EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
between
MUZAK HOLDINGS LLC,
as Issuer,
and
BANCAMERICA CAPITAL INVESTORS I, L.P,
and VARIOUS INVESTORS,
as Purchasers
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Dated as of October 18, 2000
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................................................................1
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SECTION 1.01 Definitions...................................................................1
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SECTION 1.02 Accounting Terms; Financial Statements.......................................19
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ARTICLE II PURCHASE AND SALE....................................................................................19
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SECTION 2.01 Purchase and Sale of Purchased Units.........................................19
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SECTION 2.02 Closing......................................................................19
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ARTICLE III CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO CLOSE..............................................20
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SECTION 3.01 Representations and Warranties...............................................20
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SECTION 3.02 Compliance with this Agreement...............................................20
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SECTION 3.03 No Material Adverse Change...................................................20
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SECTION 3.04 No Adverse Proceedings.......................................................20
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SECTION 3.05 Transaction Documents........................................................20
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SECTION 3.06 Officer's Certificate........................................................21
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SECTION 3.07 Secretary's Certificates.....................................................21
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SECTION 3.08 Good Standing Certificates...................................................21
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SECTION 3.09 Purchase Permitted by Applicable Laws........................................21
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SECTION 3.10 Consents and Approvals.......................................................21
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SECTION 3.11 Legal Opinions...............................................................22
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SECTION 3.12 Disbursement Instructions....................................................22
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SECTION 3.13 Other Assurances.............................................................22
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ARTICLE IV CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE.................................................22
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SECTION 4.01 Representations and Warranties...............................................22
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SECTION 4.02 Compliance with this Agreement...............................................22
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SECTION 4.03 Payment of Purchase Price....................................................22
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SECTION 4.04 Transaction Documents........................................................22
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SECTION 4.05 Issuance Permitted by Requirements of Laws...................................22
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SECTION 4.06 Consents and Approvals.......................................................22
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SECTION 4.07 Other Assurances.............................................................23
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................23
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SECTION 5.01 Organization; Powers; Qualification; Capitalization..........................23
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SECTION 5.02 Corporate Authorization; No Contravention....................................24
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SECTION 5.03 Governmental Consents........................................................24
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SECTION 5.04 Binding Effect...............................................................24
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SECTION 5.05 Financial Statements.........................................................24
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SECTION 5.06 Private Offering.............................................................24
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SECTION 5.07 Credit Documents.............................................................25
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SECTION 5.08 No Material Adverse Effect...................................................26
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SECTION 5.09 Adverse Proceedings, Etc.....................................................26
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SECTION 5.10 Payment of Taxes.............................................................26
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SECTION 5.11 Title to Properties; Intellectual Property...................................26
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SECTION 5.12 Environmental................................................................27
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SECTION 5.13 No Defaults; Material Contracts..............................................28
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SECTION 5.14 Employee Matters.............................................................28
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SECTION 5.15 Employee Benefit Plans.......................................................28
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SECTION 5.16 Certain Fees.................................................................29
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SECTION 5.17 Disclosure...................................................................29
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SECTION 5.18 Interested Transactions......................................................29
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SECTION 5.19 No Burdensome Restrictions...................................................29
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.....................................................30
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SECTION 6.01 Organization, Authorization; No Contravention................................30
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SECTION 6.02 Governmental Consents........................................................30
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SECTION 6.03 Binding Effect...............................................................30
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SECTION 6.04 Accredited Investor; Purchase for Own Account................................30
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SECTION 6.05 ERISA........................................................................30
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SECTION 6.06 Broker's, Finder's or Similar Fees...........................................31
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SECTION 6.07 Governmental Authorization; Third Party Consent..............................31
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ARTICLE VII FINANCIAL INFORMATION, INSPECTION RIGHTS AND NOTICES................................................31
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SECTION 7.01 Books and Records............................................................31
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SECTION 7.02 Inspections..................................................................31
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SECTION 7.03 Preferred Unit Information Rights............................................31
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SECTION 7.04 Common Unit Information Rights...............................................33
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SECTION 7.05 Other Notices................................................................34
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ARTICLE VIII AFFIRMATIVE COVENANTS..............................................................................35
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SECTION 8.01 Existence....................................................................35
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SECTION 8.02 Payment of Taxes and Claims..................................................35
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SECTION 8.03 Maintenance of Property......................................................35
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SECTION 8.04 Insurance....................................................................35
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SECTION 8.05 Compliance with Laws; Contractual Obligations................................35
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SECTION 8.06 Environmental................................................................36
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SECTION 8.07 Use of Proceeds..............................................................36
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ARTICLE IX NEGATIVE COVENANTS...................................................................................36
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SECTION 9.01 Mergers, Consolidations, Sales and Acquisitions..............................36
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SECTION 9.02 Senior Equity Issuances......................................................36
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SECTION 9.03 Limitation on Modifications of Company Formation Documents and Certain Other
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Agreements...................................................................36
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SECTION 9.04 Limitation on Restrictive Agreements.........................................37
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SECTION 9.05 Limitation on Certain Restrictions on Subsidiaries...........................38
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SECTION 9.06 Distributions; Restricted Payments...........................................38
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SECTION 9.07 Transactions with Affiliates.................................................39
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SECTION 9.08 Business Conducted...........................................................39
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SECTION 9.09 Financial Covenants..........................................................39
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SECTION 9.10 Book-Up of Assets............................................................41
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ARTICLE X ANTI-DILUTION PROTECTION..............................................................................41
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SECTION 10.01 Capital Protection...........................................................41
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SECTION 10.02 Common Unit Anti-Dilution Protection.........................................41
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ARTICLE XI REDEMPTION...........................................................................................45
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SECTION 11.01 Put Rights...................................................................45
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SECTION 11.02 Call Rights..................................................................46
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SECTION 11.03 Closing......................................................................47
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ARTICLE XII EVENTS OF DEFAULT...................................................................................48
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SECTION 12.01 Events of Default............................................................48
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SECTION 12.02 Remedies.....................................................................50
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ARTICLE XIII INDEMNIFICATION....................................................................................50
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SECTION 13.01 Indemnification..............................................................50
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SECTION 13.02 Notification.................................................................51
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ARTICLE XIV MISCELLANEOUS.......................................................................................52
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SECTION 14.01 Survival.....................................................................52
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SECTION 14.02 Notices......................................................................52
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SECTION 14.03 Successors and Assigns.......................................................53
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SECTION 14.04 Remedies Cumulative..........................................................54
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SECTION 14.05 Amendments, Waivers and Consents.............................................54
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SECTION 14.06 Counterparts.................................................................54
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SECTION 14.07 Headings.....................................................................54
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SECTION 14.08 Governing Law................................................................54
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SECTION 14.09 Jurisdiction.................................................................54
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SECTION 14.10 Severability.................................................................55
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SECTION 14.11 Rules of Construction........................................................55
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SECTION 14.12 Entire Agreement.............................................................55
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SECTION 14.13 Certain Expenses.............................................................55
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SECTION 14.14 Publicity....................................................................55
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SECTION 14.15 Further Assurances...........................................................55
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INDEX OF EXHIBITS AND SCHEDULES
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Exhibit Description
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Exhibit A Legal Opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Exhibit B Legal Opinion of Morris, Nichols, Asht & Tunst
Schedules Description
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Schedule 2.01 Purchased Units
Schedule 5.01(a) Authorized and Issued Units of the Company and
Record Owners of Such Units
Schedule 5.01(b) Authorized and Issued Capital Stock of Company's
Subsidiaries and Record Owners of Such Stock
Schedule 5.01(c) Outstanding Warrants, Calls, Rights or Other
Commitments of the Company or its Subsidiaries
Schedule 5.05 Projections
Schedule 5.08 Material Subsequent Events
Schedule 5.11(b) Leases in Default
Schedule 5.11(d) Intellectual Property
Schedule 5.13 Material Contracts
Schedule 5.18 Interested Transactions
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is dated as of October 18, 2000,
between MUZAK HOLDINGS LLC, a Delaware limited liability company (the
"Company"), BANCAMERICA CAPITAL INVESTORS I, L.P., ("BACI"), New York Life
Capital Partners, L.P. ("New York Life") and The Northwestern Mutual Life
Insurance Company ("Northwestern" and, together with BACI and New York Life, the
"Purchasers").
Statement of Purpose
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The Company proposes to issue certain membership units to the
Purchasers for an aggregate purchase price of $85,000,000 in order to provide
funds for future acquisitions, the expansion of the Company's operations, the
refinancing of existing debt and for working capital and general corporate
purposes.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
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SECTION 1.01 Definitions. As used in this Agreement, capitalized terms
used without definition herein shall have the respective meanings set forth in
the LLC Agreement (defined below) and the following terms have the meanings
indicated in this Section 1.01:
"ABRY Consulting Agreement" means the Amended and Restated Management
and Consulting Services Agreement dated March 18, 1999 between ABRY Partners,
LLC (as successor to ABRY Partners, Inc.) and Muzak LLC, as amended, restated,
supplemented or otherwise modified from time to time.
"Acquisition" means any acquisition on or after the date of this
Agreement, by the Company or any of its Subsidiaries, whether by purchase,
merger or otherwise, of all or substantially all of the assets, all of the
Capital Stock, or a business line or a division, of any Person.
"Acquisition Cash Flow" means for each acquired entity or assets an
amount calculated for such entity or assets on a non-consolidated basis in
accordance with the definition of "Adjusted Annualized Operating Cash Flow"
herein and all definitions included, directly or indirectly, in the calculation
thereof, but only to the extent such amount is included in Adjusted Annualized
Operating Cash Flow under the Senior Loan Agreement.
"Adjusted Annualized Operating Cash Flow" means, for any Fiscal
Quarter, Annualized Operating Cash Flow for such Fiscal Quarter, adjusted to
give effect on a Pro Forma Basis to all
Acquisitions, Asset Sales, Franchise Additions, Franchise Terminations made by
the Company and its Subsidiaries during such Fiscal Quarter.
"Adverse Proceeding" means any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration (whether or not purportedly on behalf of the Company or any of its
respective Subsidiaries), at law or in equity, or before or by any Governmental
Authority, domestic or foreign (including any Environmental Claims), whether
pending or, to the knowledge of the Company or any of its respective
Subsidiaries, threatened against or affecting the Company or any of its
respective Subsidiaries or any property of the Company or any of its respective
Subsidiaries.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person; provided, that in no event shall the Purchasers
(or any Affiliate of the Purchasers) be deemed to be an Affiliate of the
Company. For purposes of this definition, "control" when used with respect to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Securities Purchase Agreement, as amended,
restated, supplemented or otherwise modified from time to time.
"Annualized Operating Cash Flow" means, for any Fiscal Quarter,
Consolidated Operating Cash Flow for such Fiscal Quarter, multiplied by four.
"Antidilution Units" has the meaning set forth in Section 10.02(a).
"Asset Sale" means a sale, lease or sub-lease (as lessor or
sublessor), sale and leaseback, assignment, conveyance, transfer or other
disposition to, or any exchange of property with, any Person, in one transaction
or a series of transactions, of all or any part of the Company's or any of its
Subsidiaries' businesses, assets or properties of any kind whatsoever, whether
real, personal, or mixed and whether tangible or intangible, whether now owned
or hereafter acquired, including, without limitation, Capital Stock (including,
without limitation, Capital Stock of any such Subsidiaries), other than (a)
inventory sold or a license granted in the ordinary course of business and (b)
disposals of obsolete, worn out or surplus property.
"Available Funds" means, with respect to any redemption of Units
pursuant to Article XI, the amount of funds of the Company or any of its
Subsidiaries, if any, available for such redemption without violation or breach
of the Senior Loan Documents, any other Contractual Obligation restricting the
Company or any of its Subsidiaries or Section 18-607 of the Delaware Limited
Liability Company Act or any similar provision of corporate, limited liability
company or partnership law.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
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"Business Day" means any day other than a Saturday, Sunday or any other
day which is a legal holiday under the laws of North Carolina or New York or is
a day on which commercial banks in Charlotte, North Carolina or New York, New
York are authorized or required by law or other governmental action to close.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, or other equivalents (however designated) of such
Person's capital stock, any and all equivalent ownership interests in such
Person (other than a corporation), including, without limitation, partnership
interests and membership interests and any rights, warrants or options to
purchase or other arrangements or rights to acquire any of the foregoing.
"Capital Value" means, (a) with respect to any Class A Unit, the Common
Investment Unit Capital Value (as defined in the LLC Agreement), (b) with
respect to any Class A-1 Unit, the sum of the Common Investment Unit Capital
Value and the Additional Class A-1 Unit Capital Value (as such terms are defined
in the LLC Agreement) and (c) with respect to any other Unit, any stated amount
which such Unit is entitled to receive upon liquidation of the Company or in
connection with distributions pursuant to Article VII of the LLC Agreement or
any successor provision.
"Cash" means money, currency or a credit balance in any Deposit
Account.
"Cash Equivalents" has the meaning set forth in the Securities Account
Agreement.
"Change of Control" means such time as:
(a) any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), other than ABRY Broadcast
Partners III, L.P. ("ABRY") and/or one or more of its Affiliates, becomes the
beneficial owner (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time) of more than 35% of the total voting power of the Company's
Capital Stock, and ABRY and its Affiliates beneficially do not own, in the
aggregate, a greater percentage of the total voting power of the Capital Stock
of the Company than such other Person or Group and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company;
(b) there shall be consummated any consolidation or merger of
the Company in which the Company is not the continuing or surviving Person or
pursuant to which the Common Units of the Company would be converted into cash,
securities or other Property, other than a merger or consolidation of the
Company in which the holders of the Capital Stock of the Company outstanding
immediately prior to the consolidation or merger hold, directly or indirectly,
at least a majority of the Capital Stock of the surviving corporation
immediately after such consolidation or merger;
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(c) during any period of two consecutive years, individuals
who at the beginning of such period constituted the board of directors of the
Company (together with any new directors whose election by such board of
directors or whose nomination for election by the equityholders of the Company
has been approved by 66 2/3 % of the directors then still in office who either
were directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to constitute a
majority of the board of directors of the Company;
(d) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Agreement); or
(e) the Company or its applicable Subsidiary becomes obligated
to make an "Excess Proceeds Offer" as defined in and in accordance with (i)
Section 4.09 of the Senior Note Indenture, or (ii) Section 4.09 of the High
Yield Note Indenture.
"Class A Default" means any of:
(a) an Event of Default arising under Section 12.01(a),
Section 12.01(f) or Section 12.01(g) which continues for a period of one year
(in which event such Class A Default will be deemed to have occurred on the
final day of such one-year period);
(b) an Event of Default occurring under Section 9.09(d) and,
thereafter, (i) the Company failing to comply with Section 9.09(d) as of the
last day of each of the three immediately succeeding Fiscal Quarters thereafter
and (ii) either:
(A) a Senior Default occurring on or at any time
prior to the last day of the second such succeeding Fiscal Quarter
referred to in the foregoing clause (i), in which event such Class A
Default will be deemed to have occurred on the last day of the third
such succeeding Fiscal Quarter; or
(B) a Senior Default occurring at any time after the
last day of the second such succeeding Fiscal Quarter referred to in
the foregoing clause (i), in which event such Class A Default will be
deemed to have occurred on the 90th day following the occurrence of
such Senior Default;
provided, that a Class A Default arising under this clause (b) will deemed to be
cured on the last day of the first Fiscal Quarter for which the Company is in
compliance with Section 9.09(d); or
(c) an Event of Default occurring under Section 9.09(b) during
any Fiscal Quarter and, thereafter, the Company's Total Leverage Ratio computed
as of the last day of each of the three immediately succeeding Fiscal Quarters
thereafter exceeding the respective amounts set forth in Section 9.09(b) (in
which event such Class A Default will be deemed to have occurred on the last day
of the third such succeeding Fiscal Quarter); provided, that a Class A Default
arising under this clause (c) will deemed to be cured on the last day of the
first Fiscal Quarter for which the Company is in compliance with Section
9.09(b).
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"Class A Units" means the Class A Common Units of the Company as
defined and otherwise described in the LLC Agreement.
"Class B Default" means any Event of Default, other than a Class A
Default, that continues for a period of one year (in which event such Class B
Default will be deemed to have occurred on the final day of such one-year
period), including without limitation any Event of Default described in clause
(b)(i) of the definition of Class A Default with respect to which neither of the
events described in clause (b)(ii) of the definition of Class A Default shall
have occurred; provided, that upon occurrence of either of the events described
in clause (b)(ii) of the definition of Class A Default, such Class B Default
shall become a Class A Default.
"Closing" has the meaning set forth in Section 2.02.
"Closing Date" has the meaning set forth in Section 2.02.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Units" means Common Units of the Company as defined and
otherwise described in the LLC Agreement.
"Company Formation Documents" means the Certificate of Formation and
the LLC Agreement of the Company, as in effect on the date hereof, and as
amended, restated, supplemented or otherwise modified from time to time in
accordance with the provisions hereof and thereof.
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures of the Company and its Included Subsidiaries
during such period determined on a consolidated basis that, in accordance with
GAAP, are or should be included in "purchase of property and equipment" or
similar items reflected in the consolidated statement of cash flows of the
Company and its Included Subsidiaries. Consolidated Capital Expenditures shall
include capitalized expenditures related to new location growth.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of the Company and its Included Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of the
Company and its Included Subsidiaries, including all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Consolidated Net Income" means, for any period, (a) the net income
(or loss) of the Company and its Included Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with GAAP, together with the amount of dividends or other distributions actually
paid to the Company or any Included Subsidiary or by Electro during such period
to the extent Electro is not an Included Subsidiary during the period, minus (b)
(i) the income of any Person (other than an Included Subsidiary of the Company)
in which any other Person has a joint interest, except to the
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extent of the amount of dividends or other distributions actually paid to the
Company or any of its Included Subsidiaries by such Person during such period,
(ii) the income (or loss) of any Person accrued prior to the date it becomes an
Included Subsidiary of the Company or is merged into or consolidated with the
Company or any of its Included Subsidiaries or that Person's assets are acquired
by the Company or any of its Included Subsidiaries, (iii) the income of any
Included Subsidiary of the Company to the extent that the declaration or payment
of dividends or similar distributions by that Included Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Included Subsidiary, (iv) any after-tax gains or
losses attributable to Asset Sales or returned surplus assets of any Pension
Plan, (v) the income (or loss) of any Included Subsidiary attributable to
discontinued operations (including, without limitation, operations disposed of
during such period) and (vi) (to the extent not included in clauses (i) through
(v) above) any net extraordinary gains or net extraordinary losses.
"Consolidated Operating Cash Flow" means, for any period, without
duplication, an amount determined for the Company and its Included Subsidiaries
on a consolidated basis equal to (a) to the sum of the amounts for such period
of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) any
provisions for taxes based on income, (iv) total depreciation expense, (v) total
amortization of intangibles (but excluding any non-Cash item to the extent it
represents the amortization of a prepaid Cash expense that was paid in any prior
period) expense, (vi) Management Fees, and (vii) all other non-Cash items
reducing Consolidated Net Income for such period except for any non-Cash items
that represent accruals of, or reserves for, Cash disbursements to be made in
any future accounting period, minus (b) all other non-Cash items increasing
Consolidated Net Income (other than any non-Cash items representing deferred
revenue to the extent that such revenue was not included in Net Income in any
prior period).
"Consolidated Total Debt" means, as at any date of determination, all
Indebtedness of the Company and its Included Subsidiaries on such date on a
consolidated basis, excluding (a) any Permitted Sponsor Subordinated Debt, to
the extent that (i) the aggregate principal amount of such Permitted Sponsor
Subordinated Debt does not exceed $30,000,000 on such date and (ii) such
Permitted Sponsor Subordinated Debt is held by a Permitted Sponsor Debt Holder,
(b) Deferred Management Fees and (c) items of Indebtedness of the type described
in clause (j) of the definition of Indebtedness, but only if as of such date of
determination, such Indebtedness would not be considered as a liability on a
balance sheet in conformity with GAAP.
"Contingent Obligations" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person (a) with respect
to any Indebtedness, lease, dividend or other obligation of another if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (b) with respect to any letter of credit issued for the account of that
Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (c) under Hedge Agreements. Contingent Obligations shall include,
without limitation, (i) the direct or indirect guaranty, endorsement (otherwise
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (ii) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement,
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and (iii) any liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise) or (B) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another if, in the case of any agreement described under subclauses (A) or (B)
of this sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported or, if less,
the amount to which such Contingent Obligation is specifically limited.
"Contractual Obligation" means, as applied to any Person, any provision
of any Security issued by that Person or of any indenture, mortgage, deed of
trust, contract, undertaking, agreement or other instrument to which that Person
is a party or by which it or any of its properties is bound or to which it or
any of its properties is subject.
"Convertible Securities" means evidences of indebtedness, membership
interests, units or other securities which are directly or indirectly
convertible or exchangeable, with or without payment of additional consideration
in cash or property, for Common Units, either immediately or upon the onset of a
specified date or the happening of a specified event.
"Credit Documents" means, collectively, the Senior Loan Documents, the
Senior Note Documents and the High Yield Note Documents.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement, each of which is for the purpose of hedging the
foreign currency risk associated with the Company's and its Included
Subsidiaries' operations.
"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default.
"Deferred Management Fees" means any accrued Management Fees (or any
interest thereon) that were not paid as a result of (a) any provision of the
Senior Loan Agreement, or (b) to the extent such amounts would not be included
in Consolidated Total Debt under the Senior Loan Agreement, as a result of Muzak
LLC and/or its Subsidiaries putting Cash to another use.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Distribution" means (a) the payment or making of any dividend or other
distribution of property in respect of Capital Stock or (b) the redemption or
other acquisition of any Capital Stock.
"Electro" means Electro Systems Corporation.
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"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is or was sponsored, maintained, contributed to by
or required to be contributed by the Company, any of its Subsidiaries or any of
their respective ERISA Affiliates.
"Environmental Claim" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any Governmental Authority or
any other Person, arising (a) pursuant to or in connection with any actual or
alleged violation of any Environmental Law; (b) in connection with any Hazardous
Material or any actual or alleged Hazardous Materials Activity; or (c) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.
"Environmental Laws" means any and all current or future foreign or
domestic, federal or state (or any subdivision of either of them), statutes,
ordinances, orders, rules, regulations, documents, judgments, Government
Authorizations, or any other requirements of governmental authorities relating
to (i) environmental matters, including those relating to any Hazardous
Materials Activity (ii) the generation, use, storage, transportation or disposal
of Hazardous Materials; or (iii) occupational safety and health, industrial
hygiene, land use or the protection of human, plant or animal health or welfare,
in any manner applicable to Muzak LLC or any of its Subsidiaries or any
Facility.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (a) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Code of which that Person is a member; (b) any trade or
business (whether or not incorporated) which is a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the Code
of which that Person is a member; and (c) any member of an affiliated service
group within the meaning of Section 414(m) of the Code of which that Person, any
corporation described in clause (a) above or any trade or business described in
clause (b) above is a member. Any former ERISA Affiliate of the Company or any
of its Subsidiaries shall continue to be considered an ERISA Affiliate of the
Company or any such Subsidiary within the meaning of this definition with
respect to the period such entity was an ERISA Affiliate of the Company or such
Subsidiary and with respect to liabilities arising after such period for which
the Company or such Subsidiary could be liable under the Code or ERISA.
"ERISA Event" means (a) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (b) the failure to meet the minimum funding
standard of Section 412 of the Code with respect to any Pension Plan (whether or
not waived in accordance with Section 412(d) of the Code) or the failure to make
by its due date a required installment under Section 412(m) of the Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (d) the
withdrawal by the Company, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing sponsors or
the termination of any such Pension Plan resulting in liability pursuant to
Section 4063 or 4064 of ERISA; (e) the institution by the PBGC of proceedings to
terminate any Pension Plan, or
8
the occurrence of any event or condition which might constitute grounds under
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (f) the imposition of liability on the Company, any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA: (g) the withdrawal of the Company, any of its Subsidiaries or any of
their respective ERISA Affiliates in a complete or partial withdrawal (within
the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if
there is any potential material liability therefor, or the receipt by the
Company, any of its Subsidiaries or any of their respective ERISA Affiliates of
notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA; (h) the occurrence of an
act or omission which could give rise to the imposition on the Company, any of
its Subsidiaries or any of their respective ERISA Affiliates of material fines,
penalties, taxes or related charges under Chapter 43 of the Code or under
Section 409, Section 502(c), (i) or (1), or Section 4071 of ERISA in respect of
any Employee Benefit Plan; (i) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against the Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan which would reasonably be expected to result in a material
liability to the Company; (j) receipt from the Internal Revenue Service of
notice of the failure of any Pension Plan (or any other Employee Benefit Plan
intended to be qualified under Section 401(a) of the Code) to qualify under
Section 401(a) of the Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Code; or (k) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n)
of the Code or pursuant to ERISA with respect to any Pension Plan.
"Event of Default" means each of the events set forth in Section 12.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Facility" means any real property (including all buildings, fixtures
or other improvements located thereon) now, hereafter or heretofore owned,
leased, operated or used by the Company or any of its Subsidiaries or any of
their respective predecessors or Affiliates.
"Fair Market Value Per Unit" means, as of the date for which
determination is required and for any class or series of Common Units, the
amount that would be distributed with respect to each such Common Unit pursuant
to Section 7.1, subject to Sections 7.2 and 7.3, of the LLC Agreement following
an arm's length sale of the Company on such date (including its ownership
interest in all Persons) at fair market value between a willing buyer and a
willing seller, if the aggregate proceeds of such sale (after the payment of all
liabilities of the Company and its Subsidiaries) were distributed pursuant to
Section 7.1, subject to Sections 7.2 and 7.3, of the LLC Agreement. The Fair
Market Value Per Unit shall be determined initially by the Board of Directors of
the Company in good faith within ten (10) Business Days of any event for which
such determination is required and such determination (including the basis
therefor) shall be promptly provided to each Holder. The Required Holders shall
have the right to object to any determination of Fair Market Value Per Unit in
connection with any determination for purposes of Article XI hereof; provided,
that the Company's determination shall be binding on the parties hereto unless
the Required Holders object thereto in writing within ten (10) Business Days of
receipt thereof. In the event the Company and the Required Holders cannot agree
on the Fair Market Value Per Unit within
9
ten (10) Business Days of the date of the objection, the Fair Market Value Per
Unit shall be determined by a disinterested appraiser (which may be a national
or regional investment bank or national accounting firm) selected by the
Required Holders and which shall be reasonably acceptable to the Company, the
fees and expenses of which shall be paid by the Company. Any selection of a
disinterested appraiser shall be made in good faith within seven (7) Business
Days after the end of the last ten (10) Business Day period referred to above
and any determination of Fair Market Value Per Unit by a disinterested appraiser
shall be made within thirty (30) days of the date of selection.
"Financial Officer Certification" means, with respect to the financial
statements for which such certification is required, the certification of the
Company, executed on the Company's behalf by the chief financial officer or
treasurer of the Company, that such financial statements fairly present, in all
material respects, the financial condition of the Company and its Subsidiaries
as at the dates indicated and the results of their operations and their cash
flows for the periods indicated, subject to changes resulting from audit and
normal year-end adjustments.
"Financial Plan" has the meaning set forth in Section 7.03(e).
"Financial Statements" means, collectively, the Historical Financial
Statements and the Pro Forma Financial Statements.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of the Company and its Subsidiaries
ending on December 31 of each calendar year.
"Floating Rate Note Documents" means the Floating Rate Note Indenture
and each other loan or credit document as defined or referred to in the Floating
Rate Note Indenture, as amended, restated, supplemented or otherwise modified
from time to time.
"Floating Rate Note Indenture" means the Indenture dated as of February
2, 2000 among Muzak LLC, Muzak Finance Corp., the Guarantors named therein and
State Street Bank and Trust company, as Trustee, as amended, restated,
supplemented or otherwise modified from time to time.
"Franchise Addition" means (a) an investment by the Company or an
Included Subsidiary in any other Person pursuant to which such Person shall
become an Included Subsidiary, or shall be merged with or into the Company or
any Included Subsidiary or (b) the acquisition by the Company or any Included
Subsidiary of the assets of any Person (other than an Included Subsidiary) which
constitute all or substantially all of the assets of such Person or comprise any
division or class of business of such Person or any other properties or assets
of such Person other than in the ordinary course of business.
"Franchise Termination" means any direct or indirect sale, issuance,
conveyance, assignment, transfer, lease or other disposition, other than in the
ordinary course of business as to the Company, Muzak LLC or an Included
Subsidiary, in any single or series of related transactions, of a division or
line of business.
10
"GAAP" means United States generally accepted accounting principles as
in effect as of the date of determination thereof.
"Government Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any Governmental
Authority.
"Governmental Authority" means any federal, state, municipal, national
or other governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a foreign
entity or government.
"Hazardous Materials" means any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any Governmental
Authority or which may or could pose a hazard to the health and safety of the
owners, occupants or any Persons in the vicinity of any Facility or to the
indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.
"Hedge Agreement" means an Interest Rate Agreement or a Currency
Agreement entered into in order to satisfy the requirements of the Senior Loan
Agreement or otherwise in the ordinary course of the Company's or any of its
Included Subsidiaries' businesses and not for speculative purposes.
"High Yield Note Documents" means the High Yield Note Indenture and
each other related loan or credit document as defined and referred to in the
High Yield Note Indenture, as amended, restated, supplemented or otherwise
modified from time to time.
"High Yield Note Indenture" means the Indenture dated as of March 18,
1999 among Muzak Holdings Finance Corp., the Company, the Guarantors named
therein and State Street Bank and Trust Company, as Trustee, relating to the
$75,000,000 aggregate principal amount 13% Senior Discount Notes, as amended,
restated, supplemented or otherwise modified from time to time.
"Historical Financial Statements" means the audited financial
statements of the Company and its Subsidiaries, for the period from January 1,
1999 through December 31, 1999, and the unaudited financial statements of the
Company and its Subsidiaries for the period from January 1, 2000 through June
30, 2000 consisting of the consolidated balance sheets as of December 31, 1999
and as of June 30, 2000 and the related statements of income, members' equity
and cash flows for such period.
"Holder" means collectively, each Purchaser and each subsequent holder
of any Purchased Units.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
11
"Included Subsidiaries" means each domestic Subsidiary of the Company
except (a) to the extent it has any Indebtedness, Electro Systems Corporation, a
Florida corporation; (b) Muzak Heart and Soul Foundation, a Washington nonprofit
corporation; (c) Muzak Finance Corp., a Delaware corporation; and (d) Muzak
Holdings Finance Corp., a Delaware corporation.
"Indebtedness" as applied to any Person, means, without duplication,
(a) all indebtedness for borrowed money or with respect to deposits or advances
of any kind; (b) that portion of obligations with respect to Capital Leases that
is properly classified as a liability on a balance sheet in conformity with
GAAP; (c) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money; (d) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding ordinary course trade payables); (e) all obligations of such Person
upon which interest charges are customarily paid; (f) all obligations evidenced
by notes, bonds (other than performance bonds), debentures or other similar
instruments; (g) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to any property or assets
acquired by such Person (even though the rights and remedies of the seller or
the lender under such agreement in the event of default are limited to
repossession or sale of such property or assets); (h) all obligations,
contingent or otherwise, as an account party under any letter of credit or under
acceptance, letter of credit or similar facilities to the extent not reflected
as trade liabilities on the balance sheet of such Person in accordance with
GAAP; (i) all obligations, contingent or otherwise, to purchase, redeem, retire
or otherwise acquire for value any Capital Stock; (j) all obligations in respect
of any exchange traded or over the counter derivative transaction, including,
without limitation, under any Interest Rate Agreements or other Hedge
Agreements, in each case whether entered into for hedging or speculation
purposes, calculated as of any date of determination as the net amounts, if any,
that would be required to be paid by such Person if such transaction or
agreement were terminated on such date; (k) the principal portion of all
obligations of such Person under any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product of
such Person where such transaction is considered borrowed money indebtedness for
tax purposes but is classified as an operating lease in accordance with GAAP;
(l) payment obligations of such Person under any facility for the sale or
financing of receivables; (m) Contingent Obligations; and (n) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person. The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner or any Joint Venture) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent that
the terms of such Indebtedness provide that such Person is not liable therefor.
"Intellectual Property" means "Intellectual Property" as that term is
defined in the Pledge and Security Agreement.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement, each of which is for the purpose of hedging the
interest rate exposure associated with the Company's and its Included
Subsidiaries' operations.
12
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"License Agreements" means "License Agreements" as that term is defined
in the Pledge and Security Agreement.
"Lien" means (a) any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing and
(b) in the case of Securities, any purchase option, call or similar right of a
third party with respect to such Securities.
"LLC Agreement" means the Third Amended and Restated Limited Liability
Company Agreement of the Company, dated as of the date hereof, as amended,
restated, supplemented or otherwise modified from time to time.
"Management Fees" means management fees payable by Muzak LLC to ABRY
Partners, LLC (as the successor to ABRY Partners, Inc.) pursuant to the ABRY
Consulting Agreement.
"Material Adverse Effect" means a material adverse change in or effect
upon (a) the business, operations, properties, assets, condition (financial or
otherwise) of the Company and its Subsidiaries on a consolidated basis, or (b)
the ability of the Company to perform its obligations, or of the Holders to
enforce their rights, hereunder and under the other Transactions Documents.
"Material Contract" means any contract or other arrangement to which
the Company, Muzak LLC, or any of their respective Subsidiaries is a party
(other than the Credit Documents) for which breach, nonperformance, cancellation
or failure to renew could reasonably be expected to have a Material Adverse
Effect; provided, that no franchise contract or arrangement or license contract
or arrangement entered into by Muzak LLC or any of its Subsidiaries in the
ordinary course of business shall be considered a Material Contract unless it
involves aggregate annual consideration payable or receivable by Muzak LLC or
such Subsidiary of not less than $2,500,000.
"MEM" means MEM Holdings, LLC, a Delaware limited liability company.
"MLP" means Muzak Limited Partnership.
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"Narrative Report" means, with respect to the financial statements for
which such narrative report is required, a narrative report of management's
discussion and analysis of financial condition and results of operations of
Muzak LLC and its Subsidiaries in the form prepared for filings under the
Exchange Act for the applicable Fiscal Quarter or Fiscal Year and for the period
from the beginning of the then current Fiscal Year or, if later, the Closing
Date, to the end of such period to which such financial statements relate.
13
"Options" has the meaning set forth in Section 10.02(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan which is subject to Section 412 of the Code or Section 302 of
ERISA.
"Permitted Issuances" means (i) the issuance of Units as consideration
in an Acquisition; provided, that Units may not be issued as consideration for
an Acquisition from an Affiliate of the Company, any of its Subsidiaries or ABRY
Partners, LLC, (ii) the issuance of up to 5,489 Common Units or Options therefor
to employees, directors and independent contractors of the Company and its
Subsidiaries approved by the Board of Directors of the Company to the extent
designated by the Board of Directors of the Company as a Permitted Issuance,
(iii) the issuance of Antidilution Units pursuant to ARTICLE X and (iv) the
issuance of up to 5,489 other Common Units to the extent designated by the Board
of Directors of the Company as a Permitted Issuance.
"Permitted Sponsor Debt Holder" means any Person permitted to hold
Permitted Sponsor Subordinated Debt pursuant to the provisions of the Credit
Documents and which has entered into a written agreement with the Company or
issuer of such Permitted Sponsor Subordinated Debt and with, or for the benefit
of the Holders, which agreement expressly provides that (a) such Person shall
convert into Common Units all Permitted Sponsor Subordinated Debt held by such
Person immediately upon the occurrence of any of the events described in Section
12.01(f) or 12.01(g), without regard to the grace period set forth in Section
12.01(f)(ii), (b) such Person will not transfer the Permitted Sponsor
Subordinated Debt to any Person unless such transferee expressly agrees to hold
such Permitted Sponsor Subordinated Debt subject to the provisions of such
agreement and (c) such agreement may not be amended or waived without the
consent of the Required Holders.
"Permitted Sponsor Subordinated Debt" means subordinated unsecured
loans to the Company or Muzak LLC from ABRY Broadcast Partners II, L.P., ABRY
Broadcast Partners III, L.P. or MEM, in each case as permitted under the Credit
Documents.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"Pledge and Security Agreement" means the Pledge and Security Agreement
substantially in the form of Exhibit 1 to the Senior Loan Agreement, as it may
be amended, restated, supplemented or otherwise modified from time to time.
"Preemptive Rights" means any preemptive or other similar rights
(whether created by contract or any Requirement of Law applicable at any time to
the Company or any of its Subsidiaries).
14
"Preferred Units" means the Preferred Units of the Company as defined
and otherwise described in the LLC Agreement.
"Pro Forma Basis" means, with respect to compliance with any test or
covenant hereunder, compliance with such covenant or test after giving effect to
any proposed acquisition, disposition or other action which requires compliance
on a pro forma basis, giving effect to adjustments for cost reductions and
non-recurring costs and using, for purposes of determining such compliance, the
historical financial statements of all entities or assets so acquired or to be
acquired and the consolidated financial statements of the Company and its
Subsidiaries which shall be reformulated as if such acquisition, disposition or
other action, and any other such action which has been consummated during the
period, and any Indebtedness or other liabilities incurred in connection with
any such actions, had been consummated at the beginning of such period (and
assuming that such Indebtedness bears interest during any portion of the
applicable measurement period prior to the relevant action at the weighted
average of the interest rates applicable to outstanding loans during such
period); provided, that with respect to any computation that would have the
effect of increasing or decreasing Adjusted Annualized Operating Cash Flow,
Consolidated Operating Cash Flow or Consolidated Interest Expense by more than
$350,000 for any Fiscal Year, all the calculations referred to herein and the
procedures relating thereto shall be in reasonable detail and shall be in form
and substance satisfactory to the Required Holders in all respects.
"Pro Forma Financial Statements" means the pro forma consolidated and
consolidating balance sheet of the Company and its Subsidiaries as of the
Closing Date, giving effect to the transactions contemplated hereby.
"Projections" has the meaning set forth in Section 5.05.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Proprietary Software" means "Proprietary Software" as that term is
defined in the Pledge and Security Agreement.
"Public Offering" means any public offering of securities of the
Company or any successor thereof registered under the Securities Act.
"Purchased Common Units" means the Class A Units purchased hereunder.
"Purchased Units" has the meaning set forth in Section 2.01.
"Qualified Initial Public Offering" means the sale in a public offering
registered under the Securities Act of Common Units of the Company or any of its
successors (a) providing net proceeds to the Company or any of its successors
and the selling equity holders of at least $25,000,000 or (b) where at least 25%
(determined after such offering) of the outstanding common equity of the Company
or any of its successors have been sold in such sale.
"Real Estate Asset" means, at any time of determination, any interest
(whether leasehold, fee or otherwise) then owned by the Company in any real
property.
15
"Refinancing Indebtedness" means, Indebtedness incurred to refinance or
replace any Indebtedness, other than Permitted Sponsor Subordinated Debt,
outstanding on the date of such incurrence; provided, that the principal amount
of such Refinancing Indebtedness (a) does not exceed the sum of the principal
amount of the Indebtedness being refinanced or replaced thereby, plus the amount
of accrued and unpaid interest thereon plus the amount of customary fees,
expenses and costs related to the incurrence of such Refinancing Indebtedness
and (b) matures on or before June 30, 2011.
"Registration Agreement" means the Second Amended and Restated
Registration Agreement, dated as of the date hereof, among the Company, the
Purchasers and other equity holders of the Company, as amended, restated,
supplemented or otherwise modified from time to time.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of any Hazardous Material into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Material), including the
movement of any Hazardous Material through the air, soil, surface water or
groundwater.
"Required Holders" means: (a) at any time when any Series A Preferred
Units are outstanding, the Holders of at least 60% of the outstanding Series A
Preferred Units; or (b) at any other time, the Holders of at least 60% the
outstanding Purchased Common Units.
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject, including any certificate of need, and any certificate of occupancy,
zoning ordinance, building, environmental, labor, employment, occupational
safety or health law, rule or regulation.
"Restricted Units" means any (a) Preferred Units having a Capital Value
or (b) any Common Units having a right to receive distributions relating to
their Capital Value prior to or on parity with the Purchased Common Units.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase, or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from time
to time and any successor statute.
16
"Securities Account" means the Securities Account which is defined in,
and governed by, the Securities Account Agreement.
"Securities Account Agreement" means (a) the Securities Account Control
Agreement dated as of July 14, 1999 among the Muzak LLC, as borrower, Canadian
Imperial Bank of Commerce, as the secured party, and CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp., as
securities intermediary, as amended, restated, supplemented or otherwise
modified from time to time and (b) any similar document delivered or entered
into in connection with any replacement or refinancing of the Indebtedness
arising under the Senior Loan Agreement.
"Securityholders Agreement" means the Amended and Restated
Securityholders Agreement, dated as of the date hereof, among the Company, the
Purchasers and the other parties thereto, as amended, restated, supplemented or
otherwise modified from time to time.
"Senior Default" means an "Event of Default" (as defined in the Senior
Loan Agreement) arising under (a) Section 8.1(a) of the Senior Loan Agreement,
(b) Section 8.1(c) of the Senior Loan Agreement, relating to any covenant set
forth in Section 6 of the Senior Loan Agreement, (c) Section 8.1(f) or 8.1(g) of
the Senior Loan Agreement or (d) to the extent not cured or waived by the
lenders or agents party to the Senior Loan Agreement within ninety (90) days
after the occurrence thereof, any other provision of Section 8.1 of the Senior
Loan Agreement; provided, that for purposes of the foregoing clauses (a), (b)
and (c), a Senior Default shall be deemed to have occurred irrespective of
whether the lenders or agents party to the Senior Loan Agreement shall have (i)
consented to the events or circumstances that would otherwise have given rise to
such Senior Default, within six (6) months prior to the occurrence thereof, or
(ii) otherwise waived, within six (6) months prior to the occurrence thereof,
compliance with the provisions of the Senior Loan Agreement that would otherwise
have given rise to such Senior Default.
"Senior Loan Agreement" means (a) the Credit and Guaranty Agreement
dated as of March 18, 1999 among Audio Communications Network, LLC (n/k/a Muzak
LLC), as Borrower, the Company and Certain Subsidiaries of Audio Communications
Network, LLC, as Guarantors, Various Lenders, ▇▇▇▇▇▇▇ Sachs Credit Partners
L.P., as Syndication Agent, Canadian Imperial Bank of Commerce, as
Administrative Agent, and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P., and CIBC
▇▇▇▇▇▇▇▇▇▇▇ Corp. as Co-Lead Arrangers, as amended, restated, supplemented or
otherwise modified from time to time, in accordance with the provisions thereof
and (b) any credit or similar agreement delivered or entered into in connection
with any replacement or refinancing of the Indebtedness arising under the Senior
Loan Agreement, in accordance with the provisions thereof.
"Senior Loan Documents" means (a) the Senior Loan Agreement, (b) each
other related loan, credit or security document as defined and referred to in
the Senior Loan Agreement, as amended, restated, supplemented or otherwise
modified from time to time, in accordance with the provisions thereof, and (c)
any document delivered or entered into in connection with any replacement or
refinancing of the Indebtedness arising under the Senior Loan Agreement or other
Senior Loan Documents.
"Senior Note Documents" means the Senior Note Indenture and each other
related loan or credit document as defined and referred to in the Senior Note
Indenture, as amended, restated, supplemented or otherwise modified from time to
time.
17
"Senior Note Indenture" means the Indenture dated as of March 18, 1999
among Muzak Finance Corp., Muzak LLC, the Guarantors named therein and State
Street Bank and Trust Company, as Trustee, relating to the $115,000,000
aggregate principal amount 9 7/8% Senior Subordinated Notes due 2009, as
amended, restated, supplemented or otherwise modified from time to time.
"Series A Preferred Units" means the Series A Preferred Units of the
Company as defined and otherwise described in the LLC Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof; provided that in determining the percentage of ownership interests of
any Person controlled by another Person, no ownership interest in the nature of
a "qualifying share" of the former Person shall be deemed to be outstanding.
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company.
"Tax" means any present or future tax, levy, impost, duty, assessment,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided. "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office is located on all
or part of the net income, profits or gains (whether worldwide, or only insofar
as such income, profits or gains are considered to arise in or to relate to a
particular jurisdiction, or otherwise) of that Person.
"Total Leverage Ratio" means the ratio as of any day of (a)
Consolidated Total Debt as of such day to (b) Adjusted Annualized Operating Cash
Flow for the Fiscal Quarter then most recently ended (or, in the case of the
last day of any Fiscal Quarter, for the Fiscal Quarter then ending), plus,
without duplication, Acquisition Cash Flow for all entities and assets acquired
during such Fiscal Quarter. For purposes of calculating the Total Leverage Ratio
as of any day, the Company shall be permitted to reduce the amount of
Consolidated Total Debt as of such day by an amount equal to the aggregate
amount of Cash and Cash Equivalents maintained in the Securities Account as of
such day.
"Trade Secret" means "Trade Secret" as that term is defined in the
Pledge and Security Agreement.
"Transactions Documents" means this Agreement, the LLC Agreement, the
Registration Agreement, the Securityholders Agreement, the exhibits and
schedules attached hereto and thereto and each other document delivered or
executed in connection with the transactions contemplated hereby.
"Unit Coverage Ratio" means the ratio as of the last day of any Fiscal
Quarter of (a) Consolidated Operating Cash Flow for the Fiscal Quarter then
ended, to (b) the sum of (i) Consolidated Interest Expense (excluding any
interest attributable to the Permitted Sponsor Subordinated Debt, to the extent
18
that (A) the aggregate principal amount of such Permitted Sponsor Subordinated
Debt does not exceed $30,000,000 as of such day and (B) such Permitted Sponsor
Subordinated Debt is held by a Permitted Sponsor Debt Holder) for such Fiscal
Quarter plus (ii) the aggregate Series A Preferred Return accruing during such
Fiscal Quarter plus (iii) without duplication of any amount included pursuant to
clause (b)(i), the interest expense for such Fiscal Quarter relating to any
Permitted Sponsor Subordinated Debt repaid, refinanced or replaced during such
Fiscal Quarter. For purposes of calculating the Unit Coverage Ratio, each of
Consolidated Operating Cash Flow and Consolidated Interest Expense shall be
calculated on a Pro Forma Basis from the date of any transaction for which pro
forma effect is being given.
"Units" means the Preferred Units and the Common Units.
SECTION 1.02 Accounting Terms; Financial Statements. All accounting
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with sound accounting practice.
The term "sound accounting practice" means such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur. If any changes in accounting
principles are hereafter occasioned by promulgation of rules, regulations,
pronouncements or opinions of or are otherwise required by, the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), and any
of such changes results in a change in the method of calculation of, or affects
the results of such calculation of, any of the financial covenants, standards or
terms found herein, then the parties hereto agree to enter into and diligently
pursue negotiations in order to amend such financial covenants, standards or
terms so as to reflect fairly and equitably such changes, with the desired
result that the criteria for evaluating the Company's financial condition and
results of operations of the Company shall be the same after such changes as if
such changes had not been made; provided, that prior to any such amendments,
compliance with the financial covenants contained herein shall continue to be
determined in accordance with GAAP as in effect prior to such change.
ARTICLE II
PURCHASE AND SALE
-----------------
SECTION 2.01 Purchase and Sale of Purchased Units. Subject to the terms
and conditions set forth in this Agreement, and in reliance upon the
representations and warranties set forth below, on the Closing Date, each
Purchaser, severally and not jointly, shall purchase and the Company shall issue
and sell to such Purchaser, the Membership Interests, as defined and otherwise
described in the LLC Agreement, comprised of the Series A Preferred Units and
Purchased Common Units (the "Purchased Units") of the Company set forth beside
each Purchaser's name on Schedule 2.01 in each case for the Purchase Price set
forth opposite such Purchasers name on Schedule 2.01.
SECTION 2.02 Closing. Subject to the terms and conditions of this
Agreement, the issuance and purchase of the Purchased Units shall take place at
the closing (the "Closing") to be held at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P., Charlotte, North Carolina, at 10:00 a.m., on October
18, 2000 or at such other time and place as the parties hereto may agree in
writing (the
19
"Closing Date"). At the Closing, the Company shall deliver to the Purchasers
certificates representing the Purchased Units purchased by each Purchaser
against delivery to the Company by the Purchaser of the purchase price therefor
by wire transfer of immediately available funds.
ARTICLE III
CONDITIONS TO THE OBLIGATION
----------------------------
OF THE PURCHASER TO CLOSE
-------------------------
The obligation of the Purchasers to purchase the Purchased Units, to
pay the purchase price therefor at the Closing and to perform any obligations
hereunder shall be subject to the satisfaction as determined by the Purchasers
of the following conditions on or before the Closing Date:
SECTION 3.01 Representations and Warranties. The representations and
warranties of the Company contained in Article V hereof shall be true and
correct in all material respects on and as of the Closing Date as if made on and
as of such date.
SECTION 3.02 Compliance with this Agreement. The Company shall have
performed and complied with all of the agreements and conditions set forth
herein that are required to be performed or complied with by the Company on or
before the Closing Date.
SECTION 3.03 No Material Adverse Change. No event, occurrence,
condition, change, development or effect shall exist or shall have occurred or
come to exist as of the Closing Date that, individually or in the aggregate, has
had or resulted in, or could reasonably be expected to become or result in, a
Material Adverse Effect.
SECTION 3.04 No Adverse Proceedings. No action, suit or proceeding
before any Governmental Authority shall have been commenced, no investigation by
any Governmental Authority shall have been commenced, and no action, suit or
proceeding by any Governmental Authority shall have been threatened against any
of the parties to this Agreement, or any of the principals, officers, directors,
partners or unitholders of any of them, or any of their assets seeking to
restrain, prevent or challenge the transactions contemplated hereby or
questioning the validity or legality of any of such transactions or seeking
damages in connection with any of such transactions.
SECTION 3.05 Transaction Documents. The Purchasers shall have received
true, complete and correct copies of the Transaction Documents and such other
documents as it may reasonably request in connection with or relating to the
sale of the Purchased Units and the transactions contemplated hereby, all in
form and substance satisfactory to the Purchasers, including, without
limitation, the following:
(a) the Certificate of Formation of the Company, certified by the
Secretary of State of the State of Delaware;
(b) a copy of the Securityholders Agreement, executed by the Company
and each member of the Company required to effect the amendment and restatement
thereof;
20
(c) a copy of the LLC Agreement of the Company executed by each member
of the Company required to effect the amendment and restatement thereof; and
(d) a copy of the Registration Agreement, executed by the Company and
each member of the Company required to effect the amendment and restatement
thereof.
SECTION 3.06 Officer's Certificate. The Purchasers shall have received
a certificate dated as of the Closing Date from the Company, executed on its
behalf by the chief executive officer and chief financial officer or equivalent
officer of the Company, in form and substance satisfactory to the Purchasers, to
the effect that (a) all representations and warranties of the Company contained
in this Agreement are true, correct and complete in all material respects, (b)
the Company is not in violation of any of the covenants contained in this
Agreement, and (c) all conditions precedent to the Closing of this Agreement to
be performed by the Company have been duly performed in all material respects.
SECTION 3.07 Secretary's Certificates. The Purchasers shall have
received a certificate from the Company and each of its Subsidiaries, dated the
Closing Date and signed by the Secretary or Assistant Secretary of the Company
certifying (a) that the attached copies of the Company Formation Documents and
resolutions of the Board of Directors of the Company approving this Agreement
and the transactions contemplated hereby, are all true, complete and correct and
remain unamended and in full force and effect, (b) as to the incumbency and
specimen signature of each officer of the Company executing this Agreement and
any other document delivered in connection herewith on behalf of the Company and
(c) as to the good standing of the Company or such Subsidiary in the state of
its organization and in each other state in which the Company or such Subsidiary
is transacting business except where the failure to be in good standing would
not have a Material Adverse Effect.
SECTION 3.08 Good Standing Certificates. The Purchasers shall have
received certificates as of a recent date as to the existence, qualification and
good standing of the Company and each of its Subsidiaries under the laws of its
jurisdiction of organization and each jurisdiction where qualified to do
business.
SECTION 3.09 Purchase Permitted by Applicable Laws. The acquisition of
and payment for the Units to be acquired by the Purchasers hereunder and the
consummation of the transactions contemplated hereby (a) shall not be prohibited
by any Requirement of Law and (b) shall not subject the Purchasers to any
penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any Requirement of Law.
SECTION 3.10 Consents and Approvals. All consents, exemptions,
authorizations or other actions by, or notices to, or filings with, Governmental
Authorities and other Persons in respect of all Requirements of Law and with
respect to Contractual Obligations of the Company required in connection with
the execution, delivery or performance by the Company or enforcement against the
Company of this Agreement and the other Transaction Documents shall have been
obtained and be in full force and effect, and the Purchasers shall have been
furnished with appropriate evidence thereof, and all waiting periods shall have
lapsed without extension or the imposition of any conditions or restrictions.
21
SECTION 3.11 Legal Opinions. Purchasers shall have received the legal
opinion of (a) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ addressing the matters set forth in Exhibit A
hereto and (b) Morris, Nichols, Arsht & Tunst addressing the matters set forth
in Exhibit B hereto.
SECTION 3.12 Disbursement Instructions. The Purchasers shall have
received written instructions from the Company to the Purchasers directing the
payment of the Purchase Price and all fees and expenses to be paid in connection
therewith on the Closing Date.
SECTION 3.13 Other Assurances. The Company shall have delivered to the
Purchasers such other and further certificates, assurances and documents as the
Purchasers or their counsel may have reasonably requested in order to evidence
the accuracy of the representations and warranties thereof, the performance of
the covenants and agreements to be performed at or prior to the Closing thereby,
and the fulfillment of the conditions to the Purchasers' obligations.
ARTICLE IV
CONDITIONS TO THE OBLIGATION
----------------------------
OF THE COMPANY TO CLOSE
-----------------------
The obligations of the Company to issue and sell to the Purchasers the
Purchased Units and to perform its other obligations hereunder shall be subject
to the satisfaction as determined by the Company of the following conditions on
or before the Closing Date:
SECTION 4.01 Representations and Warranties. The representations and
warranties of the Purchasers contained in Article VI shall be true and correct
in all material respects on and as of the Closing Date as if made on and as of
such date.
SECTION 4.02 Compliance with this Agreement. The Purchasers shall have
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the Closing Date.
SECTION 4.03 Payment of Purchase Price. The Company shall have,
received via wire transfer of immediately available funds, the Purchase Price.
SECTION 4.04 Transaction Documents The Purchasers shall have executed
each of the Transaction Documents to which they are a party.
SECTION 4.05 Issuance Permitted by Requirements of Laws. The issuance
of the Units to be issued by the Company hereunder and the consummation of the
transactions contemplated hereby (a) shall not be prohibited by any Requirement
of Law and (b) shall not subject the Company to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any
Requirement of Law.
SECTION 4.06 Consents and Approvals. All consents, exemptions,
authorizations or other actions by, or notices to, or filings with, Governmental
Authorities and other Persons in respect of
22
all Requirements of Law and Contractual Obligations of the Purchasers required
in connection with the execution, delivery or performance by the Purchasers or
enforcement against the Purchasers of this Agreement shall have been obtained
and be in full force and effect, and the Company shall have been furnished with
appropriate evidence thereof, and all waiting periods shall have lapsed without
extension or the imposition of any conditions or restrictions.
SECTION 4.07 Other Assurances. The Purchasers shall have delivered to
the Company such other and further certificates, assurances and documents as the
Company or its counsel may have reasonably requested in order to evidence the
accuracy of the representations and warranties thereof, the performance of the
covenants and agreements to be performed at or prior to the Closing thereby, and
the fulfillment of the conditions to the Company's obligations.
ARTICLE V
REPRESENTATIONS AND
-------------------
WARRANTIES OF THE COMPANY
-------------------------
The Company hereby represents and warrants to the Purchasers, as of the
Closing Date and before and after giving effect to the transactions contemplated
by this Agreement and the other Transaction Documents, as follows:
SECTION 5.01 Organization; Powers; Qualification; Capitalization.
(a) Each of the Company and its Subsidiaries (i) is duly organized,
validly existing and in good standing under the laws of the jurisdictions
identified on Schedule 5.01(a) or 5.01(b), as the case may be, (ii) has all
requisite power and authority to own and operate its properties, to carry on its
business as now conducted and currently proposed to be conducted, to enter into
the Transaction Documents to which it is a party and to carry out the
transactions contemplated thereby, and (iii) is qualified to do business and in
good standing in every jurisdiction necessary to carry out its business and
operations, except such jurisdictions where the failure to be so qualified or in
good standing has not had, and could not be reasonably expected to have, a
Material Adverse Effect. Schedule 5.01(a) correctly sets forth the number of
authorized Units of each class or series of Capital Stock of the Company as of
the Closing Date and the number of issued and outstanding Units thereof. Such
issued and outstanding Units are owned of record by the Persons, and in the
respective amounts, set forth on Schedule 5.01(a).
(b) Other than Muzak LLC and Muzak Holdings Finance LLC, the Company
has no direct Subsidiaries or investments. Schedule 5.01(b) sets forth the
authorized Capital Stock of each Subsidiary, the respective issued and
outstanding amounts thereof and the record owners thereof. The issued and
outstanding Capital Stock of each Subsidiary of the Company has been duly
authorized and validly issued and is fully paid and non-assessable.
(c) Except as expressly provided on Schedule 5.01(c), as of the date
hereof, there is no existing option, warrant, call, right, commitment or other
agreement to which the Company or any of its Subsidiaries is a party requiring,
and there is no security of the Company or any of its Subsidiaries outstanding
which upon conversion or exchange would require, the issuance by the Company or
any of its Subsidiaries of any additional membership interests or other Capital
Stock of the Company or any of
23
its Subsidiaries or other Securities convertible into, exchangeable for or
evidencing the right to subscribe for or purchase, a membership interest or
other Capital Stock of the Company or any of its Subsidiaries.
SECTION 5.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement and each other
Transaction Document to which it is a party and the transactions contemplated
hereby and thereby, including without limitation the issuance by the Company of
the Units, (a) have been duly authorized by all necessary action of the Company,
(b) do not contravene the terms of the Company Formation Documents, or the
organizational documents of any Subsidiary of the Company, and (c) will not
violate, conflict with or result in any breach or contravention of, or the
creation of any Lien under, any Contractual Obligation or any Requirement of
Law.
SECTION 5.03 Governmental Consents. The execution, delivery and
performance by the Company of the Transaction Documents to which it is a party
and the consummation of the transactions contemplated thereby do not and will
not require the registration with, consent or approval of, or notice to, or
other action of, with or by, any Governmental Authority as of the Closing Date.
SECTION 5.04 Binding Effect. This Agreement and the other Transaction
Documents to which the Company is a party will, upon the due execution and
delivery thereof by the Company, constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
their respective terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability.
SECTION 5.05 Financial Statements. The Financial Statements were
prepared in conformity with GAAP and fairly present, in all material respects,
the financial position, on a consolidated basis, of the Persons described in
such financial statements as at the respective dates thereof and the results of
operations and cash flows, on a consolidated basis, of the entities described
therein for each of the periods then ended, subject, in the case of any such
unaudited financial statements, to changes resulting from audit and normal
year-end adjustments. As of the date hereof, neither the Company nor any of its
Subsidiaries has any contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment that is not reflected in the
Financial Statements or the notes thereto and which in any case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of the Company and any of its Subsidiaries taken as a
whole. On and as of the Closing Date, the Projections of the Company and its
Subsidiaries for the period July 1, 2000 through December 31, 2006, as adjusted
in accordance with Schedule 5.05, (the "Projections") are based on good faith
estimates and assumptions made by the management of the Company; provided, that
the Projections are not to be viewed as facts and that actual results during the
period or periods covered by the Projections may differ from such Projections
and that the differences may be material; provided further, as of the Closing
Date, management of the Company believe that the Projections were reasonable and
attainable.
SECTION 5.06 Private Offering. No form of general solicitation or
general advertising was used by the Company or its representatives in connection
with the offer or sale of the Purchased Units. Assuming the truth of the
representations made in Article VI by each of the Purchasers, no registration of
the Units pursuant to the provisions of the Securities Act or any state
securities or "blue
24
sky" laws will be required by the offer, sale or issuance of the Purchased Units
pursuant to this Agreement.
SECTION 5.07 Credit Documents.
(a) Senior Loan Documents. The Company has delivered to the Purchasers
true, complete and correct copies of the Senior Loan Documents together with all
amendments and modifications thereto. Such documents (including the schedules
and exhibits thereto) comprise a full and complete copy of all agreements
between the parties thereto with respect to the subject matter thereof and all
transactions related thereto, and there are no agreements or understandings,
oral or written, or side agreements not contained therein that relate to or
modify the substance thereof. Prior to the Closing Date, there has not been any
event of default or other default giving rise to a right of acceleration under
the Senior Loan Documents. As of the Closing Date there is no default or event
of default continuing under the Senior Loan Documents and none would be caused
by the transactions contemplated hereby.
(b) High Yield Note Documents. The Company has delivered to the
Purchasers true, complete and correct copies of the High Yield Note Documents
together with all amendments and modifications thereto. Such documents
(including the schedules and exhibits thereto) comprise a full and complete copy
of all agreements between the parties thereto with respect to the subject matter
thereof and all transactions related thereto, and there are no agreements or
understandings, oral or written, or side agreements not contained therein that
relate to or modify the substance thereof. Prior to the Closing Date, there has
not been any event of default or other default giving rise to a right of
acceleration under the High Yield Note Documents. As of the Closing Date there
is no default or event of default continuing under the High Yield Note Documents
and none would be caused by the transactions contemplated hereby.
(c) Floating Rate Note Documents. The Company has delivered to the
Purchasers true, complete and correct copies of the Floating Rate Note Documents
together with all amendments and modifications thereto. Such documents
(including the schedules and exhibits thereto) comprise a full and complete copy
of all agreements between the parties thereto with respect to the subject matter
thereof and all transactions related thereto, and there are no agreements or
understandings, oral or written, or side agreements not contained therein that
relate to or modify the substance thereof. Prior to the Closing Date, there has
not been any event of default or other default giving rise to a right of
acceleration under the Floating Rate Note Documents. As of the Closing Date
there is no default or event of default continuing under the Floating Rate Note
Documents and none would be caused by the transactions contemplated hereby.
(d) Senior Note Documents. The Company has delivered to the Purchasers
true, complete and correct copies of the Senior Note Documents together with all
amendments and modifications thereto. Such documents (including the schedules
and exhibits thereto) comprise a full and complete copy of all agreements
between the parties thereto with respect to the subject matter thereof and all
transactions related thereto, and there are no agreements or understandings,
oral or written, or side agreements not contained therein that relate to or
modify the substance thereof. Prior to the Closing Date, there has not been any
event of default or other default giving rise to a right of acceleration under
the Senior Note Documents. As of the Closing Date there is no default or event
of default continuing under the Senior Note Documents and none would be caused
by the transactions contemplated hereby.
25
SECTION 5.08 No Material Adverse Effect. Except as set forth on
Schedule 5.08, since June 30, 2000, no event or change has occurred that has
caused or evidences, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
SECTION 5.09 Adverse Proceedings, Etc. There are no Adverse
Proceedings, individually or in the aggregate, that could reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries (a) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, or (b) is subject to or in default with respect
to any final judgments, writs, injunctions, decrees, rules or regulations of any
court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.10 Payment of Taxes. All Tax returns and reports of the
Company and its Subsidiaries required to be filed by them have been timely filed
and are true, correct and complete in all material respects, and all Taxes upon
the Company and its Subsidiaries and upon their respective properties, assets,
income, businesses and franchises required to have been paid have been timely
paid except Taxes that are being actively contested in good faith and by
appropriate proceedings and for which the Company and such Subsidiary, as
applicable, has set aside on its books adequate reserves or except as where the
nonpayment of any Tax (either individually or in the aggregate) would not result
in a Material Adverse Effect.
SECTION 5.11 Title to Properties; Intellectual Property
(a) The Company and its Subsidiaries have (i) good, sufficient and
legal title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), or (iii) good title to (in the case of all other personal property),
all of their respective properties and assets reflected in their respective
Historical Financial Statements, in each case except for assets disposed of
since the date of such Historical Financial Statements in the ordinary course of
business. All such properties and assets are free and clear of Liens, other than
Permitted Liens.
(b) Except as specified in Schedule 5.11(b), each lease, sublease,
assignment of leases (together with all amendments, supplements, renewals or
extensions of any thereof) affecting each Real Estate Asset is in full force and
effect and the Company does not have knowledge of any default that has occurred
and is continuing thereunder that could reasonably be expected to have a
Material Adverse Effect, and each such agreement constitutes the legally valid
and binding obligation of the Company or any of its Subsidiaries, as applicable,
enforceable against the Company or such Subsidiary in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles.
(c) As of the date hereof, neither the Company nor any Subsidiary owns
or exclusively licenses (i) any material copyrights, or (ii) either individually
or in the aggregate, any material sound recordings or musical compositions,
whether unpublished or published. All sound recordings or musical compositions
used or necessary for the Company or each Subsidiary's business (other than such
nonmaterial sound recordings and musical compositions as are owned or
exclusively licensed by MLP or MLP Environmental Music, LLC) are utilized solely
pursuant to nonexclusive License Agreements with
26
third parties and true and complete copies of each such nonexclusive License
Agreement in effect on the Closing Date shall have been provided to the
Purchasers.
(d) (i) The Company and each Subsidiary owns or has the right to use
all material Intellectual Property used in or necessary to its business, free
and clear of all Liens other than Permitted Liens; (ii) except as would not,
individually or in the aggregate, have a Material Adverse Effect, any
Intellectual Property owned by the Company or any of its Subsidiaries is in full
force and effect and has not been cancelled, expired or abandoned and to the
best of the Company and each Subsidiary's knowledge is valid; (iii) except as
set forth on Schedule 5.11(d), neither the Company nor any of its Subsidiaries
has received written notice from any third party regarding any actual or
potential infringement by it of any material Intellectual Property of such third
party, and to the best of the Company and each Subsidiary's knowledge, the
conduct of its business as currently conducted does not infringe on the
intellectual property of any third party; (iv) except as set forth on Schedule
5.11(d), neither the Company nor any of its Subsidiaries has received written
notice from any third party regarding any assertion or claim challenging the
validity of any material Intellectual Property owned or used by the Company or
any of its Subsidiaries and neither the Company nor any of its Subsidiaries has
any knowledge of any basis for such a claim; (v) as of the date hereof, neither
the Company nor any of its Subsidiaries has licensed or sublicensed any material
rights in any material Intellectual Property, or received or been granted any
such rights, other than pursuant to the License Agreements; (vi) except as set
on Schedule 5.11(d), to the best of the Company and each Subsidiary's knowledge,
no third party is misappropriating, infringing, diluting or violating any
material Intellectual Property owned by any the Company or any of its
Subsidiaries; (vii) except to the extent as would not have a Material Adverse
Effect, the Company and each of its Subsidiaries takes reasonable measures to
protect the confidentiality of Trade Secrets including requiring third parties
having access thereto to execute written nondisclosure agreements and no Trade
Secret of the Company or any of its Subsidiaries has been authorized to be
disclosed to any third party or to the best of each the Company and each
Subsidiary's knowledge disclosed to any third party, other than pursuant to a
written nondisclosure agreement that adequately protects the proprietary
interests of the Company and such Subsidiary in and to such Trade Secrets; and
(viii) the consummation of the transactions contemplated hereby will not result
in the loss or impairment of the Company or any of its Subsidiaries to own or
use any of the Intellectual Property which are material to the operation of the
business of the Company or any of its Subsidiaries, nor, except as set forth on
Schedule 5.11(d), will such consummation require the consent of any third party
in respect of any Intellectual Property which, individually or in the aggregate,
are material to the operation of the business of the Company and its
Subsidiaries, taken as a whole.
(e) Neither the Company nor any of its Subsidiaries employs any
employee, contractor or consultant who, to the knowledge the Company and its
Subsidiaries, is in violation of any material term of any written employment
contract, patent disclosure agreement or any other written contract or agreement
relating to the relationship of any such employee, consultant or contractor with
the Company or any of its Subsidiaries or, to the knowledge of the Company or
any such of its Subsidiaries, with another party that could reasonably be
expected to negatively impact upon the Intellectual Property of the Company or
any such of its Subsidiaries.
SECTION 5.12 Environmental. Neither the Company nor any of its
Subsidiaries nor any of their respective Facilities or operations are subject to
any outstanding written order, consent decree or settlement agreement with any
Person relating to any Environmental Law, any Environmental Claim, or
27
any Hazardous Materials Activity that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries has received any letter or request for information
under Section 104 of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. ss. 9604) or any comparable state law that could
reasonably be expected to have a Material Adverse Effect. There are and, the
knowledge of the Company and its Subsidiaries, have been no conditions,
occurrences, or Hazardous Materials Activities which could reasonably be
expected to form the basis of an Environmental Claim against the Company or any
of its Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company and its Subsidiaries, any
predecessor of the Company or any of its Subsidiaries has filed any notice under
any Environmental Law indicating past or present treatment of Hazardous
Materials at any Facility, and none of the Company's or any of its Subsidiaries
operations involves the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any
state equivalent that could reasonably be expected to have a Material Adverse
Effect. Compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
No event or condition has occurred or is occurring with respect to the Company
or any of its Subsidiaries relating to any Environmental Law, any Release of
Hazardous Materials, or any Hazardous Materials Activity which individually or
in the aggregate has had, or could reasonably be expected to have, a Material
Adverse Effect.
SECTION 5.13 No Defaults; Material Contracts. Neither the Company nor
any of its Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
of its Contractual Obligations, and no condition exists that, with the giving of
notice or the lapse of time or both, could constitute such a default, except
where the consequences, direct or indirect, of such default or defaults, if any,
could not reasonable be expected to have a Material Adverse Effect. Schedule
5.13 contains a true, correct and complete list of all the Material Contracts in
effect on the Closing Date, and except as described thereon, as of the Closing
Date, all such Material Contracts are in full force and effect and no defaults
currently exist thereunder.
SECTION 5.14 Employee Matters. There is no strike or work stoppage in
existence or threatened involving the Company or any of its Subsidiaries that
could reasonably be expected to have a Material Adverse Effect.
SECTION 5.15 Employee Benefit Plans. The Company, each of its
Subsidiaries and each of their respective ERISA Affiliates are in compliance
with all applicable provisions and requirements of ERISA and the Code and the
regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan, except to the extent that any noncompliance with ERISA or
any such failure to perform would not, either individually or in the aggregate,
have a Material Adverse Effect on the Company or any of its ERISA Affiliates.
Each Employee Benefit Plan which is intended to qualify under Section 401(a) of
the Code is so qualified. No material liability to the PBGC (other than required
premium payments), the Internal Revenue Service, any Employee Benefit Plan or
any trust established under Title IV of ERISA has been, or is expected to be
incurred by the Company, any of its Subsidiaries or any of their ERISA
Affiliates. No ERISA Event has occurred or is reasonably expected to occur which
could reasonably be expected to have a Material Adverse Effect. Except to the
extent required under Section
28
4980B of the Code or similar state laws, no Employee Benefit Plan provides
health or welfare benefits (through the purchase of insurance or otherwise) for
any retired or former employee of the Company, any of its Subsidiaries or any of
their respective ERISA Affiliates. As of the most recent valuation date for any
Pension Plan there were no material unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA) with respect to any Pension Plan. The potential
liability of the Company, its Subsidiaries and their respective ERISA Affiliates
for a complete withdrawal from each Multiemployer Plan (within the meaning of
Section 4203 of ERISA), when aggregated with such potential liability for a
complete withdrawal from all Multiemployer Plans does not exceed $2,500,000. The
Company, each of its Subsidiaries and each of their ERISA Affiliates have
complied with the requirements of Section 515 of ERISA with respect to each
Multiemployer Plan and are not in material "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.
SECTION 5.16 Certain Fees. No broker's or finder's fee or commission
will be payable with respect hereto or any of the transactions contemplated
hereby.
SECTION 5.17 Disclosure. No representation or warranty of the Company
or any of its Subsidiaries contained in any Transaction Document or in any other
document, certificate or written statement furnished to the Purchasers by or on
behalf of the Company or any of its Subsidiaries for use in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact (known to the Company, in the case of any
document not furnished by either of them) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by the Company to be reasonable at the time
made, it being recognized by the Purchasers that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There are no facts known (or which should upon the reasonable exercise
of diligence be known) to the Company (other than matters of a general economic
nature) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect and that have not been disclosed herein or
in such other documents, certificates and statements furnished to the Purchasers
for use in connection with the transactions contemplated hereby.
SECTION 5.18 Interested Transactions. Except as set forth on Schedule
5.18 hereto, the Company is not party to any contract, agreement, understanding
or transaction with an Affiliate, or in which any Affiliate has any direct or
indirect interest (other than as a unitholder or employee of the Company).
SECTION 5.19 No Burdensome Restrictions. Neither the Company nor any of
its respective Subsidiaries is a party to or bound by any Contractual Obligation
which could reasonably be expected to have a Material Adverse Effect.
29
ARTICLE VI
REPRESENTATIONS AND
-------------------
WARRANTIES OF THE PURCHASERS
----------------------------
Each Purchaser hereby represents and warrants as to itself only and not
as to any other Purchaser as follows:
SECTION 6.01 Organization, Authorization; No Contravention. Each of the
Purchasers (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which such entity was formed, (b) has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and each Transaction Document to which it is a party. The
transactions contemplated in this Agreement and each Transaction Document to
which such Purchaser is a party (i) have been duly authorized by all necessary
action the transactions, (ii) do not violate the terms of such Purchaser's
organizational documents or any amendment thereof and (iii) will not violate,
conflict with or result in any breach or contravention of, or the creation of
any Lien (other than under the Transaction Documents) upon any Purchased Units
under any Contractual Obligation of such Purchaser, or any Requirement of Law.
SECTION 6.02 Governmental Consents. The execution, delivery and
performance by the Purchasers of the Transaction Documents to which each is a
party and the consummation of the transactions contemplated thereby do not and
will not require the registration with, consent or approval of, or notice to, or
other action of, with or by, any Governmental Authority as of the Closing Date.
SECTION 6.03 Binding Effect. Each Transaction Document to which it is a
party has been duly executed and delivered by such Purchaser, and constitutes
the legal, valid and binding obligation of such Purchaser enforceable against it
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally or by general equitable principles relating to enforceability.
SECTION 6.04 Accredited Investor; Purchase for Own Account. Such
Purchaser is an "accredited investor" within the meaning of Regulation D under
the Securities Act. The Units are being or will be acquired for its own account
and with no intention of distributing or reselling such securities or any part
thereof in any transaction that would be in violation of the Securities Act or
the securities laws of any state, without prejudice, however, to the rights of
the Purchaser at all times to sell or otherwise dispose of all or any part of
the Purchased Units under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act.
SECTION 6.05 ERISA. With respect to each Purchaser that is not an
insurance company, no part of the funds used by such Purchaser to purchase the
Units hereunder constitutes assets of any employee benefit plan (within the
meaning of ERISA) or "plan" (as defined in Section 4975 of the Code). For any
Purchaser that is an insurance company, the source of funds used by such
Purchaser to pay for the Units it purchased hereunder does not includes assets
allocated to any separate account maintained by such Purchaser in which any
employee benefit plan (or its related trust) has any interest, other than a
separate account that is maintained solely in connection with such Purchaser's
fixed
30
contractual obligations under which the amounts payable, or credited, to such
plan and to any participant or beneficiary of such plan (including any
annuitant) are not affected in any manner by the investment performance of the
separate account.
SECTION 6.06 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby, or by any other Transaction Document
to which such Purchaser is a party, based on any agreement, arrangement or
understanding with such Purchaser or any action taken by such Purchaser.
SECTION 6.07 Governmental Authorization; Third Party Consent. Except as
contemplated by the Transaction Documents and except to the extent previously
and duly obtained or made and in full force and effect, no approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing
with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by such Purchaser or enforcement against such Purchaser of this
Agreement or the transactions contemplated hereby.
ARTICLE VII
FINANCIAL INFORMATION, INSPECTION RIGHTS AND NOTICES
----------------------------------------------------
Until such time as there are no Purchased Common Units outstanding, the
Company hereby covenants and agrees with each Holder as follows:
SECTION 7.01 Books and Records. The Company shall maintain, at all
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with GAAP
consistent with those applied in the preparation of the Historical Financial
Statements. The Company shall, by means of appropriate entries, reflect in such
accounts and in all financial statements proper liabilities and reserves for all
taxes and proper provision for depreciation and amortization of Property and bad
debts, all in accordance with GAAP.
SECTION 7.02 Inspections. The Company will, and will cause each of its
Subsidiaries to, permit any authorized representatives designated by the Holders
to visit and inspect any of the properties of the Company or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants, all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may reasonably be requested.
SECTION 7.03 Preferred Unit Information Rights. The Company will
deliver to each holder of Series A Preferred Units the following, which
deliveries shall be in lieu of and not in addition to the information required
to be delivered pursuant to Section 7 of the Securityholders Agreement:
(a) as soon as available and in any event within thirty (30) days after
the end of each month ending after the Closing Date (other than any Fiscal
Quarter end), the consolidated balance sheet of the Company and its Subsidiaries
as at the end of such month and the related consolidated statements of
31
income, members' equity and cash flows of the Company and its Subsidiaries for
such month and for the period from the beginning of the then current Fiscal Year
to the end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal Year
and the corresponding figures from the Financial Plan for the current Fiscal
Year, to the extent prepared on a monthly basis, all in reasonable detail,
together with a Financial Officer Certification with respect thereto and any
report showing indicators of the Company's and the Subsidiaries' operations and
performance that is delivered to MEM with such financial statements;
(b) as soon as available and in any event within forty-five (45) days
after the end of each of the first three Fiscal Quarters of each Fiscal Year:
(i) the consolidated balance sheet of the Company and its Subsidiaries as at the
end of such Fiscal Quarter and the related consolidated statements of income,
members' equity and cash flows of the Company and its Subsidiaries for such
Fiscal Quarter and for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding periods of the
previous Fiscal Year and the corresponding figures from the Financial Plan for
the current Fiscal Year, all in reasonable detail, together with a Financial
Officer Certification and a Narrative Report with respect thereto; (ii) any
report showing indicators of the Company's and the Subsidiaries' operations and
performance that is delivered to MEM with such financial statements and (iii) a
statement listing any repayments of Permitted Sponsor Subordinated Debt during
such Fiscal Quarter;
(c) as soon as available and in any event within ninety (90) days after
the end of each Fiscal Year, audited financial statements including: (i) the
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such Fiscal Year and the related consolidated statements of income, members'
equity and cash flows of the Company and its Subsidiaries for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures for the
previous Fiscal Year and the corresponding figures from the Financial Plan for
the Fiscal Year covered by such financial statements, in reasonable detail,
together with a Financial Officer Certification and a Narrative Report with
respect thereto; (ii) a report thereon of PricewaterhouseCoopers LLP or other
independent certified public accountants of recognized national standing
selected by the Company, together with a written statement by such independent
certified public accountants stating whether, in connection therewith, any
condition or event that constitutes a Default or an Event of Default (as such
terms are defined in the Senior Loan Agreement) has come to their attention and,
if such a condition or event has come to their attention, specifying the nature
and period of existence thereof; and (iii) any management letters, additional
reports or other detailed information concerning the significant aspects of the
operations or financial affairs of the Company that are provided by the
certified public accountants providing the report required by Section
7.03(c)(ii);
(d) promptly upon any officer of the Company obtaining knowledge (i) of
any condition or event that constitutes a Default or an Event of Default or that
notice has been given to the Company with respect thereto; (ii) that any Person
has given any notice to the Company, or any of their respective Subsidiaries or
taken any other action with respect to any event or condition set forth in
Section 12.01; or (iii) of the occurrence of any event or change that has caused
or evidences, either in any case or in the aggregate, a Material Adverse Effect,
a certificate of the Company, specifying the nature and period of existence of
such condition, event or change, or specifying the notice given or action taken
by any such Person and the nature of such claimed Event of Default, Default,
default, event or condition, and what action the Company has taken, is taking
and proposes to take with respect thereto;
32
(e) as soon as practicable and in any event no later than thirty (30)
days after the beginning of each Fiscal Year, (i) a consolidated plan and
financial forecast for such Fiscal Year and the next three succeeding Fiscal
Years (a "Financial Plan"), including (A) a forecasted consolidated balance
sheet and forecasted consolidated statements of income and cash flows of the
Company and its Subsidiaries for each month of each such Fiscal Year, together
with an explanation of the assumptions on which such forecasts are based and (B)
forecasted consolidated statements of income and cash flows of the Company and
its Subsidiaries for each month of each such Fiscal Year, together with the
assumptions on which such forecasts are based stated in reasonable detail; and
(ii) promptly upon preparation thereof, any other significant budgets the
Company or any Subsidiary prepares and any revisions of such budgets or of the
Financial Plan;
(f) as soon as practicable and in any event no later than ten (10) days
after transmission thereof, copies of any registration statements and all
regular, special or periodic reports which the Company, or any of its officers
or managers file with respect to the Company or any Subsidiary, with the
Securities and Exchange Commission or with any securities exchange on which any
of its securities are then listed, copies of all press releases and other
statements made available generally by the Company or any Subsidiary to the
public concerning material developments in the business and any information
which the Company supplies or is required to supply to its lenders; and
(g) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may be
reasonably requested by any Holder.
SECTION 7.04 Common Unit Information Rights. The Company will deliver
the following to each Holder of Purchased Common Units, who does not also hold
Series A Preferred Units:
(a) as soon as practicable (but in any event within thirty
(30) days) after the end of each month, as soon as practicable (but in any event
within thirty (30) days) after the end of each Fiscal Quarter, and as soon as
practicable (but in any event within sixty (60) days) after the end of each
Fiscal Year, unaudited summary financial statements, including balance sheets of
the Company and the related statements of income, members' equity and cash flows
and including comparisons with the applicable budget and with the corresponding
period during the preceding fiscal year (all of which will be prepared on
consolidated and consolidating bases for the Company and its Subsidiaries, if
the Company has any Subsidiary during all or part of the period covered
thereby), prepared in accordance with GAAP on a consistent basis (except that
the unaudited financial statements may not contain all footnotes required by,
GAAP and will be subject to normal year end adjustments) and accompanied by any
report showing indicators of the Company's and the Subsidiaries' operations and
performance that is delivered to MEM with such financial statements;
(b) as soon as practicable (but in any event within 105 days)
after the end of each Fiscal Year, audited statements of income, members' equity
and cash flows of the Company for such Fiscal Year, and balance sheets of the
Company as of the end of such Fiscal Year, setting forth in each case
comparisons to the annual budget and to the preceding Fiscal Year (all of which
will be prepared on consolidated and consolidating bases for the Company and its
Subsidiaries, if the Company has any Subsidiary during all or part of the period
covered thereby), all of which will be prepared in accordance
33
with GAAP on a consistent basis and accompanied by an opinion of an independent
accounting firm of recognized national standing with respect thereto;
(c) promptly upon receipt thereof, a copy of such accounting
firm's annual management letter to the directors of the Company and any
additional reports, management letters or other detailed information concerning
significant aspects of the operations and financial affairs of the Company or
any Subsidiary given to the Company or any Subsidiary by its independent
accountants (and not otherwise contained in other materials provided hereunder);
(d) as soon as practicable (but in any event within thirty
(30) days) after to the end of each Fiscal Year, an annual budget prepared on a
monthly basis for the Company and its Subsidiaries (if any) for the succeeding
Fiscal Year (reflecting anticipated statements of income, members' equity and
cash flows and balance sheets) together with a summary of the assumptions
underlying such budget, and promptly upon preparation thereof any other
significant budgets which the Company or any Subsidiary prepares and any
revisions of such annual or other budgets, and within thirty (30) days after any
monthly period in which there is a material adverse deviation from the annual
budget, an officer's certificate explaining the deviation and what actions the
Company or any Subsidiary has taken or propose to take with respect thereto;
(e) promptly (but in any event within five (5) business days)
after the discovery or receipt of a notice of any breach or default under any
material agreement to which it or any Subsidiary is a party or any other
material adverse event or circumstance affecting the Company or any Subsidiary
(including the filing of any material litigation against the Company or any
Subsidiary or the existence of any dispute with any person which involves a
reasonable likelihood of such litigation being commenced), an officer's
certificate specifying the nature and period of existence thereof and what
actions the Company or any Subsidiary has taken and propose to take with respect
thereto; and
(f) as soon as practicable (but in any event within ten (10)
days) after transmission thereof, copies of registration statements and all
regular, special or periodic reports which it files, or any of its officers or
managers file with respect to the Company or any Subsidiary, with the Securities
and Exchange Commission or with any securities exchange on which any of its
securities are then listed, copies of all press releases and other statements
made available generally by the Company or any Subsidiary to the public
concerning material developments in the business and any information which the
Company supply or is required to supply to its lenders.
SECTION 7.05 Other Notices. The Company shall deliver to each holder of
Preferred Units: (a) written notice of, immediately upon becoming aware thereof,
the holder of any Capital Stock of the Company or of any Indebtedness in excess
of Five Million Dollars ($5,000,000) giving notice or taking any action with
respect to a claimed default; (b) written notice of any material adverse change
in the Property, business, operations, or condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole; (c) copies of any material
notices delivered to any lender pursuant to the Senior Loan Agreement; and (d)
written notice of any event, occurrence, condition, change, development or
effect shall exist that, individually or in the aggregate, has resulted in, or
could reasonably be expected to become or result in, a Material Adverse Effect.
Each notice given under this Section 7.05 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Company has
34
taken or proposes to take with respect thereto. The foregoing shall not limit
the Company's obligation to give other notices under this Agreement.
ARTICLE VIII
AFFIRMATIVE COVENANTS
---------------------
Until such time as there are no Series A Preferred Units
outstanding, the Company hereby covenants and agrees with each Holder as
follows:
SECTION 8.01 Existence. Except as permitted under the Senior Loan
Agreement, the Company will, and will cause each of its Subsidiaries to, at all
times preserve and keep in full force and effect its existence and all rights,
franchises, licenses and permits material to its business; provided, that
neither the Company nor any of its Subsidiaries shall be required to preserve
any such existence, right, franchise, license or permit if such Person's Board
of Directors (or similar governing body) shall determine that the preservation
thereof is no longer desirable in the conduct of the business of such Person,
and that the loss thereof is not disadvantageous in any material respect to such
Person or to the Purchasers.
SECTION 8.02 Payment of Taxes and Claims. The Company will, and will
cause each of its Subsidiaries to, pay all Taxes imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty or fine accrues thereon, and all claims (including
claims for labor, services, materials and supplies) for, sums that have become
due and payable and that by law have or may become a Lien upon any of its
properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, that no such Tax or claim need be paid
if it is being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, so long as adequate reserves shall have
been made therefor.
SECTION 8.03 Maintenance of Property. The Company will, and will cause
each of its Subsidiaries to, maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used or useful in the business of the Company and its Subsidiaries
and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof.
SECTION 8.04 Insurance. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers, such public liability
insurance, third party property damage insurance, business interruption
insurance and casualty insurance with respect to liabilities, losses or damage
in respect of the assets, properties and businesses of the Company and its
Subsidiaries as may customarily be carried or maintained under similar
circumstances by Persons of established reputation engaged in similar
businesses, in each case in such amounts (giving effect to self-insurance), with
such deductibles, covering such risks and otherwise on such terms and conditions
as shall be customary for such Persons.
SECTION 8.05 Compliance with Laws; Contractual Obligations. The Company
will comply, and shall cause each of its Subsidiaries and all other Persons, if
any, on or occupying any
35
Facilities to comply, with the requirements of all Contractual Obligations and
all applicable laws, rules, regulations and orders of any Governmental Authority
(including all Environmental Laws), other than noncompliance with which could
not reasonably be expected to have individually or in the aggregate, a Material
Adverse Effect.
SECTION 8.06 Environmental. The Company shall promptly take, and shall
cause each of its Subsidiaries promptly to take, any and all actions necessary
to (a) cure any violation of applicable Environmental Laws by such the Company
or its Subsidiaries that could reasonably be expected to have individually or in
the aggregate, a Material Adverse Effect, and (b) make an appropriate response
to any Environmental Claim against the Company or any of its Subsidiaries and
discharge any obligations it may have to any Person thereunder where failure to
do so could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 8.07 Use of Proceeds. On the Closing Date, the Company shall
use a portion of the proceeds of the issuance of the Purchased Units to repay in
full all Indebtedness outstanding under the Floating Rate Note Documents.
ARTICLE IX
NEGATIVE COVENANTS
------------------
The Company hereby covenants and agrees with each Holder as follows,
with respect to Section 9.03(a), until no Purchased Common Units are
outstanding, and, with respect to each other provision of this ARTICLE IX, until
no Series A Preferred Units are outstanding:
SECTION 9.01 Mergers, Consolidations, Sales and Acquisitions.
(a) Mergers, Consolidations and Sales. Neither the Company nor any of
its Subsidiaries shall enter into any transaction of merger, reorganization, or
consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or
any part of its Property, or wind up, liquidate or dissolve, or agree to do any
of the foregoing, except (i) to the extent permitted under the Senior Note
Documents or (ii) if the Indebtedness arising under the Senior Note Documents is
no longer outstanding, then to the extent that would have been permitted under
the Senior Note Documents, as last in effect.
(b) Acquisitions. Neither the Company nor any of its Subsidiaries shall
acquire or purchase any Person or substantially all of the assets of any Person
or agree to do any of the foregoing, except (i) to the extent permitted under
the Senior Note Documents or (ii) if the Indebtedness arising under the Senior
Note Documents is no longer outstanding, then to the extent that would have been
permitted under the Senior Note Documents, as last in effect.
SECTION 9.02 Senior Equity Issuances. Except for the Series A Preferred
Units, the Company shall not create or issue any class or series of Units
ranking pari passu with or senior to the Series A Preferred Units with respect
to rights to receive Distributions.
SECTION 9.03 Limitation on Modifications of Company Formation Documents
and Certain Other Agreements. Neither the Company nor any of its Subsidiaries
will amend, modify or
36
change: (a) any Company Formation Document or equivalent organizational document
(including, without limitation, by the filing or modification of any certificate
of designation); (b) the express provisions of Section 6.4(a)(v) of the Senior
Loan Agreement as in effect on the date hereof (or successor provisions
expressly relating to tax distributions), but not including any amendments,
modifications or changes (including through the operation of financial covenants
or otherwise) that would indirectly have an effect on such Section 6.4(a)(v) of
the Senior Loan Agreement (or such successor provisions); (c) Section 4.07(b)(5)
of the Senior Note Indenture as in effect on the date hereof; (d) Section
4.07(b)(5) of the High Yield Note Indenture as in effect on the date hereof; or
(e) any Transaction Document, unless in each case such amendment, modification,
change or other action contemplated by this Section 9.03 could not reasonably be
adverse to the interests of the Holders of the Preferred Units in any material
respect or would not treat the Holders of the Purchased Common Units in a manner
different from the holders of other Class A Units in any material respect.
SECTION 9.04 Limitation on Restrictive Agreements. The Company shall
not extend, or agree to extend, the maturity date of any Indebtedness
outstanding on the Closing Date to be later than, or after the Closing Date
incur any Indebtedness with a maturity date later than, June 30, 2011. Except
for Contractual Obligations in effect on the Closing Date neither the Company
nor any of its Subsidiaries shall, enter into any Contractual Obligation
(including any amendment to any Contractual Obligation in effect on the Closing
Date) which would expressly restrict or prohibit the ability of the Company to
make:
(a) (i) tax Distributions pursuant to Section 7.3 of the LLC
Agreement; provided, that with respect to the Senior Loan Documents, this
Section 9.04(a)(i) only restricts amendments to the express provisions of
Section 6.4(a)(v) of the Senior Loan Agreement as in effect on the date hereof
(or successor provisions expressly relating to tax distributions) and does not
restrict any amendments or new provisions that through the operation of
financial covenants or otherwise would indirectly have an effect on such Section
6.4(a)(v) of the Senior Loan Agreement (or such successor provisions)) or
(ii) redemption Distributions upon a Change of Control
in respect of the Preferred Units or the Common Purchased Units, in each
case, beyond the extent to which the Company is restricted from making such
Distributions as of the Closing Date, it being understood that (A) the Senior
Loan Documents as in effect on the date hereof do not permit Distributions upon
a Change of Control under any circumstances and (B) any amendment, restatement,
renewal, extension (until not later than June 30, 2011), restructuring,
refinancing, supplement or other modification (in whole or in part) of the
Senior Loan Documents pursuant to which the Senior Loan Documents continue to
prohibit redemption Distributions upon a Change of Control under all
circumstances prior to the payment in full thereof, including, without
limitation, any agreements (1) extending the maturity of (until not later than
June 30, 2011), or increasing the amount of (subject to compliance with the
Total Leverage Ratio covenant set forth in Section 9.09(b)), any Indebtedness
incurred thereunder or (2) adding or deleting agents or lenders thereunder,
shall not be interpreted as violating the terms of this Section 9.04(a)(ii); or
(b) any other Distribution in respect of the Preferred Units
or Common Purchased Units beyond the extent to which the Company is restricted
from making such Distributions as of the Closing Date unless such restrictions
under this clause (b) either (i) expire prior to June 30, 2011 or (ii) relate to
Indebtedness that matures not later than June 30, 2011 and terminate upon the
payment in full thereof.
37
SECTION 9.05 Limitation on Certain Restrictions on Subsidiaries.
Neither the Company nor any Subsidiary will, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any Lien or restriction
on the ability of the Company or any such Subsidiary to (a) pay Distributions on
its Capital Stock that is owned by the Company or any of its Subsidiaries; (b)
pay any Indebtedness owed to the Company or any Subsidiary; (c) make loans or
advances to the Company or any Subsidiary; or (d) transfer any of its Properties
to the Company or any Subsidiary, except for such Liens or restrictions:
(i) existing under or by reason of (A) applicable law; (B)
this Agreement; (C) the Senior Loan Documents, as such restrictions are in
effect on the date hereof; (D) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest; (E) customary provisions
restricting assignment of any licensing agreement entered into by the Company or
any Subsidiary in the ordinary course of business; and (F) restrictions on the
transfer of any equipment or other asset subject to a purchase money security
interest or similar Lien permitted under the Senior Loan Documents;
(ii) (A) expiring on or before June 30, 2011 or (B) relating
to Indebtedness that matures not later than June 30, 2011 and terminating upon
the payment in full thereof;
(iii) that do not encumber or restrict the ability of any
Subsidiary to make tax Distributions to the Company or any other Subsidiary
beyond the extent to which the Company and its Subsidiaries are restricted from
making such tax Distributions as of the Closing Date; provided, that with
respect to the Senior Loan Documents, this Section 9.05(iii) only restricts
amendments to the express provisions of Section 6.4(a)(v) of the Senior Loan
Agreement as in effect on the date hereof (or any successor provision thereof
expressly relating to tax distributions) and does not restrict any amendments or
new provisions that through the operation of financial covenants or otherwise
would indirectly have an effect on such Section 6.4(a)(v) of the Senior Loan
Agreement (or successor provision)); or
(iv) that do not encumber or restrict the ability of any
Subsidiary to make Distributions upon a Change of Control to the Company or any
other Subsidiary beyond the extent to which the Company and its Subsidiaries are
restricted from making such Change of Control Distributions as of the Closing
Date; it being understood that (A) the Senior Loan Documents as in effect on the
date hereof do not permit Distributions upon a Change of Control under any
circumstances and (B) any amendment, restatement, renewal, extension (until not
later than June 30, 2011), restructuring, refinancing, supplement or other
modification (in whole or in part) of the Senior Loan Documents pursuant to
which the Senior Loan Documents continue to prohibit redemption Distributions
upon a Change of Control under all circumstances prior to the payment in full
thereof, including, without limitation, any agreements (1) extending the
maturity of (until not later than June 30, 2011), or increasing the amount of
(subject to compliance with the Total Leverage Ratio covenant set forth in
Section 9.09(b)) any Indebtedness incurred thereunder or (2) adding or deleting
agents or lenders thereunder, shall not be interpreted as violating the terms of
this Section 9.05(iv).
SECTION 9.06 Distributions; Restricted Payments. The Company shall not
declare or make any Distribution in respect of any of its Capital Stock other
than Distributions in respect of the Series A Preferred Units and Distributions
for tax purposes as provided in Section 7.3 of the LLC Agreement, unless (a) the
Holders of Series A Preferred Units shall have received in full their
preferential amounts pursuant to Article VII of the LLC Agreement and (b) no
Event of Default exists or would be
38
caused by such Distribution; provided, that the Company or Muzak LLC may (i)
repay outstanding Permitted Sponsor Subordinated Debt if (A) no Default or Event
of Default exists or would otherwise be caused thereby or (B) with the proceeds
from any issuance of Capital Stock of the Company to the extent issued for the
purpose of financing such repayment and (ii) make Distributions in accordance
with Section 7.7 of the LLC Agreement (A) in an aggregate amount not to exceed
$500,000 in any Fiscal Year, (B) with the proceeds from any issuance of Capital
Stock of the Company to the extent issued for the purpose of financing such
Distribution or (C) from the proceeds of key-person life insurance on the life
of the Person in respect of whose Units such Distributions are being made.
SECTION 9.07 Transactions with Affiliates. Except as set forth below,
neither the Company nor any of its Subsidiaries shall: (a) sell, transfer,
distribute, or pay any money or Property to any Affiliate; (b) lend or advance
money or Property to any Affiliate; (c) invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness or any Property
of any Affiliate; or (d) become liable on any Contingent Obligation relating to
the Indebtedness, dividends, or other obligations of any Affiliate.
Notwithstanding the foregoing, if no Event of Default has occurred and is
continuing, the Company and its Subsidiaries may:
(i) engage in transactions with Affiliates in the ordinary course of
business or the issuance of Capital Stock of the Company, in each case, in
amounts and upon terms fully disclosed to the Purchasers and no less favorable
to the Company and its Subsidiaries than would obtain in a comparable arm's
length transaction with a third party who is not an Affiliate;
(ii) engage in the transactions contemplated by the agreements set
forth on Schedule 5.18;
(iii) engage in the transactions contemplated by the Transaction
Documents;
(iv) indemnify the officers and directors of the Company and its
Subsidiaries in accordance with Section 3.6 of the LLC Agreement or similar
provisions of the organizational documents of any Subsidiary, in each case
subject to applicable law;
(v) engage in transactions among the Company and its Subsidiaries;
(vi) repay Permitted Sponsor Subordinated Debt in accordance with the
terms thereof; and
(vii) pay the management fees as set forth in the ABRY Consulting
Agreement.
SECTION 9.08 Business Conducted. Neither the Company nor any of its
Subsidiaries shall engage in any businesses which are not reasonably similar,
ancillary, complementary or related to the businesses in which the Company or
its Subsidiaries are engaged in on the Closing Date except to such extent as
would not be material to the Company and its Subsidiaries, taken as a whole.
SECTION 9.09 Financial Covenants
(a) Unit Coverage Ratio. The Unit Coverage Ratio as of the last day of
any Fiscal Quarter (which last day occurs in any period set forth below),
beginning with December 31, 2000, shall exceed the correlative ratio indicated
below:
39
======================================= ============================
Any Fiscal Quarter Unit
ending on: Coverage Ratio
--------------------------------------- ----------------------------
December 31, 2000 through 1.15 to 1.00
March 31, 2002
--------------------------------------- ----------------------------
Thereafter 1.40 to 1.00
--------------------------------------- ----------------------------
(b) Total Leverage Ratio. The Company shall not, and shall not permit
any of its Subsidiaries to, incur any Indebtedness, other than (i) Permitted
Sponsor Subordinated Debt, to the extent that (A) the aggregate principal amount
of such Permitted Sponsor Subordinated Debt does not exceed $30,000,000 at any
time and (B) such Permitted Sponsor Subordinated Debt is held by a Permitted
Sponsor Debt Holder, and (ii) Refinancing Indebtedness, if after giving effect
to any such incurrence, the Total Leverage Ratio would exceed the correlative
ratio indicated below:
======================================= ============================
Total
Date Leverage Ratio
--------------------------------------- ----------------------------
Closing to April 1, 2001 7.75 to 1.00
--------------------------------------- ----------------------------
April 2, 2001 to October 17, 7.25 to 1.00
2004
--------------------------------------- ----------------------------
October 18, 2004 to October 7.00 to 1.00
17, 2005
--------------------------------------- ----------------------------
October 18, 2005 to October 6.00 to 1.00
17, 2006
--------------------------------------- ----------------------------
Thereafter 5.00 to 1.00
--------------------------------------- ----------------------------
(c) Maximum Consolidated Capital Expenditures. The Company shall not,
and shall not permit its Subsidiaries to, make or incur Consolidated Capital
Expenditures in any Fiscal Year indicated below in an aggregate amount for the
Company and its Included Subsidiaries and for Electro, subject to the
limitations set forth below, in excess of the corresponding amount set forth
below opposite such Fiscal Year; provided, that (i) if any portion of the
Consolidated Capital Expenditure amount permitted to be spent in a Fiscal Year
is not spent in that Fiscal Year, such unused portion may be carried forward to
the immediately subsequent Fiscal Year and may be spent in addition to the
otherwise applicable limitation for such Fiscal Year, in which event any Capital
Expenditures for such subsequent Fiscal Year shall be applied first against such
carried-forward amount and thereafter against the limitation set forth below for
such Fiscal Year, and (ii) such amount for any Fiscal Year shall be increased as
set forth below:
=========================== ==================================
Consolidated
Fiscal Year Capital Expenditures
--------------------------- ----------------------------------
2000 $40,000,000
--------------------------- ----------------------------------
2001 and each Fiscal $37,500,000
year thereafter
=========================== ==================================
In connection with each Acquisition of a "Muzak" affiliate that is consummated
during any Fiscal Year, the amount of permitted Consolidated Capital
Expenditures for such Fiscal Year shall be increased by an amount equal to the
product of (i) 3.5 and (ii) the total monthly recurring revenue of such acquired
"Muzak" affiliate (which, in the case of any such acquisition consummated on or
prior to the fifteenth day
40
of any month, shall be the total monthly recurring revenues for the second prior
month, and, in the case of any acquisition consummated after such fifteenth day,
shall be the total monthly recurring revenues for the prior month), provided
such amount for any Fiscal Year shall be prorated on an annualized basis from
the date of each such acquisition for such Fiscal Year, but the difference
between the total amount for such acquisition and the prorated amount for such
acquisition shall increase the amount of permitted Consolidated Capital
Expenditures for subsequent Fiscal Years. Except for investments by Muzak LLC in
Electro, the aggregate annual amount of which shall not exceed $250,000 and the
proceeds of which investments Electro must apply to make or incur Consolidated
Capital Expenditures permitted hereunder, Muzak LLC and its Subsidiaries shall
not be permitted to make or incur any Consolidated Capital Expenditures of any
kind in any Fiscal Year in respect of any Subsidiary other than Included
Subsidiaries.
(d) Adjusted Annualized Operating Cash Flow. As of the last day of each
Fiscal Quarter, the Company will not permit Adjusted Annualized Operating Cash
Flow for such Fiscal Quarter to be less than the sum of (a) $55,000,000 plus (b)
with respect to each quarter ending after December 31, 2000 (i) $1,000,000
multiplied by (ii) the number of Fiscal Quarters that have then ended (including
the Fiscal Quarter then ending) after December 31, 2000 plus (c) an amount equal
to eighty-five percent (85%) of the Acquisition Cash Flow for all entities
acquired by the Company or any of its Subsidiaries after the Closing Date and
prior to the last day of such Fiscal Quarter minus (d) for each Asset Sale by
the Company or any of its Subsidiaries after the Closing Date and prior to the
last day of such Fiscal Quarter, an amount calculated for each entity or assets
sold in such an Asset Sale in accordance with the definition of Adjusted
Annualized Operating Cash Flow herein, but only to the extent to which such
amount has been applied on a Pro Forma Basis to reduce Adjusted Annualized
Operating Cash Flow in any Fiscal Quarter.
SECTION 9.10 Book-Up of Assets. The Company will not increase or
decrease the "Capital Account" (as defined in the LLC Agreement) of any member
of the Company under Section 6.2 of the LLC Agreement in connection with or as a
result of the transactions contemplated hereby.
ARTICLE X
ANTI-DILUTION PROTECTION
------------------------
The Company hereby covenants and agrees with each Holder that, until
the earlier of a Qualified Initial Public Offering or October 18, 2010:
SECTION 10.01 Capital Protection. Except for Permitted Issuances, the
Company shall not issue or agree to issue any Restricted Units or any security
convertible into or exercisable for Restricted Units unless the consideration
per Restricted Unit therefor (plus any amount payable upon the conversion or
exercise of any such security) is at least equal to the Capital Value per
Restricted Unit immediately prior to such issuance. If Restricted Units or
securities convertible into or exercisable for Restricted Units are issued
together with Units or securities that are not Restricted Units or convertible
into or exercisable for securities that are not Restricted Units, then for
purposes of this Section 10.01 the consideration received will first be deemed
to have been received in respect of such Restricted Units or securities
convertible into or exercisable for such Restricted Units.
SECTION 10.02 Common Unit Anti-Dilution Protection.
41
(a) Issuance of Common Units. If at any time or from time to time the
Company shall (except for Permitted Issuances) issue or sell any additional
Common Units for a consideration per Unit less than the Fair Market Value Per
Unit of such Common Unit then, effective on the date specified below, the
Company shall issue to each holder of Purchased Common Units a number of Class
B-4 Units (as defined and otherwise described in the LLC Agreement, and herein,
the "Antidilution Units") equal to (i) the number of Purchased Common Units held
by such holder immediately prior thereto multiplied by (ii) (A) a fraction, the
numerator of which shall be the Fair Market Value Per Unit of a Purchased Common
Unit, determined immediately prior to the date referred to in the following
sentence, and the denominator of which shall be the Fair Market Value Per Unit
of a Purchased Common Unit, determined as of the date referred to in the
following sentence (and, for purposes of such denominator, the "aggregate
proceeds" of the sale referred to in the definition of the term Fair Market
Value Per Unit shall be deemed to be equal to the sum of the amount of such
"aggregate proceeds" used in computing the numerator of such fraction plus the
actual consideration received (or deemed received in accordance with the
provisions of this Section 10.02) by the Company in consideration for such
additional Common Units), minus (B) one. The date as of which the Fair Market
Value Per Unit of such additional Common Units shall be computed shall be the
earlier of the date on which the Company shall enter into a firm contract or
commitment for the issuance of such additional Common Units or the date of
actual issuance of such additional Common Units. No issuance of Antidilution
Units shall be made under this Section 10.02(a) upon the issuance of any Common
Units which are issued pursuant to the exercise of warrants, options or other
subscription or purchase rights (collectively, "Options") or the exercise of any
conversion or exchange rights in any Convertible Securities.
(b) Options. If at any time or from time to time the Company shall
issue or sell any Options to subscribe for or purchase any Common Units whether
or not the rights to subscribe for or purchase thereunder are immediately
exercisable, and the consideration per Unit for which additional Common Units
may at any time thereafter be issuable pursuant to such Options shall be less
than the Fair Market Value Per Unit of the Common Units for which such Options
are exercisable (determined on the date specified below), then the Company shall
issue a number of Antidilution Units as provided in Section 10.02(a) hereof on
the basis that (1) the maximum number of additional Common Units issuable
pursuant to all such warrants, options or other rights shall be deemed to have
been issued as of the date of determination of the Fair Market Value Per Unit of
such Common Units as hereinafter provided and (2) the aggregate consideration
for such maximum number of additional Common Units shall be deemed to be the
minimum consideration received and receivable by the Company for the issuance of
such additional Common Units pursuant to the terms of such warrants, options or
other rights. If at any time or from time to time the Company shall issue or
sell any Options to subscribe for or purchase Convertible Securities, whether or
not the rights to subscribe for or purchase Convertible Securities thereunder
are immediately exercisable, then for purposes of this Section 10.02, (A) the
maximum number of Convertible Securities issuable pursuant to such Options shall
be deemed to have been issued as of the date of determination as hereinafter
provided, and (B) the aggregate consideration for such maximum number of
Convertible Securities shall be deemed to be the minimum consideration received
and receivable by the Company for the issuance of such Convertible Securities
pursuant to the terms of such Options, and the provisions of Section 10.02(c)
shall apply to such issuance. For purposes of this Section 10.02(b), the
effective date of such adjustment and the date as of which the Fair Market Value
Per Unit shall be computed shall be the earlier of (i) the date on which the
Company shall enter into a firm contract or commitment for the issuance of such
Options and (ii) the date of actual issuance of such Options.
42
(c) Convertible Securities. If at any time or from time to time the
Company shall issue or sell (or be deemed pursuant to Section 10.02(b) to have
issued or sold) any Convertible Securities, whether or not the rights to convert
thereunder are immediately exercisable, and the consideration per Unit for which
additional Common Units may at any time thereafter be issuable pursuant to the
terms of such Convertible Securities (determined in accordance with Section
10.02(e)(ii)(C)) shall be less than the Fair Market Value Per Unit of the Common
Units into which such Convertible Securities are convertible or exchangeable
(determined on the date specified below), then the Company shall issue a number
of Antidilution Units as provided in Section 10.02(a) hereof on the basis that
the maximum number of additional Common Units necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued as of the date of determination of the Fair Market Value Per Unit of such
Common Units as hereinafter provided. For purposes of this Section 10.02(c), the
effective date of such adjustment and the date as of which the Fair Market Value
Per Unit shall be computed shall be the earlier of (i) the date on which the
Company shall enter into a firm contract or commitment for the issuance of such
Convertible Securities and (ii) the date of actual issuance of such Convertible
Securities.
(d) Subsequent Issuances. If at any time after any issuance of
Antidilution Units shall have been made pursuant to Section 10.02(b) on the
basis of the issuance of Options or pursuant to Section 10.02(c) on the basis of
the issuance of Convertible Securities, or after any new issuance of
Antidilution Units shall have been made pursuant to this Section 10.02(d),
(i) such Options or the right of conversion or exchange in
such Convertible Securities shall expire, and a portion of such Options, or the
right of conversion or exchange in respect of a portion of such Convertible
Securities, as the case may be, shall not have been exercised prior to such
expiration, and/or
(ii) in the case of adjustments made pursuant to Section
10.02(b) or 10.02(c), the consideration per Unit for which Common Units are
issuable pursuant to such Options or the terms of such Convertible Securities
shall be irrevocably increased solely by virtue of provisions therein contained
for an automatic increase in such consideration per share upon the arrival of a
specified date or the happening of a specified event,
then such previous issuance of Antidilution Units shall be rescinded and
annulled and the additional Common Units which were deemed to have been issued
by virtue of the computation made in connection with such adjustment shall no
longer be deemed to have been issued by virtue of such computation.
Simultaneously therewith, a recomputation shall be made of the effect of such
warrants, options or rights or Convertible Securities on the determination of
the number of Antidilution Units to be issued, which shall be made on the basis
of:
(A) treating the number of additional Common Units,
if any, theretofore actually issued or issuable pursuant to the previous
exercise of such Options or such right of conversion or exchange as having been
issued on the date of issuance of such Options or such right of conversion or
exchange and, in the case of a recomputation of a calculation originally made
pursuant to Section 10.02(b) or 10.02(c), for the consideration actually
received and receivable therefor, and
43
(B) in the case of a recomputation of a calculation
originally made pursuant to Section 10.02(b) or 10.02(c), treating any such
Options or any such Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of issuance of such
Options or Convertible Securities;
and, if and to the extent called for by the foregoing provisions of this Section
10.02(d) on the basis aforesaid, a new issuance of Antidilution Units shall be
made, such new adjustment shall supersede the previous adjustment so rescinded
and annulled.
(e) Miscellaneous. The following provisions shall be applicable to the
determination of any issuance of Antidilution Units provided above in this
Section 10.02:
(i) The sale or other disposition of any issued Common Units
owned or held by or for the account of the Company or any of its subsidiaries
shall be deemed an issuance thereof.
(ii) (A) To the extent that any additional Common Units or any
Convertible Securities or any Options to subscribe for or purchase any
additional Common Units or any Convertible Securities (1) are issued solely for
cash consideration, the consideration received by the Company therefor shall be
deemed to be the amount of the cash received by the Company therefor, (2) are
offered by the Company for subscription, the consideration received by the
Company shall be deemed to be the subscription price, or (3) are sold to
underwriters or dealers for public offering, the consideration received by the
Company shall be deemed to be the public offering price, in any such case
excluding any amounts paid or receivable for accrued interest or accrued
dividends. To the extent that such issuance shall be for a consideration other
than cash, or partially for cash and partially for other consideration, then,
except as otherwise expressly provided herein, the amount of such consideration
shall be deemed to be the fair market value of such consideration (plus, if
applicable, the amount of such cash), at the time of such issuance.
(B) In case any additional Common Units or any
Convertible Securities or any Options to subscribe for or purchase such
additional Common Units or Convertible Securities shall be issued by the Company
in connection with any merger in which the Company is the survivor, the amount
of consideration therefor shall be deemed to be the fair market value of such
additional Common Units, Convertible Securities, Options issued, as the case may
be.
(C) The consideration for any Common Units issuable
pursuant to the terms of any Convertible Securities shall be equal to (i) the
consideration received by the Company for issuing any Options to subscribe for
or purchase such Convertible Securities, plus (ii) the consideration paid or
payable (or deemed paid, in accordance with Section 10.02(b)) to the Company in
respect of the subscription for or purchase of such Convertible Securities, plus
(iii) the consideration, if any, payable to the Company upon the exercise of the
right of conversion or exchange of such Convertible Securities.
(D) In case of the issuance at any time of any
additional Common Units or Convertible Securities in payment or satisfaction of
any dividends upon any Preferred Units, the Company shall be deemed to have
received for such additional Common Units or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
44
(iii) The issuances required by the preceding paragraphs of
this Section 10.02 shall be made whenever and as often as any specified event
requiring an issuance shall occur, except that the Company shall not be required
to issue fractional Antidilution Units. Any event that would result in an
issuance of a fractional Unit shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 10.02 and
not previously made, would result in the issuance of one or more whole Units.
For the purpose of this section, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(f) Other Action Affecting Common Units. In case at any time or from
time to time the Company shall take any action relating to any class or series
of Common Units other than the Class A Units (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights with
equity features), then, unless in the opinion of the Board such action will not
have a material adverse effect upon the rights of any Holder of Purchased Common
Units (taking into consideration, if necessary, any prior actions which the
Board of Directors deemed not to materially adversely affect the rights of such
Holder), the Company shall issue Antidilution Units in such manner and at such
time as the Board may in good faith determine to be equitable in the
circumstances.
(g) Adjustment Notice. Whenever the Company is to issue Antidilution
Units pursuant to this Section 10.02, unless otherwise agreed by the Required
Holders, the Company shall forthwith obtain a certificate signed by the Board of
Directors of the Company, setting forth, in reasonable detail, the event
requiring the issuance and the method by which such issuance is to be
calculated. The certificate shall set forth, if applicable, a description of the
basis on which the Board determined, as applicable, the Fair Market Value Per
Unit of the Common Units in question and the Purchased Common Units, the fair
market value of any evidences of Indebtedness, shares of stock, other
securities, warrants, other subscription or purchase rights, or other property
or the equitable nature of any adjustment under this Section 10.02 hereof and
the number of Antidilution Units to be issued to each Holder. The Company shall
promptly cause a copy of such certificate to be delivered to each Holder. The
Company shall keep copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by Holder
or any prospective purchaser of any Purchased Common Units if so designated by a
Holder.
(g) No Dilution or Impairment. The Company will not, by amendment of
the LLC Agreement or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, equity exchange, dissolution or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Section 10.02, and will at all times in good faith assist in
the carrying out of all such terms and in taking of all such action as may be
necessary or appropriate to protect the rights of the Holder of each Common Unit
purchased hereunder against dilution or other impairment.
ARTICLE XI
REDEMPTION
----------
SECTION 11.01 Put Rights. (a) Redemption Option Upon the occurrence of
(i) October 17, 2011, each Holder shall have the right, but not the obligation,
to cause the Company to
45
redeem all or any portion of its Preferred Units or (ii) a Change of Control,
provided, that Sections 4.09 and 4.16 of each of the High Yield Note Indenture
and Senior Note Indenture have been complied with, each Holder shall have the
right, but not the obligation, to cause the Company to redeem all or any portion
of its Purchased Units, in each case on the terms and subject to the conditions
of this Section 11.01 by giving written notice thereof (the "Redemption
Notice"). The Redemption Notice shall specify the number of Purchased Units to
be redeemed. In the event the Company or any of its Subsidiaries or any members
of the Company propose to effect any Change of Control, the Company shall give
each Holder written notice thereof not later than thirty (30) days prior to the
proposed date of consummation of such transaction. Upon the Company's receipt of
a Redemption Notice from a Holder, subject to the availability of Available
Funds to effect such redemption as provided in Section 11.01(c), the Company
shall be obligated to redeem all or such portion of each Holder's Purchased
Units subject to the Redemption Notice at the closing therefor described in
Section 11.03.
(b) Redemption Price. The redemption price for the Purchased Units
redeemed by the Company pursuant to this Section 11.01 (the "Redemption Price")
shall be equal to (i) with respect to each Common Unit, the greater of (A) the
amount that would be distributed with respect to such Common Unit if all funds
and assets (valued at book value) of the Company available for distribution were
distributed pursuant to Section 7.1 of the LLC Agreement or (B) the Fair Market
Value per Unit of the Purchased Common Units; and (ii) with respect to each
Series A Preferred Unit, the sum of the Unreturned Series A Preferred Unit
Capital Value of such Series A Preferred Unit plus all Unpaid Series A Preferred
Return accrued thereon through the date of redemption.
(c) Available Funds. Payment of the Redemption Price under this Section
11.01 shall only be out of Available Funds. In the event Available Funds are
insufficient to pay the purchase price for the entire amount of Purchased Units
for which redemption has been requested, then each Holder having elected
redemption may elect pursuant to written notice given to the Company: (i) that
such Holder's redemption rights pursuant to the Redemption Notice shall remain
exercised and the redemption shall be deferred until any of the first five (5)
Business Days after there are sufficient Available Funds to effect such
redemption; provided, that, as and to the extent that there are sufficient
Available Funds to effect such redemption, the Company shall promptly make
partial payments of the Redemption Price to such Holder, in which case there
shall be a series of redemptions, each of which shall take place not more than
five (5) Business Days after there are sufficient Available Funds to effect such
redemption to an extent that would permit such partial payments of the
Redemption Price in increments of not less than Twenty-Five Thousand Dollars
($25,000) or (ii) that the exercise of the redemption rights pursuant to Section
11.01(a) shall be rescinded in whole or in part at the option of such Holder
with the result that such Holder may require the Company to redeem its Purchased
Units at any time thereafter in accordance with the provisions of this Section
11.01 until one year after the date such Holder gives notice to rescind the
exercise of such redemption rights.
SECTION 11.02 Call Rights. (a) Liquidity Event Call. Upon the
occurrence of (i) a Qualified Initial Public Offering or (ii) a Change of
Control, provided, that Sections 4.09 and 4.16 of each of the High Yield Note
Indenture and the Senior Note Indenture have been complied with, the Company
shall have the right, but not the obligation, to purchase all or any part of the
Series A Preferred Units at a purchase price equal to the sum of the Unreturned
Series A Preferred Unit Capital Value of such Series A Preferred Units plus all
Unpaid Series A Preferred Return accrued thereon through the date of redemption
out of Available Funds.
46
(b) General Call Right. In the absence of (i) a Qualified Initial
Public Offering or (ii) a Change of Control and at any time following the third
anniversary of the Closing Date, the Company shall have the right, but not the
obligation, to purchase all or any part of the Series A Preferred Units at a
purchase price equal to the sum of the Unreturned Series A Preferred Unit
Capital Value of such Series A Preferred Units plus all Unpaid Series A
Preferred Return accrued thereon through the date of redemption out of Available
Funds.
(c) Optional Redemption. Any call for redemption to the extent of
Available Funds of the Series A Preferred Units pursuant to this Section 11.02
shall be made, by giving written notice to the holders of the Series A Preferred
Units to be redeemed no less than ten (10) days prior to the date fixed for
redemption, which notice shall specify the number of such Series A Preferred
Units to be redeemed. If less than all the Series A Preferred Units are to be
redeemed, the notice of redemption shall identify the Series A Preferred Units
and portion thereof to be redeemed. Notice of call for redemption having been
given as aforesaid, the amount to be redeemed shall on the date designated in
such notice become due and payable unless such notice is revoked. From and after
such date, unless the Company shall default in payment of the Redemption Price
therefor when so due and payable, the Series A Preferred Return on Series A
Preferred Units shall cease to accrue.
(d) Pro Rata Allocation. Any redemption by the Company of less than all
of the Series A Preferred Units pursuant to this Section 11.02 shall be
allocated among each Holder of Series A Preferred Units, pro rata, based on the
number of Series A Preferred Units held thereby.
SECTION 11.03 Closing. The closing for the redemption or purchase of
the Units under Section 11.01 or 11.02 shall take place on such date as the
parties to the redemption or purchase may mutually agree in writing; provided,
that the closing occurs no later than thirty (30) days after the date (a)
subject to Section 11.01(c), of the final determination of the purchase price in
the case of a redemption or purchase pursuant to Section 11.01, or (b) the
Company has exercised its right to purchase all or part of the Preferred Units
under 11.02. The closing of such redemption or purchase shall take place at the
principal place of business of the Company at 10:00 a.m., local time, or at such
other place and time as the parties to such redemption or purchase may mutually
agree in writing. At the closing:
(a) the party redeeming or selling all or part of its
Purchased Units (the "Selling Holder") shall execute and deliver to the Company
such documents, certificates and other papers as the Company may reasonably
require to effect the transfer and conveyance by assignment of absolute title to
the Company of that portion of the Selling Holder's Purchased Units being
redeemed or purchased (the "Redeemed Interest") free and clear of all Liens
created by such Selling Holder, and the Selling Holder shall so represent and
warrant;
(b) the Company shall purchase the Redeemed Interest by
delivering to the Holder electing redemption the full amount of the purchase
price as determined under Section 11.01 or 11.02, as applicable, and the Company
shall execute and deliver to the Holder electing redemption such documents,
certificates and other papers to effect such transactions as the Holder electing
redemption may reasonably require;
47
(c) both the Company and the Selling Holder shall present to
the other such evidence of the authority of such Person and its agent or
representative, if any, to enter into such transaction as such other party may
reasonably request; and
(d) both the Company and the Selling Holder shall covenant to
execute all such documents and take all such further action as may be necessary
to effect the provisions of, and transactions described in and contemplated by,
the applicable provisions of this Article XI.
ARTICLE XII
EVENTS OF DEFAULT
-----------------
SECTION 12.01 Events of Default. An "Event of Default" shall occur
hereunder upon:
(a) any failure to make any redemption payment pursuant to Article XI
or any Distribution required under Section 7.3 of the LLC Agreement, on any of
the Purchased Units when due, whether upon demand or otherwise;
(b) the delivery of written notice from any Holder to the Company that
any representation or warranty made or deemed made by the Company in this
Agreement, any of the other Transaction Documents or any certificate furnished
by the Company or any Subsidiary at the Closing to the Purchasers shall prove to
be untrue in any material respect as of the date when made, deemed made, or
furnished; provided, that such Event of Default shall be deemed to be cured (i)
upon the written agreement of the Company and the Required Holders; (ii) ninety
(90) days after the date of such written notice, if prior to such date the
Holders have not commenced actively pursuing remedies against the Company
relating to such Event of Default or if, at any time thereafter, the Holders
cease to actively pursue such remedies against the Company or (iii) upon entry
of a final, non-appealable judgment relating to any claim arising out of such
Event of Default;
(c) the Company shall fail to comply with any of the covenants set
forth in Article IX;
(d) default shall occur in any material manner in the observance or
performance by the Company of any of the other covenants and agreements
contained in this Agreement or any of the other Transactions Documents, and such
default shall continue (provided, that any default relating to a failure to
provide a notice required to be provided by any Transaction Document shall be
deemed to be cured upon the provision of such notice even if such notice is
delivered after the time by which such Transaction Document required such notice
to be delivered) for a period of thirty (30) days after the earlier to occur of
(i) the date on which any Holder notifies the Company of any such default and
(ii) the date on which the Company discovers, or reasonably should have
discovered, any such default, or if any such Transaction Document shall
terminate (other than in accordance with its terms or with the written consent
of the Holder) or become void or unenforceable without the written consent of
the Required Holders;
(e) default shall occur with respect to any Indebtedness for borrowed
money in an outstanding principal amount in excess of $5,000,000 or under any
agreement or instrument under or pursuant to which any such Indebtedness may
have been issued, created, assumed, or guaranteed by the
48
Company, and such default shall continue for more than 90 days after the period
of grace, if any, therein specified, if the effect thereof (with or without the
giving of notice or further lapse of time or both) is to accelerate, or to
permit the holders of any such Indebtedness to accelerate, the maturity of any
such Indebtedness; or any such Indebtedness shall be declared due and payable or
be required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof;
(f) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company or any of its Subsidiaries,
excluding Muzak Heart and Soul Foundation, in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against the Company or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Company or any of its Subsidiaries, or over all or a substantial
part of its property, shall have been entered: or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian of
the Company or any of its Subsidiaries for all or a substantial part of its
property: or a warrant of attachment, execution or similar process shall have
been issued against any substantial part of the property of the Company or any
of its Subsidiaries, and any such event described in this clause (ii) shall
continue for sixty (60) days unless dismissed, bonded or discharged;
(g) (i) The Company or any of its Subsidiaries, excluding Muzak Heart
and Soul Foundation, shall have an order for relief entered with respect to it
or shall commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or the
Company or any of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) the Company or any of its Subsidiaries shall be unable, or
shall fail generally, or shall admit in writing its inability, to pay its debts
as such debts become due; or the Board of Directors (or similar governing body)
of the Company or any of its Subsidiaries (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the actions
referred to herein or in Section 12.01(f);
(h) any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $2,000,000
or (ii) in the aggregate at any time an amount in excess of $5,000,000 (in
either case to the extent not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall be
entered or filed against the Company or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of thirty (30) days (or in any event later than five days prior to
the date of any proposed sale thereunder);
(i) the Company shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence or have commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in furtherance
thereof; or
49
(j) any order, judgment or decree shall be entered against the Company
or any of its Subsidiaries decreeing the dissolution or split up of the Company
or any of its Subsidiaries and such order shall remain undischarged or unstayed
for a period in excess of thirty (30) days.
SECTION 12.02 Remedies. If any Event of Default occurs and is
continuing, in addition to all rights and remedies available at law or in
equity, the Series A Preferred Return shall be subject to increase as set forth
in the LLC Agreement and upon the occurrence of a Class A Default or a Class B
Default, subject to the conditions set forth in Section 2 of the Securityholders
Agreement and Section 3.1 of the LLC Agreement, the Holders shall have certain
rights set forth therein.
ARTICLE XIII
INDEMNIFICATION
---------------
SECTION 13.01 Indemnification. In addition to all other sums due
hereunder or provided for in this Agreement, the Company shall indemnify and
hold harmless the Purchaser and its Affiliates and its officers, directors,
agents, employees, subsidiaries, partners and controlling persons (the "Related
Parties" of a Purchaser, and together with the Purchasers, each, an "Indemnified
Party") to the fullest extent permitted by law, from and against any and all
losses, claims, damages (excluding consequential damages; provided, that damages
relating to the diminution in value of any Purchased Unit shall not be deemed to
be consequential damages), expenses (including reasonable fees, disbursements
and other charges of counsel) or other liabilities (collectively, "Losses")
resulting from or arising out of any breach of any representation or warranty,
covenant or agreement of the Company in any Transaction Document, or any legal,
administrative or other actions (including actions brought by the Company or any
equity holders of the Company or derivative actions brought by any Person
claiming through or in the Company's name), proceedings or investigations
(whether formal or informal), based upon, relating to or arising out of any
Transaction Document or the transactions contemplated hereby and thereby, or any
Indemnified Party's role therein or in the transactions contemplated thereby;
provided that the Company shall not be liable under this Section 13.01 to an
Indemnified Party: (a) for any amount paid in settlement of claims without the
Company's prior written consent, (b) to the extent that it is judicially
determined that such Losses resulted primarily from the willful misconduct or
gross negligence of such Indemnified Party or any of its Related Parties or (c)
to the extent that it is judicially determined that such Losses resulted
primarily from the material breach by such Indemnified Party or any of its
Related Parties of any representation, warranty, covenant or other agreement of
such Indemnified Party or any of its Related Parties contained herein or in the
other Transaction Documents; and provided, further, that if and to the extent
that such indemnification is unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of such Losses
which shall be permissible under applicable laws. In connection with the
obligation of the Company to indemnify for expenses as set forth above, the
Company shall, upon presentation of appropriate invoices containing reasonable
detail, reimburse each Indemnified Party for all such expenses (including
reasonable fees, disbursements and other charges of counsel) as they are
incurred by such Indemnified Party; provided, that without limiting the
Company's indemnity obligations hereunder, the Company shall not be required to
reimburse such expenses in connection with any legal action brought by the
Company or any Purchaser (or any of their Related Parties) against any Purchaser
(or any of their Related Parties) or the Company, respectively; provided,
50
further, that if an Indemnified Party is reimbursed hereunder for any expenses,
such reimbursement of expenses shall be refunded to the extent it is judicially
determined that the Losses in question resulted primarily from (i) the willful
misconduct or gross negligence of such Indemnified Party or any of its Related
Parties or (ii) the material breach by such Indemnified Party or any of its
Related Parties of any representation, warranty, covenant or other agreement of
such Indemnified Party or any of its Related Parties contained herein or in any
Transaction Document.
SECTION 13.02 Notification. Each Indemnified Party under this Article
XIII will, promptly after the receipt of notice of the commencement of any
action, investigation, claim or other proceeding against such Indemnified Party
in respect of which indemnity may be sought from the Company under this Article
XIII, notify the Company in writing of the commencement thereof. The omission of
any Indemnified Party so to notify the Company of any such action shall not
relieve the Company from any liability which it may have to such Indemnified
Party (a) other than pursuant to this Article XIII or (b) under this Article
XIII unless, and only to the extent that, such omission results in the Company's
forfeiture of substantive rights or defenses or the Company is otherwise
irrevocably prejudiced in defending such proceeding. In case any such action,
claim or other proceeding shall be brought against any Indemnified Party and it
shall notify the Company of the commencement thereof, the Company shall be
entitled to assume the defense thereof at its own expense, with counsel
reasonably satisfactory to the Indemnified Party. Notwithstanding the Company's
election to appoint counsel to represent the Indemnified Parties in an action,
each Indemnified Party shall have the right to employ separate counsel
(including local counsel), and the Indemnifying Parties shall bear the
reasonable fees, costs and expenses of such separate counsel (and local counsel)
if (i) the use of counsel chosen by the Company to represent the Indemnified
Parties would present such counsel with a conflict of interest, (ii) the
defendants in any such action include both an Indemnified Party and the Company
and any such Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it and/or other Indemnified Parties which are
different from or additional to those available to the Company, (iii) the
Company shall not have employed counsel satisfactory to such Indemnified Party
to represent such Indemnified Party within a reasonable time after notice of the
institution of such action or (iv) the Company shall have authorized the
Indemnified Party to employ separate counsel at the expense of the indemnifying
party. The Company agrees that it will not, without the prior written consent of
the Required Holders, settle, compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of the Purchaser and
each other Indemnified Party from all liability arising or that may arise out of
such claim, action or proceeding. The Company shall not be liable for any
settlement of any claim, action or proceeding effected against an Indemnified
Party without the prior written consent of the Company. The rights accorded to
Indemnified Parties hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise.
51
ARTICLE XIV
MISCELLANEOUS
-------------
SECTION 14.01 Survival. All of the representations, warranties and
agreements made herein shall survive the execution and delivery of this
Agreement, any investigation by or on behalf of the Purchaser, acceptance of the
Purchased Units and payment therefor, or termination of this Agreement.
SECTION 14.02 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopy,
overnight courier service or personal delivery:
(a) if to the Company:
Muzak Holdings LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
with a copy (which will not constitute notice to the
Company) to:
ABRY Partners, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to any Purchaser:
To BACI:
BancAmerica Capital Investors I, L.P.
Bank of America Corporate Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
52
With a copy, which shall not constitute notice, to:
Kennedy, Covington, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
Bank of America Corporate Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To New York Life:
New York Life Capital Partners, L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy, which shall not constitute notice, to:
Office of the General Counsel
New York Life Insurance Company
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Northwestern:
The Northwestern Mutual Life Insurance Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇ / Securities Department
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to an other Holder, to the address provided in writing by such
Holder to the Company.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five (5) Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
SECTION 14.03 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Subject to applicable securities laws, the Purchaser may assign
any of its rights under this Agreement. The Company may not assign any of its
rights under this Agreement without the prior written consent of the Required
Holders.
53
Except as provided in Article XIII, no Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of any of
the Transaction Documents.
SECTION 14.04 Remedies Cumulative. No failure or delay on the part of
the Company or the Purchaser in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. Except as expressly set
forth in this Agreement, the remedies provided for herein are cumulative and are
not exclusive of any remedies that may be available to the Company or the
Purchasers at law, in equity or otherwise.
SECTION 14.05 Amendments, Waivers and Consents. No modification or
amendment of any provision of this Agreement shall be effective against the
Holders or the Company unless such modification or amendment is (a) made in
accordance with the provisions of the Credit and Guaranty Agreement dated as of
March 18, 1999 among Audio Communications Network, LLC (n/k/a Muzak LLC), as
borrower, the Company and certain subsidiaries of Audio Communications Network,
LLC, as guarantors, various lenders, ▇▇▇▇▇▇▇ Sachs Credit Partners L.P., as
syndication agent, Canadian Imperial Bank of Commerce, as administrative agent,
and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P., and CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp. as co-lead
arrangers, as amended, restated, supplemented or otherwise modified from time to
time and (b) made or given in writing and signed by the Company and the Required
Holders. Any consent to any departure of the Company from the terms of any
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by the Company and the Required Holders. Any such
modification, amendment or consent shall be effective only in the specific
instance and for the specific purpose for which made or given
SECTION 14.06 Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 14.07 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 14.08 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
SECTION 14.09 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought in the courts of the State of North Carolina or the State of New
York or of the United States of America for the Western District of North
Carolina or of the United States of America for the Southern District of New
York and hereby expressly submits (on a non-exclusive basis) to the
non-exclusive personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such suit, action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 14.02, such service to
become effective 10 days after such mailing.
54
SECTION 14.10 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
SECTION 14.11 Rules of Construction. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
SECTION 14.12 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Documents, is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement, together with
the exhibits hereto, and the other Transaction Documents supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION 14.13 Certain Expenses. The Company agrees to pay or reimburse
(a) BACI for all reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) in connection with (i) the
negotiation, preparation, execution and delivery of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
thereby and (ii) any amendment, modification or waiver of any of the terms of
this Agreement or the Transaction Documents; and (b) each Holder for (i) all
costs and expenses of such Holder (including, without limitation, reasonable
attorney's fees and expenses) in connection with any default hereunder and any
enforcement proceedings resulting therefrom; and (ii) transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or the
Transaction Documents or any other document referred to herein or therein.
SECTION 14.14 Publicity. Except as may be required by applicable law,
none of the parties hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval by the other parties
hereto (which approval will not be unreasonably withheld). If any announcement
is required by law to be made by any party hereto, prior to making such
announcement such party will deliver a draft of such announcement to the other
parties and shall give the other parties an opportunity to comment thereon.
SECTION 14.15 Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized as
of the date first above written.
MUZAK HOLDINGS LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
----------------------------------------------
Name:
Title: Vice President and General Counsel
BANCAMERICA CAPITAL INVESTORS I, L.P.
By: BANCAMERICA CAPITAL MANAGEMENT I,
L.P., its general partner
By: BACM I GP, LLC, its general partner
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇
_______________________________________
Name: _________________________________
Title: ________________________________
NEW YORK LIFE CAPITAL PARTNERS, L.P.
By: NYLCAP Manager L.L.C., its Investment Manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_____________________________________________
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Its Authorized Representative
56
SCHEDULE 2.01
PURCHASED UNITS
Series A Class A
Purchaser Preferred Units Common Units Purchase Price
--------- --------------- ------------ --------------
BancAmerica Capital Investors I, L.P. 40,000.00 2,582.904 $40,000,000
New York Life Capital Partners, L.P. 30,000.00 1,937.178 $30,000,000
The Northwestern Mutual Life 15,000.00 968.589 $15,000,000
Insurance Company
TOTAL 85,000.00 5,488.671 $85,000,000
