AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 29, 1999,
AMONG
ACN HOLDINGS, LLC,
AUDIO COMMUNICATIONS NETWORK, LLC,
MUZAK LIMITED PARTNERSHIP,
MLP ACQUISITION L.P.,
AND
MUSIC HOLDINGS CORP.
NYFS08...:\63\64563\0011\2119\AGR8218B.23V
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER..............................1
SECTION 1.1. The Merger..................................... 1
SECTION 1.2. Closing........................................ 2
SECTION 1.3. Effective Time................................. 2
SECTION 1.4. Effects of the Merger.......................... 2
SECTION 1.5. Members, Directors and Officers of
Surviving Entity............................... 2
SECTION 1.6. Certificate of Formation; Sub LLC Agreement.... 3
ARTICLE II
CONVERSION OF INTERESTS AND
PAYMENT OF MERGER CONSIDERATION...................4
SECTION 2.1. Conversion of Interests........................ 4
SECTION 2.2. Employee Stock Options......................... 4
SECTION 2.3. Merger Consideration and Exchange Procedures... 5
SECTION 2.4. Payment of Escrow Amount....................... 11
SECTION 2.5. Senior Notes and Indenture; Foothill
Facility. ..................................... 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MLP.............. 13
SECTION 3.1. Organization, Authority and Qualification...... 13
SECTION 3.2. No Conflict.................................... 14
SECTION 3.3. Consents and Approvals......................... 14
SECTION 3.4. Capitalization................................. 15
SECTION 3.5. Partnership Agreement.......................... 15
SECTION 3.6. SEC Documents.................................. 15
SECTION 3.7. Financial Statements........................... 16
SECTION 3.8. Absence of Certain Changes or Events........... 16
SECTION 3.9. Absence of Litigation.......................... 18
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Page
SECTION 3.10. Compliance with Laws........................... 19
SECTION 3.11. Governmental Licenses and Permits.............. 19
SECTION 3.12. Intellectual Property.......................... 19
SECTION 3.13. Employee Benefits Matters...................... 20
SECTION 3.14. Taxes.......................................... 22
SECTION 3.15. Real Property.................................. 24
SECTION 3.16. Environmental Matters.......................... 25
SECTION 3.17. Material Contracts............................. 26
SECTION 3.18. Voting Requirements............................ 28
SECTION 3.19. No Undisclosed Liabilities..................... 28
SECTION 3.20. Tangible Personal Property..................... 28
SECTION 3.21. Powers of Attorney............................. 28
SECTION 3.22. Transactions with Affiliates................... 28
SECTION 3.23. Insurance...................................... 29
SECTION 3.24. Labor Matters.................................. 29
SECTION 3.25. Brokers........................................ 29
SECTION 3.26. EXCLUSIVITY OF REPRESENTATIONS................. 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUB....... 30
SECTION 4.1. Incorporation and Authority.................... 30
SECTION 4.2. No Conflict.................................... 31
SECTION 4.3. Consents and Approvals......................... 31
SECTION 4.4. Capitalization................................. 32
SECTION 4.5. Financial Statements........................... 32
SECTION 4.6. Absence of Certain Changes or Events........... 32
SECTION 4.7. Voting Requirements............................ 33
SECTION 4.8. Absence of Litigation.......................... 33
SECTION 4.9. Taxes.......................................... 33
SECTION 4.10. Material Contracts............................. 34
SECTION 4.11. Financial Ability.............................. 35
SECTION 4.12. Brokers........................................ 35
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Page
ARTICLE V
CERTAIN COVENANTS ....................... 35
SECTION 5.1. Conduct of Business Prior to the Closing....... 35
SECTION 5.2. Other Actions.................................. 38
SECTION 5.3. Notification of Certain Events................. 38
ARTICLE VI
ADDITIONAL AGREEMENTS...................... 39
SECTION 6.1. Access to Information; Confidentiality......... 39
SECTION 6.2. Best Efforts................................... 40
SECTION 6.3. Benefit Plans and Employment Agreements........ 41
SECTION 6.4. Public Announcements........................... 42
SECTION 6.5. Acquisition Proposals.......................... 42
SECTION 6.6. Consents, Approvals and Filings................ 42
SECTION 6.7. Allocation of Merger Consideration and
Tax Matters.................................... 43
SECTION 6.8. Interim Financial Statements................... 44
SECTION 6.9. Fourth Quarter Financial Statements............ 44
SECTION 6.10. Accountants' Management Letters................ 45
SECTION 6.11. Solvency Certificate........................... 45
SECTION 6.12. Amended Parent LLC Documents................... 46
ARTICLE VII
CONDITIONS PRECEDENT....................... 46
SECTION 7.1. Conditions to Each Party's Obligation
to Effect the Merger........................... 46
SECTION 7.2. Conditions to Obligations of Parent and Sub.... 46
SECTION 7.3. Conditions to Obligations of MLP and
the GP Entities................................ 48
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Page
ARTICLE VIII
CLOSING DELIVERIES........................ 49
SECTION 8.1. Documents to Be Delivered by MLP............... 49
SECTION 8.2. Documents and Funds to Be Delivered
by Parent and Sub.............................. 50
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER................ 50
SECTION 9.1. Proceedings at Closing......................... 50
SECTION 9.2. Termination.................................... 51
SECTION 9.3. Effect of Termination.......................... 52
SECTION 9.4 Limitation of Damages.......................... 52
SECTION 9.5. Amendment...................................... 52
SECTION 9.6. Extension; Waiver.............................. 53
ARTICLE X
INDEMNIFICATION......................... 53
SECTION 10.1. Right to Indemnification....................... 53
SECTION 10.2. Limitations on Indemnification................. 55
SECTION 10.3. Indemnification Procedures..................... 56
SECTION 10.4. Tax Treatment of Indemnity Payments............ 58
SECTION 10.5. Exclusive Remedy; Limitation of Liability...... 58
ARTICLE XI
REPRESENTATIVE OF PARTNERS OF MLP................ 59
SECTION 11.1. Authorization of Representative................ 59
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Page
ARTICLE XII
GENERAL PROVISIONS........................ 63
SECTION 12.1. Survival of Representations and Warranties..... 63
SECTION 12.2. Survival and Conditions of Certain
Indemnification Obligations of MHC............. 63
SECTION 12.3. Fees and Expenses.............................. 64
SECTION 12.4. Definitions.................................... 64
SECTION 12.5. Notices........................................ 74
SECTION 12.6. Interpretation................................. 75
SECTION 12.7. Counterparts................................... 76
SECTION 12.8. Entire Agreement; Third-Party Beneficiaries.... 76
SECTION 12.9. Governing Law.................................. 76
SECTION 12.10. Assignment..................................... 76
SECTION 12.11. Obligations of Parent and Sub.................. 76
SECTION 12.12. ENFORCEMENT.................................... 76
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AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of January 29, 1999 (this
"Agreement"), among ACN Holdings, LLC, a Delaware limited liability company
("Parent"), Audio Communications Network, LLC, a Delaware limited liability
company and a direct, wholly-owned Subsidiary of Parent ("Sub"), Muzak Limited
Partnership, a Delaware limited partnership ("MLP"), MLP Acquisition, L.P., a
Delaware limited partnership and the managing general partner of MLP ("MLP
Acquisition"), and Music Holdings Corp., a Delaware corporation and the general
partner of MLP Acquisition ("MHC," and together with MLP Acquisition, the "GP
Entities").
W I T N E S S E T H :
WHEREAS, each of Parent and MHC has approved this Agreement,
pursuant to which MLP shall be merged with and into Sub (the "Merger") and Sub
shall, as of immediately thereafter, remain a direct, wholly-owned Subsidiary of
Parent; and
WHEREAS, Parent, Sub, MLP and each of the GP Entities desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various terms and conditions to the Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement and Plan of Merger, and in accordance
with the Delaware RULPA, the Delaware LLCA, the DGCL and the Third Amended and
Restated Agreement of Limited Partnership of Muzak Limited Partnership, dated as
of November 4, 1992 (as amended from time to time in accordance with the terms
thereof, the "Partnership Agreement"), MLP shall be merged with and into Sub at
and as of the Effective Time (as hereinafter defined). At the Effective Time,
the
separate existence of MLP shall cease, and Sub shall continue as the surviving
entity (the "Surviving Entity"). The name of the Surviving Entity shall be
"Muzak LLC", or such other name as may be determined by Parent (the "New Name").
SECTION 1.2. Closing. Unless and until this Agreement shall have
been terminated and the transactions contemplated hereby shall have been
abandoned pursuant to Section 9.2 hereof and subject to the satisfaction or
waiver of the conditions set forth in Article VII hereof, the closing of the
Merger (the "Closing") shall take place at 9:00 a.m., New York time, on the
second business day following the date on which the last of the conditions to be
fulfilled or waived set forth in Article VII hereof shall be fulfilled or waived
in accordance with this Agreement (the "Closing Date"), at the offices of
Xxxxxxxx & Xxxxx, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 1.3. Effective Time. Subject to the provisions of this
Agreement, the parties hereto shall file with the Delaware Secretary of State on
the date of the Closing (or on such other date as Parent and MLP may agree) a
certificate of merger (the "Certificate of Merger") or other appropriate
documents, executed in accordance with the relevant provisions of the Delaware
RULPA, the Delaware LLCA and the DGCL, and make all other filings or recordings
required under the Delaware RULPA, the Delaware LLCA and the DGCL in connection
with the Merger. The Merger shall become effective upon the filing of the
Certificate of Merger with the Delaware Secretary of State (the "Effective
Time").
SECTION 1.4. Effects of the Merger. The Merger shall have the
effects set forth in Section 17-211 of the Delaware RULPA and Section 18-209 of
the Delaware LLCA. Without limiting the generality of the foregoing, subject
thereto and except as provided in Section 1.6(c)(ii), Section 6.7(d) and Section
12.3 hereof, at the Effective Time, all the properties, rights, privileges,
powers and franchises of MLP and Sub shall vest in the Surviving Entity, and all
debts, liabilities and duties of MLP and Sub shall be and become the debts,
liabilities and duties of the Surviving Entity.
SECTION 1.5. Members, Directors and Officers of Surviving Entity.
(a) Parent, the sole member of Sub immediately prior to the
Effective Time, shall be the sole member of the Surviving Entity as of
immediately after the Effective Time.
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(b) The directors of Sub immediately prior to the Effective
Time shall be the directors of the Surviving Entity from and after the Effective
Time until their successors have been duly appointed and qualified, or until
their earlier death, resignation or removal in accordance with the terms and
conditions of the Sub LLC Agreement (as hereinafter defined).
(c) The officers of Sub immediately prior to the Effective
Time shall be the officers of the Surviving Entity from and after the Effective
Time until their successors have been duly appointed and qualified, or until
their earlier death, resignation or removal in accordance with the terms and
conditions of the Sub LLC Agreement.
SECTION 1.6. Certificate of Formation; Sub LLC Agreement.
(a) At the Effective Time, Sub's Certificate of Formation (the
"Certificate of Formation") shall be the Certificate of Formation of the
Surviving Entity until thereafter changed or amended as provided therein or by
applicable Law, except that, as of the Effective Time, such Certificate of
Formation shall be amended to provide for the New Name.
(b) At the Effective Time, Sub's Limited Liability Company
Agreement in effect immediately prior to the Effective Time (the "Sub LLC
Agreement") shall be the limited liability company agreement of the Surviving
Entity until thereafter changed or amended as provided therein or by applicable
Law, except that, as of the Effective Time, such Sub LLC Agreement shall be
amended to provide for the New Name.
(c) At the Effective Time and all times thereafter (i) MLP's
Certificate of Limited Partnership shall be of no further force or effect and
(ii) except as expressly set forth in this Agreement, the Surviving Entity shall
have no obligations or liabilities to the holders of Units (as hereinafter
defined) or any of the partners of MLP under the Partnership Agreement.
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ARTICLE II
CONVERSION OF INTERESTS AND PAYMENT OF MERGER
CONSIDERATION
SECTION 2.1. Conversion of Interests. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of units
or any other right representing partnership interests (each, a "Unit" and
together, the "Units") in MLP or any holder of membership interests or any other
right representing membership interests in the Sub:
(a) Membership Interests in Sub. Each membership interest in
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be automatically converted into a similar membership interest in the Surviving
Entity.
(b) Conversion of the Units. Each Unit outstanding immediately
prior to the Effective Time shall be converted into the right to receive a
portion of the Merger Consideration (as defined in Section 2.3(a) below) as
provided herein.
(c) Cancellation and Retirement of Units. As of the Effective
Time, all Units outstanding immediately prior to the Effective Time shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of any such Units shall cease to have any rights
with respect thereto, except as provided in Section 2.3(c) below.
(d) Management Rollover. Notwithstanding any provision to the
contrary herein, the parties hereto agree that, if requested by Parent and
agreed to by the applicable employees, so long as MLP, the GP Entities and the
holders of Units shall not be adversely affected thereby, the parties hereto
shall amend this Agreement prior to Closing to permit Units and/or Options (as
herein defined) owned by certain employees of MLP to be exchanged for membership
interests in Parent (in which event the aggregate Merger Consideration will be
adjusted accordingly).
SECTION 2.2. Employee Stock Options. Prior to the Closing, MLP shall
take such action in order that, at the Effective Time, the options (the
"Options") granted under (i) MLP's 1998 Option Plan, (ii) MLP's Amended and
Restated Management Option Plan and (iii) any other option plan, agreement or
arrangement of MLP (collectively, as such plans, agreements or arrangements may
4
have been amended, supplemented or modified from time to time, the "Option
Plans") that would otherwise be unexercised as of immediately prior to the
Effective Time, shall be extinguished prior to or at the Effective Time in
exchange for a portion of the Merger Consideration ("Extinguished Options") or,
to the extent such Options are exercisable as of or at any time after the
Effective Time, converted into the right to receive, for any Option that is not
so extinguished ("Unextinguished Options"), upon payment to the Surviving Entity
of the exercise price with respect to such Unextinguished Option, solely the
same cash consideration (assuming all of the Escrow Amount, including pursuant
to Section 6.9(b), as well as any cash reserve to be held by MHC or its
Affiliate pursuant to Section 2.3(a), is distributed to the holders of the Units
as of the Effective Time) and the number of LLC Units as would have been payable
in the Merger had such Unextinguished Option been exercised immediately prior to
the Effective Time, net of any required withholding Tax (such consideration with
respect to any Unextinguished Option, the "Unextinguished Option
Consideration"). All Option Plans shall terminate as of the Effective Time and,
prior to the Closing, MLP shall take all action necessary to ensure that,
following the Effective Time, no participant in any Option Plan shall have any
right thereunder to acquire any interests of Parent, MLP, the Surviving Entity
or any Subsidiary thereof, except, in the case of any Unextinguished Options, as
provided in the immediately preceding sentence. MLP shall take all necessary
actions to report and pay over any withholding Taxes associated with the
exercise of or payment of any consideration in respect of the Extinguished
Options. The Surviving Entity shall pay upon the proper exercise of any
Unextinguished Options, the applicable Unextinguished Option Consideration as
provided hereinabove and shall take all necessary actions to report and pay over
any withholding Taxes associated with such exercise. There shall be deducted
from the number of LLC Units deposited with the Paying Agent pursuant to Section
2.3, the number of LLC Units (the "Reserve Number") that would have been
issuable in respect of the Units represented by Unextinguished Options, if any,
had such Unextinguished Options been exercised immediately prior to the
Effective Time. Parent and MLP shall agree, prior to the Closing, on the amount
of any Reserve Number.
SECTION 2.3. Merger Consideration and Exchange Procedures.
(a) Merger Consideration. The parties hereto hereby designate
U.S. Bank Trust National Association to act as the paying agent (the "Paying
Agent") with respect to the payment of the Merger Consideration (as hereinafter
defined) to the holders of Units pursuant to the terms and conditions set forth
herein. At or prior to the Effective Time, (i) Sub shall deposit, or shall cause
to be deposited, into an account, for the benefit of the holders of Units prior
to the
5
Effective Time, that is designated by the Paying Agent (the "Account") (A) cash,
in immediately available funds, in the amount of (1) the Adjusted Equity Value
(as hereinafter defined), plus (2) the Additional Consideration (as defined in
Section 2.3(b) hereof), minus (3) the Escrow Amount (as hereinafter defined),
and (B) the number of Class B-4 Units of Parent, representing a percentage equal
to the Specified Percentage (as defined below) of the number of fully-diluted
Common Units (as such term is defined in the Amended Parent LLC Agreement) of
Parent as of immediately after the Closing (the "LLC Units"), less the Reserve
Number (as defined in Section 2.2 hereof) (such cash and LLC Units,
collectively, the "Payment Fund" and, together with the Escrow Funds, the
"Merger Consideration"), and (ii) prior to the Effective Time, MLP shall deposit
into the Account or transfer to MHC (A) all of the outstanding stock of EAIC
Corp. and net Value Holdings, Inc. held by MLP (the "Distributed Shares"), and
(B) all receivables held by MLP of principal and interest in respect of
borrowings by certain management investors in the amounts set forth in Section
2.3(a) of the Disclosure Schedule (the "Management Receivables"). The Paying
Agent, as instructed by MHC, shall cause to be distributed from the Account (I)
the Distributed Shares and (II) the Payment Fund to pay the fees and expenses
incurred by MLP and the GP Entities in connection with the Merger and pay to the
holders of the Units (provided that amounts payable to any holder of Units who
is a debtor pursuant to any of the Management Receivables shall be offset by an
amount equal to the amount owed by such holder pursuant to the applicable
Management Receivable(s)), in accordance with the terms and conditions of the
Partnership Agreement (except in the case of the Distributed Shares, the LLC
Units and, at the election of MLP, a cash reserve in an amount not to exceed
$100,000, which will be issued or transferred to MHC or its Affiliate and will
be held by MHC or such Affiliate for the benefit of the holders of Units in the
relative percentages determined in accordance with the terms and conditions of
the Partnership Agreement). In addition, the Escrow Funds will be maintained by
the Paying Agent in accordance with the terms and conditions of the Post-Closing
Escrow Agreement (as such term is defined in Section 2.4 hereof) and shall be
distributed to the holders of Units as directed by MHC, in accordance with the
terms and conditions of the Partnership Agreement and the Post-Closing Escrow
Agreement upon the later to occur of (x) the expiration of the survival period
of the representations and warranties hereunder set forth in Section 12.1 hereof
and (y) so long as the applicable Parent Indemnified Parties shall be proceeding
expeditiously and in good faith to resolve any bona fide Claims pending as of
the expiration of the survival period referred to in clause (x), with respect to
a portion of the Escrow Funds up to an amount reasonably sufficient to satisfy
such Claims, until the resolution of such Claims (as such term is defined in
Section 10.3 hereof) made prior to the termination of the survival period in
Section 12.1 hereof, less the amount of any Expenses, Losses, or other amounts
paid to any
6
Parent Indemnified Parties (as hereinafter defined) pursuant to any
indemnification obligations of MHC pursuant to Section 10.1(a) hereof.
Notwithstanding the foregoing, any portion of the Escrow Funds which remains
undistributed on the date that is six (6) months after the date such Escrow
Funds would otherwise be distributable to any holder of Units pursuant to the
immediately preceding sentence and the terms and conditions of the Post-Closing
Escrow Agreement shall be delivered to the Surviving Entity upon demand, and any
holder of Units who theretofore has not complied with this Article II shall have
recourse with respect to any portion of the Escrow Funds payable to such holder
upon surrender of certificate(s) representing such holder's Units only to the
Surviving Entity and only as a general creditor thereof for payment of any
claim.
For purposes of this Section 2.3(a), the "Specified Percentage"
shall equal 4%; provided, that if, during the period beginning on October 6,
1998 and ending as of the Closing, the amount of consideration (such amoung, the
"Parent Equity Amount") Parent receives in exchange for its issuance of Common
Units (on a fully diluted basis) is less than $65,000,000, then the Specified
Percentage shall equal the percentage obtained as follows: (x) 2,708,333 divided
by (y) (I) the Parent Equity Amount plus (II) 2,708,333.
(b) Additional Consideration. The "Additional Consideration"
to be paid as part of the Merger Consideration pursuant to Section 2.3(a)
hereof, shall be an amount equal to (A) $3,875,000, plus (B) $10,025,861, which
the parties hereto agree represents the purchase price for the assets of MTI, as
set forth on Section 2.3(b) of the Disclosure Schedule (the "MTI Purchase
Price") and (C) $372,930, which the parties hereto agree represents the
out-of-pocket costs and expenses to unaffiliated third parties, including
reasonable attorney's fees and all financing costs (exclusive of interest),
incurred in connection with such acquisition, as set forth on Section 2.3(b) of
the Disclosure Schedule (the "MTI Expenses"). MLP shall cause all of the MTI
Purchase Price and the MTI Expenses to be paid on or prior to the Closing Date
(and in the event any of the MTI Purchase Price or the MTI Expenses shall be
paid on the Closing Date, such payment shall be made from the Payment Fund).
(c) Exchange Procedures. As soon as practicable after the
Effective Time, (i) MHC shall mail to each holder of record of Units as of
immediately prior to the Effective Date a notice (which notice shall include
reasonable details concerning the transaction) that the Merger has been
consummated and (ii) each general partner and each limited partner of MLP shall,
in consideration for the surrender to the Paying Agent of any and all
outstanding certificates which prior to
7
the Effective Time represented Units and acceptance thereof by the Paying Agent,
be entitled to payment of the Merger Consideration attributable to such Units in
accordance with the terms and conditions of the Partnership Agreement and
subject to the provisions of Section 2.3(a). The Paying Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as the
Paying Agent may impose to effect an orderly exchange thereof in accordance with
its normal exchange practices and in accordance with the terms and conditions of
the Partnership Agreement. After the Effective Time, there shall be no further
transfer on the records of MLP or its transfer agent of certificates
representing any Units. There shall be accepted in lieu of the delivery of any
certificate representing Units for all purposes of this Agreement, an affidavit
of loss and indemnity acceptable to the Paying Agent made by the holder or
record of such Units on the books and records of MLP.
(d) No Further Ownership Rights in MLP Units. The Merger
Consideration paid in consideration for the surrender of certificates
representing Units in accordance with the terms of this Article II shall be
deemed to have been paid in full satisfaction of all then remaining rights
pertaining to the Units theretofore represented by such certificates.
(e) Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed on the date that is six (6) months after the
Effective Time, excluding the LLC Units issued to MHC or its Affiliate, shall be
delivered to the Surviving Entity upon demand, and any holder of any Units who
theretofore has not complied with this Article II shall have recourse with
respect to any such portion of the Payment Fund payable to such holder upon
surrender of certificate(s) representing such holder's Units only to the
Surviving Entity and only as a general creditor thereof for payment of any
claim.
(f) Definitions. For purposes of this Agreement, the terms set
forth below have the following meanings:
(i) "Adjusted Equity Value" means (A) the Equity Value,
minus (B) any Fourth Quarter Adjustment Amount.
(ii) "Enterprise Value" means $235,400,000.
(iii) "Equity Value" means (A) the Enterprise Value, minus
(B) Funded Indebtedness as of immediately prior to the Closing,
minus
8
(C) the MLP Expenses, minus (D) the Option Charges, plus (E) the
Cash and Cash Equivalents.
(iv) "Fourth Quarter Adjustment Amount" means an amount in
cash equal to (A) the Fourth Quarter Adjustment Percentage,
multiplied by (B) the Enterprise Value.
(v) "Fourth Quarter Adjustment Percentage" means the
percentage calculated by dividing (A) the Adjusted EBITDA Difference
(as defined below), by (B) $7,691,000; provided, however, that if
the EBITDA Difference (as defined below) as calculated pursuant to
this subsection (v) is less than $153,820 or is a negative number,
then the Fourth Quarter Adjustment Percentage shall be zero. The
"EBITDA Difference" shall equal the result of subtracting (1) the
amount of consolidated earnings before interest, taxes, depreciation
and amortization of MLP and its Subsidiaries for the three months
ended December 31, 1998, computed based on GAAP consistent with
MLP's and its Subsidiaries' consolidated income statement for the
three month period ended September 30, 1998 as filed with the SEC
(which excludes any income or expenses generated by EAIC Corp. and
netValue Holdings, Inc.) (as adjusted for the add-back items set
forth in Section 2.3(f)(v) of the Disclosure Schedule in an amount
for each such item not to exceed the maximum amount, if any,
specified therein, in each case solely to the extent deducted in
determining such consolidated earnings before interest, taxes,
depreciation and amortization) and excluding income and expenses
relating to any business acquired by MLP or any of its Subsidiaries
on or after October 1, 1998, including the acquisition by MLP of the
assets of MTI, the assets of Central Music Company, Inc. (such
assets, "CMCI") and the assets of Barnstead Business Music, Inc.
(such assets, "BBMI"); provided that, notwithstanding the foregoing,
up to $30,000 of net earnings before interest, taxes, depreciation
and amortization of MLP and its Subsidiaries which is generated by
CMCI and BBMI during the three month period ended December 31, 1998
may be included for purposes of this clause (1) (but only to the
extent such earnings are generated by CMCI or BBMI, as the case may
be, during the period when MLP actually owned CMCI or BBMI, as the
case may be), from (2) $7,691,000. The "Adjusted EBITDA Difference"
shall equal the amount by which the EBITDA Difference exceeds
$153,820.
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(vi) "Funded Indebtedness" means, without duplication, the
outstanding principal of and accrued, unpaid interest on and other
payment obligations arising under (A) the Senior Notes (other than
any and all fees, costs and expenses related to, or incurred in
connection with, the tender for, redemption, amendment or other
modification of the Senior Notes and the Indenture), (B) the Loan
and Security Agreement dated as of December 30, 1998, between MLP
and Foothill Capital Corporation and all agreements and documents
related thereto (the "Foothill Facility"), with the exception of
$100,000 of the prepayment fee thereunder, which shall be borne by
the Surviving Entity and shall not constitute "Funded Indebtedness"
hereunder and (C) any other obligations of MLP or any of its
Subsidiaries consisting of indebtedness for borrowed money,
installment payment and deferred purchase price obligations (other
than as reflected in footnote 1 to Section 2.3(b) of the Disclosure
Schedule), obligations evidenced by any note, bond, debenture or
other debt security and capital lease obligations, including without
limitation the obligations set forth on Section 2.3(f)(vi) of the
Disclosure Schedule, in each case to the extent outstanding as of
immediately prior to the Closing.
(vii) "MLP Expenses" means, as of the Closing, the sum of
the following: (A) all out of pocket fees and expenses (including
all legal, accounting and investment banking fees and expenses) that
at such time have been incurred and not paid by MLP or any of its
Subsidiaries, including any such fees and expenses incurred on
behalf of the holders of Units or the GP Entities, in connection
with the auction of MLP, the negotiation, execution and delivery of
this Agreement or any other actual or proposed agreement providing
for the sale of MLP and/or the consummation of the transactions
contemplated hereby or thereby, except (x) the MTI Expenses and (y)
to the extent incurred at the request of Parent or Sub, any and all
fees, costs and expenses payable in connection with any tender offer
(and any related consent solicitation) for the redemption of the
outstanding Senior Notes (a "Senior Note Tender Offer"), or any
other redemption, amendment or other modification of the Senior
Notes and the Indenture (including, without limitation, entering
into a supplemental indenture relating thereto as provided under the
terms of the Indenture), and (B) any one time bonus payments and
change-in-control payments (excluding any severance payments due to
employees whose employment by MLP or any of its Subsidiaries ceases
on or after the Effective Time) that at
10
such time have been incurred and not paid and that were incurred by
MLP or any of its Subsidiaries directly in connection with or as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby, together with the amount of any
compensation-related Taxes arising directly as a consequence of the
payment obligations referred to in this clause (B); provided,
however, that MLP Expenses shall not include any such amounts paid
from the Payment Fund or included in the Option Charges.
(viii) "Option Charges" means the sum of (A) the aggregate
amount incurred and not paid by MLP or any of its Subsidiaries as of
the Effective Time in connection with any Extinguished Options, plus
(B) with respect to Unextinguished Options which are "in the money"
as of the Effective Time, the excess of the cash consideration
(assuming all of the Escrow Amount, including, pursuant to Section
6.9(b), as well as the cash reserve to be held by MHC or its
Affiliate pursuant to Section 2.3(a), is distributed to the holders
of the Units as of the Effective Time) which all holders of such
Unextinguished Options as of the Effective Time would have been
entitled to receive in the Merger had such Unextinguished Options
been exercised immediately prior to the Effective Time over the
exercise price of all such Unextinguished Options (provided that
with respect to any particular Unextinguished Option, such exercise
price shall be no more than the cash consideration described in
clause (B) attributable to such Unextinguished Option); provided,
however, that Option Charges shall not include any amount of the
Merger Consideration which is distributed or is distributable to
former holders of Extinguished Options in accordance with Section
2.3(a) hereof.
(ix) "Cash and Cash Equivalents" means the sum of all cash and
cash equivalents of MLP or any of its Subsidiaries as of immediately
prior to the Closing.
SECTION 2.4. Payment of Escrow Amount. On the date hereof, and as a
condition to execution of this Agreement by MLP and MHC, Sub, MLP and MHC have
entered into an escrow agreement substantially in the form of Exhibit A-1
attached hereto (the "Pre-Closing Escrow Agreement"), with the Paying Agent,
whereby Sub has caused to be deposited a letter of credit (the "Letter of
Credit") in the face amount of $9,000,000 (the "Escrow Deposit"). In the event
the Closing occurs in accordance with Section 1.2 hereof, the Letter of Credit
shall be returned to
11
Sub in exchange for a cash deposit of $9,000,000 (such cash, as well as any cash
placed in escrow pursuant to Section 6.9(b), the "Escrow Funds" and such amount,
the "Escrow Amount"), which shall be retained pursuant to the terms and
conditions of an escrow agreement substantially in the form of Exhibit A-2
hereto (the "Post-Closing Escrow Agreement" and, collectively with the
Pre-Closing Agreement, the "Escrow Agreement") as security for the payment by
MHC of its indemnification obligations pursuant to the provisions of Section
10.1 hereof. Pursuant and subject to the terms and conditions of the Pre-Closing
Escrow Agreement, (i) in the event of a termination of this Agreement pursuant
to Section 9.2(e) hereof, MHC may direct the Paying Agent to draw upon the
Letter of Credit and disburse to MLP the funds paid in connection which such
drawing and (ii) in the event of a termination of this Agreement in any manner
provided by Section 9.2 other than Section 9.2(e), Sub may direct the Paying
Agent to return the Letter of Credit to Sub, and Sub shall thereafter have the
Letter of Credit terminated. Following the Closing pursuant and subject to the
terms and conditions of the Post-Closing Escrow Agreement and in accordance with
the provisions of Section 2.3(a) and Article X of this Agreement, in the event
of any Losses, Expenses or other amounts becoming due and payable by MHC on
behalf of holders of Units pursuant to the indemnification provisions of Section
10.1 hereof, MHC and the Parent shall direct the Paying Agent to disburse to
Parent funds in the amount of any such Losses, Expenses or other amounts from
the Escrow Funds. Earnings from the investment of the Escrow Funds under the
Post-Closing Escrow Agreement shall be paid in accordance with the Post-Closing
Escrow Agreement. Notwithstanding anything to the contrary set forth in this
Agreement (except as provided in Section 12.2(a) hereof), after the Closing, the
Escrow Funds shall be the sole and exclusive remedy available to the Parent
Indemnified Parties for any Losses, Expenses or other amounts arising under the
indemnification obligations set forth herein or otherwise in respect of the
transactions contemplated hereby.
SECTION 2.5. Senior Notes and Indenture; Foothill Facility. Each of
the Parent and Sub hereby acknowledges and agrees (x) that, after the Closing,
the holders of the Senior Notes issued pursuant to the Indenture will have a
right to require the Surviving Entity to redeem the Senior Notes pursuant to
certain terms and conditions set forth in the Indenture, and (y) that pursuant
to the Merger contemplated hereunder and the terms and conditions of this
Agreement, the Surviving Entity shall assume and be responsible for any
obligations under the Indenture remaining after the Effective Time in accordance
with the provisions of the Indenture. In addition, Parent and Sub hereby
acknowledge and agree that as of the Closing Date, they will take all necessary
actions to cause the repayment of all amounts due under the Foothill Facility
(and the replacement or cash collateralization of all outstanding letters of
credit issued for account of MLP under the Foothill
12
Facility, excluding in any case the letter of credit furnished by Centre Capital
Investors L.P. as credit support thereunder).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MLP
MLP represents and warrants to the Parent and Sub as follows:
SECTION 3.1. Organization, Authority and Qualification. Each of MLP
and MLP Acquisition is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
necessary partnership power and authority to enter into this Agreement and each
other agreement, document, or instrument or certificate to be executed by MLP or
MLP Acquisition, in connection with the consummation of the transactions
contemplated by this Agreement (together with this Agreement, such agreements,
documents, instruments and certificates to be executed by MHC in connection with
the consummation of the transactions contemplated by this Agreement being, the
"MLP Documents"), to carry out its respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
MHC is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement and each of the MLP Documents to which it
is a party, to carry out its respective obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other MLP Documents by MLP and each of
the GP Entities, the performance by MLP and each of the GP Entities of its
respective obligations hereunder and the consummation by MLP and each of the GP
Entities of the transactions contemplated hereby and thereby have been duly
authorized by all requisite partnership or corporate action, as the case may be,
on the part of MLP, its partners and each of the GP Entities, respectively. This
Agreement has been, and each of the other MLP Documents at the Closing will be,
duly executed and delivered by MLP and each of the GP Entities, respectively,
and (assuming due authorization, execution and delivery hereof and thereof by
each of the parties hereto and thereto other than MLP and the GP Entities) this
Agreement constitutes, and each of the other MLP Documents when so executed and
delivered will constitute, the legal, valid and binding obligations of MLP and
each of the GP Entities, respectively, enforceable against each of them in
accordance with their respective terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or
similar
13
laws affecting creditors' rights generally and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). MLP and each
of its Subsidiaries is duly qualified to do business, and is in good standing,
in each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except for where the failure to be so qualified would not have a Material
Adverse Effect. Muzak Capital Corporation ("Capital Corp.") is a wholly-owned
Subsidiary of MLP and is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. MLP Environmental Music,
LLC is a wholly owned Subsidiary of MLP and is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Washington. Except as set forth in Section 3.1 of the Disclosure Schedule, (i)
MLP has no Subsidiaries and no shares of capital stock or other equity
securities of, or loans to (other than extensions of credit in the ordinary
course of business) any other Person and (ii) Capital Corp. owns no material
assets and has no material liabilities (other than as co-issuer of the Senior
Notes). None of the assets of netValue Holdings Inc. or (except for the shared
T1 line subject to the Administrative Services Agreement between MLP and EAIC
Corp.) EAIC Corp. are used in the business of MLP.
SECTION 3.2. No Conflict. Except as set forth in Section 3.2 of the
Disclosure Schedule, assuming all consents, approvals, authorizations and other
actions described in Section 3.3 or under the agreements set forth in Section
3.3 of the Disclosure Schedule shall have been obtained, the execution, delivery
and performance of this Agreement and the other MLP Documents by MLP do not and
will not (i) violate or conflict with the Certificate of Limited Partnership or
the Partnership Agreement, (ii) conflict with or violate any material Law or
Governmental Order applicable to MLP or (iii) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to any Person any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien (except Permitted Liens) on any Units or on any assets of
MLP pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other material instrument to which MLP or
its Subsidiaries is a party or by which any of such Units or the assets are
bound or affected, except (1) for Liens created by or through Parent or Sub or
any of its Affiliates and (2) as would not reasonably be expected to (A) have,
individually or in the aggregate, a Material Adverse Effect or (B) materially
impair the ability of MLP to consummate the transactions as contemplated by this
Agreement.
14
SECTION 3.3. Consents and Approvals. The execution and delivery of
this Agreement and the other MLP Documents by MLP do not, and the performance of
this Agreement and the other MLP Documents by MLP will not, require any consent,
approval or authorization of, or declaration or filing with, or notification to,
any Governmental Entity in connection with the execution and delivery of this
Agreement or any of the other MLP Documents by MLP or the consummation by MLP of
the transactions contemplated hereby and thereby, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger, (ii) the filing with the SEC of such reports under the Exchange Act, as
may be required in connection with this Agreement or the other MLP Documents and
the transactions contemplated hereby and thereby, (iii) the filing of the
Certificate of Merger with the Delaware Secretary of State and the appropriate
notification documentation with the relevant authorities of other states in
which MLP is qualified to do business, (iv) such other consents, approvals,
authorizations, filings or notices as are set forth in Section 3.3 of the
Disclosure Schedule, (v) any applicable filings under state anti-takeover laws
and (vi) any other filings, authorizations, consents or approvals the failure to
make or obtain which, in the aggregate, would not reasonably be expected to have
a Material Adverse Effect. No general or limited partner of MLP has or will have
any appraisal or dissenters rights pursuant to Section 17-212 of the Delaware
RULPA, the Partnership Agreement or otherwise as a result of the execution and
delivery of this Agreement by MLP or any of the GP Entities or the consummation
of the Merger.
SECTION 3.4. Capitalization. The capitalization of MLP immediately
prior to the Effective Time is as set forth in Section 3.4 of the Disclosure
Schedule. Except as set forth in Section 3.4 of the Disclosure Schedule and
except for the Options, there is no existing option, warrant, call, right,
commitment or other agreement to which MLP is a party requiring, and there is no
partnership interest of MLP outstanding which upon conversion or exchange would
require, the issuance or transfer of any additional interests or other
securities of MLP or other securities convertible into, exchangeable for or
evidencing the right to subscribe for or purchase, a partnership interest in
MLP.
SECTION 3.5. Partnership Agreement. MLP has delivered to Parent a
true and correct copy of the Partnership Agreement.
SECTION 3.6. SEC Documents. (i) MLP has filed with the SEC all
reports, schedules, forms, statements and other documents required to be filed
by MLP under the Exchange Act since October 2, 1996 (such reports, schedules,
forms, statements and other documents are hereinafter referred to as the "SEC
15
Documents"); and (ii) as of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to such SEC
Documents.
SECTION 3.7. Financial Statements.
(a) Except as set forth in Section 3.7 of the Disclosure
Schedule, the audited consolidated balance sheets of MLP as at December 31,
1997, December 31, 1996 and December 31, 1995 and the related audited statements
of income, partners' interests and cash flows of MLP for the years then ended,
together with the notes related thereto, included in the SEC Documents have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and present
fairly in all material respects the consolidated financial position of MLP as at
the dates thereof and the consolidated results of its operations and cash flows
for the periods then ended.
(b) Except as set forth in Section 3.7 of the Disclosure
Schedule, the unaudited condensed consolidated balance sheet of MLP as at
September 30, 1998 (the "Balance Sheet") and the related unaudited condensed
consolidated statements of income and cash flows of MLP for the nine months then
ended, together with the notes thereto included in the SEC Documents, have been
prepared in accordance with GAAP for interim financial information applied on a
consistent basis during such interim period (except as may be indicated in the
notes thereto) and, subject to normal year-end audit adjustments (which, in the
aggregate, will not be material), in all material respects present fairly the
consolidated financial position of MLP as at the date thereof and the
consolidated results of its operations and cash flows for the period then ended.
September 30, 1998 is referred to herein as the "Balance Sheet Date."
SECTION 3.8. Absence of Certain Changes or Events. For the period
commencing on October 1, 1998 and ending on the date hereof, except as disclosed
in Section 3.8 of the Disclosure Schedule or as contemplated by this Agreement,
MLP and each of its Subsidiaries has conducted its business in the ordinary
course consistent with past practice, there has not occurred any event which
would reasonably be expected to have a Material Adverse Effect and neither MLP
nor any of its Subsidiaries has done any of the following during the period
commencing on October 1, 1998 and ending as of the date hereof:
(i) issued any notes, bonds or other debt securities or any
Units or other equity securities or any securities convertible, exchangeable or
exercisable into
16
any Units or other equity securities except upon the exercise or extinguishment
of Options;
(ii) except for indebtedness under the Foothill Facility,
incurred any indebtedness for borrowed money, individually or in the aggregate,
in excess of $100,000, except such indebtedness incurred in the ordinary course
of business consistent with past practice;
(iii) granted any Lien on any material asset (whether tangible or
intangible) other than Permitted Liens or Liens securing Funded Indebtedness;
(iv) established or materially increased any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, option
(including the granting of options or performance awards) or other employee
benefit plan, or otherwise materially increased the compensation payable to or
to become payable to any key employee, except in the ordinary course of business
consistent with past practice or as may be required by law or applicable
employment agreement or collective bargaining agreement;
(v) entered into any employment or severance agreement with any
employee, other than any employment agreement entered into in the ordinary
course of business providing for compensation of not more than $50,000 per annum
and not providing any material severance benefits or other payment or benefit
after the termination of employment thereunder except as required by Law;
(vi) (A) declared, set aside or pay any distributions (whether
in cash, equity securities, partnership interests or other property) in respect
of its partnership interests or equity securities; (B) redeemed, purchased or
otherwise acquired any of its partnership interests or equity securities or any
other securities or obligations convertible into or exercisable or exchangeable
for partnership interests or equity securities; or (C) sold, assigned,
transferred, leased or otherwise disposed of any assets other than the sale of
inventory in the ordinary course of business and the sale or other disposition
or replacement of used or obsolete equipment in the ordinary course of business;
(vii) (A) acquired (by merger, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership or other business
organization or division thereof or material assets outside the ordinary course
of business, or (B) assumed, granted, guaranteed or endorsed, or otherwise as an
accommodation become responsible for, the obligations of any Person (other than
MLP and its
17
Subsidiaries), or made any loans, advances (other than advances of expenses to
employees in the ordinary course of business) or distributions of cash (other
than by any Subsidiary of MLP to MLP);
(viii) except as required by law or changes required by GAAP,
materially changed any method of accounting used by MLP or its Subsidiaries;
(ix) amended the Certificate of Limited Partnership, Partnership
Agreement, or other constitutive documents of MLP or any of its Subsidiaries in
any respect materially adverse to MLP, Parent or Sub;
(x) except in the ordinary course of business consistent with past
practice, amended any Material Contract (as hereinafter defined), or any
material portion of any existing contract or agreement of MLP or any of its
Subsidiaries, in any respect materially adverse to MLP, Parent or Sub;
(xi) except in the ordinary course of business consistent with past
practice, taken any action with the intention of causing a material slowdown in
sales or reduction in capital expenditures, including under the 1998 capital
expenditure plan set forth in Section 5.1(b)(x) of the Disclosure Schedule;
(xii) except (A) for the furnishing of credit support arrangements
in connection with the Foothill Facility and (B) as contemplated in this
Agreement, entered into any transaction with an Affiliate or partner of MLP;
(xiii) amended any Tax Return or settled any material controversy
with respect to Taxes;
(xiv) suffered any damage, destruction or casualty loss exceeding in
the aggregate $100,000, except for any damage or losses covered by insurance;
(xv) sold, assigned, licensed or transferred any material
Intellectual Property; or
(xvi) entered into any settlement or other agreement with BMI or any
material agreement with EAIC Corp. (including any amendment to any existing
agreement).
SECTION 3.9. Absence of Litigation. Except as set forth in Section
3.9 of the Disclosure Schedule, there are no actions, suits or proceedings, to
18
which MLP or any of its Subsidiaries is a party before any court or
administrative agency of any federal, state or local jurisdiction, or any
arbitrator or other widely-recognized dispute-resolving entity pending, or, to
the knowledge of MLP, threatened in writing against MLP or any of its
Subsidiaries, that (i) would materially impair the ability of MLP to consummate
the Merger as contemplated by this Agreement or (ii) could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.10. Compliance with Laws. Neither MLP nor any of its
Subsidiaries is in violation of any Law applicable to its business, or by which
it is bound, and neither MLP or any of its Subsidiaries has received notice of
any such violation, except for violations the existence of which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.11. Governmental Licenses and Permits. Except as set forth
in Section 3.11 of the Disclosure Schedule, MLP holds all governmental
qualifications, registrations, filings, privileges, franchises, licenses,
permits, approvals or authorizations material to, or necessary for, the
operation of its business as currently operated by it, except for such failures
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.12. Intellectual Property. (a) Section 3.12 (a) of the
Disclosure Schedule lists as of the date hereof (i) all United States and
foreign patents, trademarks and service marks and applications and registrations
therefor, material copyrights and registrations and applications therefor owned
or licensed by MLP and each of its Subsidiaries which are material to, or
necessary for, the conduct of the business of MLP and each of its Subsidiaries;
(ii) all licenses granted to or by MLP or any of its Subsidiaries pursuant to
written agreements pertaining to Intellectual Property which are material to, or
necessary for, the conduct of the business of MLP and each of its Subsidiaries;
(iii) all material computer software owned and/or used in the business of MLP
and its Subsidiaries (excluding in any event mass-marketed software with
individual license fees of less than $1,000); (iv) all written collaboration,
development and settlement agreements pertaining to Intellectual Property which
are material to, or necessary for, the conduct of the business of MLP and each
of its Subsidiaries; and (iv) all suits, actions, proceedings (including,
without limitation, infringement, misappropriation, interference, opposition,
revocation, cancellation and conflict proceedings) and written claims presently
pending or, to the knowledge of MLP, threatened, and all final orders,
injunctions, judgments, writs, edicts, awards and decrees presently outstanding,
pertaining to any Intellectual Property that is either (A) described in Section
3.12(a) to
19
the Disclosure Schedule, or (B) owned by any third Person and asserted against
MLP or any of its Subsidiaries.
(b) Except as set forth in Section 3.12(b) of the Disclosure
Schedule: (i) MLP and each of its Subsidiaries owns and possesses all right,
title and interest in and to, or has a valid and enforceable license to use,
free and clear of all Liens (except Permitted Liens), all of the Intellectual
Property described in Section 3.12(a) of the Disclosure Schedule that is
necessary for the operation of the business of MLP and each of its Subsidiaries
as currently conducted; (ii) to MLP's knowledge, all of the Intellectual
Property described in Section 3.12(a) of the Disclosure Schedule is valid and
enforceable and is not subject to any challenge by any third party, pending or
to MLP's knowledge overtly threatened, except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect; (iii)
to MLP's knowledge, MLP and each of its Subsidiaries have not infringed or
misappropriated, and the operation of the business of MLP and each of its
Subsidiaries as currently conducted does not infringe or misappropriate any
Intellectual Property rights of any Person, and there have been no claims made
and neither MLP nor its Subsidiaries has received any written notice concerning
its infringement or misappropriation of any Intellectual Property rights of any
third Person, in any case that could reasonably be expected to have a Material
Adverse Effect; (iv) to MLP's knowledge, no third Person has infringed or
misappropriated any of the Intellectual Property described in Section 3.12(a) of
the Disclosure Schedule and neither MLP nor its Subsidiaries has received any
notice concerning any infringement, misappropriation or conflict by any third
Person with the Intellectual Property required to be described in Section
3.12(a) of the Disclosure Schedule, in any case that could reasonably be
expected to have a Material Adverse Effect; and (v) with respect to all material
agreements entered into by MLP or any of its Subsidiaries pertaining to
Intellectual Property, MLP and its Subsidiaries and, to the knowledge of MLP,
each of the other parties thereto have performed, in all material respects, all
obligations under each such agreement which are required to be performed by such
party, there is no default thereunder, and, to the knowledge of MLP, each such
agreement is enforceable against MLP and its Subsidiaries and, to the knowledge
of MLP, each party thereto in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity), in each case except as could not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.13. Employee Benefits Matters. Section 3.13 of the
Disclosure Schedule lists all the employee benefit plans (as that phrase is
defined in
20
Section 3(3) of ERISA) and any other material benefit or compensation plan,
program or arrangement maintained or contributed to by MLP or any of its
Subsidiaries or with respect to which MLP or any of its Subsidiaries has any
liability to since January 1, 1998 for the benefit of any current or former
employee, officer or general partner of MLP or any of its Subsidiaries (the
"Benefit Plans"). Except as set forth in Section 3.13 of the Disclosure Schedule
or as would not, individually, or in the aggregate, reasonably be expected to
have a Material Adverse Effect:
(i) none of the Benefit Plans is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA or is subject to Title
IV of ERISA;
(ii) none of the Benefit Plans (other than a multiemployer
plan) promises or provides retiree medical or life insurance
benefits coverage to any Person other than as required under Section
4980B of the Code;
(iii) none of the Benefit Plans (other than a multiemployer
plan) provides for payment of a benefit, the increase of a benefit
amount, the payment of a contingent benefit, or the acceleration of
the payment or vesting of a benefit by reason of the execution of
this Agreement or the other MLP Documents or the consummation of the
transactions contemplated hereby or thereby;
(iv) each Benefit Plan (other than a multiemployer plan)
intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS that it is so
qualified and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of
such Benefit Plan;
(v) each Benefit Plan (other than a multiemployer plan)
has been maintained in form and operation in all material respects
in accordance with its terms and the requirements of applicable Law;
(vi) MLP has not incurred any liability that remains
unsatisfied under, arising out of or by operation of Title IV of
ERISA in connection with the termination of, or withdrawal from, any
benefit plan (as that phrase is defined in Section 3(3) of ERISA) or
other retirement plan or arrangement that MLP or any of its
Subsidiaries or any other entity that, together with MLP or any of
its Subsidiaries, is
21
treated as a single employer under Section 414 of the Code,
maintains, contributes to or has an obligation to contribute to, or
to which any of them within six (6) years prior to the date of this
Agreement contributed or had an obligation to contribute;
(vii) all contributions, premiums or payments under or with
respect to a Benefit Plan which are due on or before the Closing
Date have been timely paid as of such date;
(viii) there are no actions, suits or claims (other than
routine claims for benefits) pending or threatened involving any
Benefit Plan or the assets thereof; and
(ix) no liability exists with respect to any multiemployer
plan (as such term is defined under Section 3(37) of ERISA) which
has arisen as a result of the failure of MLP or any of its
Subsidiaries to make required contributions to any multiemployer
plan.
SECTION 3.14. Taxes.
(a) MLP and each of its Subsidiaries has timely filed, or will
timely file, all material Tax Returns required to be filed by it with respect to
Taxes for any period ending on or before the Closing. All such Tax Returns were
(or will be) true and correct in all material respects. All Taxes shown to be
payable on such Tax Returns have been (or will be) paid.
(b) Except as set forth in Section 3.14(b) of the Disclosure
Schedule, all material deficiencies asserted or material assessments made as a
result of any examinations by the Internal Revenue Service or any other taxing
authority of the material Tax Returns required to be filed by MLP or any of its
Subsidiaries have been fully paid, and there are no other pending audits, or to
the knowledge of MLP, pending investigations by any taxing authority, nor has
MLP or any of its Subsidiaries received any notice from any taxing authority
that it intends to conduct such an audit or investigation.
(c) Except as set forth in Section 3.14(c) of the Disclosure
Schedule, neither MLP nor any of its Subsidiaries is a party to any material tax
sharing or similar agreement or arrangement or any material tax indemnification
or similar arrangement.
22
(d) Except as set forth in Section 3.14(d) of the Disclosure
Schedule, to MLP's knowledge, no claim has ever been made by an authority in a
jurisdiction where MLP or any of its Subsidiaries does not currently file Tax
Returns that the entity so not filing is or may be subject to taxation by or a
filing requirement in that jurisdiction.
(e) None of the assets of MLP and its Subsidiaries are subject
to any Liens for Taxes, other than Permitted Liens.
(f) Except as set forth in Section 3.14(f) of the Disclosure
Schedule, neither MLP nor any of its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(g) MLP is (and, during its entire existence, has been)
properly classified as a partnership for federal income tax purposes. All Tax
Returns have been filed consistent with such classification.
(h) No Subsidiary of MLP (i) has filed a consent under Section
341(f) of the Code concerning collapsible corporations or (ii) has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(i) None of MLP nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code.
(j) Neither MLP nor any of its Subsidiaries will be required
to make an adjustment to taxable income under Section 481 of the Code (or any
similar provision of state, local, or foreign law) for any period ending on or
after the Closing Date by reason of a voluntary change in accounting method
initiated by it and neither the Internal Revenue Service nor any other
governmental authority has initiated or proposed any such change in accounting
method.
(k) No Subsidiary of MLP (i) is a "controlled foreign
corporation" within the meaning of Section 957 of the Code or (ii) has been a
member of an affiliated group filing a consolidated federal income Tax Return.
23
(l) Neither MLP nor any of its Subsidiaries owns an interest
in an entity either treated as a partnership or whose separate existence is
ignored for federal income tax purposes.
SECTION 3.15. Real Property.
(a) Section 3.15(a) of the Disclosure Schedule lists by street
address (i) all real estate leased, subleased or otherwise occupied pursuant to
a written agreement (the "Leases") by MLP or any of its Subsidiaries (each, a
"Leased Property" and collectively, the "Leased Properties") or (ii) owned in
fee by MLP or any of its Subsidiaries (each, an "Owned Property" and
collectively, the "Owned Properties," and collectively with the Leased
Properties, the "Real Property"). Each of the Leased Properties is leased to MLP
or one of its Subsidiaries pursuant to a written lease, copies of which have
been made available to Parent prior to the date hereof. With respect to each
Lease: (A) MLP or the applicable Subsidiary has a good and valid leasehold
interest in and to the applicable Leased Property, subject to no Liens, except
for Permitted Liens; (B) each Lease is in full force and effect and is
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity), and none of
MLP or any of its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in such Lease, except for Permitted
Liens; and (iii) MLP has received no notice of any material default or, to the
knowledge of MLP, any condition exists which, with the giving of notice, the
passage of time or both, would reasonably be expected to result in a material
default under any Lease, except, in case of clauses (i), (ii) and (iii) above,
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. There are no outstanding options or rights of first
refusal to purchase the Owned Property or any portion thereof or interest
therein. MLP or one of its Subsidiaries has good and insurable title in and to
the Owned Property, free and clear of all Liens other than Permitted Liens.
(b) The Real Property constitutes all of the real property
owned, leased, or otherwise utilized in connection with the business of MLP and
its Subsidiaries. Except as set forth in Section 3.15(b) of the Disclosure
Schedule, other than MLP and its Subsidiaries, there are no parties in
possession or parties having any current or future right to occupy any of the
Real Property, except under or pursuant to Permitted Liens or as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To MLP's knowledge, there exists no
24
violation of any material covenant, condition, restriction, easement, agreement
or order affecting any portion of the Real Property that would, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. All
facilities located on the Real Property are supplied with adequate utilities and
other services necessary for the current operation of such facilities. There is
no pending or, to the knowledge of MLP, any threatened condemnation proceeding,
or material lawsuit or administrative action affecting any portion of the Real
Property that would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
SECTION 3.16. Environmental Matters.
(a) Except as disclosed in Section 3.16 of the Disclosure
Schedule, MLP and each of its Subsidiaries is in compliance with all
Environmental Laws and has obtained and is in compliance with all governmental
permits, licenses, orders, consents and approvals required under such
Environmental Laws and necessary for MLP to conduct its business as currently
conducted, except for such non-compliance as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Since January 1, 1996, neither MLP nor its Subsidiaries
have received any written notice from a Governmental Entity alleging that MLP is
in violation in any material respect of any Environmental Law, or any permit
issued pursuant to any Environmental Law.
(c) To the knowledge of MLP, MLP and its Subsidiaries have no
contingent liability in connection with any Release of any Hazardous Materials
into the environment.
(d) No investigations or judicial or administrative
proceedings are pending with any Governmental Entity or, to the knowledge of
MLP, overtly threatened (including with respect to the business, operations or
current or previously owned, operated or leased real property of MLP and its
Subsidiaries) which would, individually or in the aggregate, reasonably be
expected to result in the imposition of any material liability under any
Environmental Law.
(e) Except as set forth in Section 3.16(e) of the Disclosure
Schedule, there is not located at any Owned Property to the knowledge of MLP,
any (i) underground storage tank, (ii) friable asbestos-containing material or
(iii) equipment containing polychlorinated biphenyls.
25
SECTION 3.17. Material Contracts.
(a) Except as expressly provided in this Section 3.17(a),
Section 3.17 of the Disclosure Schedule lists each of the following contracts
and agreements of MLP and its Subsidiaries (such contracts being "Material
Contracts") as of the date hereof:
(i) all contracts and agreements for the purchase or lease
of inventory, other materials or real or personal property for the
furnishing of services under the terms of which: (A) MLP or any of
its Subsidiaries (I) has paid or is likely to pay consideration of
more than $100,000 in the aggregate during any twelve-month period
which includes the date hereof and the Closing Date, or (II) is
likely to pay or otherwise give consideration of more than $100,000
in the aggregate over the remaining term of such contract and (B)
cannot be cancelled by MLP or any of its Subsidiaries without
penalty or further payment or without more than ninety (90) days'
notice;
(ii) all contracts and agreements for the sale or lease of
inventory or other personal or real property or for the furnishing
of services of MLP or any of its Subsidiaries which: (A)(I) are
likely to involve consideration of more than $100,000 in the
aggregate during the twelve-month period immediately preceding the
date hereof, or (II) are likely to involve consideration of more
than $100,000 in the aggregate over the remaining term of the
contract and (B) cannot be cancelled by MLP or any of its
Subsidiaries without penalty or further payment or without more than
ninety (90) days' notice (provided that such contracts and
agreements for the furnishing of services of MLP or any of its
subsidiaries which have been entered into in the ordinary course of
business, consistent with past practice need not be disclosed on
Section 3.17 of the Disclosure Schedule but shall be deemed
"Material Contracts" for all purposes of this Agreement);
(iii) all contracts and agreements relating to indebtedness
for borrowed money of MLP or any of its Subsidiaries in excess of
$100,000;
26
(iv) all contracts and agreements that limit or purport to
limit the ability of MLP or any of its Subsidiaries (insofar as it
relates to any business) to compete in any line of business or with
any Person or in any geographic area or during any period of time
after the date hereof;
(v) all contracts and agreements relating to the
acquisition by MLP or any of its Subsidiaries of any operating
business, the capital stock or all or substantially all of the
assets of any Person since January 1, 1998;
(vi) all contracts and agreements with any director,
officer or employee of MLP or any of its Subsidiaries (including any
involving employment or severance) in excess of $100,000 or with any
union or other employee representative;
(vii) all contracts and agreements containing any guarantee
granted by MLP or any of its Subsidiaries in excess of $100,000;
(viii) all joint venture agreements; and
(ix) any other contract or agreement involving the receipt
or expenditure of more than $500,000 in the aggregate or $200,000
annually.
(b) Each Material Contract is binding on MLP and, to MLP's
knowledge, on the other party thereto, and, to MLP's knowledge, is in full force
and effect and is enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity) and except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither MLP nor any of its
Subsidiaries is in default under any Material Contract, and no event has
occurred that with the passage of time or the giving of notice or both would
constitute a default by MLP or the applicable Subsidiary, as the case may be,
under any provision thereof, and to MLP's knowledge, each party other than MLP
or its Subsidiaries party to any of the Material Contracts has complied with the
material provisions of the Material Contracts, is not in material default under
any of the terms thereof, and no event has occurred that with the passage of
time or the giving of notice or both would constitute a default by any such
other party under any provision thereof, in any case that this could
27
reasonably be expected to have a Material Adverse Effect. Neither MLP nor any of
its Subsidiaries has (i) received any written notice of termination with respect
to any of the Material Contracts, (ii) assigned any of its material rights or
material obligations under any of the Material Contracts or (iii) waived any of
its material rights in writing under any of the Material Contracts. True and
complete copies of all written Material Contracts (along with any amendments
thereto) have been made available to Parent prior to the date hereof.
SECTION 3.18. Voting Requirements. No vote or approval of any holder
of any class of partnership interest of MLP is necessary to approve this
Agreement, the other MLP Documents, the Merger or the consummation of the
transactions contemplated hereby or thereby, except as shall have been obtained
prior to the date hereof.
SECTION 3.19. No Undisclosed Liabilities. Except as set forth in
Section 3.19 of the Disclosure Schedule, none of MLP or any of its Subsidiaries
has any indebtedness, obligations or liabilities of any kind (whether accrued,
absolute or contingent) that would be required to be reflected in or described
in the footnotes to a balance sheet of MLP prepared in accordance with GAAP
which was not either (i) reflected in or described in the footnotes to the
September 30, 1998 consolidated balance sheet of MLP, (ii) incurred in the
ordinary course of business consistent with past practice since September 30,
1998, or (iii) otherwise disclosed in this Agreement or any Sections of the
Disclosure Schedule.
SECTION 3.20. Tangible Personal Property. MLP or its Subsidiaries
has good title to, or holds by valid and existing lease or license, free and
clear of all Liens other than Permitted Liens, all items of tangible personal
property reflected on the Balance Sheet or currently used the business of MLP
and its Subsidiaries (except in each case such tangible personal property sold
or disposed of subsequent to the date thereof in the ordinary course of business
consistent with past practice).
SECTION 3.21. Powers of Attorney. Neither MLP nor any of its
Subsidiaries has granted any power of attorney to any Person.
SECTION 3.22. Transactions with Affiliates. Except as set forth on
Section 3.22 of the Disclosure Schedule, (a) neither MLP nor any of its
Subsidiaries is a party to any Material Contract with any of its Affiliates, and
(b) no Affiliate of MLP or any of its Subsidiaries (other than MLP and its
Subsidiaries)
28
owns any material asset, property, or right, tangible or intangible, that is
used in MLP's or any of its Subsidiaries' business as currently conducted.
SECTION 3.23. Insurance. Section 3.23 of the Disclosure Schedule
sets forth a list of all policies of fire, liability, product liability,
worker's compensation and other forms of liability and casualty insurance,
including self-insurance programs, currently in effect with respect to MLP and
its Subsidiaries and their respective businesses and assets involving coverage
amounts in excess of $100,000 in any given year. To MLP's knowledge, neither MLP
nor any of its Subsidiaries is in default with respect to its material
obligations under any such insurance policy.
SECTION 3.24. Labor Matters. Except as set forth in Section 3.24(a)
of the Disclosure Schedule, neither MLP or any of its Subsidiaries is a party of
any labor union or collective bargaining agreement. Except as set forth in
3.24(b) of the Disclosure Schedule, neither MLP nor any of its Subsidiaries is a
party to any pending, or to MLP's knowledge, threatened, labor action,
arbitration, lawsuit or administrative proceeding relating to labor matters
involving the employees of MLP or any of its Subsidiaries (excluding routine
workers' compensation claims), which, if adversely determined would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. With respect to MLP and its Subsidiaries, any notice to any
employee representative pursuant to the WARN Act or any currently effective
collective bargaining agreement has been given, and all employer bargaining
obligations have been, or prior to the Effective Time will be, satisfied except
where the failure to give such notice or satisfy such obligations could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.25. Brokers. Except for fees and commissions which will be
paid by MHC to Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
or the other MLP Documents based upon arrangements made by or on behalf of MLP
or any partner thereof.
SECTION 3.26. EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS
AND WARRANTIES MADE BY MLP IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF
ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES. MLP HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED
REPRESENTATIONS OR WARRANTIES,
29
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE PARENT OR THE SUB OR THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PROJECTIONS OR OTHER
SUPPLEMENTAL DATA).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUB
Parent and Sub, jointly and severally, represent and warrant to MLP
as follows:
SECTION 4.1. Incorporation and Authority. Each of Parent and Sub is
a limited liability company, duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary limited
liability company power and authority to own, lease and operate its properties
and to carry on its business as currently conducted, and to enter into this
Agreement and each other agreement, document, instrument or certificate to be
executed by Parent or Sub in connection with the consummation of the
transactions contemplated by this Agreement (together with this Agreement, such
agreements, documents, instruments and certificates being, the "Purchaser
Documents"), to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other Purchaser Documents by each of Parent
and Sub, the performance by each of Parent and Sub of its obligations hereunder
and thereunder and the consummation by each of Parent and Sub of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite limited liability company action on the part of Parent, its members
and Sub. This Agreement has been, and each of the other Purchaser Documents at
Closing will be, duly executed and delivered by each of Parent and Sub, and
(assuming due authorization, execution and delivery by each of the parties
hereto and thereto other than Parent and Sub) this Agreement constitutes, and
each of the other Purchaser Documents when so executed and delivered will
constitute, legal, valid and binding obligations of Parent and Sub enforceable
against Parent and Sub in accordance with their respective terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Each of Parent and Sub is duly qualified to do
30
business, and is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased or the nature of its activities makes
such qualification necessary, except for where the failure to be so qualified
would not have a Material Adverse Effect with respect to Parent or Sub. Parent
owns beneficially and of record all of the outstanding membership interests in
Sub. As of the date hereof, (i) Parent has no material assets and has no
material liabilities (other than its ownership of membership interests in Sub
and capital stock of ACN Holdings, Inc., a Delaware corporation) and (ii) Sub
has no Subsidiaries or shares of capital stock or other equity securities of any
Person (other than Sub's ownership of capital stock of Business Sound, Inc., an
Ohio corporation).
SECTION 4.2. No Conflict. The execution, delivery and performance of
this Agreement and the other Purchaser Documents by Parent and Sub do not and
will not (a) violate or conflict with the certificate of formation, limited
liability company agreement, members agreement or other constitutive documents
of Parent or Sub, (b) conflict with or violate any Law or Governmental Order
applicable to Parent or Sub or (c) conflict with, violate, result in any breach
of, or constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, or give to any Person any right
of termination, amendment, acceleration or cancellation of, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other material instrument to which Parent or Sub is a party, except as would not
reasonably be expected to (A) have a Material Adverse Effect with respect to
Parent or Sub, or (B) materially impair the ability of Parent and Sub to
consummate the Merger and the other transactions contemplated by this Agreement
and the other Purchaser Documents in accordance with the terms hereof and
thereof.
SECTION 4.3. Consents and Approvals. The execution and delivery of
this Agreement and the other Purchaser Documents by Parent and Sub do not, and
the performance of this Agreement and the other Purchaser Documents by Parent
and Sub will not, require any consent, approval or authorization of, or
declaration or filing with, or notice to, any Governmental Entity in connection
with the execution and delivery of this Agreement or any of the other Purchaser
Documents by Parent or Sub or the consummation by Parent or Sub, as the case may
be, of any of the transactions contemplated by this Agreement or any of the
other Purchaser Documents, except for (i) the filing of premerger notification
and report forms under the HSR Act with respect to the Merger, (ii) the filing
with the SEC of such reports under the Exchange Act as may be required in
connection with this Agreement or any of the other Purchaser Documents and the
transactions contemplated hereby and thereby, (iii) the filing of the
Certificate of Merger with the
31
Delaware Secretary of State, and appropriate notification documentation with the
relevant authorities of other states in which MLP or Sub is qualified to do
business, (iv) such other consents, approvals, authorizations, filings or
notices as are set forth in Section 3.3 of the Disclosure Schedule, (v) any
applicable filings under state anti-takeover laws, and (vi) any other filings,
authorizations, consents or approvals, the failure to make or obtain which, in
the aggregate, would not reasonably be expected to (A) a Material Adverse Effect
with respect to Parent or Sub, or (B) materially impair the ability of Parent
and Sub to consummate the Merger and the other transactions contemplated by this
Agreement and any of the other Purchaser Documents.
SECTION 4.4. Capitalization. The capitalization of Parent
immediately after the Effective Time shall be as set forth on Schedule B of the
Amended Parent LLC Agreement. Except as expressly provided in this Agreement and
except for the ACN LLC Documents (as herein defined), as of the date hereof,
there is no existing option, warrant, call, right, commitment or other agreement
to which Parent or Sub is a party requiring, and there is no membership interest
or other equity security of Parent outstanding which upon conversion or exchange
would require, the issuance by Parent or Sub of any additional membership
interests or other equity securities of Parent or Sub or other securities
convertible into, exchangeable for or evidencing the right to subscribe for or
purchase, a membership interest or other equity security of Parent or Sub.
SECTION 4.5. Financial Statements. The parties acknowledge that the
balance sheets at October 6, 1998 and November 30, 1998 of Sub have not been
completed, and, therefore, have not been furnished to MLP and the GP Entities.
Parent has furnished to MLP and the GP Entities an unaudited statement of
operations of Sub for the period from October 6, 1998 through November 30, 1998.
Management of Sub believes that this statement has been prepared, in all
material respects, in accordance with GAAP, except for (a) year-end audit
adjustments, (b) for potential effects of conforming accounting policies as a
result of the consummation of the transactions contemplated by this Agreement,
(c) that such statement excludes any charges related to depreciation and
amortization of tangible and intangible assets and (d) that such statement
excludes interest expense for borrowed money.
SECTION 4.6. Absence of Certain Changes or Events. Parent and Sub
were organized for the purpose of acquiring the assets formerly of Audio
Communications Network, Inc. and its Subsidiaries pursuant to the terms and
conditions of the Asset Purchase Agreement dated as of October 6, 1998 (the "ACN
Purchase Agreement") between Sub and DMA Holdings Statutory Trust (the "ACN
32
Seller"), and prior to the consummation of such acquisition neither Parent nor
Sub were engaged in any other business or operating activities. Since October 6,
1998, to Parent's and Sub's knowledge as of the date hereof, there has not
occurred any event that could reasonably be expected to have a Material Adverse
Effect with respect to Parent or Sub. Since October 6, 1998, neither Parent nor
Sub has done any of the following:
(i) (1) declared, set aside or paid any distributions (whether in cash,
equity securities or other property) in respect of its membership
interests or other equity securities; or (2) except from current or
former employees of Parent or Sub, redeemed, purchased or otherwise
acquired any of its membership interests or other equity securities;
or
(ii) except as set forth on Schedule 4.6 or as contemplated by this
Agreement, entered into any material transaction with ABRY Broadcast
Partners III, L.P., its partners or employees or any of their
respective Affiliates (other than Xxxxx Xxxxx, Xxxxxx Xxxx, Parent
or any of Parent's Subsidiaries).
SECTION 4.7. Voting Requirements. No vote of the holders of the
membership interests or other equity securities of any class or series of Parent
is necessary to approve this Agreement, any of the other Purchaser Documents,
the Merger or to consummate the other transactions contemplated hereby or
thereby, except as shall have been obtained prior to the date hereof.
SECTION 4.8. Absence of Litigation. No action is pending or, to the
best knowledge of Parent and Sub, threatened before any Governmental Entity
which (i) seeks to delay or prevent the consummation of the Merger and the other
transactions contemplated hereby or (ii) (A) which would materially impair the
ability of Parent and Sub to consummate the Merger and the other transactions
contemplated by this Agreement or any of the other Purchaser Documents in
accordance with the terms hereof or thereof or (B) could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect with respect
to Parent or Sub.
SECTION 4.9. Taxes.
(a) Each of Parent and Sub has timely filed, or will timely
file, all material Tax Returns required to be filed by it with respect to Taxes
for any period ending on or before the Closing. All such material Tax Returns
were (or will
33
be) true and correct in all material respects. All Taxes shown to be payable on
such material Tax Returns have been (or will be) paid.
(b) Except as set forth on Schedule 4.9(b), as of the date
hereof, there are no pending audits or, to the knowledge of Parent and Sub
pending investigations by any taxing authority, nor has Parent or Sub received
any notice from any taxing authority that it intends to conduct such an audit or
investigation, in each case, which could reasonably be expected to have a
Material Adverse Effect with respect to Parent or Sub.
(c) Neither Parent nor Sub is a party to any material tax
sharing or similar agreement or arrangement.
(d) Parent is (and, during its entire existence, has been)
properly classified as a partnership for federal income tax purposes and Sub is
(and during its entire existence, has been) properly either classified as a
partnership or disregarded as a separate entity, in each case, for federal
income tax purposes. No federal Tax Return has been filed in any manner that is
inconsistent with such classification.
SECTION 4.10. Material Contracts.
(a) Except for the agreements listed on Schedule 4.10, this
Agreement and as contemplated by this Agreement (collectively, the "ACN LLC
Documents"), as of the date hereof, there are no agreements or understandings
with respect to the voting, sale or transfer of any membership interests or
other equity securities of Parent or Sub to which Parent, Sub or, to the
knowledge of Parent or Sub, any member of Parent is a party.
(b) As of the date hereof, neither Parent nor Sub have
received notice of, nor to the knowledge of Parent or Sub as of the date hereof,
has there occurred, any material breach of any representation or warranty made
by the ACN Seller in or any default by the ACN Seller under the ACN Purchase
Agreement which breach or default could reasonably be expected to have a
Material Adverse Effect with respect to Parent or Sub. As of the date hereof,
there are no material claims or disputes pending between the ACN Seller and its
Affiliates, on the one hand, and Parent and Sub and their respective Affiliates,
on the other, with respect to the transactions consummated pursuant to the ACN
Purchase Agreement.
34
(c) True and complete copies of the ACN LLC Documents and the
ACN Purchase Agreement have been provided to the GP Entities, and, as of the
date hereof, neither Parent nor Sub have entered into or agreed to any amendment
or modification of or material waiver of rights under the ACN Purchase Agreement
or, except as expressly provided herein, the Parent LLC Documents.
SECTION 4.11. Financial Ability. Sub has received, and has delivered
to MLP prior to the date hereof, a true, correct and complete copy of the
commitment letter from Xxxxxxx Sachs Credit Partners L.P., Canadian Imperial
Bank of Commerce and CIBC Xxxxxxxxxxx Corp. (the "Senior Lenders") dated January
28, 1999 (the "Senior Debt Commitment Letter"), pursuant to which the Senior
Lenders have committed to provide to Sub up to $245,000,000 in financing for the
Merger, subject to the terms and conditions contained therein. At the Closing,
Sub shall have cash available sufficient to enable it to pay the remainder of
the cash portion of the Merger Consideration and to repay the Funded
Indebtedness as of the Closing in accordance with the terms and conditions set
forth in this Agreement. During the period beginning on October 6, 1998 and
ending as of immediately prior to the Closing, Parent shall have received at
least $45,000,000 in aggregate capital contributions in exchange for the
issuance of its Class A Units.
SECTION 4.12. Brokers. Except for fees and commissions which will be
paid by Parent or Sub, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement and any of the other Purchaser
Documents based upon arrangements made by or on behalf of Parent or Sub.
ARTICLE V
CERTAIN COVENANTS
SECTION 5.1. Conduct of Business Prior to the Closing . (a) Unless
Parent otherwise agrees in writing and except as otherwise expressly set forth
herein, between the date of this Agreement and the Effective Time, MLP shall,
and shall cause its Subsidiaries to, (i) carry on their respective businesses in
the ordinary course consistent with past practice, and (ii) use commercially
reasonable efforts to keep available the services of its key officers and
employees (except for retirements in the ordinary course) and preserve the good
will of those engaged in material business relationships with it; provided,
however, that nothing herein shall require MLP to
35
increase the compensation of, or provide any other retention incentive to, any
officer or employee beyond that provided as of the date of this Agreement.
(b) Except as expressly provided in this Agreement between the
date of this Agreement and the Effective Time, MLP will not and will not permit
any of its Subsidiaries to, do any of the following without the prior written
consent of Parent (which consent shall not be unreasonably withheld):
(i) grant any Lien on any material asset (whether tangible
or intangible) other than Permitted Liens or Liens securing Funded
Indebtedness;
(ii) establish or materially increase any bonus, insurance,
severance, deferred compensation, pension, retirement, profit
sharing, option (including the granting of options or performance
awards) or other employee benefit plan, or otherwise materially
increase the compensation payable to or to become payable to any key
employee, except in the ordinary course of business consistent with
past practice or as may be required by law or applicable employment
agreement or collective bargaining agreement;
(iii) enter into any employment or severance agreement with
any employee or any collective bargaining agreement other than any
employment agreement entered into in the ordinary course of business
providing for compensation of not more than $50,000 per annum and
not providing any material severance benefits or other payment or
benefit after the termination of employment thereunder except as
required by Law;
(iv)(1) declare, set aside or pay any distributions
(whether in cash, equity securities, partnership interests or other
property) in respect of its partnership interests or equity
securities; (2) redeem, purchase or otherwise acquire any of its
partnership interests or equity securities or any other securities
or obligations convertible into or exercisable or exchangeable for
any partnership interests or equity securities; (3) issue, sell or
encumber any of its partnership interests or equity securities or
any securities or obligations convertible into or exercisable or
exchangeable for any such partnership interests or equity
securities; or (4) sell, assign, transfer, lease or otherwise
dispose of any assets other than the sale of inventory in the
ordinary course of
36
business, except (A) in connection with the sale or other
disposition or replacement of used or obsolete equipment in the
ordinary course of business, (B) the distribution of the Distributed
Shares to the Paying Agent pursuant to Section 2.3(a) hereof, (C)
the distribution of the Management Receivables to the Paying Agent
pursuant to Section 2.3(a) hereof, or (D) the issuance of Units upon
the exercise or extinguishment of outstanding Options;
(v) (A) acquire (by merger, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership or other
business organization or division thereof or material assets outside
the ordinary course of business, or (B) except for borrowings under
the Foothill Facility, incur any indebtedness for borrowed money or
issue any debt securities or assume, grant, guarantee or endorse, or
otherwise as an accommodation become responsible for, the
obligations of any Person (other than MLP or any of its
Subsidiaries), or make any loans, advances (other than advances of
expenses to employees in the ordinary course of business) or
distributions of cash (other than by any Subsidiary of MLP to MLP;
(vi) except as required by law or changes required by GAAP,
materially change any method of accounting used by MLP or its
Subsidiaries;
(vii) amend the Certificate of Limited Partnership,
Partnership Agreement, or other constitutive documents of MLP or any
of its Subsidiaries in any respect materially adverse to MLP, Parent
or Sub;
(viii) except in the ordinary course of business consistent
with past practice enter into or amend any Material Contract (or any
contract or agreement which would be deemed a Material Contract if
such contract or agreement had been entered into as of the date
hereof), or waive any material portion of any existing contract or
agreement of MLP or any of its Subsidiaries in any respect
materially adverse to MLP, Parent or Sub;
(ix) enter into any settlement or other agreement with BMI
or any material agreement with EAIC Corp. (including any amendment
to any existing agreement);
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(x) except in the ordinary course of business consistent
with past practice, take any action with the intention of causing a
material slowdown in sales or reduction in capital expenditures,
including under the 1998 capital expenditure plan set forth in
Section 5.1(b)(x) of the Disclosure Schedule;
(xi) except (A) for the furnishing of credit support
arrangements in connection with the Foothill Facility and (B) as
contemplated in this Agreement, enter into any transaction with an
Affiliate or partner of MLP;
(xii) amend any Tax Return or settle any material
controversy with respect to Taxes;
(xiii) sell, assign, license or transfer any material
Intellectual Property; or
(xiv) implement any plant closing or layoff of employees
that would require the provision of notification of workers pursuant
to the WARN Act prior to the Effective Time.
SECTION 5.2. Other Actions. MLP and Parent shall not, and shall not
permit any of their respective Subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement becoming untrue in any
material respect or (ii) any of the conditions of the Merger set forth in
Article VII not being satisfied.
SECTION 5.3. Notification of Certain Events. Each of the parties
hereto shall use its commercially reasonable best efforts to notify the other
parties hereto in writing of the occurrence of any event, change or condition
that results in the breach of a representation or warranty of such party under
this Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1. Access to Information; Confidentiality; Assistance with
Financing.
(a) Upon reasonable prior notice, MLP shall afford to Parent
and Sub and to the officers, counsel, financial advisors and other
representatives of Parent and Sub reasonable access during normal business hours
during the period prior to the Effective Time to all of its properties, books,
contracts, commitments, personnel and records and, during such period, MLP shall
furnish as promptly as practicable to Parent and Sub such information concerning
its business, properties, financial condition, operations and personnel as
Parent and Sub may from time to time reasonably request. Parent and Sub will
hold, and will cause its respective directors, officers, partners, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any information obtained from MLP in confidence in
accordance with the provisions of that certain confidentiality agreement dated
July 21, 1998, between Parent and MLP (the "Confidentiality Agreement").
Notwithstanding the preceding sentence, MLP acknowledges that (i) Parent and/or
Sub may cause an offering memorandum or similar document to be prepared and used
in connection with the consummation of Parent's and Sub's financing of the
transactions contemplated hereby and (ii) Parent and/or Sub may commence, or may
request MLP to commence (subject to agreement on reasonable expense
reimbursement and indemnification arrangements), a Senior Note Tender Offer (the
closing of which shall be conditioned on the consummation of the Merger); and
MLP agrees to use commercially reasonably efforts to furnish Parent and Sub with
access to, and to permit the use of, all information necessary, and to cause the
cooperation of, all personnel necessary for Parent and Sub to consummate such
financing and any such Senior Note Tender Offer; provided, however, that (A) no
information obtained from MLP or its agents subject to the Confidentiality
Agreement (excluding any information currently on file with the SEC or
information the disclosure of which would customarily be contained in the SEC
filings of a public issuer and could not reasonably be expected to have a
Material Adverse Effect with respect to MLP) shall be included without MLP's
prior consent (which consent shall not be unreasonably withheld) in any offering
memorandum, offer to purchase or similar disclosure document utilized in
connection with such financing or Senior Note Tender Offer, and (B) MLP shall be
provided a reasonable opportunity to review any such information proposed to be
included in any such disclosure documents or any material revisions or
supplements thereto or modifications thereof. In addition, MLP (w) shall permit
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Parent, Sub and/or ACN Holdings, Inc. to use the name Muzak LLC and/or Muzak
Finance Corp. (or any similar derivation thereof other than the actual name of
MLP or any of its Subsidiaries) in connection with the Surviving Entity's,
Parent's and Sub's financing of the transactions contemplated hereby, provided
the applicable disclosure documents contain reasonable disclosures to
distinguish MLP and its Affiliates from the Person(s) seeking the financing, (x)
shall request its accountants to consent to the inclusion of their report or
reports in, and to issue a comfort letter in connection with, any offering
memoranda or filings required by such financing, (y) shall permit Parent and Sub
to negotiate employment and equity participation arrangements with MLP's and its
Subsidiaries' management, provided that Parent and Sub shall disclose to MHC in
writing upon its request at any time prior to the Closing the terms of all
employment, equity participation and other compensatory arrangements with such
management and (z) shall permit Parent and Sub to use MLP's management for
presentations in connection with Parent's and Sub's financing of the
transactions contemplated hereby. Parent and Sub acknowledge that any pro forma
adjustments to the financial statements of MLP included in any disclosure
document utilized in connection with any financing or Senior Note Tender Offer
are the sole responsibility of Parent and Sub, and Parent and Sub agree to bear
all fees and expenses of Deloitte & Touche in reviewing and giving comfort on
the financial statements and information concerning MLP included in any such
disclosure document.
(b) If required by Parent's and Sub's financing sources, with
respect to any parcel of Owned Property, MLP shall use its commercially
reasonable efforts to deliver to Parent and Sub, at Parent and Sub's sole cost
and expense, title insurance and/or survey or surveys for such parcel of Owned
Property, in each case, in form and substance reasonably acceptable to Parent.
If required by a Parent's and Sub's financing sources, with respect to each
parcel of Leased Property, MLP shall use its commercially reasonable efforts to
deliver to Parent and Sub a nondisturbance agreement, a consent and waiver
and/or an estoppel letter executed by the landlord, lessor, landlord and/or
licensor of such Leased Property, in each case, in form and substance reasonably
acceptable to Parent; provided, that all reasonable out-of-pocket expenses
(including attorney's fees) in connection with the delivery of such agreements,
consents, waivers and estoppel letters shall be paid by Parent and Sub.
SECTION 6.2. Best Efforts.
(a) Upon the terms and subject to the conditions and other
agreements set forth in this Agreement, each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause
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to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including the satisfaction of the respective
conditions set forth in Article VII. The parties acknowledge and agree, for
greater clarity, that the failure of the representations and warranties of MLP
to be true and correct on and as of the Closing Date in accordance with Section
7.2(b) hereof shall not of itself constitute a breach of this Agreement by MLP
or any GP Entity; in such event the officer's certificate delivered by MHC
pursuant to Section 7.2(b) shall set forth any such failures, and Parent and Sub
shall have the right to determine whether or not to waive the satisfaction of
such condition.
(b) Parent and Sub shall not attempt, directly or indirectly,
to induce or encourage, the exercise by the Senior Lenders of any right not to
fund such credit facilities under the terms of the Senior Debt Commitment
Letter. In the event the Senior Lenders fail to fund such credit facilities,
Parent and Sub shall request the Senior Lenders to communicate directly to MLP
the circumstances and bases therefor.
(c) Prior to the Closing, MLP shall use reasonable best
efforts to obtain such third party consents to the Merger under MLP's customer
contracts described in Section 6.2(c) of the Disclosure Schedule as may
reasonably be requested by Parent and Sub.
SECTION 6.3. Benefit Plans and Employment Agreements.
Parent shall cause the Surviving Entity and its Subsidiaries
to continue to employ, on terms comparable to those currently provided by MLP
and its Subsidiaries, all employees of MLP and its Subsidiaries as of the
Effective Time ("Continuing Employees"), including any employees on disability
or other approved leave of absence; provided, however, nothing in this Agreement
shall limit the Surviving Entity's or any of its Subsidiaries' right to
terminate any employee after the Effective Time. With respect to those employee
benefit plans, arrangements or policies of Parent or any of its Subsidiaries
made available to Continuing Employees after the Effective Time (other than
Option Plans), each such plan, arrangement or policy shall be offered to such
Continuing Employees (and, if applicable, their dependents) with recognition for
service under corresponding Benefit Plans prior to the Effective Time for
purposes of eligibility, vesting, any waiting period, pre-existing conditions or
insurability (other than any waiting period, pre-existing conditions of lack of
insurability that constituted a restriction or limitation with
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respect the benefits available to a Continuing Employee immediately prior to the
Effective Time) and shall credit the Continuing Employees with any co-payments
or deductibles satisfied in the current plan year.
After Closing, Parent and the Surviving Entity shall
indemnify, defend and hold harmless MHC and its present and former directors,
officers, employees, Affiliates, successors, assigns, agents and representatives
and each other GP Indemnified Party from and against any and all Losses and
related Expenses based upon, attributable or resulting from any claims or
demands by Continuing Employees or their family members arising out of or in
connection with the employment of the Continuing Employees on and after the
Effective Time, including any claims relating to any severance arrangements and
any Employee Benefit Plans which are "welfare" plans (within the meaning of
Section 3(1) of ERISA). Notwithstanding the foregoing sentence, nothing in this
Section 6.3 shall limit the indemnification of the Parent Indemnified Parties
pursuant to Section 10.1(a).
SECTION 6.4. Public Announcements. Parent and Sub, on the one hand,
and MLP and each GP Entity, on the other hand, will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 6.5. Acquisition Proposals. None of MLP, any holders of
Units (on behalf of MLP) or any GP Entity shall, nor shall any of MLP, the
holders of Units (on behalf of MLP) or any GP Entity authorize or permit any
officer or employee thereof, or any investment banker, attorney or other advisor
or representative of MLP or any GP Entity to, directly or indirectly, (i)
solicit, initiate or encourage the submission of any Acquisition Proposal or
(ii) participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal. In the event MLP receives any
Acquisition Proposal in writing after the date hereof, MLP shall promptly notify
Parent thereof.
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SECTION 6.6. Consents, Approvals and Filings. (a) MLP and Parent
will make and cause their respective Subsidiaries, as soon as practicable, to
make all necessary filings, including, without limitation, those required under
the HSR Act, the Securities Act of 1933, as amended, and the Exchange Act in
order to facilitate the prompt consummation of the Merger and the other
transactions contemplated by this Agreement in accordance with the terms hereof.
In addition, each of MLP and Parent will use its commercially reasonable best
efforts, and will cooperate fully with each other, (i) to comply as promptly as
practicable with all governmental requirements applicable to the Merger and the
other transactions contemplated by this Agreement and (ii) to obtain as promptly
as practicable all necessary permits, orders or other consents of Governmental
Entities and consents of all third parties necessary for the consummation of the
Merger and the other transactions contemplated by this Agreement. Each of MLP
and Parent shall use its commercially reasonable best efforts to provide such
information and communications to Governmental Entities as such Governmental
Entities may reasonably request.
(b) Each of the parties shall provide to the other party
copies of all applications in advance of filing or submission of such
applications to any Governmental Entity in connection with this Agreement.
(c) At the Closing, the GP Entities agree, subject to
obtaining the necessary regulatory approvals, to cause the FCC licenses listed
in Section 3.3 of the Disclosure Schedule, which are held by MLP Communications
Company, to be transferred to the Surviving Entity or its designee.
SECTION 6.7. Allocation of Merger Consideration and Tax
Matters.
(a) Parent and MLP agree that the Merger Consideration
(together with the amount of all liabilities of MLP as of the Closing) shall be
allocated among the assets of MLP in accordance with Section 1060 of the Code
and the Treasury Regulations promulgated thereunder.
(b) The allocation prescribed by subsection (a) shall be made
by MHC within ninety (90) days following the Closing, and shall be subject to
the approval of Parent, which shall not be unreasonably withheld, in each case
in accordance with Section 6.7 of the Disclosure Schedule. Subject to the
requirement of applicable Tax law, Parent, the Surviving Entity, MLP and the GP
Entities agree to be bound by such allocations and to cause all Tax Returns and
reports filed by
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them to be prepared consistently with such allocations and neither Parent nor
the GP Entities shall take a position contrary thereto.
(c) Parent, the Surviving Entity, MLP and the GP Entities
agree to treat the Merger, for all federal, state and local income tax purposes,
as (i) a transfer by MLP of all of its assets (subject to its liabilities) to
the Surviving Entity in exchange for the Payment Fund (exclusive of the LLC
Units) and the Escrow Funds followed by (ii) the liquidation of MLP.
(d) For the avoidance of doubt and notwithstanding any other
provision of this Agreement, the Delaware RULPA or the Delaware LLCA, as of and
following the Effective Date, the Surviving Entity shall have no obligations
under the tax distribution provisions of the Partnership Agreement either with
respect to income reported as earned by MLP prior to, on or after the Effective
Date or due to a subsequent adjustment of that reported income due to a Tax
examination, audit or other proceeding.
(e) The Surviving Entity shall promptly forward any notices
received by it with respect to Taxes or taxable income of MLP to MHC and any
controversy with respect to the Taxes or taxable income of MLP shall be handled
exclusively by MHC.
SECTION 6.8. Interim Financial Statements. As soon as available, but
in any event not later than thirty (30) days after the end of each monthly
fiscal period beginning after the date hereof and ending on the last monthly
fiscal period preceding the Effective Date, MLP shall deliver to Parent the
unaudited consolidated balance sheet of MLP as at the end of each such period
and the related unaudited consolidated statements of income and cash flows of
MLP for such period. Except as expressly stated therein, all such financial
statements shall be prepared in accordance with GAAP applied on a basis
consistent with the financial statements referenced in Section 3.7(b) hereof.
SECTION 6.9. Fourth Quarter Financial Statements.
(a) As soon as reasonably practicable after the end of the
last quarterly fiscal period of MLP for fiscal year 1998 but in any event no
later than February 15, 1999, MLP shall deliver to Parent the unaudited
consolidated balance sheet of MLP as of December 31, 1998 and the related
unaudited consolidated statements of income and cash flows of MLP for such
period (the "Fourth Quarter Financial Statements") as well as a detailed
calculation of the Fourth Quarter
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Adjustment Percentage based on such Fourth Quarter Financial Statements (the
"Fourth Quarter Adjustment Percentage Statement"). The Fourth Quarter Financial
Statements shall be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the financial statements
referenced in Section 3.7(b) hereof. MLP shall use commercially reasonable
efforts to cause the audit of the 1998 financial statements of MLP to be
completed no later than February 15, 1999 or as soon as practicable thereafter,
provided, that the failure to cause such audit to be completed on or prior to
February 15, 1999 shall not constitute a breach or default by MLP hereunder.
Whether or not the transactions hereby shall be consummated, Parent shall
reimburse MLP for, or pay, the incremental costs and Expenses associated with
expediting the completion of the audit in accordance with the preceding
sentence.
(b) At least five business days prior to the Closing, MLP
shall prepare and furnish to Parent MLP's proposed computation of the Adjusted
Equity Value (which shall be based on the Fourth Quarter Adjustment Percentage
Statement, as it may be adjusted by MLP and Parent in writing after the date
such statement has been delivered to Parent) together with a statement of the
basis of such computation setting forth in reasonable detail the component items
specified in Section 2.3(f) hereof. Parent shall promptly review such
computation, and Parent and MLP shall use reasonable best efforts in good faith
to reach agreement on the amount of the Adjusted Equity Value prior to the
Closing and shall in good faith provide reasonable access to the other to the
information necessary to do so. In the event such parties are unable so to
agree, subject to the condition of Parent and Sub contained in Section 7.2(h)
being satisfied or waived in writing by Parent and Sub, the disputed amount up
to $10,000,000 shall be paid into escrow with the Paying Agent at the Closing
under the Post-Closing Escrow Agreement pending resolution of such dispute in
accordance with the arbitration provisions of the Post-Closing Escrow Agreement.
In no event shall the resolution of any such dispute following the Closing
require the payment of any amounts by MHC on behalf of the holders of the Units
in excess of the amount paid into escrow pursuant to this Section 6.9(b)
together with any earnings, costs and expenses payable under the provisions of
the Post-Closing Escrow Agreement.
SECTION 6.10. Accountants' Management Letters. Promptly after
receipt by MLP, MLP shall deliver to Parent copies of all accountants'
management letters and all management and board responses to such letters.
SECTION 6.11. Solvency Certificate. At the Closing, Parent and the
Surviving Entity shall furnish to the GP entities a solvency certificate (the
"Solvency Certificate"), substantially in the form attached hereto as Exhibit C
that the
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Surviving Entity, giving effect to the transactions contemplated hereunder at
the Closing is "Solvent". For purposes of this Section 6.11, "Solvent" means
that the Surviving Entity hereunder (a) will own assets, the fair saleable value
of which are (i) greater than the total amount of liabilities (including
contingent liabilities) of the Surviving Entity and (ii) greater than the amount
that will be required to pay the probable liabilities of the Surviving Entity's
then existing debts as they become absolute and matured, considering all
financing alternatives and potential asset sales reasonably available to the
Surviving Entity; (b) will have capital that is not unreasonably small in
relation to its business as presently conducted or for any contemplated or
undertaken transaction; and (c) does not believe that the Surviving Entity will
incur debts beyond its ability to pay such debts as they become reasonably due
and payable.
SECTION 6.12. Amended Parent LLC Documents. At the Closing, Parent
shall cause there to be executed and delivered to MHC (by each party thereto
other than MHC) and MHC shall execute and deliver to Parent the Amended Parent
LLC Agreement, Amended Parent Members Agreement and Amended Parent Registration
Rights Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party hereto to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) HSR Act, etc. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have expired or early
termination shall have been granted.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by, any court
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the party
invoking this condition shall use its reasonable best efforts to have any such
order or injunction vacated.
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SECTION 7.2. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger and the other transactions
contemplated under this Agreement are further subject to the following
conditions:
(a) Governmental and Regulatory Consents. All filings required
to be made prior to the Effective Time by MLP with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from, Governmental Entities, including, without limitation, those set forth in
Section 3.3 of the Disclosure Schedule, in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by MLP, Parent and Sub shall have been made or obtained (as the case may
be) and shall be final and non-appealable.
(b) Representations and Warranties. The representations and
warranties of MLP set forth in Article III shall be true and correct, in each
case as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations and
warranties are made as of a specified date, in which case the same shall
continue on the Closing Date to be true and correct as of the specified date,
and except to the extent the failure of such representations and warranties
(without giving effect to any materiality standard contained in such
representations and warranties) to be true and correct could not reasonably be
expected to have a Material Adverse Effect, and Parent shall have received a
certificate of an officer of MHC signed on behalf of MLP to such effect.
(c) Performance of Obligations of MLP and the GP Entities. MLP
and each of the GP Entities shall have performed and complied in all material
respects with all obligations required to be performed or complied with by such
parties under this Agreement on or prior to the Closing Date, and Parent shall
have received a certificate of an officer of MHC to such effect.
(d) Senior Lenders MAC Out. The Senior Lenders shall not have
failed to close on or terminated the Senior Debt Commitment Letter (but only if
a material adverse change in the financial markets or in the market for debt
financing, in either case affecting Parent's and Sub's financing of the
transactions contemplated hereby, has occurred since the date of execution of
this Agreement).
(e) Fourth Quarter Financial Statements. MLP shall have
delivered to Parent the Fourth Quarter Financial Statements and the Fourth
Quarter Adjustment Percentage Statement, and a period of not more than sixty
(60) days shall have elapsed from the date of such delivery to the Closing Date,
provided that Parent
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and Sub shall use reasonable best efforts to have the Closing occur by no later
than forty-five (45) days after delivery of the Fourth Quarter Financial
Statements and the Fourth Quarter Adjustment Percentage Statement.
(f) Debt Pay-off. MLP shall have obtained (i) pay-off letters
as of immediately prior to the Effective Time for all then outstanding Funded
Indebtedness other than the Senior Notes, (ii) the release (or undertaking upon
payment at Closing to release) of all Liens on any of the assets of MLP or any
of its Subsidiaries except for Permitted Liens and (iii) the release of any
guarantees by MLP or any of its Subsidiaries of indebtedness of any other Person
(other than MLP and its Subsidiaries) for borrowed money (including any
guarantees) listed in Section 3.17 of the Disclosure Schedule.
(g) ACN Documents. MHC, in its capacity as the legal holder of
the LLC Units, shall have executed and delivered to Parent the Amended Parent
LLC Agreement, the Amended Parent Members Agreement and the Amended Parent
Registration Rights Agreement.
(h) (A) MLP's proposed calculation of the Adjusted Equity
Value as furnished to Parent pursuant to Section 6.9(b) minus (B) the actual
Adjusted Equity Value, shall not exceed $10,000,000.
SECTION 7.3. Conditions to Obligations of MLP and the GP Entities.
The obligation of MLP and each of the GP Entities to effect the Merger and the
other transactions contemplated under this Agreement is further subject to the
following conditions:
(a) Governmental and Regulatory Consents. All filings required
to be made prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from, Governmental Entities, including, without limitation, those set forth in
Section 3.3 of the Disclosure Schedule, in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by MLP, Parent and Sub shall have been made or obtained (as the case may
be) and shall be final and non-appealable except as could not reasonably be
expected to result in any material liability of MHC and its directors, officers,
employees, Affiliates and agents or materially impair the ability of Parent and
Sub to consummate the Merger and the other transactions contemplated by this
Agreement and any of the other Purchaser Documents in accordance with the terms
hereof and thereof.
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(b) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in Article IV shall be true and correct,
in each case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the extent such
representations and warranties are made as of a specified date, in which case
the same shall continue on the Closing Date to be true and correct in all
material respects as of the specified date, and except to the extent the failure
of such representations and warranties (without giving effect to any materiality
standard contained in such representations and warranties) to be true and
correct could not reasonably be expected to have a Material Adverse Effect with
respect to Parent and Sub, and MLP shall have received a certificate of an
officer of Parent and Sub to such effect.
(c) Performance of Obligations of Parent and Sub. Each of
Parent and Sub shall have performed and complied in all material respects with
all obligations required to be performed or complied with by each of them under
this Agreement on or prior to the Closing Date, and MLP and the GP Entities
shall have received a certificate of an officer of Parent and Sub to such
effect.
ARTICLE VIII
CLOSING DELIVERIES
SECTION 8.1. Documents to Be Delivered by MLP. At the Closing, MLP
shall deliver, or cause to be delivered, to Parent the following:
(a) to the extent reasonably available to MLP and the GP
Entities, copies of certificates (or in the absence thereof signed affidavits of
loss) representing the Units, duly endorsed in blank in proper form for
transmittal;
(b) the opinion of Weil, Gotshal & Xxxxxx LLP, counsel to MLP,
in form and substance reasonably satisfactory to Parent;
(c) long-form certificate of good standing with respect to MLP
and Capital Corp. issued by the Delaware Secretary of State;
(d) the original minute books and Unit transfer ledger of MLP;
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(e) the certificates signed by a duly authorized officer of
MHC referred to in Sections 7.2(b) and 7.2(c) hereof;
(f) copies of the pay-off letters referred to in Section
7.2(g) hereof;
(g) evidence reasonably satisfactory to the Parent of the
release of the Liens and guarantees referred to in Section 7.2(g) hereof;
(h) executed assignments of the FCC Licenses referred to in
Section 3.3 of the Disclosure Schedule to the Surviving Entity, in form and
substance reasonably satisfactory to Parent; and
(i) such other documents as Parent may reasonably request.
SECTION 8.2. Documents and Funds to Be Delivered by Parent and Sub.
At the Closing, Parent shall deliver, or cause to be delivered to MLP or MHC (or
where stated, the Paying Agent) , the following:
(a) the Payment Fund and the Escrow Funds to the Paying Agent
in accordance with Article II and Section 6.9(b) hereof;
(b) the certificates signed by a duly authorized officer of
each of Parent and Sub referred to in Sections 7.3(b) and 7.3(c) hereof;
(c) the Solvency Certificate executed by a duly authorized
officer of Parent and Surviving Entity;
(d) the opinion of Xxxxxxxx & Xxxxx, counsel to the Parent, in
form and substance reasonably satisfactory to MLP; and
(e) such other documents as MLP may reasonably request.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Proceedings at Closing. All proceedings to be taken and
all documents to be executed and delivered by Parent or Sub in connection with
the consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to MLP. All proceedings to be taken and all
documents to be executed and delivered by MLP and the GP Entities in connection
with the consummation of the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Parent. All proceedings to be
taken and all documents to be executed and delivered by all parties at the
Closing shall be deemed to have been taken, executed and delivered
simultaneously, and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed and delivered.
SECTION 9.2. Termination. This Agreement may be terminated
and abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent and MLP; or
(b) by MLP if the Merger shall not have been consummated on or
before the later of (i) April 30, 1999, and (ii) the date 65 days after the date
MLP shall have delivered to Parent the Fourth Quarter Financial Statements and
the Fourth Quarter Adjustment Percentage Statement, unless the failure to
consummate the Merger is the result of a breach by MLP or any GP Entity of its
respective obligations under this Agreement; or
(c) by Parent if the Merger shall not have been consummated on
or before April 30, 1999, unless the failure to consummate the Merger is the
result of a breach by Parent or Sub of its respective obligations under this
Agreement; or
(d) by either Parent or MLP, if any Government Entity shall
have issued a final non-appealable order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the Merger;
or
(e) by MLP if at any time all of the conditions set forth in
Sections 7.1 and 7.2 hereof shall have been satisfied in full or waived (or the
failure of each such unsatisfied condition to be satisfied is the result of a
breach by Parent or
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Sub of its respective obligations hereunder), MLP and the GP Entities have
tendered Closing and thereafter the Closing of the Merger shall not have
occurred in accordance with Section 1.2 hereof; or
(f) by MLP if (i) the Fourth Quarter Adjustment Amount
calculated in accordance with the terms and conditions set forth in Section
2.3(f)(iii) hereof exceeds $769,100 and (ii) Sub fails to agree (by delivery of
written notice to MLP) to deem the Fourth Quarter Adjustment Amount as equal to
$769,100 for purposes of this Agreement within ten business days after Sub
receives notice from MLP that MLP desires to terminate this Agreement pursuant
to this Section 9.2(f); provided, however, that MLP shall pay the reasonable
out-of-pocket fees (including commitment fees) and expenses (including
accountants', lenders', investment bankers' and attorney's fees) of Parent and
Sub in connection with their due diligence review of MLP and its Subsidiaries,
the negotiation of this Agreement and their preparation for Closing (including
arranging for the financing of the Merger), up to a maximum aggregate amount of
$500,000.
SECTION 9.3. Effect of Termination. In the event of termination of
this Agreement by either MLP or Parent as provided in Section 9.2, this
Agreement shall forthwith become void and have no further force and effect,
without any liability or obligation on the part of Parent, Sub or MLP, other
than the representations and warranties of the parties set forth in Sections
3.25 and 4.12, and the provisions of Sections 6.1, 6.4, 9.2, 9.4 and 12.3,
Article X hereof (with respect to Section 10.1(b)(iv)) and this Section 9.3.
Notwithstanding the foregoing, nothing contained in this Section 9.3 shall
relieve any party from any liability resulting from any breach of its
representations, warranties, covenants or agreements set forth in this Agreement
prior to such termination; provided, however, that in the event this Agreement
shall be terminated pursuant to Section 9.2(e) hereof, MLP's and the GP
Entities' sole and exclusive remedy (including at law and in equity) in respect
of any breach of any of Parent's or Sub's representations, warranties, covenants
or agreements, shall be to receive a payment pursuant to the terms and
conditions of the Pre-Closing Escrow Agreement in an amount equal to the face
amount of the Letter of Credit (the "Liquidated Damages Amount"); and Parent and
Sub agree that MLP shall be entitled to receive upon such termination, as
liquidated damages and not as a penalty, the full Liquidated Damages Amount and
MLP's receipt of the Liquidated Damages Amount in such event shall constitute
payment of liquidated damages hereunder and not a penalty.
SECTION 9.4 Limitation of Damages. In the event the Closing shall
not occur, in no event shall Parent and Sub, on the one hand, or MLP and the
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GP Entities, on the other hand, be liable for more than $9,000,000 under this
Agreement or as a consequence of any breach hereof (except, in the case of
Parent and Sub, pursuant to Section 10.1(b)(iv) hereof).
SECTION 9.5. Amendment. Subject to the applicable provisions of the
Delaware RULPA, the Delaware LLCA and the DGCL, at any time prior to the
Effective Time, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 9.6. Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) waive
compliance with any of the agreements or conditions of the other parties
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of any such rights.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. Right to Indemnification.
(a) Subject to Section 10.2 hereof, after the Closing, MHC (on
behalf of the holders of Units) hereby agrees to indemnify and hold Parent, Sub
and their respective directors, officers, employees, Affiliates (including,
after the Closing Date, the Surviving Entity and its Subsidiaries) agents,
successors and assigns (such Persons, the "Parent Indemnified Parties") harmless
from and against:
(i) subject to Section 12.1 hereof, any and all Losses
based upon, attributable to or resulting from the failure of any
representation or warranty of MLP set forth in Article III hereof to
be true and correct (x) as of the date hereof and (y) as of the
Closing Date as though made on and as of the Closing Date, except
(A) to the extent
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such representations and warranties are made as of a specified date
or (B) as set forth in the certificate delivered pursuant to Section
7.2(b);
(ii) any and all Losses based upon, attributable to or
resulting from the breach of any covenant or other agreement on the
part of MLP or any GP Entity under this Agreement;
(iii) subject to Section 12.2 hereof, any and all Losses
based upon, attributable to or resulting from any audit or
assessment against the predecessor to MLP or the Surviving Entity by
the Washington State Department of Revenue or any other agency of
the State of Washington concerning any sales, use, business,
occupation or similar taxes with respect to the period from January
1, 1987 through September 30, 1992;
(iv) subject to Section 12.2 hereof, any and all Losses
based upon, attributable to or resulting from (A) any claims by any
holder of an Unextinguished Option for any amounts other than the
applicable Unextinguished Option Consideration with respect to such
Unextinguished Option (including any claim by any holder of an
Unextinguished Option for any of the Distributed Shares) or (B) the
claims of Xxxxx Xxxx Xxxxxxxxx set forth in the complaint dated
November 4, 1998, civil action no. 398CV2141 and any other claims of
Xx. Xxxxxxxxx related thereto;
(v) subject to Section 12.2 hereof, fifty (50%) percent of the
licensing fees actually paid after the Effective Time by the
Surviving Entity to BMI in respect of the period beginning on
January 1, 1994 and terminating on the Closing Date hereof (such
period, the "Interim Period"), pursuant to any final judgment
obtained by or against, or definitive settlement, contract or other
agreement by the Surviving Entity with, BMI; provided that the
monthly royalties to be paid to BMI by the Surviving Entity for the
period beginning on the effective date of such final judgment or
definitive settlement, contract or other agreement is no less than
the prospective monthly royalty payments which would have been
payable by MLP under the proposed settlement described in Section
10.1(a)(v) of the Disclosure Schedule; and
(vi) any and all Expenses incident to the matters referred
to in clauses (i), (ii), (iii) and (iv) of this Section 10.1(a).
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(b) Subject to Section 10.2 hereof, after the Closing Parent
and the Surviving Entity and, in the case of Section 10.1(b)(iv) below, before
the Closing Parent and Sub hereby agree, jointly and severally, to indemnify and
hold the GP Entities and their respective partners and any of their respective
Affiliates, directors, officers, employees, agents, successors and assigns
(collectively the "GP Indemnified Parties") harmless from and against:
(i) subject to Section 12.1 hereof, any and all Losses
based upon, attributable to or resulting from the failure of any
representation or warranty of the Parent or Sub set forth in Article
IV hereof to be true and correct (x) as of the date made and (y) as
of the Closing Date as though made on and as of the Closing Date
except (A) to the extent such representations and warranties are
made as of a specified date or (B) as set forth in the certificate
delivered pursuant to Section 7.3(b);
(ii) any and all Losses based upon, attributable to or
resulting from the breach of any covenant or other agreement on the
part of Parent or Sub under this Agreement;
(iii) any and all Losses based upon, attributable to or
resulting from the tender for, redemption, amendment or other
modification of the Senior Notes and the Indenture;
(iv) any and all Losses (except in any GP Indemnified
Party's capacity as a direct or indirect holder or owner of any LLC
Units) based upon, attributable to or resulting from (A) the use of
(1) any financial statements or other information pertaining to MLP,
(2) any pro forma adjustments to such financial statements or (3)
any other information appearing in an offering document prepared by
Parent or Sub or their respective Affiliates, in each case, in
connection with any debt or equity financings by Parent or Sub or
their respective Affiliates (including, at and after the Closing,
the Surviving Entity), whether commenced or completed prior to, at
or after the Closing or (B) the participation of MLP's management in
financing presentations or the execution by such individuals of
"management representation letters" to independent auditors in
connection therewith, except to the extent that, in the case of
either (A) or (B), MHC (on behalf of the holders of Units) would be
obligated to indemnify the Parent Indemnified Parties with respect
to the subject matter of such claims pursuant to Section
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10.1(a) of this Agreement (without regard to the limits contained in
Section 10.2 of this Agreement); and
(v) any and all Expenses incident to the foregoing.
SECTION 10.2. Limitations on Indemnification.
(a) Notwithstanding Section 10.1 hereof, the Parent
Indemnified Parties shall not be entitled to any indemnification pursuant to
Section 10.1(a)(i) hereof unless and except to the extent that the aggregate
amount of Losses and Expenses to the Parent Indemnified Parties pursuant to
Sections 10.1(a)(i) and (iv)(B) and, to the extent incident to any matter
referred to in Section 10.1(a)(i) or (iv)(B), Section 10.1(a)(vi), exceeds
$1,000,000 (the "Basket") and, in such event, the indemnifying party shall only
be required to pay the amount of such Losses and Expenses in excess of $750,000.
(b) The amount of any Losses and Expenses for which
indemnification is provided under Section 10.1(a) or Section 10.1(b) hereof
shall be net of any amounts recovered or recoverable by the indemnified party
under insurance policies with respect to such Losses and Expenses.
(c) Notwithstanding anything to the contrary contained herein,
Losses and Expenses indemnifiable pursuant to Section 10.1 hereof shall not
include any damages attributable to an indemnified party's failure to mitigate
damages after the indemnified party became aware of the events or omissions
which caused such damages (it being understood that the concept of mitigation of
damages shall be applied with regard to what is commercially reasonable under
the circumstances).
(d) Notwithstanding anything to the contrary contained herein,
in no event shall the Parent Indemnified Parties be entitled to recover any
Losses, Expenses or other amounts pursuant to the provisions of this Article X
in excess of $9,000,000 in the aggregate. Any amounts paid into escrow pursuant
to Section 6.9(b) hereof shall be available solely to settle any dispute
relating to the determination of Adjusted Equity Value and shall not be
available for satisfaction of any indemnification claims hereunder and any
amount distributed from the Escrow Funds to Parent or the Surviving Entity in
connection with such dispute shall not reduce or otherwise count against or
toward the $9,000,000 limitation contained in the immediately preceding
sentence.
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SECTION 10.3. Indemnification Procedures.
(a) A party seeking indemnification pursuant to this Article X
(an "Indemnified Party") on the basis of a claim asserted by a third party shall
give prompt notice to the party from whom such indemnification is sought (the
"Indemnifying Party") of the assertion of such claim, or the commencement of any
action, suit or proceeding brought by a third party, in respect of which
indemnity may be sought hereunder and will give the Indemnifying Party such
information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such notice shall not relieve the Indemnifying
Party of any liability hereunder (except to the extent that the Indemnifying
Party has suffered actual prejudice thereby). The Indemnifying Party shall have
the right (but not the obligation), exercisable by written notice to the
Indemnified Party within fifteen (15) days of receipt of notice from the
Indemnified Party of the commencement of or assertion of any claim or action,
suit or proceeding by a third party (other than a party hereto or an Affiliate
of any party hereto) in respect of which indemnity may be sought hereunder (a
"Claim"), to assume the defense and control the settlement of such Claim which
involves (and continues to involve) solely monetary damages; provided, however,
that MHC hereby irrevocably agrees (i) not to assume any defense or control any
settlement of any Claim which involves BMI and (ii) that Parent and Surviving
Entity shall together have the exclusive right to defend and settle any Claim
which involves BMI, provided that Parent and Sub shall bear all expenses and
professional fees incident thereto.
(b) Within ten (10) days after the Indemnifying Party has
given written notice to the Indemnified Party of its intended exercise of its
right to defend and control the right to settle a Claim, the Indemnifying Party
shall be entitled to assume and conduct such defense, with counsel selected by
the Indemnifying Party and reasonably acceptable to the Indemnified Party.
Unless the Indemnifying Party has assumed the defense of and the right to
control the settlement of a Claim pursuant to the terms of this Section 10.3,
the Indemnified Party shall defend and control the settlement of such Claim with
counsel selected by it and reasonably acceptable to the Indemnifying Party.
(c) The Indemnifying Party or the Indemnified Party, as the
case may be, shall have the right to participate in (but not control), at its
own expense, the defense of any Claim which the other is defending as provided
in this Agreement.
(d) The Indemnifying Party, if it shall have assumed the
defense of any Claim as provided in this Agreement, shall not consent to any
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compromise or settlement of, or the entry of any judgment arising from, any such
Claim without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed), if such compromise, settlement
or judgment which commits the Indemnified Party to take, or to forbear to take,
any action or which does not provide for a complete release by such third party
of the Indemnified Party. The Indemnified Party shall have the sole and
exclusive right to settle any Claim, on such terms and conditions as it deems
reasonably appropriate, solely to the extent such Claim involves equitable or
other non-monetary relief.
(e) Whether or not the Indemnifying Party chooses to defend or
prosecute any Claim, all the parties hereto shall cooperate in the defense or
prosecution thereof and shall furnish such records, information and testimony,
and attend such conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested in connection therewith.
(f) The failure of the Indemnified Party to give reasonably
prompt notice of any Claim shall not release, waive or otherwise affect the
Indemnifying Party's obligations with respect thereto except to the extent that
the Indemnifying Party can demonstrate actual loss and prejudice as a result of
such failure.
SECTION 10.4. Tax Treatment of Indemnity Payments. The parties
hereto agree to treat any indemnity payment made pursuant to this Article X as
an adjustment to the Merger Consideration for tax purposes, unless otherwise
required by applicable Law.
SECTION 10.5. Exclusive Remedy; Limitation of Liability.
(a) Notwithstanding anything to the contrary contained in this
Agreement or in any of the other MLP Documents, after the Closing, a Parent
Indemnified Party's exclusive remedy against an Indemnifying Party for any
breach of the representations, warranties, covenants and agreements herein or
otherwise in respect of the transactions contemplated hereby shall be a claim
for indemnification made pursuant to and subject to the terms and conditions of
this Article X and Sections 6.3 and 12.2 hereof.
(b) None of the officers, directors, or agents of MLP or any
of the GP Entities, respectively, are making any representation or warranty, and
none of them shall have any personal liability to any Parent Indemnified Party,
under this Agreement or any certificate delivered in connection herewith.
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(c) None of the officers, directors, or agents of Parent or
Sub, respectively, are making any representation or warranty, and none of them
shall have any personal liability to any GP Indemnified Party, under this
Agreement or any certificate delivered in connection herewith.
ARTICLE XI
REPRESENTATIVE OF PARTNERS OF MLP
SECTION 11.1. Authorization of Representative.
(a) MHC is hereby appointed, authorized and empowered to act
as a representative (the "Representative"), for the benefit of the holders of
Units, in connection with and to facilitate the consummation of the transactions
contemplated hereby, as the exclusive agent and attorney-in-fact to act on
behalf of each partner of MLP with respect to any and all Claims relating to any
partner of MLP and any and all Claims by the Parent Indemnified Parties arising
under this Agreement and in connection with the performance of the various
actions required or permitted to be performed on behalf of the holders of Units
under the Escrow Agreement and ACN LLC Documents, for the purposes and with the
powers and authority hereinafter set forth in this Section 11.1 and in the
Escrow Agreement, which shall include the power and authority:
(i) to execute and deliver the Escrow Agreement and ACN
LLC Documents (with such modifications or changes therein as to
which the Representative, in its sole discretion, shall have
consented) and to agree to such amendments or modifications thereto
as the Representative, in its sole discretion, determines to be
desirable;
(ii) to execute and deliver such waivers and consents in
connection with this Agreement and the Escrow Agreement and ACN LLC
Documents and the consummation of the transactions contemplated
hereby and thereby as the Representative, in its sole discretion,
may deem necessary or desirable;
(iii) to collect and receive all moneys and other proceeds
and property payable to the holders of Units pursuant to the terms
of this Agreement, the Escrow Agreement and ACN LLC Documents,
including, without limitation, the Payment Fund, the Escrow Deposit,
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the Escrow Funds and any portion of or earnings accrued on the
Escrow Funds which are distributable to holders of Units, subject to
the Escrow Agreement, and, subject to any applicable withholding and
retention laws, to disburse and pay the same to each of the holders
of Units to the extent of, and in accordance with, the respective
interests of the holders of Units in the Merger Consideration (the
"Percentage Interests");
(iv) as Representative, to enforce and protect the rights
and interests of the holders of Units (including the Representative,
in its capacity as a partner) and to enforce and protect the rights
and interests of the Representative arising out of or under or in
any manner relating to this Agreement, the Escrow Agreement and the
ACN LLC Documents, and each other agreement, document, instrument or
certificate referred to herein or therein or the transactions
provided for herein or therein (including, without limitation, in
connection with any and all claims for indemnification brought under
Article X hereof), and to take any and all actions which the
Representative believes are necessary or appropriate under the
Escrow Agreement, this Agreement and the ACN LLC Documents for and
on behalf of the holders of Units, including, without limitation,
asserting Claims against Parent, defending all Claims by the Parent
Indemnified Parties, consenting to, compromising or settling all
such Claims, conducting negotiations with Parent and its
representatives regarding such Claims, and, in connection therewith,
to (A) assert any claim or institute any action, proceeding or
investigation; (B) investigate, defend, contest or litigate any
claim, action, proceeding or investigation initiated by Parent, the
Surviving Entity or any other Person, or by any federal, state or
local Governmental Entity against the Representative and/or any of
the holders of Units and/or the Escrow Funds, and receive process on
behalf of any or all holders of Units in any such claim, action,
proceeding or investigation and compromise or settle on such terms
as the Representative shall determine to be appropriate, and give
receipts, releases and discharges with respect to, any such claim,
action, proceeding or investigation; (C) file any proofs of debt,
claims and petitions as the Representative may deem advisable or
necessary; (D) settle or compromise any claims asserted under the
Escrow Agreement or the ACN LLC Documents; and (E) file and
prosecute appeals from any decision, judgment or award rendered in
any such action, proceeding or investigation, it being understood
that the
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Representative shall not have any obligation to take any such
actions, and shall not have any liability for any failure to take
any such actions;
(v) to refrain from enforcing any right of the holders of
Units or any of them and/or the Representative arising out of or
under or in any manner relating to this Agreement, the Escrow
Agreement or any other agreement, instrument or document in
connection with the foregoing; provided, however, that no such
failure to act on the part of the Representative, except as
otherwise provided in this Agreement or in the Escrow Agreement,
shall be deemed a waiver of any such right or interest by the
Representative or by the holders of Units unless such waiver is in
writing signed by the waiving party or by the Representative; and
(vi) to make, execute, acknowledge and deliver all such
other agreement, guarantees, orders, receipts, endorsements,
notices, requests, instructions, certificates, stock powers, letters
and other writings, and, in general, to do any and all things and to
take any and all action that the Representative, in its sole and
absolute discretion, may consider necessary or proper or convenient
in connection with or to carry out the transactions contemplated by
this Agreement, the Escrow Agreement, and all other agreements,
documents or instruments referred to herein or therein or executed
in connection herewith and therewith.
(b) The Representative shall not be entitled to any fee,
commission or other compensation for the performance of its services hereunder,
but shall be entitled to the payment of all its expenses incurred as the
Representative. In connection with this Agreement, the Escrow Agreement and any
instrument, agreement or document relating hereto or thereto, and in exercising
or failing to exercise all or any of the powers conferred upon the
Representative hereunder (i) the Representative shall incur no responsibility
whatsoever to any holders of Units by reason of any error in judgment or other
act or omission performed or omitted hereunder or in connection with the Escrow
Agreement or any such other agreement, instrument or document, excepting only
responsibility for any act or failure to act which represents willful
misconduct, and (ii) the Representative shall be entitled to rely on the advice
of counsel, public accountants or other independent experts experienced in the
matter at issue, and any error in judgment or other act or omission of the
Representative pursuant to such advice shall in no event subject the
Representative to liability to any holders of Units. Each partner of MLP shall
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indemnify, pro rata based upon each partner's percentage interest in the Merger
Consideration ("Percentage Interest"), the Representative against all losses,
damages, liabilities, claims, obligations, costs and expenses, including
reasonable attorneys', accountants' and other experts' fees and the amount of
any judgment against them, of any nature whatsoever (including, but not limited
to, any and all expense whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened or any
claims whatsoever), arising out of or in connection with any claim,
investigation, challenge, action or proceeding or in connection with any appeal
thereof, relating to the acts or omissions of the Representative hereunder, or
under the Escrow Agreement or otherwise. The foregoing indemnification shall not
be deemed exclusive of any other right to which the Representative may be
entitled apart from the provisions hereof. The foregoing indemnification shall
not apply in the event of any action or proceeding which finally adjudicates the
liability of the Representative hereunder for its gross negligence or willful
misconduct. In the event of any indemnification hereunder, upon written notice
from Representative to the holders of Units as to the existence of a deficiency
toward the payment of any such indemnification amount, each partner of MLP shall
promptly deliver to the Representative full payment of his or her ratable share
of the amount of such deficiency, in accordance with such partner's Percentage
Interest.
(c) All of the indemnities, immunities and powers granted to
the Representative under this Agreement shall survive the Effective Date and/or
any termination of this Agreement and/or the Escrow Agreement.
(d) Notwithstanding anything herein to the contrary, each
holder of Units acknowledges that none of Parent, Sub, nor MLP shall have any
responsibility or obligation whatsoever to any holder of Units or to any other
party with respect to or arising out of any actions taken or any inaction by the
Representative and nothing contained herein shall limit or affect in any manner
whatsoever the responsibilities or obligations of the Representative to,
howsoever arising, or release the Representative from any liabilities with
respect to, Parent, Sub, or MLP.
(e) Parent shall have the right to rely upon all actions taken
or omitted to be taken by the Representative pursuant to this Agreement, all of
which actions or omissions shall be legally binding upon the holders of Units.
(f) The grant of authority provided for herein (i) is coupled
with an interest and shall be irrevocable and survive the death, incompetency,
bankruptcy or liquidation of any partner of MLP; and (ii) shall survive the
delivery of
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an assignment by a partner of MLP of the whole or any fraction of his or her
interest hereunder, including his or her Percentage Interest.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. Survival of Representations and Warranties. The
parties hereto hereby agree that the representations and warranties contained in
this Agreement shall survive the execution and delivery of this Agreement until
April 30, 2000. No claim or action shall be asserted with respect to such
representations and warranties pursuant to Article X hereof unless by April 30,
2000, written notice of such claim is given the indemnifying party or such
action is commenced. Notwithstanding the foregoing, except as set forth in
Section 12.2 hereof, this Section 12.1 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time.
SECTION 12.2. Survival and Conditions of Certain Indemnification
Obligations of MHC.
(a) The parties hereto hereby acknowledge and agree that,
following the expiration of the survival period of the representations and
warranties hereunder set forth in Section 12.1, Parent shall be entitled to set
off the amount of any Losses, Expenses or other amounts payable pursuant to
Sections 10.1(a)(iii), (iv) and (v) (along with any amounts due to any Parent
Indemnified Party pursuant to Section 10(a)(vi) incident to the matters referred
to in Sections 10(a)(iii) and (iv)) against any distributions to or any other
amounts payable to the holders of the LLC Units and the Parent Indemnified
Parties shall have no other rights to payment of such Losses, Expenses or other
amounts.
(b) Notwithstanding the foregoing, no claim for
indemnification by the Parent Indemnified Parties pursuant to Sections
10.1(a)(iii), (iv), (v) or (vi) hereof shall be asserted against MHC in the
manner described in Section 12.2(a) following the occurrence of a Change of
Control or an initial underwritten public offering of the common equity
securities of Parent or the Surviving Entity (or any successor to the assets and
business of such entitites), respectively.
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(c) Any Claims for indemnification by the Parent Indemnified
Parties pursuant to Section 10.1(a)(v) hereof shall be limited to $1,000,000 in
the aggregate.
SECTION 12.3. Fees and Expenses. Whether or not the Merger shall be
consummated, each party hereto shall pay its own fees and expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby; provided that, after the
Merger, the Surviving Entity shall not be liable for, and MHC, as agent for the
holders of Units, shall be responsible for and shall pay, all such fees and
expenses incurred by MLP, any of its Subsidiaries or any GP Entity except to the
extent such items were either satisfied on or prior to the Closing or included
in the calculation of MLP Expenses at the Closing. No later than five (5) days
prior to Closing, MLP shall provide to Parent and Sub their best estimate of MLP
Expenses and such parties shall agree, prior to Closing, to an estimated amount
of MLP Expenses.
SECTION 12.4. Definitions. For purposes of this Agreement:
"ACN LLC Documents" shall have the meaning set forth in
Section 4.10.
"ACN Purchase Agreement" shall have the meaning set forth in
Section 4.6.
"ACN Seller" shall have the meaning set forth in Section 4.6.
"Account" shall have the meaning set forth in Section 2.3.
"Acquisition Proposal" means any proposal with respect to a
merger, consolidation, share exchange or similar transaction involving MLP or
any of its Subsidiaries or any purchase of all or a material portion of the
assets of MLP or any of its Subsidiaries or any partnership unit or equity
interest in MLP, other than the transactions contemplated in this Agreement.
"Additional Consideration" shall have the meaning set forth in
Section 2.3.
"Adjusted EBITDA Difference" shall have the meaning set forth
in Section 2.3.
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"Adjusted Equity Value" shall have the meaning set forth in
Section 2.3
"Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the Recitals.
"Amended Parent LLC Agreement" means the Amended and
Restated Limited Liability Company Agreement of ACN Holdings, LLC, substantially
in the form of Exhibit B-1 attached hereto.
"BBMI" shall have the meaning set forth in Section 2.3.
"Amended Parent Members Agreement" means the Amended and
Restated Members Agreement of ACN Holdings, LLC, substantially in the form of
Exhibit B-2 attached hereto.
"Amended Parent Registration Rights Agreement" means the
Amended and Restated Registration Rights Agreement, substantially in the form of
Exhibit B-3 attached hereto.
"BMI" means Broadcast Music, Inc. or any of its affiliates.
"Balance Sheet" and "Balance Sheet Date" shall have the
meanings set forth in Section 3.7.
"Basket" shall have the meaning set forth in Section 10.2.
"Benefit Plan" shall have the meaning set forth in Section
3.13.
"CMCI" shall have the meaning set forth in Section 2.3.
"Capital Corp." shall have the meaning set forth in Section
3.1.
"Cash and Cash Equivalents" shall have the meaning set forth
in Section 2.3.
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"Certificate of Formation" shall have the meaning set forth in
Section 1.6.
"Certificate of Limited Partnership" shall have the meaning
set forth in Section 1.6.
"Certificate of Merger" shall have the meaning set forth in
Section 1.3.
"Change of Control" means (i) assets constituting all or
substantially all of the assets of a Person are sold, in one or more related
transactions, to any other "person" or "group" (as such term is defined in the
Exchange Act) or (ii) an event or series of events (whether a stock purchase,
merger, consolidation or other business combination or otherwise) by which any
person or group is or becomes the "beneficial owner" (as defined in the Exchange
Act) directly or indirectly of more than fifty (50%) percent of the combined
voting power of the then outstanding securities of a Person, excluding in the
case of each of clauses (i) and (ii) above any reincorporation, reorganization
or recapitalization transaction in which the securityholders of such Person
immediately prior to the effective date of such transaction continue to possess
at least fifty (50%) percent of the outstanding voting securities of the
successor or surviving entity in substantially the same relative proportions
(exclusive of any shares owned as a result of ownership of an entity other than
such Person).
"Claim" shall have the meaning set forth in Section 10.3.
"Class B-4 Units" means the Class B-4 Units of Parent.
"Closing" and "Closing Date" shall have the meanings set forth
in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentially Agreement" shall have the meaning set forth in
Section 6.1.
"Continuing Employees" shall have the meaning set forth in
Section 6.3.
"DGCL" means the Delaware General Corporations Law.
66
"Delaware LLCA" means the Delaware Limited Liability Company
Act of 1992, as amended.
"Delaware RULPA" means the Delaware Revised Uniform Limited
Partnership Act of 1983, as amended.
"Delaware Secretary of State" means the Secretary of State of
the State of Delaware.
"Distributed Shares" shall have the meaning set forth in
Section 2.3.
"EBITDA Difference" shall have the meaning set forth in
Section 2.3.
"Effective Time" shall have the meaning set forth in
Section 1.3.
"Enterprise Value" shall have the meaning set forth in Section
2.3.
"Environmental Law" means any Law relating to noise, odor,
Hazardous Material or the protection of public health or safety, workplace
health or safety or pollution or protection of the environment.
"Equity Value" shall have the meaning set forth in Section
2.3.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Escrow Amount", "Escrow Agreement", "Escrow Deposit" and
"Escrow Funds" shall have the meanings set forth in Section 2.4.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expenses" means any and all expenses, claims, judgements,
costs, or penalties, including reasonable attorneys' and other professionals'
fees and disbursements.
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"Extinguished Options" shall have the meaning set forth in
Section 2.2.
"Foothill Facility" shall have the meaning set forth in
Section 2.3.
"Fourth Quarter Adjusted Percentage Statement" shall have the
meaning set forth in Section 6.9.
"Fourth Quarter Financial Statements" shall have the meaning
set forth in Section 6.9.
"Fourth Quarter Adjustment Amount" and "Fourth Quarter
Adjustment Percentage" shall have the meaning set forth in Section 2.3
"Funded Indebtedness" shall have the meaning set forth in
Section 2.3.
"GP Entities" shall have the meaning set forth in the
Recitals.
"GP Indemnified Parties" shall have the meaning set forth in
Section 10.2.
"GAAP" means United States generally accepted accounting
principles in effect as of the date hereof.
"Governmental Entity" means any United States federal, state
or local governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"Hazardous Material" means any substance, material or waste
which is regulated by the United States, or any state or local governmental
authority including, without limitation, petroleum and its by-products,
asbestos, and any material or substance which is defined as a "hazardous waste,"
"hazardous substance," "hazardous material," "restricted hazardous waste,"
"industrial waste,"
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"solid waste," "contaminant," "pollutant," "toxic waste" or "toxic substance"
under any provision of Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement
Act of 1976, as amended.
"Indemnified Party" and "Indemnifying Party" shall have the
meanings set forth in Section 10.3.
"Indenture" means that certain indenture, dated as of October
2, 1996, among MLP, Capital Corp. and First Trust National Association, as
Trustee.
"Intellectual Property" means (i) all patents, patent
applications and patent disclosures; all inventions (whether or not patentable
and whether or not reduced to practice); (ii) all trademarks, service marks,
trade names, logos, slogans, corporate names and Internet domain names, and all
the goodwill associated with each of the foregoing; (iii) all mask works; (iv)
all registered and unregistered statutory and common law copyrights, including,
without limitation, all proprietary musical compositions and sound recordings;
(v) all registrations, applications and renewals for any of the foregoing; and
(vi) all trade secrets, confidential information, ideas, formulae, compositions,
know-how, manufacturing and production processes and techniques, research
information, drawings, specifications, designs, plans, improvements, proposals,
technical and computer data, documentation and software, financial business and
marketing plans, customer and supplier lists and related information and
marketing materials.
"Interim Period" shall have the meaning set forth in
Section 10.1.
"LLC Units" shall have the meaning set forth in Section 2.3.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law, or
any decree, judicial decision or other agency requirement having the full force
and effect of law, or any common law.
"Leases", "Leased Property" and "Leased Properties" shall have
the meanings set forth in Section 3.15.
69
"Lien" means any mortgage, deed or trust, pledge,
hypothecation, security interest, encumbrance, claim, lien or charge of any
kind.
"Liquidated Damages Amount" shall have the meaning set forth
in Section 9.3.
"Losses" means any and all losses, liabilities, obligations or
damages.
"Management Receivables" shall have the meaning set forth in
Section 2.3.
"Material Adverse Effect" means, with respect to any Person,
any material adverse effect on the assets, properties, business, prospects,
financial condition or results of operations of such Person and its
Subsidiaries, taken as a whole, except for changes relating to or resulting from
changes that affect to the same extent all participants in the business music
industry, and except, in the case of any Material Adverse Effect with respect to
MLP, for changes (i) directly resulting from the public announcement of the
transactions contemplated by this Agreement, or (ii) relating to or resulting
from actions taken by Parent or Sub or any of their Affiliates following the
date of this Agreement. Unless otherwise specifically provided herein, reference
to "Material Adverse Effect" shall mean "Material Adverse Effect with respect to
MLP.
"Material Contracts" shall have the meaning set forth in
Section 3.17.
"Merger" shall have the meaning set forth in the Recitals.
"Merger Consideration" shall have the meaning set forth in
Section 2.3.
"MHC" shall have the meaning set forth in the Recitals.
"MLP" shall have the meaning set forth in the Recitals.
"MLP Acquisition" shall have the meaning set forth in the
Recitals.
70
"MLP Documents" shall have the meaning set forth in Section
3.1.
"MLP Expenses" shall have the meaning set forth in Section
2.3.
"MTI" means Music Technologies, Inc.
"MTI Purchase Agreement" means the Asset Purchase Agreement,
dated October 28, 1998, between MTI and MLP, together with the Amendment to the
Asset Purchase Agreement, dated November 27, 1998, the Second Amendment to Asset
Purchase Agreement dated December 23, 1998 and the Third Amendment to Asset
Purchase Agreement dated December 30, 1998.
"MTI Expenses" and "MTI Purchase Price" shall have the
meanings set forth in Section 2.3.
"New Name" shall have the meaning set forth in Section 1.1.
"Option" or "Option Plan" shall have the meanings set forth in
Section 2.2.
"Option Charges" shall have the meaning set forth in Section
2.3.
"Owned Property" or "Owned Properties" shall have the meanings
set forth in Section 3.15.
"Parent" shall have the meaning set forth in the Recitals.
"Parent Indemnified Parties" shall have the meaning set forth
in Section 10.1.
"Partnership Agreement" shall have the meaning set forth in
Section 1.1.
"Paying Agent" shall have the meaning set forth in Section
2.3.
"Payment Fund" shall have the meaning set forth in Section
2.3.
71
"Percentage Interests" shall have the meaning set forth in
Section 11.1.
"Permitted Liens" means, with respect to any Person, (A) Liens
for taxes, assessments or other governmental charges with reserve or levies that
are not yet due or payable or that are being contested in good faith by such
Person in an appropriate proceeding, (B) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, materialmen, repairmen and other Liens
imposed by law and on a basis consistent with past practice for amounts not yet
due, (C) Liens incurred or deposits made in the ordinary course of business and
on a basis consistent with past practice in connection with workers'
compensation, unemployment insurance or other types of social security and (D)
nonconsensual Liens incurred in the ordinary course of business and on a basis
consistent with past practice securing obligations or liabilities which are not
material individually or in the aggregate to the conduct of the business of such
Person.
"Person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"Pre-Closing Escrow Agreement" and "Post-Closing Escrow
Agreement" shall have the meaning set forth in Section 2.4.
"Purchaser Documents" shall have the meaning set forth in
Section 4.1.
"Real Property" shall have the meaning set forth in
Section 3.15.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal or leaching into the
indoor or outdoor environment, or into or out of any property.
"Representative" shall have the meaning set forth in
Section 11.1.
"Reserve Number" shall have the meaning set forth in
Section 2.2.
"SEC" means the Securities and Exchange Commission.
72
"SEC Documents" shall have the meaning set forth in
Section 3.6.
"Senior Debt Commitment Letter" shall have the meaning set
forth in Section 4.11.
"Senior Lenders" shall have the meaning set forth in
Section 4.11.
"Senior Notes" means the $100,000,000 aggregate principal
amount of ten percent (10%) Senior Notes due 2003, pursuant to the Indenture.
"Senior Note Tender Offer" shall have the meaning set forth in
Section 2.3.
"Solvency Certificate" shall have the meaning set forth in
Section 6.11.
"Sub" shall have the meaning set forth in the Recitals.
"Sub LLC Agreement" shall have the meaning set forth in
Section 1.6.
"Subsidiary" of any Person means any Person of which such
first Person owns, directly or indirectly, fifty percent (50%) or more of the
equity securities the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such Person.
"Surviving Entity" shall have the meaning set forth in
Section 1.1.
"Tax" means all federal, state, local and foreign taxes,
duties, levies or similar charges of any kind, including but not limited to
those measured or referred to as income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
73
"Tax Return" means any return, report, claim for refund,
estimate, information return or statement or other similar document relating to
or required to be filed with any governmental authority with respect to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Treasury Regulations" means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as the same may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Unextinguished Options" and "Unextinguished Option
Consideration" shall have the meanings set forth in Section 2.2.
"Units" or "Units" shall have the meanings set forth in
Section 2.1.
"WARN Act" means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and any similar state or local Law.
SECTION 12.5. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
ACN Holdings, LLC.
c/o ABRY Partners, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx
Xxxx Xxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
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Fax: (000) 000-0000
Attention: Xxxx X. Xxxxx
(b) if to MLP, to:
Muzak Limited Partnership
0000 Xxxxx Xxx., Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
with copies to:
Centre Partners Management LLC
00 Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
SECTION 12.6. Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of, or
a Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
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SECTION 12.7. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 12.8. Entire Agreement; Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement referred to in Section 6.1
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. This Agreement is not intended to confer upon
any Person, other than the parties hereto, the Parent Indemnified Parties and
the GP Indemnified Parties, any rights or remedies.
SECTION 12.9. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 12.10. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void; provided however, that notwithstanding
the foregoing, Parent and Sub may assign their respective rights and obligations
hereunder to any of their respective Affiliates, and Parent, Sub and the
Surviving Entity may assign their respective rights and obligations hereunder as
collateral security to any Person providing financing to Parent, Sub or
Surviving Entity without obtaining the prior written consent of any other party
hereto; provided, further, however, any such assignment permitted pursuant to
the terms of this Section 12.10 shall not release Parent and Sub from any
obligation or liability hereunder (including any right or obligation under
Article X hereof). Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 12.11. Obligations of Parent and Sub. The obligations of
Parent and Sub hereunder are jointly and severally guaranteed by the other.
SECTION 12.12. ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE
DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT
WERE NOT PERFORMED IN
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ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED. IT IS
ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF THE UNITED STATES
LOCATED IN THE STATE OF DELAWARE, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. IN ADDITION, EACH OF THE PARTIES
HERETO (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL
COURT LOCATED IN THE STATE OF DELAWARE IN THE EVENT ANY DISPUTE ARISES OUT OF
THIS AGREEMENT OR ANY OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT, (B)
AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION OR
VENUE BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT AND (C) AGREES
THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL
COURT SITTING IN THE STATE OF DELAWARE.
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[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, Parent, Sub, MLP and GP Entities have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
ACN HOLDINGS, LLC
By: /s/ Xxxx Xxxxxx
--------------------------------------
Name: Xxxx Xxxxxx
Title: Executive Vice President
AUDIO COMMUNICATIONS NETWORK, LLC
By: /s/ Xxxx Xxxxxx
--------------------------------------
Name: Xxxx Xxxxxx
Title: Executive Vice President
78
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
MUZAK LIMITED PARTNERSHIP
By: MUZAK ACQUISITION, L.P.
Managing General Partner
By: MUSIC HOLDINGS CORP.,
its General Partner
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President and
Assistant Secretary
MLP ACQUISITION, L.P.
By: MUSIC HOLDINGS CORP.,
its General Partner
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President and
Assistant Secretary
MUSIC HOLDINGS CORP.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President and
Assistant Secretary
79
