management Company, Inc. as
Portfolio Manager
By:_____________________________
Name:___________________________
Title:____________________________
S-12
<PAGE>
CYPRESSTREE INSTITUTIONAL FUND, LLC
By: CypressTree Investment
Management Company, Inc. its
Managing Member
By:_____________________________
Name:___________________________
Title:____________________________
S-13
<PAGE>
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC.
As: Attorney-in-Fact and on behalf
of First Allmerica Financial Life
Insurance Company as Portfolio
Manager
By:_____________________________
Name:___________________________
Title:____________________________
S-14
<PAGE>
FREMONT INVESTMENT & LOAN
By:_____________________________
Name:___________________________
Title:____________________________
S-15
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:_____________________________
Name:___________________________
Title:____________________________
S-16
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
By:_____________________________
Name:___________________________
Title:____________________________
S-17
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By:_____________________________
Name:___________________________
Title:____________________________
S-18
<PAGE>
WINGED FOOT FUNDING TRUST
By:_____________________________
Name:___________________________
Title:____________________________
S-19
<PAGE>
NEW YORK LIFE INSURANCE COMPANY
By:_____________________________
Name:___________________________
Title:____________________________
S-20
<PAGE>
SANKATY ADVISORS, INC., as
Collateral Manager for GREAT POINT
CLO 1999-1 LTD.
By:_____________________________
Name:___________________________
Title:____________________________
S-21
<PAGE>
SAWGRASS TRADING LLC
By:_____________________________
Name:___________________________
Title:____________________________
S-22
<PAGE>
SRF TRADING, INC.
By:_____________________________
Name:___________________________
Title:____________________________
S-23
<PAGE>
STEIN, ROE AND FARNHAM CLO I
By:_____________________________
Name:___________________________
Title:____________________________
S-24
<PAGE>
THE TORONTO-DOMINION BANK
By:_____________________________
Name:___________________________
Title:____________________________
S-25
<PAGE>
VAN KAMPEN PRIME RATE INCOME TRUST
By:_____________________________
Name:___________________________
Title:____________________________
S-26
<PAGE>
By signing below, the Guarantors (w) ratify and reaffirm the Credit Documents to
which they are a party, (x) acknowledge this Amendment and (y) agree and admit
that they have no defenses or offsets against any of their obligations to the
Administrative Agent or any Lender under the Credit Documents.
MUZAK HOLDINGS LLC AUDIO ENVIRONMENTS, INC.
By:_____________________________ By:__________________________
Name:___________________________ Name:_______________________
Title:____________________________ Title:________________________
MUZAK CAPITAL CORPORATION BACKGROUND MUSIC
BROADCASTERS, INC.
By:_____________________________
Name:___________________________ By:__________________________
Title:____________________________ Name:_______________________
Title:________________________
MLP ENVIRONMENTAL MUSIC, LLC
By:_____________________________
Name:___________________________
Title:____________________________
ELECTRO-SYSTEMS CORPORATION
By:_____________________________
Name:___________________________
Title:____________________________
BUSINESS SOUND, INC.
By:_____________________________
Name:___________________________
Title:____________________________
BI ACQUISITION, LLC
By:_____________________________
Name:___________________________
Title:____________________________
S-27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-K of
Muzak Holdings LLC and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001085320
<NAME> MUZAK HOLDINGS LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,275
<SECURITIES> 0
<RECEIVABLES> 42,886
<ALLOWANCES> 3,683
<INVENTORY> 12,283
<CURRENT-ASSETS> 56,065
<PP&E> 113,474
<DEPRECIATION> (18,424)
<TOTAL-ASSETS> 497,315
<CURRENT-LIABILITIES> 91,318
<BONDS> 159,214
0
0
<COMMON> 73,421
<OTHER-SE> (30,353)
<TOTAL-LIABILITY-AND-EQUITY> 497,315
<SALES> 130,016
<TOTAL-REVENUES> 130,016
<CGS> 48,319
<TOTAL-COSTS> 48,319
<OTHER-EXPENSES> 77,789
<LOSS-PROVISION> 1,185
<INTEREST-EXPENSE> (29,394)
<INCOME-PRETAX> (26,651)
<INCOME-TAX> (439)
<INCOME-CONTINUING> (26,212)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,212)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-K of
MUZAK HOLDINGS FINANCE CORP and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0001085319
<NAME> MUZAK HOLDINGS FINANCE CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
