THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT
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This THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT is entered into this
30th day of December 1998 by and between MUSIC TECHNOLOGIES, INC., a Michigan
corporation ("Seller") and MUZAK LIMITED PARTNERSHIP, a Delaware limited
partnership ("Buyer").
R E C I T A L S:
A. The parties entered into an Asset Purchase Agreement dated October
28, 1998, with associated Schedules and Exhibits (collectively the "Asset
Purchase Agreement").
B. The parties amended the Asset Purchase Agreement on November 27,
1998, by entering into an Amendment To Asset Purchase Agreement (`First
Amendment"). Thereafter, the parties further amended the Asset Purchase
Agreement on December 23, 1998, by entering into a Second Amendment To Asset
Purchase Agreement--Extension Agreement ("Second Amendment"). The First
Amendment and the Second Amendment are incorporated herein by reference.
C. The parties wish to amend the Asset Purchase Agreement further to
reflect, among other things, an increase in the Purchase Price, an agreement by
Seller to receive a portion of the Purchase Price over time, an elimination of
the Escrow Fund, and certain other changes.
NOW, THEREFORE, the parties agree to amend the Asset Purchase Agreement
as follows:
1. Schedule 1.1.2, Schedule 1.1.3 and Schedule 2. The final form of
Schedule 1.1.2 (Customer Contracts, including Deferred Payment Contracts), and
Schedule 1.1.3 (a summary list of Useable Inventory), and Schedule 2 (list of
Designated Customers) are attached hereto and incorporated into the Asset
Purchase Agreement.
2. Section 2--Designated Customers. The following sentences are added
at the end of Section 2:
"Notwithstanding the foregoing approval process, Buyer (by entering
into this Third Amendment) hereby approves the terms set forth in those
two redacted contracts which were presented to Buyer's counsel by fax
on December 24, 1998, and Buyer agrees to enter into such contracts
with the other parties thereto, each of whom shall become a Designated
Customer. In the event Buyer rejects any other agreement proposed by
Seller with a Designated Customer, Buyer must advise Seller at the time
of the rejection of the specific reasons for the rejection and specify
the terms on which Buyer would enter into an agreement with such
rejected Designated Customer (the "Acceptable Terms"); thereafter if
Buyer enters into an agreement with such rejected Designated Customer
(the "New Agreement") at any time within one year after the date of
Buyer's rejection of Seller's proposed agreement, which New Agreement
is on terms less favorable to Buyer than the Acceptable Terms, Buyer
shall pay a commission to Seller based upon such New Agreement computed
at the rate set forth in this section 2."
3. Section 3--Purchase Price. Section 3.1 is amended to provide that
the Purchase Price shall be Eleven Million One Hundred Sixty Thousand Dollars
($11,160,000), plus the dollar value of the Usable Inventory, plus or minus the
Adjustment Amount, plus any additions to the Purchase Price pursuant to the
Promissory Note..
In addition, the last sentence of Section 3.1 is deleted and the
following is substituted in its place:
"At the Closing, subject to the terms and conditions of this Agreement,
Buyer shall (a) pay to Seller Seven Million Two Hundred Seventy Thousand Dollars
($7,270,000) (subject to adjustment, if any, set forth in Section 3.1.1), plus
the dollar value of the Useable Inventory, all by wire transfer of immediately
available funds (the "Closing Payment"), (b) deliver Buyer's executed Promissory
Note in the principal amount of $2,550,000 (and otherwise in the form of the
promissory note attached hereto as Exhibit 3.1) (the "Promissory Note"), (c) pay
to Equity Partners, Ltd. the sum of $25,000 and pay to Seyburn Kahn Ginn Bess
Deitch and Serlin, P.C. the sum of $25,000 both by wire transfer and (d) assume
the Assumed Obligations. The Promissory Note shall provide that if it is paid on
or before the Adjustment Date, then $450,000 of the Note may be paid, by Buyer
making a payment of $450,000 to Pacific Northwest Title Company (or other
mutually agreeable third party) as Escrow Agent (the "Escrow Agent") pursuant to
an Escrow Agreement between Buyer, Seller and the Escrow Agent substantially in
the form of Exhibit 3.1 attached hereto; such $450,000 is referred to as the
"Escrowed Funds," and if an escrow account is funded, such Escrow Funds shall be
disbursed in accordance with Section 3.3.
"At the Closing, Buyer shall receive the benefit of revenues earned by
the Seller with respect to the Music Business on or after December 1, 1998;
accordingly, Seller shall prepare a list of invoices rendered by Seller for
services rendered on and after December 1, 1998 with respect to Seller's Music
Business, and for each such invoice which has been paid by the invoice recipient
on the Closing Date, Seller shall credit Buyer by such amount against the
Closing Payment, and for each such invoice which has not been paid on or before
the Closing Date, Seller shall assign the right to collect such invoice to
Buyer."
The Deferred Payment of $1,290,000 shall be paid in accord with Section
3.1.2 of the Agreement.
The Asset Purchase Agreement is further amended to confirm the parties'
agreement that the dollar value of the Useable Inventory is $155,861.00.
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4. Section 3.2.1 Adjustment Amount--Escrowed Funds. The last sentence
of Section 3.2.1 is deleted and the following is hereby substituted in its
place:
"If Seller does not provide Buyer written notice of objection to the
Adjustment Amount, payments shall be made on the Adjustment Date as follows: (1)
if the Adjustment Amount, as calculated above, is a positive number, such amount
shall be paid to Seller on the Adjustment Date (2) If the Adjustment Amount, as
calculated above, is a negative number in excess of negative $990,500, the
difference between the negative number and negative $990,500 shall be either:
(i) paid by Seller to Buyer on the Adjustment Date out of the Escrowed Funds
with the balance of the Escrowed Funds (if any) paid to Seller (if the
Promissory Note has been paid in full prior to the Adjustment Date) or (ii)
treated as a reduction in the principal amount of the Promissory Note (to be
applied to the final payment due under the Promissory Note), up to a maximum of
$450,000."
5. Sale of Muzak Business. A new section 3.4 is hereby added to the
Agreement, which shall read as follows:
"3.4 Payments Due on Sale of Muzak Business. Notwithstanding
anything to the contrary contained herein, upon a Sale of the Muzak Business (as
that term is defined in the Advertising Agreement and the Promissory Note), the
entire outstanding balance of the Promissory Note together with all interest due
thereon (as set forth in the Promissory Note) and that portion of the Deferred
Payment which is attributable to Deferred Payment Contracts (other than
Undocumented Deferred Payment Contracts) shall be due and payable no later than
the closing of the Sale of the Muzak Business. With respect to that portion of
the Deferred Payment attributable to Undocumented Deferred Payment Contracts,
Buyer shall cause the purchaser of the Muzak Business to assume Buyer's
obligations to make the annual payments described in Section 3.1.2 of the
Agreement. In the event of a sale of the Muzak Business which is closed prior to
the Adjustment Date, the Adjustment Amount shall be computed on the Adjustment
Date without regard to the sale of the Muzak Business."
6. Interest And Expenses At Closing. Section 4.1 is further amended to
provide that the interest on the Closing Payment described therein shall be due
and payable on the Closing Date; in addition, on the Closing Date, Buyer shall
reimburse Seller the amount of $117,351.00 (which Buyer and Seller acknowledge
and agree is the amount of the expenses paid by Seller relating to the Music
Business for periods on or after December 1, 1998). If the Closing is extended
beyond December 31, 1998, the reimbursement for expenses of $117,351.00 will be
increased for each day in January to the date of Closing by an amount of $3,786
per day.
7. Section 4.3 Buyer's Deliveries to Seller at Closing. Section 4.3.10,
Section 4.3.11 and Section 4.3.12 are hereby added to Section 4.3 as follows:
"4.3.10. The Promissory Note;
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4.3.11 An opinion of counsel from Weil Gotshal and Manges,
substantially in the form agreed to by the parties prior to the Closing Date,
and as more fully described in the Second Amendment to Purchase Agreement."
4.3.12 An Officer's Certificate signed by Brad Bodenman, Chief
Financial Officer of the Buyer, stating that neither the Buyer's execution and
delivery of the Promissory Note, nor the Buyer's performance under such Note:
(i) will violate any agreement or other obligation arising under any loan or
financing arrangement to which Buyer is subject (including, without limitation,
that certain $100 Million Bond Indenture in favor of First Trust National
Association, Indenture Trustee, dated 10/2/96); or, (ii) will violate any other
agreement or obligation to which Buyer is subject (except for such other
agreements or obligations which Buyer can show are non-material).
8. Advertising Agreement. The form of the Advertising Agreement is
hereby amended to conform to the form of the Advertising Agreement attached
hereto as Exhibit A.
9. Interest on Deferred Payment and Adjustment Amount. Section 3.1.2
and section 3.2 are hereby amended to provide that the Deferred Payment and the
Adjustment Amount, if not paid when due, shall bear interest at the greater of:
(I) 19% per annum; or, (ii) the interest rate (as it changes from time to time)
which would be then prevailing under the Promissory Note (assuming for this
purpose that the Promissory Note remained unpaid at such time). In addition, if
the Deferred Payment and Adjustment Amount are not paid when due, Buyer shall
continue to perform and observe the Affirmative Covenants and Negative Covenants
contained in the Promissory Note until the Adjustment Amount and the Deferred
Payment are paid in full (even if the Promissory Note has been paid prior to the
payment of those two amounts); if Buyer fails to perform and observe such
covenants, then the Adjustment Amount and the Deferred Payment shall be
immediately due and payable.
10. Capitalized Terms. Capitalized terms not otherwise defined in this
Agreement have the same meaning as ascribed to them in the Asset Purchase
Agreement.
11. No Other Modification. Except as expressly modified herein, the
Asset Purchase Agreement (as amended by the First Amendment and the Second
Amendment) shall remain in full force and effect. The provisions of Section 15
(Miscellaneous) of the Asset Purchase Agreement are hereby incorporated by
reference.
12. Counterparts/Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original but all
of which taken together shall constitute one and the same instrument. The
parties agree that a signature of this Agreement obtained by facsimile machine
will be binding as an original.
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IN WITNESS WHEREOF, the parties have signed this Third Amendment to
Asset Purchase Agreement as of the date written above.
MUSIC TECHNOLOGIES, INC.
BY: /s/ Lorraine Golden
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LORRAINE GOLDEN, PRESIDENT
MUZAK LIMITED PARTNERSHIP
BY: /s/ Brad D. Bodenman
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BRAD D. BODENMAN, CHIEF FINANCIAL OFFICER