ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of this
28th of October, 1998, by and between Music Technologies, Inc., a Michigan
corporation ("Seller") and Muzak Limited Partnership, a Delaware limited
partnership ("Buyer"). The parties hereby agree as follows:
RECITALS
A. Seller operates a Music Business throughout the United States. As
used herein, the term "Music Business" includes the transmission of background,
foreground and other forms of subscription music to commercial and industrial
subscribers, and the installation and maintenance of equipment used in
connection with such Services at subscriber premises (hereinafter collectively
referred to as "Services").
B. Subject to the terms and conditions of this Agreement, Buyer desires
to purchase, and Seller desires to sell, certain of the assets of Seller used in
the Music Business, and in connection with such purchase and sale, Buyer is
willing to assume certain obligations as expressly set forth herein.
AGREEMENT
SALE AND PURCHASE OF ASSETS.
SALE OF ASSETS. AT THE CLOSING (AS DEFINED IN SECTION 4), ON THE TERMS AND
SUBJECT TO THE CONDITIONS OF THIS AGREEMENT AND FOR THE CONSIDERATION SET FORTH
HEREIN, SELLER SHALL SELL, CONVEY, ASSIGN, TRANSFER AND DELIVER TO BUYER, AND
BUYER SHALL PURCHASE AND ACQUIRE FROM SELLER, THE FOLLOWING ASSETS OF SELLER
USED IN THE MUSIC BUSINESS (THE "ASSETS"):
The tuners, tape play-back equipment, receivers, satellite equipment,
amplifiers, speakers, and other equipment owned by Seller and installed on the
premises of the Customers (as hereinafter defined).
All of Seller's rights in and to the agreements and contracts ("Customer
Contracts") to furnish Services and associated equipment to subscribers and
customers ("Customers") which will be listed on Schedule 1.1.2 to be delivered
to Buyer immediately following satisfaction (or waiver) of the financing
condition in Section 8.6. Copies of all Customer Contracts (with the exception
of one Deferred Payment Contract (as hereinafter defined)) will be furnished to
Buyer on November 15, 1998. The Customer Contracts include three national
account contracts with locations to be installed upon expiration of existing
contracts with competitors which will aggregate at least $46,000 in expected
Recurring Monthly Xxxxxxxx (as hereinafter defined) once installations are
complete (the "Deferred Payment Contracts").
All rights in and to the items of "Usable Inventory" of Seller used in the Music
Business. Usable Inventory shall mean inventory which, after completion of its
due diligence with respect to the inventory, Buyer determines in its sole
discretion to be usable in either its present business or its business after the
consummation of the transactions contemplated by this Agreement. Inventory which
is not Usable Inventory shall be retained by Seller.
All rights in and to the satellite space segment contracts, the software
licenses, and the Act Radio contract which are listed on Schedule 1.1.4
("Satellite Contracts").
The equipment related to Seller's music and messaging distribution system which
are listed on Schedule 1.1.5. (the "Distribution System Assets")
EXCLUDED ASSETS. SELLER SHALL NOT SELL, AND BUYER SHALL NOT ACQUIRE ANY INTEREST
IN, ANY OF SELLER'S CASH, ACCOUNTS RECEIVABLE, ADVERTISING BUSINESS ASSETS,
PERSONAL MEMORABILIA, PREPAID EXPENSES, OR ANY ASSETS NOT SET FORTH IN SECTION
1.1 (THE "EXCLUDED ASSETS"). THE EXCLUDED ASSETS SHALL REMAIN THE PROPERTY OF
SELLER AND BUYER SHALL BE DEEMED TO HAVE NO RIGHT, DUTY, LIABILITY OR OTHER
RESPONSIBILITY WITH RESPECT THERETO. ACCOUNTS RECEIVABLE INCLUDE XXXXXXXX
(WHENEVER GENERATED) FOR SERVICES PROVIDED BY SELLER UP TO AND INCLUDING
NOVEMBER 30, 1998.
ASSUMPTION OF OBLIGATIONS. IN CONNECTION WITH THE PURCHASE AND SALE OF THE
ASSETS PURSUANT TO THIS AGREEMENT, BUYER SHALL ASSUME IN WRITING AT THE CLOSING
ONLY THOSE OBLIGATIONS OF SELLER UNDER THE TERMS OF THE (I) CUSTOMER CONTRACTS
AND (II) THE SATELLITE CONTRACTS AND (III) THE OBLIGATIONS DESCRIBED ON SCHEDULE
1.3 ("ASSUMED OBLIGATIONS"). BUYER IS OBLIGATED TO ASSUME AND PERFORM ALL OF
SELLER'S OBLIGATIONS UNDER THE CUSTOMER CONTRACTS AND THE SATELLITE CONTRACTS
FROM AND AFTER THE CLOSING DATE. NO OTHER LIABILITIES OR OBLIGATIONS OF ANY
NATURE, WHETHER KNOWN OR UNKNOWN, FIXED OR CONTINGENT, ACCRUED OR UNACCRUED,
SHALL BE ASSUMED BY BUYER IN CONNECTION WITH THE PURCHASE AND SALE OF THE ASSETS
HEREUNDER, INCLUDING WITHOUT LIMITATION, ANY OBLIGATIONS OF SELLER TO PAY
COMMISSIONS OR OTHER COMPENSATION TO ITS EMPLOYEES, SALESPERSONS AND AGENTS. ALL
SUCH LIABILITIES AND OBLIGATIONS SHALL REMAIN THE RESPONSIBILITY OF SELLER.
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SALES AGENT AGREEMENT. AT ANY TIME AFTER THE CLOSING DATE (AS HEREINAFTER
DEFINED) AND 15 DAYS PRIOR TO THE "ADJUSTMENT DATE," WHICH IS 285 DAYS AFTER THE
CLOSING DATE, SELLER MAY, AS AGENT FOR BUYER, AND ON THE TERMS AND CONDITIONS
SET FORTH IN THIS SECTION 2, OFFER MUZAK(R) MUSIC AND ADJUNCT SERVICES FOR SALE
TO THOSE CERTAIN POTENTIAL CUSTOMERS (THE "DESIGNATED CUSTOMERS") AGREED TO IN
WRITING BY BUYER AND SELLER ON THE CLOSING DATE. ANY SUCH OFFER SHALL BE ON SUCH
TERMS AS ARE APPROVED IN ADVANCE BY BUYER'S NATIONAL SALES COMMITTEE, WHICH
APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED. BUYER'S
NATIONAL SALES COMMITTEE SHALL CONSIDER EACH SUCH OFFER IN GOOD FAITH AND IN
ACCORDANCE WITH ITS PAST PRACTICES. IN THE EVENT THAT BUYER ENTERS INTO A
SERVICES AGREEMENT WITH A DESIGNATED CUSTOMER BETWEEN THE CLOSING DATE AND THE
ADJUSTMENT DATE (A "DESIGNATED CUSTOMER CONTRACT"), BUYER SHALL PAY TO SELLER ON
THE ADJUSTMENT DATE IN CONSIDERATION OF SELLER'S MARKETING EFFORTS WITH RESPECT
THERETO A SALES COMMISSION (THE "DESIGNATED CUSTOMER PAYMENT") EQUAL TO THIRTY
TIMES THE EXPECTED RECURRING MONTHLY XXXXXXXX (AS DEFINED IN SECTION 3.3.1)
UNDER THE DESIGNATED CUSTOMER CONTRACT, UNLESS SUCH DESIGNATED CUSTOMER CONTRACT
REQUIRES NO PURCHASE OR INSTALLATION OF EQUIPMENT BY BUYER, IN WHICH CASE THE
SALES COMMISSION SHALL BE FORTY-TWO TIMES THE EXPECTED RECURRING MONTHLY
XXXXXXXX UNDER SUCH DESIGNATED CUSTOMER CONTRACT. SUCH SALES COMMISSIONS SHALL
BE PAID IN ACCORDANCE WITH AND SUBJECT TO THE ADJUSTMENTS DESCRIBED IN SECTION
3.3.1 BELOW.
PURCHASE PRICE.
3.1 Consideration for Assets. The full consideration for the
Assets shall be Fourteen Million Two Hundred Thousand Dollars ($14,200,000),
plus the dollar value of the Usable Inventory (the "Purchase Price"), subject to
adjustments to the Escrowed Funds (as hereinafter defined) pursuant to Section
3.3. Buyer shall pay the lower of Seller's cost or the fair market value for the
Usable Inventory. For purposes of this paragraph, "fair market value" shall be
net of any costs of reconditioning, and the cost of making the equipment
compatible with Buyer's system. If the parties cannot agree on the dollar value
of one or more items of Useable Inventory, such item(s) shall remain the
property of Seller. At the Closing, subject to the terms and conditions of this
Agreement, Buyer shall (a) pay to Seller Twelve Million Two Hundred Twenty
Thousand Dollars ($12,220,000) (subject to the adjustment, if any, set forth in
Section 3.1.1), plus the dollar value of the Usable Inventory, all by wire
transfer of immediately available funds (the "Closing Payment"), (b) deposit Six
Hundred Thousand Dollars ($600,000) in escrow (the "Escrowed Funds") with
Pacific Northwest Title Company (or other mutually agreeable third party) as
escrow agent (the "Escrow Agent") pursuant to an escrow agreement to be entered
into among Buyer, Seller and the Escrow Agent substantially in the form of
Exhibit 3.1 for disbursement in accordance with Section 3.3 and (c) assume the
Assumed Obligations.
3.1.1 Reduction in Amount of Closing Payment. In the event
that between the date of this Agreement and the Closing Date, there is a
cancellation or a notice of cancellation with respect to a Customer Contract,
the Closing Payment shall be reduced by an amount equal to twenty-one (21) times
the expected Recurring Monthly Xxxxxxxx which would have been earned under such
cancelled contract but for such cancellation, but the maximum amount of any such
reduction in the Closing Payment as a result of this Section 3.1.1 shall not
exceed Six Hundred Thousand Dollars ($600,000).
DEFERRED PAYMENT. ON THE ADJUSTMENT DATE, BUYER SHALL PAY TO SELLER ONE MILLION
THREE HUNDRED EIGHTY THOUSAND DOLLARS ($1,380,000) (THE "DEFERRED PAYMENT") BY
WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS. IF ANY DEFERRED PAYMENT CONTRACT
HAS NOT BEEN EXECUTED BY THE ADJUSTMENT DATE, THE DEFERRED PAYMENT SHALL BE
REDUCED BY AN AMOUNT EQUAL TO 30 TIMES THE EXPECTED RECURRING MONTHLY XXXXXXXX
FOR SUCH DEFERRED PAYMENT CONTRACT.
With respect to any Deferred Payment Contract which: (i) has
not been executed by the Adjustment Date, or (ii) as to which a consent to
assignment has not been obtained by the Adjustment Date, or (iii) as to which a
notice of cancellation (the "Notice of Cancellation") has not been sent by the
Customer cancelling its existing contracts with competing music providers,
(hereinafter an "Undocumented Deferred Payment Contract"), Buyer will pay to
Seller on each of the first three (3) annual anniversaries of the Closing Date
the following amounts:
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(i) On the first annual anniversary of the Closing Date, for each such
Contract an amount equal to ten (10) times the Average Monthly
Recurring Revenues earned by Buyer during the one (1) year period
ending on such anniversary date with respect to each Undocumented
Deferred Payment Contract;
(ii) On the second annual anniversary of the Closing Date, for each
such Contract an amount equal to twenty (20) times the Average Monthly
Recurring Revenues with respect to each such Undocumented Deferred
Payment Contract earned by Buyer during the two (2) year period ending
on the second anniversary date, less amounts paid by Buyer to Seller
with respect to such Contract under clause (i) above; and,
(iii) On the third annual anniversary of the Closing Date, for each
such Contract an amount equal to thirty (30) times the Average Monthly
Recurring Revenues with respect to each such Undocumented Deferred
Payment Contract earned by Buyer during the three (3) year period
ending on such third anniversary date, less amounts paid by Buyer to
Seller with respect to such Undocumented Deferred Payment Contract
under clause (i) and (ii) above.
If the Seller has obtained a signed agreement, a consent to assignment,
and a copy of the Notice of Cancellation with respect to any
Undocumented Deferred Payment Contract during the three (3) year period
following the Closing Date, then at the xxxx Xxxxxx obtains such signed
agreement and consent, Buyer shall pay to Seller an amount equal to
thirty (30) times the expected Recurring Monthly Xxxxxxxx with respect
to that Contract, less any amounts paid by Buyer to Seller under clause
(i) and/or (ii) above with respect to such Contract.
"Average Monthly Recurring Revenues" shall be computed on a
contract-by-contract basis for each of the Undocumented Deferred Payment
Contracts, and shall equal one-twelfth (1/12) of the total revenues from
Recurring Monthly Xxxxxxxx earned by Buyer with respect to each such
Undocumented Deferred Payment Contract during the twelve (12) month period
preceding the date on which Average Monthly Recurring Revenues is computed.
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ADJUSTMENT AMOUNT -- ESCROWED FUNDS.
At least fifteen (15) days prior to the Adjustment Date, Buyer shall deliver to
Seller a statement (the "Adjustment Statement") setting forth the "Adjustment
Amount" (as hereinafter defined). The Adjustment Amount shall be the total of
(i) all Designated Customer Payments plus (ii) the "Renegotiation Amount" (as
hereinafter defined) minus the sum of (a) 42 times the expected Recurring
Monthly Xxxxxxxx for all Customer Contracts cancelled by Customers during the
Adjustment Period where such cancellations are not attributable to the actions
of Buyer and (b) 30 times the expected Recurring Monthly Xxxxxxxx for all
Deferred Payment Contracts cancelled by customers during the Adjustment Period
where such cancellations are not attributable to the actions of Buyer. As used
herein, "Recurring Monthly Xxxxxxxx" means the recurring monthly xxxxxxxx for
Services and/or equipment, net of sales taxes, deriving from a customer
contract. As used herein, the "Renegotiation Amount" shall be any increase in
the Recurring Monthly Xxxxxxxx under any Customer Contract multiplied by 30 (if
equipment needs to be provided) or 42 (if no equipment needs to be provided),
where such increase (1) becomes effective between the date of this Agreement and
the Adjustment Date and (2) has been approved by Buyer in its reasonable
discretion prior to completion of its due diligence. The Adjustment Statement
shall be final and binding on the parties unless, within thirty days after
delivery of the Adjustment Statement, written notice is given by Seller to Buyer
of Seller's objection thereto. During the thirty day period after Buyer's
delivery to Seller of the Adjustment Statement, Buyer shall provide Seller with
copies of any records Buyer used to determine the Adjustment Amount. If Seller
does not provide Buyer written notice of objection to the Adjustment Amount,
payments shall be made on the Adjustment Date as follows: (1) If the Adjustment
Amount, as calculated above, is a positive number, such amount plus the Escrowed
Funds shall be paid to Seller on the Adjustment Date. (2) If the Adjustment
Amount, as calculated above, is a negative number in excess of negative
$990,500, the difference between the negative number and negative $990,500 shall
be paid to Buyer from the Escrowed Funds, with the balance of the Escrowed Funds
remaining after such payment, if any, to be paid to Seller. Even if the negative
number exceeds $990,500 by more than $600,000, the payment to the Buyer shall be
limited to the value of $600,000. (3) If the Adjustment Amount, as calculated
above, is a negative number that is less than negative $990,500, than the
Escrowed Funds shall be paid to Seller. (4) If no adjustment is made, the
Escrowed Funds shall be paid to Seller.
If notice of objection is given by Seller in accordance with Section 3.3.1, the
parties shall consult with each other with respect to the objection. If the
parties are unable to reach agreement within 30 days after the notice of
objection has been given, the dispute shall be resolved by a firm of independent
accountants of nationally recognized standing jointly selected by the parties,
which resolution shall be final and binding on the parties. The Escrow Agent
shall promptly disburse funds to the Seller and/or Buyer in accordance with the
accountants' determination of the Adjustment Amount. The accountants shall not
have been engaged by either party at any time within the past ten years. In the
event that the accountants determine that the statement in question was
substantially correct, the costs of the accountants shall be borne by Seller. If
the accountants determine that the statement in question was not substantially
correct, the costs of the accountants shall be borne by Buyer.
ALLOCATION OF PURCHASE PRICE. THE PURCHASE PRICE SHALL BE ALLOCATED AMONG THE
ASSETS IN ACCORDANCE WITH SCHEDULE 3.4, AS SUBMITTED BY SELLER TO BUYER. THE
PARTIES SHALL REPORT CONSISTENTLY WITH SUCH ALLOCATIONS ON ALL INCOME TAX
RETURNS AND OTHER STATEMENTS, INCLUDING WITHOUT LIMITATION, FORM 8594, AND IN
THE COURSE OF ANY TAX AUDIT, TAX REVIEW OR TAX LITIGATION RELATING THERETO.
CLOSING.
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CLOSING DATE. THE CLOSING OF THE PURCHASE AND SALE OF THE ASSETS (THE "CLOSING")
SHALL TAKE PLACE AT THE OFFICES OF SEYBURN, KAHN, GINN, BESS, XXXXXX AND XXXXXX,
P.C., 0000 XXXX XXXXXX, XXXXX 0000, XXXXXXXXXX, XXXXXXXX 00000 AT 2:00 P.M.
EASTERN STANDARD TIME. ON NOVEMBER 30, 1998, OR AT SUCH OTHER PLACE, DATE OR
TIME AS BUYER AND SELLER MAY AGREE IN WRITING. THE CLOSING MAY BE EXTENDED BY
EITHER PARTY UP TO AND UNTIL DECEMBER 7, 1998. IN ADDITION, THE CLOSING DATE
SHALL BE AUTOMATICALLY EXTENDED UP TO AND UNTIL DECEMBER 23, 1998 IN ORDER FOR
SELLER TO CONTINUE ITS EFFORTS TO OBTAIN THE REQUIRED CONSENTS FROM CUSTOMERS TO
ASSIGN TO BUYER CUSTOMER CONTRACTS (IF SUCH REQUIRED CONSENTS HAVE NOT BEEN
OBTAINED BY NOVEMBER 30). IF THE CLOSING DATE OCCURS AFTER NOVEMBER 30, BECAUSE:
(I) SELLER HAS NOT OBTAINED THE REQUIRED CONSENTS BY NOVEMBER 30; OR (II) BUYER
IS NOT PREPARED TO DELIVER ITS DELIVERABLES SET FORTH IN SECTION 4.3 ON NOVEMBER
30, THEN ON THE CLOSING DATE (AS HEREINAFTER DEFINED), BUYER SHALL PAY TO SELLER
INTEREST ON THE CLOSING PAYMENT AT THE PRIME RATE DETERMINED AND PUBLICLY QUOTED
FROM TIME TO TIME BY BANK OF AMERICA NTS&A COMPUTED FROM NOVEMBER 30 TO THE
CLOSING DATE. THE DATE OF THE CLOSING SHALL BE REFERRED TO HEREIN AS THE
"CLOSING DATE."
SELLER'S DELIVERIES TO BUYER AT CLOSING. AT THE CLOSING, SELLER SHALL DELIVER OR
CAUSE TO BE DELIVERED TO BUYER:
A xxxx of sale substantially in the form of Exhibit 4.2.1, for the Assets (the
"Xxxx of Sale");
An executed counterpart of an assumption agreement substantially in the form of
Exhibit 4.2.2 (the "Assumption Agreement");
An executed counterpart of the Escrow Agreement;
An executed counterpart of a non-compete agreement in favor of Buyer effective
as of the Closing Date for a period of five years thereafter from each of Seller
and Xxxxxxxx Xxxxxx substantially in the form of Exhibit 4.2.4 (the "Non-Compete
Agreement");
An executed counterpart of an advertising agreement between the Seller and the
Buyer, substantially in the form of Exhibit 4.2.5 (the "Advertising Agreement");
A copy of resolutions of the Board of Directors and shareholders of Seller
authorizing consummation of the transactions contemplated by this Agreement, and
a certificate of Seller's secretary or assistant secretary that such resolutions
were duly adopted and are in full force and effect as of the Closing Date;
Tax and Secretary of State good standing certificates from the State of Michigan
for Seller as of a date not earlier than five (5) business days before the
Closing;
All third party consents (including consents from Customers with respect to
Customer Contracts constituting at least $219,750 of expected Recurring Monthly
Xxxxxxxx) (the "Required Consents");
Copies of notifications of cancellation of current music provider services under
each Deferred Payment Contract (or, if such Notice of Cancellation has not been
obtained by Seller, the Closing shall proceed and the procedure in Section 3.1.2
Deferred Payment shall be followed);
An opinion of counsel of Seyburn, Kahn, Ginn, Bess, Xxxxxx and Xxxxxx, P.C, in
substantially the form of Exhibit 4.2.10;
4.2.11 An agreed upon list of Designated Customers as
contemplated by Section 2; and
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4.2.12 Such other documents and instruments as shall
be reasonably requested by Buyer to effect the transactions contemplated hereby.
Simultaneously with such deliveries, Seller shall take such steps as
are necessary to put Buyer in actual possession and/or control of the Assets.
BUYER'S DELIVERIES TO SELLER AT CLOSING. AT THE CLOSING, BUYER SHALL DELIVER OR
CAUSE TO BE DELIVERED TO SELLER THE FOLLOWING INSTRUMENTS AND DOCUMENTS AGAINST
DELIVERY OF THE ITEMS SPECIFIED IN SECTION 4.2:
An executed counterpart of the Assumption Agreement;
An executed counterpart of the Escrow Agreement;
An executed counterpart of the Non-Compete Agreement;
An executed counterpart of the Advertising Agreement;
An opinion of counsel of Xxxxxx Xxxxxx White & XxXxxxxxx substantially in the
form of Exhibit 4.3.5;
A copy of resolutions of the Board of Directors and shareholders of Buyer
authorizing consummation of the transactions contemplated by this Agreement, and
a certificate of Buyer's secretary or assistant secretary that such resolutions
were duly adopted and are in full force and effect as of the Closing Date;
the Closing Payment;
4.3.8 An agreed upon list of Designated Customers as
contemplated by Section 2; and
4.3.9 Such other documents and instruments as shall
be reasonably requested by Seller to effect the transactions contemplated
hereby.
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REPRESENTATIONS AND WARRANTIES OF SELLER. SELLER HEREBY REPRESENTS AND WARRANTS
TO BUYER THAT:
ORGANIZATION AND AUTHORITY. SELLER (A) IS A CORPORATION DULY ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE OF MICHIGAN; (B) HAS
ALL NECESSARY CORPORATE POWER TO OWN AND LEASE ITS PROPERTIES RELATING TO THE
MUSIC BUSINESS, CARRY ON ITS MUSIC BUSINESS AS NOW BEING CONDUCTED AND ENTER
INTO AND PERFORM THIS AGREEMENT; AND (C) IS QUALIFIED TO DO BUSINESS IN ALL
JURISDICTIONS IN WHICH THE FAILURE TO SO QUALIFY WOULD HAVE A MATERIAL ADVERSE
EFFECT ON ITS MUSIC BUSINESS OR FINANCIAL CONDITION.
AUTHORIZATION OF AGREEMENT; NO VIOLATION OF OTHER INSTRUMENTS.
The execution and delivery of this Agreement and the performance hereunder by
Seller have been duly authorized by all necessary corporate action on the part
of Seller and, assuming execution of this Agreement by Buyer, this Agreement
will constitute a legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
Except for liens to be discharged at Closing and except for non-assignment
covenants in certain Customer Contracts as set forth in Schedule 5.9, to be
discharged or waived at or prior to Closing, neither the execution of this
Agreement nor the performance hereof by Seller will (a) conflict with or result
in any breach or violation of the terms of any decree, judgment, order, law or
regulation of any court or other governmental body now in effect applicable to
Seller; (b) conflict with, or result in, with or without the passage of time or
the giving of notice, any breach of any of the terms, conditions and provisions
of, or constitute a default under, or result in the creation of any lien,
charge, or encumbrance upon any of the Assets pursuant to, any indenture,
mortgage, lease, agreement or other instrument to which Seller is a party or by
which it or any of the Assets are bound; (c) permit the acceleration of the
maturity of any material indebtedness of Seller or of any other person secured
by the Assets; or (d) violate or conflict with any provision of its Articles of
Incorporation or Bylaws.
Except as set forth on Schedule 5.2.3, no consent, approval or authorization of,
or declaration, filing or registration with, any third party or government or
regulatory authority is required to be made or obtained by Seller in order to
permit the execution, delivery or performance of this Agreement by Seller, or
the consummation of the transactions contemplated by this Agreement.
STOCKHOLDERS. SCHEDULE 5.3 SETS FORTH A TRUE AND COMPLETE LIST OF ALL OF THE
STOCKHOLDERS OF SELLER AND THEIR RESPECTIVE PERCENTAGE OWNERSHIP OF SELLER'S
CAPITAL STOCK.
OWNERSHIP AND DELIVERY OF ASSETS. EXCEPT FOR LIENS LISTED ON THE ATTACHED
SCHEDULE 5.4 AND ANY LIENS FROM LANDLORDS OR CREDITORS OF SELLER'S CUSTOMERS,
AND SUBJECT TO OBTAINING THE CUSTOMER CONSENTS LISTED IN SCHEDULE 5.9, SELLER IS
THE TRUE AND LAWFUL OWNER OF THE ASSETS AND HAS ALL NECESSARY POWER AND
AUTHORITY TO TRANSFER THE ASSETS TO BUYER FREE AND CLEAR OF ALL LIENS, CHARGES,
EASEMENTS, SECURITY INTERESTS, MORTGAGES, CONDITIONAL SALE CONTRACTS, EQUITIES,
RIGHTS OF WAY, COVENANTS, RESTRICTIONS, TITLE DEFECTS, OBJECTIONS, CLAIMS OR
OTHER ENCUMBRANCES ("LIENS"). NO OTHER PERSON, INCLUDING ANY OFFICER, DIRECTOR,
EMPLOYEE, OR SHAREHOLDER OF SELLER, WILL HAVE ON THE CLOSING DATE ANY DIRECT OR
INDIRECT INTEREST IN ANY OF THE ASSETS. UPON DELIVERY TO BUYER OF THE XXXX OF
SALE AND OTHER INSTRUMENTS OF CONVEYANCE WITH RESPECT TO THE ASSETS ON THE
CLOSING DATE, BUYER WILL ACQUIRE GOOD AND VALID TITLE TO THE ASSETS FREE AND
CLEAR OF ALL LIENS. THE ASSETS INCLUDE ALL EQUIPMENT LOCATED ON THE CUSTOMERS'
PREMISES AND USED IN CONNECTION WITH THE SERVICES.
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COMPLIANCE WITH LAW. TO THE BEST OF SELLER'S KNOWLEDGE, SELLER HOLDS ALL
LICENSES, PERMITS AND AUTHORIZATIONS NECESSARY FOR THE LAWFUL CONDUCT OF
SELLER'S MUSIC BUSINESS WHEREVER CONDUCTED PURSUANT TO ALL APPLICABLE STATUTES,
LAWS, ORDINANCES, RULES AND REGULATIONS OF ALL GOVERNMENTAL BODIES, AGENCIES AND
SUBDIVISIONS HAVING, ASSERTING OR CLAIMING JURISDICTION OVER SELLER OR OVER ANY
PART OF SELLER'S OPERATIONS, AND SELLER IS NOT IN MATERIAL VIOLATION THEREOF.
TAXES. ALL TAX RETURNS AND REPORTS WITH RESPECT TO SELLER REQUIRED BY LAW TO BE
FILED UNDER THE LAWS OF ANY JURISDICTION, DOMESTIC OR FOREIGN, HAVE BEEN DULY
AND TIMELY FILED AND ALL TAXES, FEES OR OTHER GOVERNMENTAL CHARGES OF ANY NATURE
WHICH WERE REQUIRED TO HAVE BEEN PAID HAVE BEEN PAID OR PROVIDED FOR. SELLER HAS
NO KNOWLEDGE OF ANY UNPAID TAXES OR ANY ACTUAL OR THREATENED ASSESSMENT OF
DEFICIENCY OR ADDITIONAL TAX OR OTHER GOVERNMENTAL CHARGE OR A BASIS FOR SUCH A
CLAIM AGAINST SELLER. SELLER HAS NO KNOWLEDGE OF ANY TAX AUDIT OF SELLER BY ANY
TAXING OR OTHER AUTHORITY IN CONNECTION WITH ANY OF ITS FISCAL YEARS, NOR ANY
KNOWLEDGE OF ANY SUCH AUDIT CURRENTLY PENDING OR THREATENED AGAINST SELLER, AND
THERE ARE NO TAX LIENS ON ANY OF THE PROPERTIES OF SELLER, NOR HAVE ANY SUCH
LIENS BEEN THREATENED.
LITIGATION. EXCEPT AS SET FORTH ON SCHEDULE 5.7, NEITHER SELLER NOR ANY OFFICER,
DIRECTOR, SHAREHOLDER, EMPLOYEE OR AGENT OF SELLER IS A PARTY TO ANY PENDING OR,
TO THE BEST KNOWLEDGE OF SELLER, THREATENED, ACTION, SUIT, PROCEEDING OR
INVESTIGATION FOR OR BY ANY COURT OR OTHER GOVERNMENTAL BODY THAT COULD HAVE A
MATERIAL ADVERSE EFFECT ON: THE ASSETS OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT; NOR, TO THE BEST KNOWLEDGE OF SELLER, DOES ANY BASIS EXIST FOR ANY
SUCH ACTION, SUIT, PROCEEDING OR INVESTIGATION. EXCEPT AS SET FORTH ON SCHEDULE
5.7, SELLER IS NOT SUBJECT TO ANY DECREE, JUDGMENT, OR ORDER OF ANY COURT OR
OTHER GOVERNMENTAL BODY THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON THE
CONDITION, FINANCIAL OR OTHERWISE, OF THE ASSETS, LIABILITIES, BUSINESS,
PROSPECTS OR RESULTS OF OPERATIONS OF SELLER RELATING TO THE MUSIC BUSINESS OR
WHICH COULD PREVENT OR LIMIT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
BROKERS AND FINDERS. EXCEPT FOR THE FEE PAYABLE BY SELLER AT THE CLOSING TO
XXXXXXX XXXXXXX OF EQUITY PARTNERS IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND SET FORTH ON SCHEDULE 5.8, NEITHER THE SELLER
NOR ANY DIRECTOR, OFFICER, EMPLOYEE OR AGENT OF SELLER HAS ANY LIABILITY OR
OBLIGATION TO PAY ANY FEES OR COMMISSIONS TO ANY BROKER, FINDER, INVESTMENT
BANKER, OR AGENT WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT
FOR WHICH BUYER COULD BECOME LIABLE OR OBLIGATED.
CONTRACTS. THE CONTRACTS AND AGREEMENTS TO BE LISTED ON SCHEDULE 1.1.2
CONSTITUTE ALL OF THE CUSTOMER CONTRACTS OF SELLER IN CONNECTION WITH THE MUSIC
BUSINESS. EXCEPT AS SET FORTH ON SCHEDULE 5.9 (TO BE DELIVERED TO BUYER
IMMEDIATELY FOLLOWING SATISFACTION (OR WAIVER) OF THE FINANCING CONDITION IN
SECTION 8.6), NEITHER SELLER NOR, TO THE BEST OF SELLER'S KNOWLEDGE, ANY OTHER
PARTY TO THE CUSTOMER CONTRACTS OR SATELLITE CONTRACTS IS IN DEFAULT IN
PERFORMANCE OF OR NOT IN COMPLIANCE WITH ANY MATERIAL PROVISIONS OF SUCH
CUSTOMER CONTRACTS OR THE SATELLITE CONTRACTS. SELLER HAS NO KNOWLEDGE OF ANY
INTENT BY ANY OTHER PARTY NOT TO PERFORM ITS OBLIGATIONS UNDER ANY SUCH
CONTRACT. EXCEPT AS SET FORTH ON SCHEDULE 5.9, SELLER HAS THE RIGHT TO ASSIGN
ALL CUSTOMER CONTRACTS AND SATELLITE CONTRACTS TO BUYER PURSUANT TO THIS
AGREEMENT AND NEITHER THE ASSIGNMENT OF SUCH CUSTOMER CONTRACTS AND SATELLITE
CONTRACTS NOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT PERMITS, OR TO THE BEST KNOWLEDGE OF SELLER, WOULD LEAD ANY PARTY TO
SUCH CUSTOMER CONTRACT OR SATELLITE CONTRACT TO TERMINATE OR ALTER SUCH
CONTRACT.
USABLE INVENTORY. TO THE BEST OF SELLER'S KNOWLEDGE, THE USABLE INVENTORY IS IN
GOOD CONDITION AND IS OF A QUALITY USEABLE AND SALEABLE IN ACCORDANCE WITH GOOD
BUSINESS PRACTICE, AND ANY ADDITIONAL ITEMS OF INVENTORY TO BE PURCHASED
PURSUANT TO THIS AGREEMENT WILL BE IN GOOD CONDITION AND OF A QUALITY USEABLE
AND SALEABLE IN ACCORDANCE WITH GOOD BUSINESS PRACTICE.
DISTRIBUTION SYSTEM ASSETS. THE SATELLITE CONTRACTS AND DISTRIBUTION SYSTEM
ASSETS CONSTITUTES ALL OF THE ASSETS NECESSARY TO OPERATE SELLER'S MUSIC AND
MESSAGING DISTRIBUTION SYSTEM AS CURRENTLY OPERATED WHEN USED IN CONJUNCTION
WITH THE ASSETS DESCRIBED IN SECTION 1.1.1 OF THIS AGREEMENT.
9
ADVANCE PAYMENTS. SELLER HAS NOT RECEIVED ANY ADVANCE PAYMENTS AGAINST THE
CUSTOMER CONTRACTS.
ASCAP/BMI ROYALTIES. SELLER IS CURRENT ON ALL OF ITS ROYALTY PAYMENTS TO ASCAP
AND BMI.
TOTAL ASSETS. THE LAST REGULARLY PREPARED BALANCE SHEET OF SELLER PROVIDES THAT
THE TOTAL ASSETS OF SELLER ARE LESS THAN TEN MILLION DOLLARS ($10,000,000). THE
TOTAL ASSETS OF SELLER, INCLUDING ANY "PERSON" (AS THAT TERM IS DEFINED IN 16
C.F.R. SS. 801.1(A), A REGULATION PROMULGATED PURSUANT TO THE XXXX-XXXXX-XXXXXX
ANTITRUST IMPROVEMENTS ACT OF 1976) WITHIN SELLER, ARE LESS THAN TEN MILLION
DOLLARS ($10,000,000).
REPRESENTATIONS AND WARRANTIES OF BUYER. BUYER HEREBY REPRESENTS AND WARRANTS TO
SELLER THAT:
ORGANIZATION AND AUTHORITY. BUYER IS A LIMITED PARTNERSHIP DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE OF DELAWARE.
BUYER HAS ALL NECESSARY POWER AND AUTHORITY TO ENTER INTO AND PERFORM THIS
AGREEMENT.
AUTHORIZATION OF AGREEMENT; NO VIOLATION OF OTHER INSTRUMENTS.
The execution and delivery of this Agreement and the performance hereunder by
Buyer have been duly authorized by all necessary action on the part of Buyer
and, assuming execution of this Agreement by Seller, this Agreement will
constitute a legal, valid and binding obligation of Buyer.
Neither the execution of this Agreement nor the performance hereof by Buyer will
(a) conflict with or result in the breach or violation of the terms of any
decree, judgment, order, law or regulation of any court or other governmental
body now in effect applicable to Buyer; or (b) conflict with, or result in, with
or without the passage of time or the giving of notice, any breach of any of the
terms, conditions and provisions of, or constitute a default under, any
indenture, mortgage, lease, agreement or other instrument to which Buyer is a
party or by which it is bound.
No consent, approval or authorization of, or declaration, filing or registration
with, any third party or governmental or regulatory authority is required to be
made or obtained by Buyer in order to permit the execution, delivery or
performance of this Agreement, or the consummation of the transactions
contemplated by this Agreement, except as shall have been made or obtained at
the Closing.
BROKERS AND FINDERS. NEITHER BUYER NOR ANY SHAREHOLDER, DIRECTOR, OFFICER,
EMPLOYEE OR AGENT OF BUYER HAS RETAINED ANY BROKER, FINDER, AGENT OR INVESTMENT
BANKER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
BUYER'S DUE DILIGENCE. BUYER'S DUE DILIGENCE SHALL PROCEED IN TWO STAGES. FIRST,
BY NOVEMBER 15, 1998 (PROVIDED THAT ALL REASONABLY REQUESTED MATERIALS HAVE BEEN
PROVIDED ON A TIMELY BASIS), BUYER SHALL COMPLETE ITS DUE DILIGENCE TO CONFIRM
THE TRUTH AND ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES UNDER THIS
AGREEMENT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION
5.9 OF THIS AGREEMENT AS THEY RELATE TO CUSTOMER CONTRACTS, AND TO CONFIRM THAT
THE ECONOMIC TERMS UNDER THE SATELLITE CONTRACTS ARE ACCEPTABLE TO BUYER IN ITS
REASONABLE DISCRETION. SUCH DUE DILIGENCE SHALL BE CONDUCTED OFFSITE, OR IF ON
MTI'S SITE, THEN AFTER BUSINESS HOURS, AND, IN ANY EVENT, IN SUCH A MANNER AS TO
PROTECT THE CONFIDENTIALITY OF THIS AGREEMENT AND THE PROPOSED TRANSACTION
(SOFTWARE LICENSE AGREEMENTS SHALL BE DELIVERED TO BUYER DURING THE FIRST DUE
DILIGENCE PERIOD WITH REDACTED VENDOR NAMES; SATELLITE CONTRACTS SHALL BE
DELIVERED TO BUYER DURING THE FIRST DUE DILIGENCE PERIOD WITH THE AMOUNT OF FEES
AND OTHER PAYMENTS REDACTED).
10
Second, between November 17, 1998 and November 22, 1998
(provided that all reasonably requested materials have been provided on a timely
basis), Buyer shall complete its due diligence with respect to the Customer
Contracts (the "Contract Due Diligence"). With respect to the Contract Due
Diligence, Buyer's due diligence shall be conducted solely to confirm: (1). that
the Customer Contracts (excluding the Deferred Payment Contracts) represent at
least $293,000 in expected Recurring Monthly Xxxxxxxx, and that the Deferred
Payment Contracts represent at least $46,000 in expected Recurring Monthly
Xxxxxxxx; (2) except for two Customer Contracts (the "Excluded Contracts"), that
the average remaining term for the Customer Contracts taken as a whole and
weighted by number of sites is at least 3.2 years and the average rate for the
Customer Contracts taken as a whole and weighted by the number of sites is at
least $34.00; (3) that the economic terms of the Excluded Contracts are
acceptable to Buyer in its reasonable discretion; (4) that the representations
and warranties contained in Section 5.9 are true and accurate; and (5) there are
no terms in the redacted Customer Contracts which in Buyer's reasonable
discretion materially and adversely affect the accuracy of items (2), (4) or (5)
on Schedule 1.1.2.
11
CONDITIONS TO THE OBLIGATIONS OF BUYER. EXCEPT AS OTHERWISE SPECIFICALLY SET
FORTH HEREIN OR AS CONTEMPLATED BY THIS AGREEMENT, ALL OBLIGATIONS OF BUYER
UNDER THIS AGREEMENT ARE SUBJECT TO THE FULFILLMENT, PRIOR TO OR AT THE CLOSING
DATE OF EACH OF THE FOLLOWING CONDITIONS:
REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. THE REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE AGAIN AT AND AS OF THE CLOSING DATE AND SHALL THEN BE TRUE IN ALL RESPECTS.
COVENANTS PERFORMED BY SELLER. EACH OF THE OBLIGATIONS OF SELLER TO BE PERFORMED
ON OR BEFORE THE CLOSING DATE PURSUANT TO THE TERMS OF THIS AGREEMENT SHALL HAVE
BEEN DULY PERFORMED.
NO ACTION TO PREVENT COMPLETION. THERE SHALL NOT HAVE BEEN INSTITUTED AND BE
CONTINUING OR THREATENED ANY CLAIM, ACTION OR PROCEEDING THAT COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE CONDITION, FINANCIAL OR OTHERWISE, OF THE ASSETS,
NOR SHALL THERE HAVE BEEN INSTITUTED AND BE CONTINUING OR THREATENED ANY SUCH
CLAIM, ACTION OR PROCEEDING TO RESTRAIN, PROHIBIT OR INVALIDATE, OR TO OBTAIN
DAMAGES IN RESPECT OF, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR WHICH
MIGHT AFFECT THE RIGHT OF BUYER AFTER THE CLOSING DATE TO OWN THE ASSETS.
CONSENTS. SELLER AND BUYER SHALL HAVE RECEIVED ALL PERMITS AND AUTHORIZATIONS
NECESSARY FOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. SELLER SHALL HAVE RECEIVED THE REQUIRED CONSENTS TO ASSIGN THE
CUSTOMER CONTRACTS AND SATELLITE CONTRACTS FROM ALL OF THE PARTIES LISTED IN
SCHEDULE 5.9 AND SHALL HAVE OBTAINED A RENEWAL OF THE G-STAR 4 SATELLITE
CONTRACT WITH A TERM EXTENDING TO APPROXIMATELY JULY 15, 2002.
TAX ON PRIOR SALES AND ACTIVITIES. SELLER SHALL HAVE DELIVERED TO BUYER A LETTER
FROM THE STATE OF MICHIGAN ADVISING BUYER THAT ALL OF SELLER'S REQUIRED TAX
FILINGS HAVE BEEN MADE.
ACQUISITION FINANCING. BY NOVEMBER 15, 1998, BUYER SHALL HAVE OBTAINED: (I) A
WRITTEN COMMITMENT FROM A LENDER TO FINANCE THE ACQUISITION OF THE ASSETS OR
WAIVED ITS RIGHT TO CONDITION ITS PERFORMANCE UNDER THIS AGREEMENT TO SUCH
COMMITMENT, AND (II) A LETTER FROM CENTER PARTNERS COMMITTING TO PROVIDE UP TO
$2.0 MILLION OF FUNDS FOR THE BENEFIT OF BUYER AT CLOSING TO COVER ANY SHORTFALL
BETWEEN THE FINANCING COMMITMENT DESCRIBED IN (I) AND THE CLOSING PAYMENT, AND
SELLER SHALL HAVE APPROVED SUCH FINANCING COMMITMENT AND CENTER PARTNERS' LETTER
IN ITS SOLE DISCRETION WITHIN TWENTY-FOUR (24) HOURS FROM THE TIME IT RECEIVES
SUCH FINANCING COMMITMENT AND CENTER PARTNERS LETTER.
DUE DILIGENCE. BUYER SHALL HAVE COMPLETED AND BE SATISFIED WITH, IN ITS
REASONABLE DISCRETION, ITS DUE DILIGENCE AS DESCRIBED IN SECTION 7 OF THIS
AGREEMENT.
DELIVERY OF CLOSING DOCUMENTS. SELLER SHALL HAVE DELIVERED TO BUYER AT THE
CLOSING THE CLOSING DOCUMENTS REQUIRED TO BE DELIVERED PURSUANT TO SECTION 4.2
IN FORM AND SUBSTANCE SATISFACTORY TO BUYER AND ITS COUNSEL.
DEFERRED PAYMENT CONTRACTS. SELLER SHALL HAVE DELIVERED TO BUYER A LIST
IDENTIFYING THE DEFERRED PAYMENT CONTRACTS, THE MONTHLY RECURRING REVENUES AND
THE EXPIRATION DATES OF ALL MUSIC/ADVERTISING SERVICE CONTRACTS BETWEEN THE
CUSTOMERS THEREUNDER AND THIRD PARTIES.
12
CANCELLATION OF CUSTOMER CONTRACTS. THERE SHALL HAVE BEEN NO CANCELLATION,
NOTICE OF CANCELLATION, OR ANY OTHER EVENT THAT WOULD REASONABLY RESULT IN THE
CANCELLATION, OF ANY CUSTOMER CONTRACT WHICH WOULD RESULT IN A REDUCTION OF THE
CLOSING PAYMENT UNDER SECTION 3.1.1 BY MORE THAN SIX HUNDRED THOUSAND DOLLARS
($600,000).
CONDITIONS TO THE OBLIGATIONS OF SELLER. EXCEPT AS OTHERWISE SPECIFICALLY SET
FORTH HEREIN, ALL OBLIGATIONS OF SELLER UNDER THIS AGREEMENT ARE SUBJECT TO THE
FULFILLMENT AND SATISFACTION, PRIOR TO OR AT THE CLOSING, AS THE CASE MAY BE, OF
EACH OF THE FOLLOWING CONDITIONS:
REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING. THE REPRESENTATIONS AND
WARRANTIES OF BUYER CONTAINED IN THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE AGAIN AT AND AS OF THE CLOSING DATE.
COVENANTS PERFORMED BY BUYER. EACH OF THE OBLIGATIONS OF BUYER TO BE PERFORMED
ON OR BEFORE THE CLOSING DATE PURSUANT TO THE TERMS OF THIS AGREEMENT SHALL HAVE
BEEN DULY PERFORMED.
NO ACTION TO PREVENT COMPLETION. THERE SHALL NOT HAVE BEEN INSTITUTED AND BE
CONTINUING OR THREATENED ANY ACTION OR PROCEEDING BY OR BEFORE ANY COURT OR
OTHER GOVERNMENTAL BODY TO RESTRAIN, PROHIBIT OR INVALIDATE, OR TO OBTAIN
DAMAGES IN RESPECT OF, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
DELIVERY OF CLOSING DOCUMENTS. BUYER SHALL HAVE DELIVERED TO SELLER AT THE
CLOSING THE CLOSING DOCUMENTS REQUIRED TO BE DELIVERED PURSUANT TO SECTION 4.3
IN FORM AND SUBSTANCE SATISFACTORY TO SELLER AND ITS COUNSEL.
ACQUISITION FINANCING. BY NOVEMBER 15, 1998, BUYER SHALL HAVE OBTAINED: (I) A
WRITTEN COMMITMENT FROM A LENDER TO FINANCE THE ACQUISITION OF THE ASSETS OR
WAIVED ITS RIGHT TO CONDITION ITS PERFORMANCE UNDER THIS AGREEMENT TO SUCH
COMMITMENT, AND (II) A LETTER FROM CENTER PARTNERS COMMITTING TO PROVIDE UP TO
$2.0 MILLION OF FUNDS FOR THE BENEFIT OF BUYER AT CLOSING TO COVER ANY SHORTFALL
BETWEEN THE FINANCING COMMITMENT DESCRIBED IN (I) AND THE CLOSING PAYMENT, AND
SELLER SHALL HAVE APPROVED SUCH FINANCING COMMITMENT AND CENTER PARTNERS' LETTER
IN ITS SOLE DISCRETION WITHIN TWENTY-FOUR (24) HOURS FROM THE TIME IT RECEIVES
SUCH FINANCING COMMITMENT AND CENTER PARTNERS LETTER.
CANCELLATION OF CUSTOMER CONTRACTS. THERE SHALL HAVE BEEN NO CANCELLATION,
NOTICE OF CANCELLATION, OR ANY OTHER EVENT THAT WOULD REASONABLY RESULT IN THE
CANCELLATION, OF ANY CUSTOMER CONTRACT WHICH WOULD RESULT IN A REDUCTION OF THE
CLOSING PAYMENT UNDER SECTION 3.1.1 BY MORE THAN SIX HUNDRED THOUSAND DOLLARS
($600,000).
13
COVENANTS OF SELLER. SELLER COVENANTS AS FOLLOWS:
ACCESS TO PROPERTIES AND RECORDS. THROUGHOUT THE PERIOD BETWEEN THE DATE OF THIS
AGREEMENT AND THE CLOSING DATE, SELLER SHALL GIVE TO BUYER AND BUYER'S
AUTHORIZED REPRESENTATIVES FULL ACCESS, DURING NORMAL BUSINESS HOURS, IN SUCH A
MANNER AS NOT TO UNDULY DISRUPT THE BUSINESS ACTIVITIES OF SELLER, TO ANY AND
ALL OF THE ASSETS. SELLER SHALL ALSO PROVIDE COPIES OR EXTRACTS OF DOCUMENTS AND
RECORDS RELATED TO THE ASSETS AS BUYER REASONABLY MAY REQUEST.
CONDUCT OF BUSINESS PRIOR TO CLOSING. BETWEEN THE DATE OF THIS AGREEMENT AND THE
CLOSING, AND EXCEPT AS OTHERWISE CONSENTED TO OR APPROVED BY AN OFFICER OF BUYER
IN WRITING OR AS REQUIRED BY THIS AGREEMENT:
Seller's Music Business shall be operated in the ordinary course consistent with
past practices and in a normal businesslike fashion (including its normal
accounts receivable practice). Seller shall use its best efforts to preserve and
maintain its goodwill, including relationships with employees, suppliers and
customers of its Music Business.
Seller shall not take any action which would cause any material change in any of
the items and matters covered by the representations and warranties set forth in
Section 5.
Advise of Adverse Developments. Seller shall promptly advise Buyer in writing of
all significant adverse matters concerning the Assets.
SATISFACTION OF CONDITIONS. SELLER SHALL IN GOOD FAITH PROCEED TO TAKE OR CAUSE
TO BE TAKEN ALL ACTIONS WITHIN ITS POWER NECESSARY TO SATISFY ALL CONDITIONS TO
ITS OBLIGATIONS TO CLOSE AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
10.4 Third Party Consents. Seller, without being compelled to
spend a material amount of money, shall make its best efforts to obtain all
third party consents required by this Agreement provided that Buyer assists
Seller as reasonably requested by Seller.
COVENANTS OF BUYER. BUYER COVENANTS TO SELLER AS FOLLOWS:
SATISFACTION OF CONDITIONS. BUYER SHALL IN GOOD FAITH PROCEED TO TAKE OR CAUSE
TO BE TAKEN ALL ACTIONS WITHIN ITS POWER NECESSARY TO SATISFY ALL CONDITIONS TO
ITS OBLIGATIONS TO CLOSE AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
11.2 Financing Commitment. Buyer shall use commercially
reasonable efforts to obtain the financing commitment described in Section 8.6.
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INDEMNITY.
SELLER'S INDEMNITY. SELLER SHALL INDEMNIFY AND HOLD HARMLESS BUYER AND BUYER'S
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY AND ALL LOSSES,
COSTS, EXPENSES, LIABILITIES, OBLIGATIONS, CLAIMS, DEMANDS, CAUSES OF ACTION,
SUITS, SETTLEMENTS AND JUDGMENTS OF EVERY NATURE, INCLUDING THE COSTS AND
EXPENSES ASSOCIATED THEREWITH AND REASONABLE ATTORNEYS' AND WITNESS FEES
INCURRED ("BUYER'S DAMAGES") WHICH ARISE OUT OF (A) THE BREACH BY SELLER OF ANY
REPRESENTATION OR WARRANTY MADE BY SELLER IN THIS AGREEMENT, OR ANY THIRD-PARTY
ALLEGATION THEREOF; (B) THE NON-PERFORMANCE, PARTIAL OR TOTAL, OF ANY COVENANT
MADE BY SELLER IN THIS AGREEMENT, OR ANY THIRD-PARTY ALLEGATION THEREOF; (C) THE
CONDUCT OF THE MUSIC BUSINESS BY SELLER PRIOR TO THE CLOSING; OR (D) ANY OTHER
LIABILITY OR OBLIGATION OF SELLER THAT IS NOT SPECIFICALLY INCLUDED IN THE
ASSUMED OBLIGATIONS.
BUYER'S INDEMNITY. BUYER SHALL INDEMNIFY AND HOLD HARMLESS SELLER AND SELLER'S
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY AND ALL LOSSES,
COSTS, EXPENSES, LIABILITIES, OBLIGATIONS, CLAIMS, DEMANDS, CAUSES OF ACTION,
SUITS, SETTLEMENTS AND JUDGMENTS OF EVERY NATURE, INCLUDING THE COSTS AND
EXPENSES ASSOCIATED THEREWITH AND REASONABLE ATTORNEYS' AND WITNESS FEES
INCURRED ("SELLER'S DAMAGES" AND WHEN USED TOGETHER WITH OR IN THE ALTERNATIVE
TO BUYER'S DAMAGES, "DAMAGES"), WHICH ARISE OUT OF (A) THE BREACH BY BUYER OF
ANY REPRESENTATION OR WARRANTY MADE BY BUYER IN THIS AGREEMENT; (B) THE
NON-PERFORMANCE, PARTIAL OR TOTAL, OF ANY COVENANT MADE BY BUYER IN THIS
AGREEMENT; OR ANY THIRD PARTY ALLEGATION THEREOF OR (C) EVENTS ARISING IN THE
MUSIC BUSINESS OF SELLER TRANSFERRED TO BUYER AFTER THE CLOSING NOT DIRECTLY
RELATED TO EVENTS OCCURRING PRIOR TO THE CLOSING.
LIMITATION ON INDEMNITY. EACH PARTY'S INDEMNIFICATION OBLIGATIONS HEREUNDER
SHALL BE LIMITED TO ONE MILLION DOLLARS ($1,000,000), EXCEPT WITH RESPECT TO
BREACHES BY SELLER OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTIONS
5.3, 5.4 AND/OR 5.6 (AS TO WHICH BREACHES SELLER'S LIABILITY SHALL BE
UNLIMITED). ESCROWED FUNDS SHALL NOT BE USED BY EITHER PARTY TO SATISFY ITS
RESPECTIVE INDEMNIFICATION OBLIGATIONS. EACH PARTY'S RIGHT TO SEEK
INDEMNIFICATION FROM THE OTHER PARTY WITH RESPECT TO CUSTOMER CONTRACTS SHALL
TERMINATE ONE YEAR AFTER THE CLOSING DATE, AND EACH PARTY'S RIGHT TO SEEK
INDEMNIFICATION FROM THE OTHER PARTY WITH RESPECT TO DESIGNATED CUSTOMER
CONTRACTS SHALL TERMINATE ONE YEAR AFTER THE ADJUSTMENT DATE.
PROCEDURE. ALL CLAIMS FOR INDEMNIFICATION BY A PARTY UNDER THIS SECTION 12 (THE
PARTY CLAIMING INDEMNIFICATION AND THE PARTY AGAINST WHOM SUCH CLAIMS ARE
ASSERTED BEING HEREINAFTER CALLED THE "INDEMNIFIED PARTY" AND THE "INDEMNIFYING
PARTY", RESPECTIVELY) SHALL BE ASSERTED AND RESOLVED AS FOLLOWS:
15
In the event that any claim or demand for which an Indemnifying Party would be
liable to an Indemnified Party hereunder is asserted against or sought to be
collected from such Indemnified Party by a third party, such Indemnified Party
shall, promptly but in any event within 30 days of the receipt thereof, give
notice (the "Claim Notice") to the Indemnifying Party of such claim or demand,
specifying the nature of and specific basis for such claim or demand and the
amount or the estimated amount thereof to the extent then feasible, which
estimate shall not be binding upon the Indemnifying Party in its effort to
collect the final amount of such claim or demand. To the extent the Indemnifying
Party is prejudiced thereby, the failure to so notify the Indemnifying Party of
any such claims or action shall relieve the Indemnifying Party from liability
that it may have to the Indemnified Party under the indemnification provisions
contained in this Section 12, but only to the extent of the actual loss
incurred, and shall not relieve the Indemnifying Party from any liability that
it may have to the Indemnified Party otherwise than under this Section 12. In
any case, if any such actions shall be brought against the Indemnified Party and
the Indemnified Party shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to assume the defense thereof
at its own expense with counsel reasonably acceptable to the Indemnified Party.
If the Indemnifying Party does not assume such defense by written notice to the
Indemnified Party within 15 days of a request from the Indemnified Party to the
Indemnifying Party asking if it intends to assume such defense, the Indemnified
Party shall, in its sole discretion, conduct such defense with counsel of its
choice. If the Indemnifying Party assumes the defense, the Indemnified Party
shall be entitled to participate in the defense at its expense. The settlement
of any claim hereunder by the Indemnifying Party may only be made upon the prior
approval by the Indemnified Party of the terms of the settlement, which approval
shall not be unreasonably withheld. If the Indemnifying Party has assumed the
defense of a claim in accordance with this Section 12.3(a), the Indemnified
Party shall not settle the claim except with the written consent of the
Indemnifying Party or upon the waiver of any claim for indemnity hereunder with
respect to such claim.
If requested by the Indemnifying Party, the Indemnified Party agrees, at the
Indemnifying Party's expense, to cooperate with the Indemnifying Party and its
counsel in contesting any claim or demand that the Indemnifying Party elects to
contest, or, if appropriate and related to the claim in question, in making any
counterclaim against the Person asserting the third party claim or demand, or
any cross-complaint against any Person other than an affiliate of the
Indemnified Party.
If any Indemnified Party should have a claim against the Indemnifying Party
hereunder that does not involve a claim or demand being asserted against or
sought to be collected from it by a third party, the Indemnified Party shall
send a Claim Notice with respect to such claim to the Indemnifying Party. If the
Indemnifying Party disputes such claim, such dispute shall be resolved in
accordance with Section 15.11.
INSURANCE. IN DETERMINING THE AMOUNT OF ANY BUYER'S OR SELLER'S DAMAGES, THERE
SHALL BE DEDUCTED THEREFROM THE AMOUNT OF INSURANCE PROCEEDS COLLECTED IN
RESPECT THEREOF NET OF ALL COST TO OBTAIN SUCH PROCEEDS AND ANY ADDITIONAL COSTS
INCURRED OR TO BE INCURRED THROUGH RETROSPECTIVE PREMIUM ADJUSTMENTS OR
OTHERWISE ON ACCOUNT OF THE COLLECTION THEREOF.
TERMINATION.
MUTUAL AGREEMENT. THIS AGREEMENT MAY BE TERMINATED AND ABANDONED AT ANY TIME
PRIOR TO THE CLOSING DATE BY THE WRITTEN AGREEMENT OF SELLER AND BUYER.
TERMINATION BY BUYER. EXCEPT IF SUCH FAILURE TO CLOSE OR TO SATISFY CONDITIONS
IS DUE TO A BREACH BY BUYER OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THIS
AGREEMENT MAY BE TERMINATED BY BUYER IF THE CLOSING DATE HAS NOT OCCURRED BY
NOVEMBER 30, 1998 (OR BY DECEMBER 23, 1998, IF THE CLOSING DATE IS EXTENDED
PURSUANT TO SECTION 4 OF THIS AGREEMENT), OR IF ON THE CLOSING DATE THE
CONDITIONS SET FORTH IN SECTION 8 SHALL NOT HAVE BEEN MET BY SELLER OR WAIVED BY
BUYER.
16
TERMINATION BY SELLER. EXCEPT IF FAILURE TO CLOSE OR TO SATISFY CONDITIONS IS
DUE TO A BREACH BY SELLER OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THIS
AGREEMENT MAY BE TERMINATED BY SELLER IF THE CLOSING DATE HAS NOT OCCURRED BY
NOVEMBER 30, 1998 (OR BY DECEMBER 7, 1998, IF THE CLOSING DATE IS EXTENDED
PURSUANT TO SECTION 4 OF THIS AGREEMENT) OR IF ON THE CLOSING DATE THE
CONDITIONS SET FORTH IN SECTION 9 SHALL NOT HAVE BEEN MET BY BUYER OR WAIVED BY
SELLER.
CONFIDENTIALITY AND EFFECT OF TERMINATION. IN THE EVENT THAT THIS AGREEMENT IS
TERMINATED IN ACCORDANCE HEREWITH, (A) EACH OF THE PARTIES SHALL RETURN (WITHOUT
RETAINING COPIES) ALL DOCUMENTS AND PAPERS CONTAINING CONFIDENTIAL INFORMATION
(INCLUDING TECHNICAL INFORMATION, CUSTOMER LISTS, FINANCIAL DATA AND ANY SIMILAR
INFORMATION DEVELOPED BY ANOTHER PARTY PURSUANT TO THIS AGREEMENT OR IN
CONTEMPLATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT) AND SHALL
NEITHER USE NOR DISCLOSE ANY SUCH INFORMATION, EXCEPT TO THE EXTENT THAT SUCH
INFORMATION IS AVAILABLE TO THE PUBLIC OR IS OTHERWISE RIGHTFULLY OBTAINED AND
(B) NEITHER PARTY SHALL HAVE ANY OBLIGATION TO THE OTHER WHATSOEVER WITH RESPECT
TO THIS AGREEMENT, THE TRANSACTIONS PROVIDED FOR HEREIN, OR THE EXPENSES EITHER
OF THEM INCURRED IN CONNECTION WITH OR IN CONTEMPLATION OF SUCH TRANSACTIONS.
TRANSITION. BUYER SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO INTERVIEW
SELLER'S EMPLOYEES ENGAGED IN THE MUSIC BUSINESS, AND, AT ITS SOLE DISCRETION,
TO OFFER SAID EMPLOYEES EMPLOYMENT WITH BUYER. THE SCHEDULING OF INTERVIEWS AND
THE MAKING OF EMPLOYMENT OFFERS, IF ANY, SHALL BE MUTUALLY AGREED UPON BY THE
PARTIES. IN ADDITION, FROM THE DATE HEREOF THROUGH THE ADJUSTMENT DATE, SELLER
SHALL HAVE THE RIGHT TO FACILITATE AND PARTICIPATE IN A SMOOTH TRANSITION OF
CUSTOMERS FROM SELLER TO BUYER. BUYER WILL IN GOOD FAITH PARTICIPATE WITH SELLER
IN SUCH TRANSITION EFFORTS.
MISCELLANEOUS.
ASSIGNMENT. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE
SUCCESSORS AND ASSIGNS OF THE PARTIES. NEITHER PARTY MAY ASSIGN EITHER THIS
AGREEMENT OR ANY OF ITS RIGHTS, INTERESTS AND DUTIES HEREUNDER WITHOUT THE PRIOR
WRITTEN CONSENT OF THE OTHER PARTY.
CONFIDENTIALITY. WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY, NEITHER
PARTY SHALL ISSUE A PRESS RELEASE OR OTHERWISE PUBLICIZE THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR OTHERWISE DISCLOSE (INCLUDING, WITHOUT LIMIT,
TO SELLER'S CUSTOMERS AND EMPLOYEES) THE NATURE OR CONTENTS OF THIS AGREEMENT ON
OR PRIOR TO THE CLOSING DATE EXCEPT AS, AND ONLY TO THE EXTENT, OTHERWISE
REQUIRED BY APPLICABLE LAW OR REGULATION, INCLUDING WITHOUT LIMITATION, FEDERAL
AND STATE SECURITIES LAWS. NO INFORMATION, DOCUMENTS OR REPORTS PROVIDED TO OR
OBTAINED BY EITHER PARTY IN CONNECTION WITH THIS TRANSACTION SHALL BE DISCLOSED
OR TRANSFERRED TO ANY THIRD PARTY EXCEPT (A) TO ATTORNEYS, ACCOUNTANTS AND
FINANCIAL ADVISORS OF BUYER OR SELLER (WHO THEMSELVES HAVE AGREED IN WRITING TO
KEEP SUCH INFORMATION CONFIDENTIAL) AS REQUIRED IN CARRYING OUT THE TRANSACTIONS
CONTEMPLATED HEREBY OR (B) TO THE EXTENT SUCH INFORMATION, DOCUMENTS OR REPORTS
ARE AVAILABLE TO THE PUBLIC OTHER THAN BY BREACH OF THIS AGREEMENT BY SUCH
PARTY. IT IS BUYER'S CURRENT VIEW THAT NO DISCLOSURE UNDER FEDERAL OR STATE
SECURITIES LAWS IS REQUIRED UNTIL 15 DAYS AFTER THE CLOSING DATE. IN THE EVENT
BUYER DETERMINES THAT DISCLOSURE OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT IS REQUIRED BY APPLICABLE LAW OR REGULATION (INCLUDING, WITHOUT
LIMITATION, FEDERAL AND STATE SECURITIES LAWS), BUYER SHALL GIVE SELLER AT LEAST
TEN (10) DAYS PRIOR WRITTEN NOTICE OF BUYER'S INTENT TO MAKE SUCH DISCLOSURE
(SUCH NOTICE TO INDICATE THE NATURE AND EXTENT OF THE DISCLOSURE WHICH BUYER
CONTEMPLATES MAKING). IN THE EVENT THIS AGREEMENT IS TERMINATED AS PERMITTED
HEREIN, THE OBLIGATIONS OF THE PARTIES CONTAINED IN THIS SECTION 15.2 AND
SECTION 13.4 SHALL SURVIVE, AND EACH PARTY SHALL RETURN TO THE OTHER PARTY
(WITHOUT RETAINING COPIES) ALL SUCH DOCUMENTS, INFORMATION AND REPORTS. THE
NON-DISCLOSURE AGREEMENT BETWEEN BUYER AND SELLER, DATED AS OF JULY 31, 1998, IS
INCORPORATED HEREIN BY REFERENCE.
17
NOTICES. ANY NOTICE OR OTHER COMMUNICATION REQUIRED OR PERMITTED HEREUNDER SHALL
BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN DULY GIVEN ON THE DATE OF SERVICE
IF SERVED PERSONALLY OR BY FACSIMILE, OR FIVE (5) DAYS AFTER THE DATE OF MAILING
IF MAILED, BY FIRST CLASS MAIL, REGISTERED OR CERTIFIED, POSTAGE PREPAID.
NOTICES SHALL BE ADDRESSED AS FOLLOWS:
To Buyer at: Muzak Limited Partnership
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
With a copy to: Heller, Ehrman, White & XxXxxxxxx
0000 Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx
Fax: (000) 000-0000
To Seller at: Music Technologies, Inc.
00000 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
With a copy to: Seyburn, Kahn, Ginn, Xxxx
Xxxxxx and Xxxxxx, P.C.
Suite 1500
0000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Fax: (000) 000-0000
or to such other address as a party has designated by notice in writing to the
other party in the manner provided by this Section 15.3.
18
TRANSFER TAXES. SELLER AGREES TO BEAR ANY AND ALL TAX LIABILITY ARISING OUT OF
OR INCURRED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
EXCEPT FOR ANY SALES OR USE TAX PAYABLE BY A BUYER AND ANY TAX ON BUYER'S
OPERATIONS FOLLOWING THE CLOSING OR ACCRUED PRIOR TO THE CLOSING AND
CONSTITUTING AN ASSUMED LIABILITY PURSUANT TO SECTION 1.3 HEREOF.
EXPENSES. EACH PARTY WILL PAY ITS RESPECTIVE COSTS AND EXPENSES, INCLUDING
WITHOUT LIMITATION, LEGAL AND ACCOUNTING EXPENSES, RELATED TO THE NEGOTIATION,
PREPARATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
FURTHER ASSURANCES. SELLER WILL FROM TIME TO TIME SUBSEQUENT TO THE CLOSING DATE
AT BUYER'S REQUEST AND WITHOUT FURTHER CONSIDERATION PAYABLE BY SELLER, EXECUTE
AND DELIVER SUCH OTHER INSTRUMENTS OF CONVEYANCE, ASSIGNMENT AND TRANSFER AND
TAKE SUCH OTHER ACTIONS AS BUYER MAY REASONABLY REQUEST IN ORDER MORE
EFFECTIVELY TO CONVEY, ASSIGN, TRANSFER TO AND VEST IN BUYER THE ASSETS AND THE
RIGHT TO OPERATE THE MUSIC BUSINESS OF SELLER.
NO WAIVER. FAILURE OR DELAY ON THE PART OF EITHER PARTY IN EXERCISING ANY
RIGHTS, POWER OR PRIVILEGES UNDER THIS AGREEMENT SHALL NOT BE DEEMED A WAIVER OF
ANY EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE.
BULK SALES. BUYER HEREBY WAIVES COMPLIANCE BY SELLER WITH THE PROVISIONS OF THE
BULK SALES LAW OF ANY STATE.
ENTIRE AGREEMENT AND MODIFICATION. THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES
HERETO CONSTITUTE AND CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES
ANY AND ALL PRIOR NEGOTIATIONS, CORRESPONDENCE, UNDERSTANDINGS AND AGREEMENTS
BETWEEN THE PARTIES RESPECTING THE SUBJECT MATTER HEREOF. THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO MAY ONLY BE AMENDED BY WRITTEN INSTRUMENT SIGNED
BY THE PARTIES.
SURVIVAL OF TERMS. ALL WARRANTIES, REPRESENTATIONS AND COVENANTS CONTAINED IN
THIS AGREEMENT AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY OR ON BEHALF
OF THE PARTIES PURSUANT TO THIS AGREEMENT SHALL BE CONTINUOUS AND SHALL SURVIVE
THE CLOSING.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF WASHINGTON, WITHOUT REGARD TO ITS CONFLICTS OF LAW
PRINCIPLES. IN CASE OF A LAWSUIT BETWEEN THEM ARISING UNDER THIS AGREEMENT,
BUYER AND SELLER SUBMIT TO EITHER (1) THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE OR,
ALTERNATIVELY, THE SUPERIOR COURT OF WASHINGTON FOR KING COUNTY ("BUYER'S
JURISDICTION") OR (2) THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF MICHIGAN OR, ALTERNATIVELY, THE CIRCUIT COURT OF MICHIGAN FOR OAKLAND COUNTY
("SELLER'S JURISDICTION"). BUYER MUST COMMENCE ANY LAWSUIT ARISING UNDER THIS
AGREEMENT IN SELLER'S JURISDICTION, AND SELLER MUST COMMENCE ANY LAWSUIT ARISING
UNDER THIS AGREEMENT IN BUYER'S JURISDICTION, UNLESS: (I) THE LAWSUIT SEEKS
INJUNCTIVE OR EQUITABLE RELIEF, IN WHICH CASE BUYER OR SELLER MAY COMMENCE THE
SUIT IN BUYER'S JURISDICTION OR SELLER'S JURISDICTION; AND/OR, (II) THE LAWSUIT
SEEKS PAYMENT OF THE PURCHASE PRICE, IN WHICH CASE SELLER MAY COMMENCE THE SUIT
IN BUYER'S JURISDICTION OR SELLER'S JURISDICTION. EACH PARTY AGREES TO WAIVE ITS
RIGHT TO A JURY TRIAL. FOR THE PURPOSES OF THIS SECTION 15.11, OWNER'S RIGHT AND
OBLIGATIONS SHALL BE IDENTICAL TO SELLER'S.
ATTORNEYS' FEES. IF LEGAL PROCEEDINGS ARE BROUGHT TO ENFORCE OR INTERPRET ANY
PROVISION OF THIS AGREEMENT, THE SUBSTANTIALLY PREVAILING PARTY SHALL BE AWARDED
ITS REASONABLE ATTORNEYS' FEES AND COSTS IN ADDITION TO ANY OTHER RELIEF OR
REMEDY WHICH MAY BE AVAILABLE.
19
SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE UNENFORCEABLE FOR
ANY REASON, IT SHALL BE ADJUSTED RATHER THAN VOIDED, IF POSSIBLE, IN ORDER TO
ACHIEVE THE INTENT OF THE PARTIES TO THE EXTENT POSSIBLE. IF ANY EVENT, ALL
OTHER PROVISIONS OF THIS AGREEMENT SHALL BE DEEMED VALID AND ENFORCEABLE TO THE
FULLEST EXTENT POSSIBLE.
INTERPRETATION. THE HEADINGS CONTAINED IN THIS AGREEMENT ARE FOR REFERENCE
PURPOSES ONLY AND WILL NOT AFFECT IN ANY WAY THE MEANING OR INTERPRETATION OF
THIS AGREEMENT. NO RULE OF CONSTRUCTION BASED UPON WHICH PARTY DRAFTED A
DOCUMENT OR PROVISION IN IT WILL BE APPLIED AGAINST EITHER PARTY WITH RESPECT TO
THIS AGREEMENT OR ANY OF ITS PROVISIONS.
COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, EACH
OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH WHEN TAKEN TOGETHER SHALL
CONSTITUTE ONE AND THE SAME INSTRUMENT.
FACSIMILE SIGNATURES. THE PARTIES AGREE THAT A SIGNATURE OF THIS AGREEMENT
OBTAINED BY FACSIMILE MACHINE, IF FOLLOWED BY THE ORIGINAL SIGNATURE WITHIN 10
DAYS, IS ACCEPTABLE AND WILL BE BINDING AND SUFFICIENT.
MUSIC TECHNOLOGIES, INC. MUZAK LIMITED PARTNERSHIP
By /s/ Xxxxxxxx Xxxxxx By /s/ Xxxx X. Xxxxxxxx
----------------------------- --------------------------------
Name: Xxxxxxxx Xxxxxx Name: Xxxx X. Xxxxxxxx
Title: President Title: Chief Financial Officer
20
[SCHEDULES]
1.1.2 - Customer Contracts
1.1.4 - Satellite Contracts
1.1.5 - Distribution Systems Assets
3.4 - Purchase Price Allocation
5.2.3 - Consents
5.3 - Stockholders
5.4 - Liens
5.7 - Litigation
5.8 - Broker Fees
5.9 - Contract Defaults, etc.
[EXHIBITS]
3.1 - form of Escrow Agreement
4.2.1 - form of Xxxx of Sale
4.2.2 - form of Assumption Agreement
4.2.4 - form of Non-Compete Agreement
4.2.5 - form of Advertising Agreement
4.2.10 - Opinion of Seller's Counsel
4.3.5 - Opinion of Buyer's Counsel
00000.00.XX (1#FD28B.DOC)
01/12/99 3:03 PM (12778-0036)
21
PROMISSORY NOTE
---------------
$2,550,000 Southfield, Michigan
December ___ , 1998
Effective Date: November 30, 1998
FOR VALUE RECEIVED, the undersigned, MUZAK LIMITED PARTNERSHIP, a
Delaware limited partnership ("Maker"), promises to pay to the order of MUSIC
TECHNOLOGIES, INC., a Michigan corporation ("Payee"), the principal sum of Two
Million Five Hundred Fifty Thousand and 00/100 ($2,550,000) Dollars, together
with interest on the unpaid balance thereof which shall accrue from the date of
this Note until paid at the rate of fourteen (14%) percent per annum from the
Effective Date until April 30, 1999 (during the Extension Period, interest shall
accrue at the rates set forth below). Principal and interest shall be paid by
the Maker in lawful money of the United States of America at Payee's address
shown below, or at such other address as the Payee may designate in writing to
the Maker. The Maturity Date of this Note shall be April 30, 1999, unless
extended by Buyer pursuant to the Extension Privilege set forth below (in which
case the Maturity Date shall be December 31, 1999).
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meaning:
"EXTENSION FEE" shall mean an amount equal to twenty percent (20%) of
all amounts due under this Promissory Note (unpaid principal plus accrued and
unpaid interest) on April 30, 1999. The Extension Fee shall be added to the
unpaid principal balance due under this note and shall accrue interest at the
applicable rates set forth herein.
"EXTENSION PRIVILEGE" shall mean the Maker's right to extend the
Maturity Date of this Note from April 30, 1999 to December 31, 1999, subject to
the conditions and according to the procedures set forth below in the paragraph
entitled "Extension Privilege."
"EXTENSION PERIOD" shall mean that period beginning April 30, 1999 and
ending December 31, 1999.
"AFFILIATE" shall mean:
(i) with respect to any INDIVIDUAL, any member of such
individual's immediate family, and any organization
(x) in which such individual and/or his Affiliate(s)
own, directly or indirectly, more than fifty percent
(50%) of any class of equity security or (y) in which
such individual and/or his Affiliate is the sole
general partner, or is the managing general partner,
or which is controlled by such individual and/or his
Affiliates, directly or indirectly; and
(ii) with respect to any CORPORATION, PARTNERSHIP, TRUST,
OR OTHER ORGANIZATION, any other corporation,
partnership, trust, or other organization, which
controls, is controlled by, or is under common
control with, the first-referenced corporation,
partnership, trust, or other organization, and any
individual or entity who is the general partner,
officer, director, trustee of, or who directly or
indirectly controls, the first-referenced
corporation, partnership, trust, or other
organization; and,
(iii) the Maker, the Maker's General Partner and Centre
Capital Investors, L.P.
(iv) any Affiliate of any other Affiliate.
For purposes of this definition, the term "controls,"
"is controlled by" or "is under common control with"
shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the
management and policies of a person or entity,
whether through the ownership of voting securities,
by contract or otherwise.
"NON-AFFILIATE" shall mean any individual or entity which is not an
Affiliate.
"SALE OF THE MUZAK BUSINESS" shall mean a sale of substantially all
of Muzak's assets, or the sale of substantially all of Muzak's
limited partnership interests to or merger with one or more
non-affiliated third-part(ies) which results in Muzak's
current owners having less than a controlling ownership
interest in Muzak.
PAYMENT. Principal and interest shall be paid by the Maker as follows:
a. Maker shall pay to Payee the sum of Five Hundred Thousand
dollars ($500,000) (principal and interest) on each of the
following dates: January 31, 1999, February 28, 1999, and
March 31, 1999.
b. Maker shall pay the full balance due hereunder, principal and
interest, to Payee, on or before the earlier of: (i) April 30,
1999 (unless Maker has timely exercised the Extension
Privilege); or (ii) upon a Sale of the Muzak Business.
If this Note is paid in full on or before the Adjustment Date (as that
term is defined in the Asset Purchase Agreement between Maker and Payee of even
date herewith), Maker may pay $450,000 of the amount due under this Note to
Pacific Northwest Title Company (or other mutually agreeable third party) as
Escrow Agent, which funds shall be held by Escrow Agent pursuant to an Escrow
Agreement to be entered into between Maker and Payee substantially in the form
attached as Exhibit 3.1 to the Asset Purchase Agreement. Amounts paid by Maker
to the Escrow Agent and held by Escrow Agent as Escrowed Funds under such Escrow
Agreement (up to a maximum of $450,000) pursuant to the foregoing sentence,
shall be deemed to be a payment under this Note.
All payments made under this Note shall be applied first against
accrued interest, and the remainder of such payment shall be applied against
principal.
All payments shall be made without any right of setoff or counterclaim
by Maker against Payee.
Maker may make payments hereunder by wire transfer (or direct deposit)
of funds to Payee's account, pursuant to wire transfer instructions provided
from time to time by Payee. Any payment made by mail will be deemed tendered and
received only upon actual receipt, promptly on the date due for each such
payment as herein required (time being of the essence), at the address of Payee
designated for such payment (or in the case of wire transfers or direct
deposits, to the account designated for such payment). Maker hereby expressly
assumes all risk of loss or liability resulting from non-delivery or delay in
delivery of any payment transmitted by mail or in any other manner. All payments
under this Note shall be in immediately available United States funds, without
set off or counterclaim.
Acceptance by Payee of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and the failure to pay
the entire amount then due shall be and continue to be an Event of Default (as
hereinafter defined), and at any time thereafter and until the entire amount
then due has been paid, Payee shall be entitled to exercise all rights conferred
upon it by this instrument upon the occurrence of an Event of Default as herein
set forth.
This Note is for commercial, investment or business purposes and not
for personal, family or household purposes.
Nothing contained herein shall be construed so as to require the Maker
to pay interest at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest or other charges, charged, paid or
payable by the Maker in connection with this Note, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed by
the applicable law as aforesaid as determined by the final order of a court of
competent jurisdiction, then any and all such excess shall be and the same is
hereby waived by the Payee, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If it is determined by a final order of a court of competent jurisdiction
that the interest rate under this Note is, or may be usurious or otherwise
limited by law, the unpaid balance of this Note, with accrued interest at the
highest rate then permitted to be charged by stipulation in writing between
Payee and Maker, at the option of Payee, shall immediately become due and
payable.
EXTENSION PRIVILEGE. Provided that no Event of Default has occurred hereunder,
Maker may elect to extend the Maturity Date of this Note to December 31, 1999,
by providing written notice of its election to extend to Payee on or before
April 15, 1999 (time being of the essence) and by agreeing in writing to payment
of the Extension Fee (which may be paid by adding the amount of the Extension
Fee to the unpaid principal balance of this note).
During the Extension Period (that period from May 1, 1999 to December
31, 1999), interest shall accrue on the unpaid balance hereof at the following
rates:
15% during the month of May, 1999;
16% during the month of June, 1999;
17% during the month of July, 1999;
18% during the month of August, 1999;
19% during the month of September, 1999;
20% during the month of October, 1999;
21% during the month November, 1999; and
22% from December 1, 1999 until paid in full.
In addition, during the Extension Period, Maker shall pay to Payee the
sum of Five Hundred Thousand dollars ($500,000) (principal and interest) on each
of the following dates: June 30, 1999 and September 30, 1999.
PREPAYMENT. Maker shall have the right at any time to prepay the principal
balance hereof (including any accrued but unpaid interest) without penalty in
whole or in part. Any prepayment shall be credited first on interest then due
and the remainder on principal.
DEFAULT. The occurrence of any of the following events shall be deemed an Event
of Default hereunder:
a. immediately upon written notice by Payee to Maker of
the failure to make any payment hereunder which has
become due; or
b. breach of any Affirmative Covenant, or Negative
Covenant contained herein, if Maker does not cure
any such breach within ten (10) days after the
occurrence of such breach; or,
c. breach by Maker of any of its obligations: to pay
money, or to refrain from competing with Payee,
under either the Asset Purchase Agreement between
Maker and Payee dated October 28, 1998 as amended,
the Advertising Agreement between Maker and Payee of
even date herewith or the Non-Competition Agreement
between Maker and Payee of even date herewith, if
Maker does not cure any such breach within ten (10)
days after written notice of such breach is given to
Maker (provided, however, in the case of breaches by
Maker of its monetary or non-compete obligations,
Maker shall not be entitled to receive any notice or
right to cure with respect to such breach if prior
to such breach Payee has already given written
notice to Maker of an earlier monetary or
non-compete breach even if such earlier breach has
been cured); or,
d. breach of any other obligation by Maker under the
Asset Purchase Agreement, the Advertising Agreement,
or the Non-Compete Agreement (other than
non-monetary breaches which Maker can show are
non-material, or breaches addressed in paragraph c
above), if Maker does not cure any such breach
within thirty (30) days after written notice of such
breach is given to Maker (provided, however, Maker
shall not be entitled to any notice or cure period
with respect to such breach if, prior to the
occurrence of such breach, Payee has already given
Maker three (3) written notices of other breaches,
even if such other breaches have been timely cured).
Upon the occurrence of any Event of Default hereunder:
a. Interest shall accrue on the unpaid principal
balance hereof at a rate equal to five percentage
points in excess of the interest rates which would
then prevail (as the same increase from time to
time) if no Event of Default had occurred.
b. Payee's obligations to make any payments to Maker
under the Advertising Agreement between Maker and
Payee of even date herewith (which payments arise
out of collections from advertising customers
received after the Event of Default but prior to
cure) shall be forever forgiven; Payee's obligations
to make payments to Maker under the Advertising
Agreement will be reinstated with respect to
payments that arise out of collections from
Advertising Customers received after the date when
all amounts due under this Note have been paid in
full by Maker (and if full payment of all amounts
due under this Note occurs on or after December 31,
1999, then the amount of Advertising Payments due
from Payee to Maker under the Advertising Agreement
shall be equal to five percent (5%) of Net
Advertising Revenues regardless of whether such
Revenues are collected from an Exclusive Customer or
a Non-Exclusive Customer. The amount of Advertising
Agreement payments which are forgiven shall not be
deemed to be payments of this Note.
c. The obligations of Payee and Payee's Owner under the
Non-Competition Agreement between them of even date
herewith shall be suspended until this note is paid
in full (or if this note is not paid in full on or
before December 31, 1999, then Payee and Owner shall
have no further obligations under the
Non-Competition Agreement, but Maker's obligations
thereunder shall continue).
d. The Deferred Payment and the Adjustment Amount (as
those terms are defined in the Asset Purchase
Agreement between the parties) shall be immediately
due and payable; interest shall accrue on such
Deferred Payment and Adjustment Amount from the date
of such Event of Default until paid at the rates set
forth in paragraph a above. For this purpose, the
Adjustment Amount shall be computed and paid as of
the date of the Event of Default, and the Deferred
Payment shall be immediately due and payable in full
(as if none of the Deferred Payment Contracts were
Undocumented Deferred Payment Contracts).
Further, upon any Event of Default under this Note, then, at the option
of the Payee, without notice to the Maker, the entire indebtedness evidenced
hereby shall become immediately due and payable. Maker further promises to pay
any and all costs of collecting the amount due hereunder, including reasonable
attorney fees. No delay on the part of the Payee in the exercise of any of the
aforesaid rights or remedies shall operate as a waiver thereof, and no single or
partial exercise of any right or remedy by the Payee shall preclude the exercise
of any other right or remedy. Any remedy provided hereunder shall be in addition
to all other remedies available to Payee and such remedies shall be cumulative.
AFFIRMATIVE COVENANTS. Maker covenants and agrees that so long as any
indebtedness hereunder remains unpaid, it will:
a. furnish monthly, on January 31, 1999, February 28,
1999, March 31, 1999 and April 30, 1999: (i) an
affidavit from Maker's Chief Financial Officer,
certifying that Maker is in full compliance with the
Affirmative and Negative covenants set forth in this
Note and that there has been no default by Maker
under the Indenture (described below in Section d);
and (ii) a balance sheet, income statement and
statement of cash flows of Maker for the prior
calendar month;
b. faithfully perform any and all covenants, obligations
and other commitments under any indebtedness (which
indebtedness, when aggregated with all other
indebtedness under which there has been a declared
default or a failure by Maker to perform its
obligations, aggregates at least $100,000) to which
Maker is subject; and,
c. continue at all times to comply with all material
laws, ordinances, regulations or requirements of any
governmental authority relating to Maker's business,
property or affairs;
d. to the extent not otherwise covered herein, comply
with the affirmative covenants set forth in Article 4
and Section 5.01 of that certain Indenture between
Maker and First Trust, N.A., Indenture Trustee, dated
October 2, 1996, as if the promisee of such covenants
in such indenture was the Payee and regardless of
whether the indebtedness represented by the Indenture
has been paid.
NEGATIVE COVENANTS. Maker covenants and agree that so long as any indebtedness
hereunder remains unpaid it will not:
a. Make any payments of principal under any indebtedness
to which the Maker is subject (except for regularly
scheduled payments as set forth in the attached
schedule of Permitted Principal Payments);
b. make any distributions to any partners, redeem any
partnership interests, or make any payment whatsoever
with respect to any partner's partnership interest;
c. pay any amounts whatsoever to any partner (or any
Affiliate of a partner) (whether a management fee,
salary, compensation, or fee to the general partner
or otherwise), except for (i) board of director fees
consistent with past practice; (ii) payment of a
letter of credit fee to Centre Partners in connection
with Maker's financing facility with Foothill Capital
Corporation; and, (iii) other payments consistent
with past practices, on arms length terms and not
otherwise prohibited by any other provision hereof;
d. consent to any amendment to the terms of any loan or
any indebtedness which would have the effect of
shortening the term, increasing the interest rate or
the amount of any payments, or otherwise materially
impairing the ability of Maker to make payments to
Payee hereunder, without Payee's prior written
consent.
e. to the extent not otherwise covered herein, breach
any of the Negative Covenants set forth in Article 4
and Section 5.01 of that certain Indenture between
Maker and First Trust, N.A., Indenture Trustee, dated
October 2, 1996 (the "Indenture") (such Negative
Covenants are incorporated herein by reference, shall
be deemed to be made to Payee and shall remain in
force even if the indebtedness under the Indenture is
paid in full).
f. commit any default under the Indenture.
ASSIGNMENT. This Note and all rights and remedies of the Payee shall inure to
the benefit of the Payee's legal representatives, successors and to any other
holder who derives title to or interest in this Note, and shall bind the Maker
and its legal representatives, successors and assigns.
NOTICES. Any notice or other communications required or permitted hereunder
shall be sufficiently given if in writing and delivered personally or sent by
confirmed facsimile transmission, telex, telecopy or other wire transmission
(with request for confirmation in a manner typical with respect to
communications of that type), overnight air courier (postage prepaid), or
registered or certified mail (postage prepaid with return receipt requested)
addressed to the respective party as follows:
IF TO THE MAKER:
MUZAK LIMITED PARTNERSHIP
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
Fax: 000-000-0000
with copies to:
Heller, Ehrman, White & XxXxxxxxx
0000 Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxx
Fax: 000-000-0000
IF TO PAYEE:
Music Technologies, Inc.
00000 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: President
Fax: 000-000-0000
with a copy to:
Xxxxx X. Xxxx, Esq.
Seyburn, Kahn, Ginn, Bess, Xxxxxx & Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000-0000.
Fax: 000-000-0000
Unless otherwise specified herein, notices shall be deemed received (a) on the
date delivered, if delivered personally, by wire transmission or confirmed
facsimile transmission; (b) on the next business day after deposit with an
overnight air courier; or (c) three (3) business days after being sent, if sent
by registered or certified mail.
AMBIGUITY. Maker and Payee acknowledge and agree that they have each contributed
to the drafting of this document, and accordingly there shall arise no
presumption in favor of or against any party as a result of any ambiguity in the
language of this document.
WAIVER. The Maker and all endorsers, sureties and guarantors hereby jointly and
severally waive presentment, demand for payment, notice of dishonor, notice of
protest, and protest, and all other notices or demands in connection with the
delivery, acceptance, performance, default, endorsement or guaranty of this
instrument (except for any notice or grace period expressly provided in this
Note); and agree that no obligation hereunder shall be discharged by any
extension, indulgence or release given to Maker or to any guarantor or other
person or by the release or non-enforcement of any security or guaranty given in
connection herewith. Notwithstanding anything herein to the contrary, nothing
shall limit any rights granted to Payee by other instruments or by law.
PARTIAL INVALIDITY. If any provision of this Note is held by a court of
competent jurisdiction to be invalid, void or unenforceable in any manner, the
remaining provisions of this Note shall nonetheless continue in full force and
effect without being impaired or invalidated in any way. In addition, if any
provision of this Note may be modified by a court of competent jurisdiction such
that it may be enforced, then that provision shall be so modified and as
modified shall be fully enforced.
GOVERNING LAW. This Note is being executed and delivered in the State of
Michigan and shall be governed by and be construed in accordance with the laws
of the State of Michigan. The Maker agrees that all actions arising from or in
connection with this Note shall, be litigated only in the United States District
Court for the Eastern District of Michigan, or the Oakland County Michigan
Circuit Court, and the Maker consents to the jurisdiction and venue of these
courts.
MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership
By:______________________________________
Xxxx X. Xxxxxxxx, Chief Financial Officer
NON-COMPETITION AGREEMENT
-------------------------
THIS Non-Competition Agreement is made and entered into as of the ___
day of December, 1998, by and between MUZAK LIMITED PARTNERSHIP, a Delaware
limited partnership ("Muzak"), MUSIC TECHNOLOGIES, INC., a Michigan corporation
("MTI") and XXXXXXXX XXXXXX ("Owner").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement dated as of
October 28, 1998, between Muzak & MTI (the "Asset Purchase Agreement"), Muzak
acquired certain of MTI's assets (the "MTI Assets"). Muzak is engaged in the
business of selling business music services and other recurring music related
in-store business services within the United States (the "Business").
B. MTI and Owner possess expertise and extensive knowledge of the
Business which if shared with persons or entities that are in competition with
MTI and will be in competition with Muzak would be harmful to the Business and
Muzak.
C. The covenants and undertakings set forth in this Agreement are
integral to Muzak's acquisition of the MTI Assets. Muzak would not have acquired
the MTI Assets without the benefits of this Agreement.
AGREEMENT
In consideration of the promises and mutual covenants contained herein
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, and assuming there is no payment default (after notice and
opportunity to cure in accordance herewith) by Muzak under the Asset Purchase
Agreement, the parties agree as follows:
1. NON-COMPETITION. IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED IN THE
ASSET PURCHASE AGREEMENT, FOR A PERIOD OF FIVE (5) YEARS FROM THE DATE OF THIS
AGREEMENT (THE "NON-COMPETE PERIOD"), MTI AND OWNER JOINTLY AND SEVERALLY
COVENANT AND AGREE THAT THEY, EITHER DIRECTLY OR INDIRECTLY, WHETHER OR NOT
THROUGH OTHERS ACTING AS SUCH PARTY'S EMPLOYEE OR AGENT, SHALL NOT COMPETE WITH
THE BUSINESS. FOR PURPOSES OF THIS AGREEMENT, THE TERM "COMPETE" MEANS AND WILL
MEAN STARTING, ACQUIRING, OR OBTAINING ANY EQUITY INTEREST (EXCEPT FOR
NON-CONTROLLING INVESTMENTS IN MUTUAL FUNDS OR PUBLICLY-TRADED COMPANIES WITHOUT
ANY PARTICIPATION IN THE MANAGEMENT THEREOF) IN OR OTHERWISE ENGAGING IN ANY
BUSINESS WHICH IS IN THE BUSINESS OF SELLING BUSINESS MUSIC SERVICES AND OTHER
RECURRING MUSIC RELATED IN-STORE BUSINESS SERVICES WITHIN THE UNITED STATES.
NOTHING HEREIN SHALL RESTRICT MTI OR OWNER FROM ENGAGING IN ACTIVITIES IN THE
BUSINESS PURSUANT TO THE SALES AGENT AGREEMENT SET FORTH IN SECTION 2 OF THE
ASSET PURCHASE AGREEMENT BETWEEN MUZAK AND MTI OF EVEN DATE HEREWITH OR THE
ADVERTISING AGREEMENT BETWEEN MUZAK AND MTI OF EVEN DATE HEREWITH.
Nothing herein shall restrict MTI or Owner from engaging in activities
in the Business, to the extent reasonably necessary or desirable to enable MTI
or Owner to continue selling Business Music services and other recurring
music-related in-store business services within the United States to Kmart.
In addition, in consideration of the mutual covenants contained in the
Asset Purchase Agreement, for the period of the Muzak Non-Compete Period as
hereinafter defined, Muzak and its affiliates, jointly and severally, covenant
and agree that they, either directly or indirectly, whether or not through
others acting as such party's employee or agent, shall not compete with MTI in
the business of selling business music services or other recurring music-related
in-store business services, in the United States and Puerto Rico, covered by the
then existing contract between MTI and Kmart, provided that should Kmart extend
its services provided under the contract to any of its affiliates then the
provisions of this non-compete agreement would apply. For purposes of this
Agreement, the term "Compete" will mean "starting, acquiring, or obtaining any
equity interest (except for non-controlling investments in mutual funds or
publicly-traded companies without any participation in the management thereof)
in or otherwise engaging in any business which is in the business of selling
business music services and other recurring music-related in-store business
services within the United States to Kmart. The "Muzak Non-Compete Period" shall
mean the shorter of: (a) ten (10) years; or, (b) twelve (12) months after MTI or
its successors or assigns ceases providing business music services to Kmart.
As used in this Agreement, "Kmart" shall mean Kmart Corporation, and
its present and future affiliates, its successors or assigns. Notwithstanding
anything contained in this Section to the contrary, all geographic references in
this Section shall apply to Kmart's existing music-related in-store business
services in the United States and Puerto Rico, and shall include any such
services worldwide in the event Kmart so expands its music-related in-store
business services.
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2. NONINTERFERENCE. DURING THE NON-COMPETE PERIOD, MTI AND OWNER SHALL NOT (1)
SOLICIT OR ATTEMPT TO SOLICIT ANY PERSONS EMPLOYED BY MUZAK TO BECOME EMPLOYED
IN ANY BUSINESS, INCLUDING PERSONS BECOMING EMPLOYED BY MUZAK UPON THE CLOSING
OF MUZAK'S ACQUISITION OF THE MTI ASSETS OR (2) INDUCE OR ATTEMPT TO INDUCE ANY
CUSTOMER, SUPPLIER, LICENSEE OR OTHER BUSINESS RELATION OF MUZAK TO CEASE DOING
BUSINESS WITH MUZAK, OR IN ANY WAY INTERFERE WITH THE RELATIONSHIP BETWEEN ANY
CUSTOMER OR BUSINESS RELATION AND MUZAK.
During the Muzak Non-Compete Period, Muzak and its Affiliates shall
not, unless the parties agree otherwise in writing, (1) solicit or attempt to
solicit any persons employed by MTI who are engaged by MTI in whole or in part
to service Kmart, to become employed in any business, including persons becoming
employed by MTI upon the closing of MTI's sale of assets to Muzak; or (2) induce
or attempt to induce any customer, supplier, licensee or other business relation
of MTI, which relation is used by MTI for purposes of servicing the Kmart
account, to cease doing business with MTI, or in any way to interfere with the
relationship between MTI and Kmart or any business relation which assists MTI in
servicing Kmart.
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3. REMEDIES
A. IN THE EVENT OF ANY BREACH BY A PARTY OF, OR A DEFAULT BY A PARTY UNDER, ANY
OF THE PROVISIONS OF THIS AGREEMENT, THE OTHER PARTIES SHALL HAVE ANY AND ALL
RIGHTS AND REMEDIES AVAILABLE TO THEM UNDER THIS AGREEMENT, BY OPERATION OF LAW
OR IN EQUITY. ALL OF THESE RIGHTS AND REMEDIES SHALL BE CUMULATIVE AND NOT
ELECTIVE IN ANY RESPECT. ANY OF EACH SHALL BE DEEMED TO BE IN ADDITION TO AND
NOT IN LIEU OF ANY OF THE OTHER RIGHTS AND REMEDIES.
B. EACH PARTY ACKNOWLEDGES AND AGREES THAT, IN THE EVENT OF ANY BREACH BY THEM
OF OR DEFAULT BY THEM UNDER EITHER SECTION 1 OR 2 OF THIS AGREEMENT, THE OTHER
PARTY WILL SUFFER IRREPARABLE AND ONGOING HARM WHICH, WHILE SUBSTANTIAL, WILL
NOT BE FULLY COMPENSABLE BY DAMAGES. AS A CONSEQUENCE, IN THE EVENT OF ANY
ACTUAL OR THREATENED BREACH OF OR DEFAULT UNDER EITHER SECTION 1 OR 2 OF THIS
AGREEMENT BY EITHER PARTY, THE OTHER PARTY MAY, IN ADDITION AND SUPPLEMENTARY TO
ANY AND ALL OTHER RIGHTS AND REMEDIES EXISTING IN ITS FAVOR, OBTAIN IMMEDIATE
AND ONGOING INJUNCTIVE RELIEF, ENJOINING OR RESTRAINING WHATEVER VIOLATION MAY
HAVE OCCURRED OR BE OCCURRING OR MAY HAVE BEEN THREATENED. THIS INJUNCTIVE
RELIEF SHALL BE IN THE FORM OF A TEMPORARY RESTRAINING ORDER, PRELIMINARY
INJUNCTION OR SIMILAR RELIEF, AND A PERMANENT INJUNCTION, AS MAY BE SOUGHT BY
THE NON-DEFAULTING PARTY. NO BOND, OR THE MINIMUM REQUIRED BY LAW, SHALL BE
REQUIRED OF THE NON-DEFAULTING PARTY.
C. THE PROVISIONS OF THIS AGREEMENT SHALL BE DEEMED TO BE SEVERABLE. THE
INVALIDATION OF ANY ONE PROVISION BY A COURT OF COMPETENT JURISDICTION SHALL NOT
INVALIDATE ANY OTHER PROVISION. IN THE EVENT A COURT OF COMPETENT JURISDICTION
DETERMINES THAT ANY OF THE RESTRICTIONS CONTAINED IN THIS AGREEMENT ARE
UNREASONABLE, SUCH COURT IS FREE TO IMPOSE AND IS AUTHORIZED TO ENFORCE ANY
LESSER RESTRICTION OR RESTRICTIONS DETERMINED BY IT TO BE REASONABLE. INCLUSION
IN THIS AGREEMENT OF THIS SECTION 3(C) SHALL NOT IN ANY WAY BE DEEMED TO BE A
WAIVER, RENUNCIATION OR DENIAL BY ANY PARTY OF THE OTHER PARTY'S ACKNOWLEDGMENTS
AND AGREEMENTS CONTAINED IN SECTION 3(F).
D. MTI AND OWNER (ON THE ONE HAND) AND MUZAK (ON THE OTHER HAND) EACH AGREE THAT
THE COVENANTS AND AGREEMENTS MADE IN AND THE REQUIREMENTS IMPOSED BY THIS
SECTION 3 SHALL BE CONSTRUED AS AN AGREEMENT INDEPENDENT OF ANY OTHER PROVISIONS
OF THIS AGREEMENT AND SHALL SURVIVE THE TERM AND ANY TERMINATION OF THIS
AGREEMENT. THE EXISTENCE OF ANY CLAIM OR CAUSE OF ACTION OF EITHER PARTY AGAINST
THE OTHER (OR SUCH OTHER'S AFFILIATES), IRRESPECTIVE OF WHETHER PREDICATED ON
THE TERMS OF THIS AGREEMENT, SHALL NOT CONSTITUTE A DEFENSE TO THE ENFORCEMENT
OF THE COVENANTS AND AGREEMENTS OF THE PARTY MAKING SUCH CLAIM CONTAINED IN, OR
THE REQUIREMENTS IMPOSED UPON IT BY, SECTION 1, SECTION 2, AND SECTION 3 OF THIS
AGREEMENT; PROVIDED HOWEVER, THAT IN THE EVENT OF A PAYMENT DEFAULT OF THE ASSET
PURCHASE AGREEMENT, UNLESS CURED AFTER 30 DAYS PRIOR WRITTEN NOTICE BY MTI, MTI
AND OWNER SHALL NOT BE BOUND BY THIS AGREEMENT.
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E. IF ANY SUIT, ARBITRATION OR OTHER PROCEEDING IS INSTITUTED BY ANY PARTY
PERTAINING TO THIS AGREEMENT OR PERFORMANCE HEREUNDER, THE SUBSTANTIALLY
PREVAILING PARTY, IN ADDITION TO ANY OTHER RELIEF AS MIGHT BE AWARDED, WILL BE
ENTITLED TO ITS COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES AS SET BY AN
ARBITRATOR, A TRIAL COURT, AND AN APPELLATE COURT.
F. MTI AND OWNER (ON THE OTHER HAND) AND MUZAK (ON THE OTHER HAND) EACH
ACKNOWLEDGE THAT THEY HAVE CAREFULLY READ AND REVIEWED THE PROVISIONS OF THIS
AGREEMENT, INCLUDING THE PROVISIONS CONTAINED IN THIS SECTION 3; HAVE DISCUSSED
THE MEANING AND EFFECT OF THESE PROVISIONS WITH COUNSEL; AND AGREE THAT THEY ARE
FAIR AND REASONABLE.
4. NOTICES. ALL NOTICES, COMMUNICATIONS AND DELIVERIES UNDER THIS AGREEMENT
SHALL BE MADE IN WRITING AND SIGNED BY THE PARTY MAKING THE SAME, AND SHALL BE
DEEMED TO BE GIVEN ON THE DATE DELIVERED IF DELIVERED IN PERSON OR BY FACSIMILE
OR ON THE THIRD (3RD) BUSINESS DAY AFTER MAILED IF MAILED CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, WITH POSTAGE PREPAID, AS FOLLOWS:
To Muzak:
Muzak Limited Partnership
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
To MTI or Owner:
Music Technologies, Inc.
00000 Xxxxxxxxxxxx Xxxxxxx Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Fax: (000) 000-0000
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5. ENTIRE AGREEMENT. THIS AGREEMENT CONTAINS THE ENTIRE AGREEMENT BETWEEN THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY AND ALL
OTHER COMMUNICATIONS, REPRESENTATIONS, PROPOSALS, UNDERSTANDINGS OR AGREEMENTS,
WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF. THIS AGREEMENT MAY NOT BE MODIFIED OR AMENDED, IN WHOLE OR IN
PART, EXCEPT BY A WRITING SIGNED BY ALL PARTIES.
6. ASSIGNMENT. NO PARTY SHALL ASSIGN THIS AGREEMENT WITHOUT THE PRIOR CONSENT OF
THE OTHER PARTIES TO THIS AGREEMENT. THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO BENEFIT OF THE PARTIES AND THEIR LEGAL REPRESENTATIVES, SUCCESSORS,
PERMITTED ASSIGNS AND HEIRS.
7. CONSTRUCTION. THE LANGUAGE OF THIS IS AND WILL BE DEEMED TO BE THE LANGUAGE
CHOSEN BY THE PARTIES JOINTLY TO EXPRESS THEIR MUTUAL INTENT. NO RULE OF
CONSTRUCTION BASED ON WHICH PARTY DRAFTED THE AGREEMENT OR CERTAIN OF ITS
PROVISIONS WILL BE APPLIED AGAINST ANY PARTY.
8. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED SEPARATELY OR INDEPENDENTLY IN
ANY NUMBER OF COUNTERPARTS AND MAY BE DELIVERED BY MANUALLY SIGNED COUNTERPART
OR FACSIMILE. EACH AND ALL OF THESE COUNTERPARTS SHALL BE DEEMED TO HAVE BEEN
EXECUTED SIMULTANEOUSLY AND FOR ALL PURPOSES TO BE ONE DOCUMENT, BINDING AS SUCH
ON THE PARTIES.
9. HEADINGS. THE HEADINGS OF THE SECTIONS OF THIS AGREEMENT ARE FOR REFERENCE
ONLY AND WILL NOT BE CONSIDERED TO MODIFY OR OTHERWISE AFFECT THE TERMS OF THE
AGREEMENT.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF WASHINGTON WITHOUT REFERENCE TO THE CONFLICT OF LAW
PRINCIPLES OF SUCH STATE.
MUZAK LIMITED PARTNERSHIP MUSIC TECHNOLOGIES, INC.
By:___________________________ By:_________________________
Xxxx X. Xxxxxxxx Xxxxxxxx Xxxxxx
Chief Financial Officer President
Owner:
------------------------------
Xxxxxxxx Xxxxxx
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ADVERTISING AGREEMENT
---------------------
This Advertising Agreement ("Agreement") is entered into on
_____________, 1998 by Muzak Limited Partnership ("Muzak"), a Delaware limited
partnership, whose principal business address is 0000 Xxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxxxxx 00000 and Music Technologies, Inc. ("MTI"), a Michigan
corporation, whose principal business address is 00000 Xxxxxxxxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000.
R E C I T A L S:
A. Muzak has agreed to purchase from MTI and MTI has agreed to sell to
Muzak certain assets of MTI upon the terms and conditions described in a certain
asset purchase agreement entered into by the parties concurrently with the
execution of this Agreement ("Purchase Agreement").
B. From and after the closing of the above-described sale of MTI's
assets to Muzak, MTI shall have the right to sell advertising on Muzak's
customers' in-store audio networks, subject to the terms and conditions
described in this Agreement.
For valuable consideration, the adequacy and receipt of which is
acknowledged, the parties agree as follows:
I. ADVERTISING SALES. During the Term (as defined in paragraph 3 below) of
this Agreement:
I. Exclusive Customers. Muzak shall provide MTI, on an
exclusive basis, the opportunity to sell advertising on the
in-store audio networks of the customers described on attached
Exhibit "A" (sometimes individually referred to as an
"Exclusive Customer" and collectively as the "Exclusive
Customers"). Notwithstanding the foregoing, Muzak's grant of
exclusivity contained herein shall be subject to the rights
(if any) of Act Radio under the Act Radio Agreement (as
defined in Section 1.1.4 of the Asset Purchase Agreement) as
such rights (if any) exist on the date hereof, but only to the
extent that Act Radio expressly requires Muzak to honor such
rights. In the event any issues arise regarding the scope of
Act Radio's rights, the parties agree to discuss them in good
faith and in an effort to resolve them. The parties intend
that the foregoing exception to MTI exclusivity shall not be
construed to permit Muzak to engage in any activities
described in the first sentence of this subparagraph unless it
does so through Act Radio as a result of Act Radio's express
requirement.
I. Non-Exclusive Customers. MTI shall also be entitled, on a
non- exclusive basis, to sell advertising on the in-store
audio networks of Muzak's current and future customers
(sometimes individually referred to as a "Non-Exclusive
Customer" and collectively as the "Non-Exclusive Customers").
I. Production of All Advertisements and Indemnification.
Except for those advertisements produced by the advertisers
themselves, MTI shall be solely responsible for producing the
advertisements sold by MTI pursuant to this Agreement. MTI
agrees to indemnify Muzak against claims by third parties that
any advertisement(s) which MTI sold, infringes such third
party's U.S. copyright or other proprietary rights.
I. ADVERTISING PAYMENTS. During the Term of this Agreement:
I. Collections. MTI shall timely xxxx and diligently collect
all fees due from Exclusive Customers and Non-Exclusive
Customers for all advertising sold to such customers by MTI.
MTI shall provide Muzak, on a calendar quarter basis, with an
accounting of all amounts billed and actually collected from
each such customer during the subject calendar quarter.
I. Allocations and Inspections. MTI shall remit to Muzak five
(5%) percent of the Net Advertising Revenues (as defined
below) actually collected by MTI from sales of in-store
advertisements placed on the in-store audio networks of
Exclusive Customers, and with respect to a Non-Exclusive
Customer, MTI shall remit to Muzak a fee equal to the greater
of: (i) Six Hundred Dollars ($600) per advertising minute per
month per account (regardless of the number of stores in such
customer's system on which the advertisement is broadcast);
or, (ii) Eighteen Percent (18%) of the Net Advertising
Revenues (as defined below) actually collected by MTI from
sales of in-store advertisements placed on the in-store audio
networks of such Non-Exclusive Customer. The five (5%) percent
remittance is intended to compensate Muzak for the handling,
insertion and trafficking of advertisements. The remittance
with respect to Non-Exclusive Customers is intended to
compensate Muzak for its obligation to introduce and promote
MTI to such customers in accordance with this Agreement, as
well as for Muzak's handling, insertion and trafficking of
advertisements. MTI shall pay Muzak's share of said Net
Advertising Revenues actually received by MTI during the
immediately preceding calendar quarter to Muzak on or before
the fifteenth (15th) day of each March, June, September and
December during the term of this Agreement. For purposes of
this Agreement, the term "Net Advertising Revenues" shall mean
the gross amounts actually collected by MTI from the sale of
2
in-store advertisement(s) to the applicable advertiser(s),
less any and all amounts which MTI is obligated to pay to the
applicable customer(s) or as a "finder's fee" to any third
party(ies) for running said advertisement(s) on such
customer(s)' in-store networks. For purposes of this
paragraph, the phrase "finder's fee" shall be deemed to
exclude sales commissions regularly payable to MTI's own
employees or independent sales agents. Muzak shall have the
right, at its sole cost and expense, but not more than once
each calendar year, to inspect MTI's books and records for the
year in which the inspection(s) takes place to verify that
Muzak's share of Net Advertising Revenues is/was accurately
calculated. The date, time and location of any such
inspection(s) shall be mutually agreed upon by the parties. If
such inspection(s) discloses that Muzak's share of Net
Advertising Revenues is/was understated/overstated, said
deficiency/overpayment shall be promptly paid to Muzak or to
MTI, as applicable, by the other party. Except as specified in
this Agreement, Muzak shall not be entitled to any advertising
and/or other revenues of any kind whatsoever collected by MTI.
In the event MTI fails to remit amounts due and payable under
this paragraph, and such failure is not cured within thirty
(30) days after MTI receives written notice from Muzak
describing such failure in reasonable detail, then, in such
event, Muzak's non-competition obligations contained in
paragraph 4 of this Agreement shall be deemed terminated.
I. Promotion of MTI to Non-Exclusive Customers. Upon execution
of this Agreement, Muzak shall provide MTI with an initial
list of current and prospective Non-Exclusive Customers to
which MTI will be presented and promoted by Muzak in
accordance with this paragraph 2.c. (the "Initial List"). The
Initial List shall include Xxxxxxx, Affiliated Foods,
Associated Wholesale Grocers and Bi-Lo, and the Initial List
shall be updated and expanded over the term of this Agreement
to include such additional Non-Exclusive Customers as Muzak
determines to be appropriate in its reasonable discretion, or
that MTI identifies as a prospective advertising customer and
which Muzak agrees to add to the Initial List in its
reasonable discretion. It is the intention of both MTI and
Muzak to have Xxxxxxx, Affiliated Foods, Associated Wholesale
Grocers and Bi-Lo enter into contracts with MTI which will
(upon terms and conditions acceptable to MTI in its sole
discretion) provide MTI the exclusive right to sell
advertising on said customers' in-store audio networks. Within
ninety (90) days following execution of this Agreement, with
respect to customers identified on the Initial List, and
within ninety (90) days following any additions thereto, with
respect to such additions, Muzak shall provide MTI with a
3
written introduction to such customers, and will use
commercially reasonable efforts to arrange for meetings or
other business contacts with such customers. In addition to
the foregoing, and to the extent that the same will not
jeopardize in any way Muzak's relationships with its customers
(as determined by Muzak in its sole discretion), Muzak and MTI
shall cooperate in the solicitation of new in-store audio
accounts with a view to maximizing the advertising portion of
such accounts. Muzak represents to MTI that it has no
agreements or other obligations with third parties for the
sale of advertising to any Exclusive or Non-Exclusive
Customers which it has not previously disclosed to MTI in
writing. Notwithstanding anything to the contrary in this
paragraph 2.c., MTI acknowledges that Muzak previously entered
into a certain written agreement with Act Radio/News America
(now expired) which provided for Act Radio/News America's
right to sell advertising to Muzak customers and any
obligations arising under such agreement shall not be deemed a
violation of Muzak's obligations under this paragraph 2.c.
I. Satellite Segment Space. In the event that the satellite
segment assumed by Muzak (in accordance with the terms of the
Purchase Agreement) becomes insufficient to provide the
contractually required volume of advertisements to the
Exclusive Customers, and such insufficiency results in Muzak
having to acquire additional satellite segment, the parties
acknowledge and agree that the allocation of Net Advertising
Revenues as between Muzak and MTI for Exclusive Customers
(i.e. the 5% remittance only) shall be adjusted equitably to
defray a portion of Muzak's additional satellite segment
costs. Such an adjustment shall only occur if the
insufficiency of satellite segment is caused solely by an
increase in the volume of advertising sold by MTI, and for no
other reason. The amount of such adjustment, if any, shall be
determined in good faith by the mutual written agreement of
Muzak and MTI.
e. Kmart Excluded. The parties agree that
Kmart Corporation (and its present and future
affiliates), to the extent they continue to be
serviced by MTI or its successors or assigns, are
excluded from the definition of "Exclusive Customers"
and "Non-Exclusive Customers," and no advertising
payment under Section 2 of this Advertising Agreement
shall be due from MTI to Muzak in respect of services
rendered to Kmart.
I. TERM. The initial term of this Agreement shall be for five
(5) years from the date of this Agreement ("Term"). In
addition, the parties agree to commence good faith
negotiations from and after the fourth anniversary date of
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this Agreement to extend the Term. Upon the termination of
this Agreement, MTI shall have no further obligations of any
kind whatsoever under this Agreement and/or liability to Muzak
(including any purchaser of Muzak), including, without
limitation, for fees paid to Muzak by MTI pursuant to
paragraph 2 of this Agreement, except only for such fees which
are due and owing on the effective date of such termination.
I. NON-COMPETITION OBLIGATIONS AND REMEDIES.
I. Non-Competition Obligations. Muzak agrees that it will not,
for the five (5) year period from and after the date of this
Agreement, in any geographic area where MTI conducts its
Advertising Business (as defined below), directly or
indirectly, on its own behalf or on behalf of any party it is
affiliated in any manner with, compete with MTI's Advertising
Business and/or solicit Advertising Business from any
advertising customer(s) of MTI. Upon a "Sale of Muzak's
Business," as defined hereinbelow, Muzak agrees to require any
purchaser of its business to agree in writing to be bound
(and, in any event, such purchaser shall be bound) by the
foregoing prohibitions, as a condition of the Sale of Muzak's
Business. For purposes of this Agreement, the phrase "Sale of
Muzak's Business" shall mean a sale of substantially all of
Muzak's assets, or the sale of substantially all of Muzak's
voting stock to or merger with one or more non-affiliated
third-party(ies) which results in Muzak's current owners
having less than a controlling ownership interest in Muzak.
Muzak agrees to provide MTI with written notice of any and all
proposed Sale(s) of Muzak's Business at least thirty (30) days
prior to the proposed closing date of such sale(s) and further
written notice indicating that a Sale of Muzak's Business was
actually consummated (including the date of such completed
Sale of Muzak's Business). Without limiting the generality of
the foregoing, the parties agree that if a Sale of Muzak's
Business (as defined above) shall be consummated while this
Agreement is in effect such purchaser: i) shall assume Muzak's
obligations under this Agreement; and ii) if Muzak has ceased
all of its operations as a separate entity following such sale
(or, in lieu of such cessation, the "Sale of Muzak's Business"
is structured as a stock sale or merger in which the Muzak
entity is the survivor entity and Muzak's current owners have
less than a controlling interest in such survivor entity),
then the purchaser of Muzak can elect, by delivering written
notice of such election to MTI at any time during the 90 day
period immediately following the consummation of the Sale of
Muzak's Business, to have the non-competition prohibitions
described in this paragraph 4.a. only apply to the Exclusive
Customers, to Kmart Corporation (and its present and future
5
affiliates), and to those Non-Exclusive Customers with whom
MTI has established an advertising arrangement prior to the
date of MTI's receipt of such notice of election (which
election shall be effective sixty (60) days following MTI's
receipt of the notice of election). For purposes of this
Agreement, the term "Advertising Business" shall mean the sale
or attempted sale of promotional messages to advertisers of
their products (including, without limitation, private label
products) on the in-store audio networks of any business or
other organization. Notwithstanding anything to the contrary
contained in this Agreement, nothing in this Agreement shall
be deemed to preclude MTI from selling advertising for use on
a customer's in-store video network, from selling other video
services related to its advertising business, or from
continuing its advertising business with any and all customers
and/or prospective customers during and after the five (5)
year period referred to in this paragraph 4.a.
I. Remedies. Muzak acknowledges that the restrictions set
forth in paragraph 4.a. are fair and reasonable, and are
reasonably required for the protection of MTI's legitimate
business interests. Muzak further acknowledges and agrees that
in the event of a breach (or an attempted breach) of paragraph
4.a., MTI's damages will be substantial and difficult, if not
impossible, to ascertain, and that MTI will suffer irreparable
damage. Accordingly, Muzak hereby consents that in the event
of a breach or attempted breach by it, upon application by MTI
to a court of competent jurisdiction, such court shall grant
MTI injunctive relief, both temporary and permanent, to
prevent or restrain such breach or the continuance of such
breach, in addition to any other damages otherwise obtainable
or available at law. Muzak further agrees that the applicable
time period for the prohibitions set forth in paragraph 4.a.
shall automatically be extended for a period of time equal to
the time that Muzak is in default under this Agreement as
determined by a court of competent jurisdiction.
I. MISCELLANEOUS. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of
the heirs, successors, administrators, legal representatives
and permitted assigns, as the case may be, of the parties. In
the event of a sale of substantially all of the assets or
substantially all of the capital voting stock of MTI to a
non-affiliated third party, MTI shall have the right to assign
MTI's rights and obligations under this Agreement, provided
that MTI has obtained from the assignee a written agreement to
be bound by all of the terms and conditions of this Agreement
and, provided further, that Muzak shall have consented in
writing to the assignment, which consent Muzak shall not
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unreasonably withhold or delay. Except for the foregoing right
to assign this Agreement, and except for a Sale of Muzak's
Business referred to in paragraph 4.a. of this Agreement,
neither party shall have the right to assign any of its rights
and/or delegate its obligations under this Agreement. If any
provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable in any
manner, the remaining provisions of this Agreement shall
nonetheless continue in full force and effect without being
impaired or invalidated in any way. In addition, if any
provision of this Agreement may be modified by a court of
competent jurisdiction such that it may be enforced, then that
provision shall be so modified and as modified shall be fully
enforced. Failure of either party to complain of any act or
omission on the part of the other party (no matter how long
the same may continue) shall not be deemed to be a waiver by
such party of any of its rights under this Agreement. No
consent or waiver by any party at any time of any provision of
this Agreement shall be deemed a consent to any other action
or waiver of any breach of any other provision of this
Agreement, or a consent to any future action or later breach
of the same or any other provision of this Agreement. Each
party acknowledges that they have been advised by the other to
seek the advice of their attorney regarding their rights under
this Agreement and the effect of entering into this Agreement.
After having received the advice of their own attorney, each
party hereby represents to the other that they understand the
language and the effect of this Agreement and knowingly and
voluntarily enter into this Agreement. Each of the parties
acknowledges that they and their counsel have reviewed this
Agreement and suggested changes to its language. Therefore,
any rule of construction that any ambiguity shall be construed
against the drafter of this Agreement shall not apply in
interpreting the provisions of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall
be deemed an original and all of which shall constitute one
agreement. The signature of any party to any counterpart shall
be deemed to be a signature to, and may be appended to, any
other counterpart. Telecopied signatures shall be binding as
originals. Any notice or communication permitted or required
under this Agreement shall be made either by letter (certified
mail with a return receipt requested), or by personal
delivery, to the other party (if to MTI, attention Xxxxxxxx
Xxxxxx and if to Muzak, attention Xxxx Xxxxxxxx) at their
respective addresses set forth above, with a copy, if the
notice is to Muzak, to Xxxxxx Xxxxxx, Esq., Xxxxxx Xxxxxx
White & XxXxxxxxx, 6100 Columbia Center, 000 Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000-0000 and, if the notice is to MTI,
to Xxxxx X. Xxxx, Esq., Seyburn, Kahn, Ginn, Bess, Xxxxxx and
Xxxxxx, P.C., 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, XX
7
48075-1195. Each party agrees to sign and deliver all
documents, instruments, certificates and applications which
may be deemed reasonably necessary by the other party, to
consummate the transactions contemplated by this Agreement.
Any dispute between the parties regarding any provision in
this Agreement (except for the provisions allowing an
aggrieved party equitable relief, disputes over which shall be
resolved at the option of the aggrieved party through court
litigation and not arbitration) shall be resolved by binding
arbitration. Judgment upon the award of the arbitrators may be
entered by any court of competent jurisdiction. The parties
agree that all actions arising directly or indirectly out of
this Agreement (which do not involve a request for equitable
relief) shall be arbitrated before the American Arbitration
Association in Seattle, Washington according to its rules of
commercial arbitration ("Seller's Jurisdiction") if such
action is commenced by Muzak, and before the American
Arbitration Association in Southfield, Michigan according to
its rules of commercial arbitration ("Buyer's Jurisdiction")
if such action is commenced by MTI; provided, however, that if
the lawsuit seeks injunctive relief, then Muzak or MTI may
commence such action in either Buyer's Jurisdiction (the
Superior Court of Washington for King County, or the United
States District Court for the Western District of Washington,
at Seattle) or Seller's Jurisdiction (the Oakland County,
Michigan Circuit Court or the United States District Court for
the Eastern District of Michigan). The laws/rules of the forum
state shall apply in any such action(s), and the parties
hereby irrevocably consent to the jurisdiction and venue of
those courts/agencies over the parties to this Agreement.
Except as provided in this Agreement otherwise, all rights and
remedies of either party under this Agreement shall be
cumulative and none shall exclude any other rights or remedies
permitted by law. This Agreement contains the entire
understanding of the parties with respect to its subject
matter, and supersedes all prior and contemporaneous
agreements, understandings and negotiations. No parol evidence
of prior or contemporaneous agreements, understandings or
negotiations shall govern or be used to construe or modify
this Agreement. No modification or alteration of this
Agreement shall be deemed effective unless in writing and
signed by the parties.
8
The parties have signed this Agreement on the date set forth
above.
"MUZAK"
Muzak Limited Partnership,
a Delaware limited partnership
By:_____________________________
Its: ____________________________
"MTI"
Music Technologies, Inc.,
a Michigan corporation
By:____________________________
Xxxxxxxx Xxxxxx
Its: President
9
EXHIBIT "A"
