EXHIBIT 2.3
CONTRIBUTION AGREEMENT
between
Capstar Broadcasting Corporation
and
ACN Holdings, LLC
dated as of
February 19, 1999
TABLE OF CONTENTS
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PAGE
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ARTICLE I
DEFINED TERMS
1.1 Defined Terms....................................................... 2
ARTICLE II
CONTRIBUTION OF ASSETS
2.1 Agreement to Contribute............................................. 12
2.2 Excluded Assets..................................................... 13
2.3 Issuance of Class A Units........................................... 14
2.4 Working Capital Adjustment.......................................... 14
2.5 Acceptance of Assets As Is.......................................... 18
2.6 Assumption of Liabilities and Obligations........................... 18
2.7 Deemed Assignment of Contracts...................................... 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Capstar........................... 19
(a) Organization, Standing and Power............................. 19
(b) Power; Authority; and Enforceability......................... 19
(c) No Conflict; Required Filings and Consents................... 20
(d) Title and Sufficiency of Assets.............................. 20
(e) Third Party Consents......................................... 21
(f) Affiliate Relationships...................................... 21
(g) No Brokers................................................... 21
(h) MRR.......................................................... 21
(k) No Other Representations and Warranties...................... 21
3.2 Representations and Warranties of ACN Holdings...................... 21
(a) Organization, Standing and Power............................. 21
(b) Power; Authority; and Enforceability......................... 22
(c) No Conflict; Required Filings and Consents................... 22
(d) Capitalization............................................... 23
(e) Financial Statements......................................... 23
(f) Absence of Certain Changes or Events......................... 23
i
(g) ABRY Investments.............................................. 24
(h) Material Contracts............................................ 24
(i) Pending and Completed Acquisitions............................ 24
(j) MRR........................................................... 24
(k) Tax Matters................................................... 24
(l) No Brokers.................................................... 25
(m) No Other Representations and Warranties....................... 25
ARTICLE IV
COVENANTS
4.1 Conduct of Business.................................................. 25
4.2 Third Party Consents; Release of Liens............................... 27
4.3 Governmental Consents................................................ 27
4.4 Membership Agreements................................................ 28
4.5 Bridge Loan Conversion............................................... 28
4.6 Transaction Structure................................................ 28
4.7 Employee Matters..................................................... 29
4.8 Access and Information............................................... 29
4.9 Notification of Certain Events....................................... 30
4.10 Public Announcements................................................. 30
4.11 Assistance........................................................... 30
4.12 MLP Merger Agreement................................................. 30
4.13 Additional Agreements................................................ 31
4.14 Receivables.......................................................... 31
4.15 Osborn Healthcare Division........................................... 31
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to each Party's Obligations............................... 31
(a) No Injunctions or Restraints.................................. 31
(b) No Action..................................................... 31
(c) Proceedings or Investigations................................. 32
(d) HSR Act....................................................... 32
(e) Governmental and Regulatory Consents.......................... 32
5.2 Conditions to Obligations of Capstar................................. 32
(a) Representations and Warranties................................ 32
(b) Performance of Obligations.................................... 32
(c) Senior Lender Consent......................................... 32
(e) Legal Opinion................................................. 33
(f) Closing Deliveries............................................ 33
5.3 Conditions to Obligation of ACN Holdings............................. 33
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(a) Representations and Warranties................................ 33
(b) Performance of Obligations.................................... 33
(c) Third Party Consents.......................................... 33
(d) Legal Opinion................................................. 33
(e) Closing Deliveries............................................ 33
ARTICLE VI
CLOSINGS
6.1 Closings............................................................. 34
6.2 Actions to Occur at the First Closing................................ 34
6.3 Actions to Occur at the Second Closing............................... 37
ARTICLE VII
TERMINATION
7.1 Termination.......................................................... 39
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of ACN Holdings...................................... 40
8.2 Indemnification of Capstar........................................... 40
8.3 Defense of Third-Party Claims........................................ 40
8.4 Direct Claims........................................................ 41
8.5 Limitation on Indemnification........................................ 42
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties........................... 42
9.2 Fees and Expenses.................................................... 42
9.3 Assignment; Amendment................................................ 43
9.4 Waiver of Compliance................................................. 43
9.5 Specific Performance................................................. 43
9.6 Parties in Interest.................................................. 43
9.7 Notices.............................................................. 43
9.8 Entire Agreement..................................................... 44
9.9 Governing Law........................................................ 44
9.10 Interpretation....................................................... 45
9.11 Counterparts......................................................... 45
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9.12 Further Assurances................................................... 45
9.13 Severability......................................................... 45
9.14 No Liability......................................................... 45
Exhibits
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Exhibit A -- Form of LLC Agreement
Exhibit B -- Form of Omaha Lease Agreement
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of SCA Lease Agreement
Exhibit E -- Form of Securityholders Agreement
Exhibit F -- Form of Bill of Sale and Assignment for the First Closing
Exhibit G -- Form of Assumption Agreement for the First Closing
Exhibit H -- Form of Bill of Sale and Assignment for the Second Closing
Exhibit I -- Form of Assumption Agreement for the Second Closing
Schedules
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Schedule 1.1(jjj) -- FCC Licenses
Schedule 1.1(xxx) -- Leased Real Property
Schedule 1.1(kkkk) -- Personal Property
Schedule 2.1 -- Assumed Contracts
Schedule 3.1(f) -- Affiliate Relationships
Schedule 3.1(g) -- MRR Calculation
Schedule 3.2(d) -- Capitalization of ACN Holdings
Schedule 3.2(f) -- Absence of Certain Changes or Events
Schedule 3.2(g) -- Abry Investments
Schedule 3.2(h) -- Material Contracts
Schedule 3.2(i) -- Pending and Completed Acquisitions
Schedule 3.2(k) -- Tax Matters
Schedule 4.1(b) -- ACN Holdings Conduct of Business
Schedule 4.1(c) -- Capstar Conduct of Business
Schedule 4.7(a) -- Continuing Employees
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CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as
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of February 19, 1999, by and between Capstar Broadcasting Corporation, a
Delaware corporation ("Capstar"), and ACN Holdings, LLC, a Delaware limited
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liability company ("ACN Holdings").
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R E C I T A L S
- - - - - - - -
A. Capstar desires to contribute, and ACN Holdings desires to accept and
acquire those certain Assets (as hereinafter defined) in exchange for units
representing a fractional part of the membership interests in ACN Holdings of
all unitholders having the rights and obligations specified with respect to
"Class A Units" in that certain Amended and Restated Limited Liability Company
Agreement of ACN Holdings to be entered into by Capstar in substantially the
form of Exhibit A attached hereto (the "LLC Agreement").
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B. The Assets of the Atlanta Muzak Franchise (as hereinafter defined) and
of the Ft. Myers Muzak Franchise (as hereinafter defined) are currently owned
by one or more Subsidiaries of Capstar and, upon the consummation of the
Triathlon Acquisition (as hereinafter defined), the Assets of the Omaha Muzak
Franchise (as hereinafter defined) shall be owned by one or more Subsidiaries
of Capstar, and, immediately prior to each Closing (as hereinafter defined), the
Assets to be contributed to ACN Holdings at such Closing will be distributed
(each, a "Capstar Distribution") by the applicable Subsidiaries of Capstar to
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Capstar via one or more property dividends so that Capstar may contribute such
Assets to ACN Holdings at such Closing as provided herein.
C. Immediately after each Closing, ACN Holdings will contribute the
Assets received from Capstar at such Closing to Audio Communications Network,
LLC, a Delaware limited liability company and wholly-owned subsidiary of ACN
Holdings ("ACN") or to the successor entity of the MLP Merger (as hereinafter
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defined), which will be a wholly-owned Subsidiary of ACN Holdings.
A G R E E M E N T S
- - - - - - - - - -
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE 1.
DEFINED TERMS
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1.1 Defined Terms. The following terms shall have the following
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meanings in this Agreement:
(a) "ABRY" means ABRY Broadcast Partners III, L.P.
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(b) "ACN" has the meaning set forth in Recital C. of this
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Agreement.
(c) "ACN Accountants" means the Boston, Massachusetts office of
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PricewaterhouseCoopers LLP.
(d) "ACN Documents" has the meaning set forth in Section 3.2(i).
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(e) "ACN Estimated Closing Balance Sheet" has the meaning set
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forth in Section 2.4(c).
(f) "ACN Holdings" has the meaning set forth in the first
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paragraph of this Agreement.
(g) "ACN Indemnified Costs" means any and all damages, losses,
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claims, liabilities, demands, charges, suits, penalties, costs, and expenses
(including court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
ACN Indemnified Parties incurs and that arise out of (i) any breach or default
by Capstar of any representation, warranty, covenant or agreement under this
Agreement or any agreement or document executed in connection herewith, (ii) any
obligations or liabilities of Capstar or any of its Subsidiaries (including
under any contract or agreement) not expressly assumed by ACN Holdings pursuant
to the terms hereof or (iii) any Employee Benefit Plan obligation.
(h) "ACN Indemnified Parties" means ACN Holdings and each
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officer, director, employee, consultant, member, and Affiliate of ACN Holdings.
(i) "ACN MRR" means $1,385,600, which was determined as provided
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in Schedule 3.1(g).
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(j) "ACN Working Capital Statement" has the meaning set forth in
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Section 2.4(g).
(k) "Affiliate" means, with respect to any person, any other
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person controlling, controlled by or under common control with such person. For
purposes of this definition and this
2
Agreement, the term "control" (and correlative terms) means the power, whether
by contract, equity ownership or otherwise, to direct the policies or management
of a person.
(l) "Agreement" has the meaning set forth in the first paragraph
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of this Agreement.
(m) "Assets" means all the tangible and intangible assets owned,
leased or licensed by Capstar as of immediately prior to the applicable Closing
Date (after giving effect to the applicable Capstar Distributions) that are
principally used or held for principal use in connection with the business or
operations of any of the Contributed Franchises, including the assets described
in Section 2.1(b), but specifically excluding therefrom the Excluded Assets.
(n) "Assumed Contracts" means those Contracts set forth on
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Schedule 2.1 and all other contracts entered into or assumed by Capstar or any
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of its Subsidiaries in the ordinary course of business before or after the date
of this Agreement that are principally used or held for principal use in
connection with the business or operations of any of the Contributed Franchises.
(o) "Atlanta Muzak Franchise" means that certain business
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consisting of the marketing and distribution of subscription music services
through local franchises pursuant to those two certain Muzak License Agreements,
each dated as of January 1, 1991, as amended, between Muzak Limited Partnership
and Osborn Sound & Communications of Georgia, Inc., a predecessor entity to
Osborn Entertainment.
(p) "Bridge Loan" means the $40,817,757.69 in principal amount
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Promissory Note issued on October 6, 1998 by ACN to ABRY.
(q) "Bridge Loan Conversion" has the meaning set forth in
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Section 4.5.
(r) "Bridge Loan Payment" has the meaning set forth in Section
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4.5.
(s) "business" means, with respect to Capstar, the business of
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the Atlanta Muzak Franchise and the Ft. Myers Muzak Franchise and, to the extent
within Capstar's control, the Omaha Muzak Franchise.
(t) "Business Day" means any day, other than (i) a Saturday or
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Sunday or (ii) a day on which commercial banks in New York, New York or Dallas,
Texas are authorized or required to be closed.
(u) "Capstar" has the meaning set forth in the first paragraph
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of this Agreement.
(v) "Capstar Accountants" means the Austin, Texas office of
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PricewaterhouseCoopers LLP.
(w) "Capstar Atlanta-Ft. Myers MRR" means $356,900, which was
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determined as provided in Schedule 3.1(g).
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(x) "Capstar Atlanta-Ft. Myers MRR Ratio" means a fraction, the
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numerator of which shall be the Capstar Atlanta-Ft. Myers MRR and the
denominator of which shall be the sum of the ACN MRR and the Capstar Atlanta-Ft.
Myers MRR.
(y) "Capstar Combined MRR Ratio" means a fraction, the numerator
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of which shall be the sum of the Capstar Atlanta-Ft. Myers MRR and the Capstar
Omaha MRR and the denominator of which shall be the sum of the ACN MRR, the
Capstar Atlanta-Ft. Myers MRR and the Capstar Omaha MRR.
(z) "Capstar Credit Agreement" means the Credit Agreement dated
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as of May 29, 1998, as amended, among Capstar Radio Broadcasting Partners, Inc.
as the borrower, Capstar, Capstar Broadcasting Partners, Inc. and the financial
institutions party thereto.
(aa) "Capstar Distribution" has the meaning set forth in Recital
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B. to this Agreement.
(bb) "Capstar Estimated First Closing Balance Sheet" has the
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meaning set forth in Section 2.4(a).
(cc) "Capstar Estimated Second Closing Balance Sheet" has the
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meaning set forth in Section 2.4(b).
(dd) "Capstar Estimated First Closing WC Target" means if the
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Omaha Muzak Franchise is contributed to ACN Holdings at the First Closing, then
the amount equal to the quotient of the amount equal to the product of the
Capstar Combined MRR Ratio multiplied times the Estimated ACN Working Capital
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divided by the amount equal to one (1) minus the Capstar Combined MRR Ratio or
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if the Omaha Muzak Franchise is not contributed to ACN Holdings at the First
Closing, then the amount equal to the quotient of the amount equal to the
product of the Capstar Atlanta-Ft. Myers MRR Ratio multiplied times the
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Estimated ACN Working Capital divided by the amount equal to one (1) minus the
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Capstar Atlanta-Ft. Myers MRR Ratio.
(ee) "Capstar Estimated Second Closing WC Target" means the
amount equal to the quotient of the amount equal to the product of the Capstar
Omaha MRR Ratio multiplied times the Estimated ACN Working Capital (or, if
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determined, the Final ACN Working Capital) divided by the amount equal to one
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(1) minus the Capstar Omaha MRR Ratio.
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(ff) "Capstar Final First Closing WC Target" means if the Omaha
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Muzak Franchise is contributed to ACN Holdings at the First Closing, then the
amount equal to the quotient of the amount equal to the product of the Capstar
Combined MRR Ratio multiplied times the Final ACN Working Capital divided by the
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amount equal to one (1) minus the Capstar Combined MRR Ratio or if the Omaha
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Muzak Franchise is not contributed to ACN Holdings at the First Closing, then
the amount equal to the quotient of the amount equal to the product of the
Capstar Atlanta-Ft. Myers MRR Ratio multiplied times the Final ACN Working
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Capital divided by the amount equal to one (1) minus the Capstar Atlanta-Ft.
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Myers MRR Ratio.
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(gg) "Capstar Final Second Closing WC Target" means the amount
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equal to the quotient of the amount equal to the product of the Capstar Omaha
MRR Ratio multiplied times the Final ACN Working Capital divided by the amount
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equal to one (1) minus the Capstar Omaha MRR Ratio.
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(hh) "Capstar Indemnified Costs" means any and all damages,
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losses, claims, liabilities, demands, charges, suits, penalties, costs, and
expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding) that
any of the Capstar Indemnified Parties incurs and that arise out of any breach
or default by ACN Holdings of any representation, warranty, covenant or
agreement under this Agreement or any agreement or document executed in
connection herewith, the items indemnified against pursuant to Section 4.11 and
except in any Capstar Indemnified Party's capacity as a direct or indirect
holder or owner of any equity securities of ACN Holdings (or any of its
successors), the waiver by ACN Holdings of the conditions to Closing set forth
in Section 5.3(c).
(ii) "Capstar Indemnified Parties" means Capstar and each
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officer, director, employee, consultant, member, and Affiliate of Capstar (other
than ACN Holdings or any of its Subsidiaries).
(jj) "Capstar Omaha MRR" means $62,900, which was determined as
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provided in Schedule 3.1(g).
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(kk) "Capstar Omaha MRR Ratio" means a fraction, the numerator of
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which shall be the Capstar Omaha MRR and the denominator of which shall be the
ACN MRR and the Capstar Omaha MRR.
(ll) "Capstar's Expenses" has the meaning set forth in Section
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9.2.
(mm) "Capstar First Closing Working Capital Statement" has the
meaning set forth in Section 2.4(f).
(nn) "Choses in Action" means a right to receive or recover
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property, debt, or damages on a cause of action principally related to the
Assets or any of the Contributed Franchises, whether pending or not and whether
arising in contract, tort or otherwise. The term shall include rights to
indemnification, damages for breach of warranty or any other event or
circumstance, judgments, settlements, and proceeds from judgments or
settlements.
(oo) "Class A Unit" has the meaning set forth in Recital A. to
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this Agreement.
(pp) "Closing" has the meaning set forth in Section 6.1.
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(qq) "Closing Date" has the meaning set forth in Section 6.1.
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5
(rr) "Consents" means all governmental consents and approvals and
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all consents and approvals of third parties, in each case that are necessary in
order to transfer the Assets to ACN Holdings and otherwise to consummate the
transactions contemplated hereby.
(ss) "Continuing Employee" has the meaning set forth in Section
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4.7.
(tt) "Contracts" means all agreements, contracts, or other
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binding commitments or arrangements, written or oral (including any amendments
and other modifications thereto), to which Capstar or any of its Subsidiaries
will be a party or otherwise bound as of the applicable Closing Date and which
principally affect or principally relate to the Assets or the business or
operations of any of the Contributed Franchises.
(uu) "Contributed Franchise Financial Statements" has the meaning
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set forth in Section 3.1(j).
(vv) "Contributed Franchises" means, collectively, the Atlanta
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Muzak Franchise, the Ft. Myers Muzak Franchise and the Omaha Muzak Franchise.
(ww) "Contribution" has the meaning set forth in Section 2.1(a).
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(xx) "Conversion Principal Amount" has the meaning set forth in
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Section 4.5.
(yy) "Cure Period" has the meaning set forth in Section
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7.1(b)(i).
(zz) "Employee Benefit Plan" means any "employee benefit plan"
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within the meaning of Section 3(3) of ERISA and any bonus, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, severance, disability, death benefit,
hospitalization or insurance plan providing benefits to any present or former
employee or contractor of Capstar or any member of the ERISA Group maintained by
any such entity or as to which any such entity has any liability or obligation.
(aaa) "ERISA" means the Employee Retirement Income Security Act of
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1974, as amended.
(bbb) "ERISA Group" means the collective reference to Capstar and
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any other trades or businesses under common control with Capstar within the
meaning of Section 4001(b)(1) of ERISA.
(ccc) "Estimated ACN Working Capital" has the meaning set forth in
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Section 2.4(c).
(ddd) "Estimated First Closing Capstar Working Capital" has the
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meaning set forth in Section 2.4(a).
(eee) "Estimated Second Closing Capstar Working Capital" has the
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meaning set forth in Section 2.4(b).
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(fff) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(ggg) "Excluded Assets" has the meaning set forth in Section 2.2.
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(hhh) "FCC" means the Federal Communications Commission.
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(iii) "FCC Consents" has the meaning set forth in Section 4.3.
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(jjj) "FCC Licenses" means all of the licenses, permits and other
------------
authorizations issued by the FCC and all applications, if any, to the FCC
relating to or used in the business or operations of the Contributed Franchises,
including the licenses, permits and other authorizations issued by the FCC which
are listed on Schedule 1.1(jjj) hereto, together with any pending applications
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therefor and renewals, extensions or modifications thereof and any additions
thereto between the date hereof and the applicable Closing Date.
(kkk) "Final ACN Balance Sheet" has the meaning set forth in
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Section 2.4(g).
(lll) "Final First Closing Capstar Balance Sheet" has the meaning
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set forth in Section 2.4(f).
(mmm) "Final Second Closing Capstar Balance Sheet" has the meaning
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set forth in Section 2.4(i).
(nnn) "Final ACN Working Capital" has the meaning set forth in
-------------------------
Section 2.4(i).
(ooo) "Final First Closing Capstar Working Capital" has the
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meaning set forth in Section 2.4(i).
(ppp) "First Closing" has the meaning set forth in Section 6.1.
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(qqq) "First Closing Date" has the meaning set forth in Section
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6.1.
(rrr) "Ft. Myers Muzak Franchise" means that certain business
-------------------------
consisting of the marketing and distribution of subscription music services
through a local franchise pursuant to that certain Muzak License Agreement dated
as of January 1, 1991, as amended, between Muzak Limited Partnership and Osborn
Sound & Communications of Florida, Inc., a predecessor entity to Osborn
Entertainment.
(sss) "GAAP" means generally accepted accounting principles in the
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United States.
(ttt) "Governmental Entity" means any governmental department,
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commission, board, bureau, agency, court or other instrumentality of the United
States or any state, county, parish or municipality, jurisdiction, or other
political subdivision thereof.
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(uuu) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvement
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Act of 1976, as amended.
(vvv) "Indemnified Parties" means the ACN Indemnified Parties or
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the Capstar Indemnified Parties, as applicable.
(www) "Intellectual Property" means (i) all patents, patent
---------------------
applications and patent disclosures; all inventions (whether or not patentable
and whether or not reduced to practice); (ii) all trademarks, service marks,
trade names, logos, slogans, and Internet domain names, including, with respect
to the Omaha Muzak Franchise, the trademark and trade name "Business Music
Service," and all the goodwill associated with each of the foregoing; (iii) all
mask works; (iv) all registered and unregistered statutory and common law
copyrights; (v) all registrations, applications and renewals for any of the
foregoing; and (vi) all trade secrets, confidential information, ideas,
formulae, compositions, know-how, manufacturing and production processes and
techniques, research information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, documentation and
software, financial business and marketing plans, customer and supplier lists
and related information and marketing materials, in the case of clauses (i)
through (vi), principally relating to the business or operations of any of the
Contributed Franchises.
(xxx) "Leased Real Property" means all leasehold interests,
easements, licenses, rights to access and rights-of-way which are solely used or
held for sole use in the business and operations of the Contributed Franchises
(excluding any use of any such leasehold interests, easements, licenses, rights
to access and rights-of-way to the Osborn Healthcare Division of Capstar)
including the leasehold interests leased pursuant to the leases listed on
Schedule 1.1(xxx) hereto, with any additions between the date hereof and the
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applicable Closing Date.
(yyy) "Licenses" means the FCC Licenses and all Permits issued by
any Governmental Entity and relating to or used or held for use in the business
and operations of any of the Contributed Franchises, with any additions thereto
between the date hereof and the applicable Closing Date.
(zzz) "Liens" means, collectively, all liens, pledges, claims,
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security interests, restrictions, mortgages, deeds of trust, tenancies, and
other possessory interests, conditional sale or other title retention
agreements, assessments, easements, rights of way, covenants, restrictions,
rights of first refusal, defects in title, encroachments, and other burdens,
options or encumbrances of any kind.
(aaaa) "LLC Agreement" has the meaning set forth in Recital A. to
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this Agreement.
(bbbb) "Material Adverse Effect" means a material adverse effect on
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the business, operations, properties (taken as a whole), condition (financial or
otherwise), results of operations, assets (taken as a whole), liabilities, or
prospects of (i) with respect to Capstar, the Contributed Franchises, taken as a
whole, and (ii) with respect to ACN Holdings, ACN Holdings and its Subsidiaries,
taken as a whole.
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(cccc) "MLP Merger" means the pending merger of Muzak Limited
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Partnership with and into ACN pursuant to the MLP Merger Agreement.
(dddd) "MLP Merger Agreement" means that certain Agreement and Plan
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of Merger dated as of January 29, 1999, among ACN Holdings, ACN, Muzak Limited
Partnership, MLP Acquisition L.P., and Music Holdings Corp.
(eeee) "Omaha Lease Agreement" means the Office Lease Agreement to
---------------------
be entered into by and between an indirect wholly-owned subsidiary of Capstar
and ACN or the successor entity of the MLP Merger, which will be a wholly-owned
Subsidiary of ACN Holdings, in substantially the form attached as Exhibit B
---------
hereto.
(ffff) "Omaha Muzak Franchise" means that certain business
---------------------
consisting of the marketing and distribution of subscription music services
through a local franchise pursuant to that certain Muzak License Agreement dated
as of October 25, 1996, by and between Muzak Limited Partnership and Business
Music Service, the business name of the Omaha Muzak Franchise.
(gggg) "Osborn Entertainment" means Osborn Entertainment
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Enterprises Corporation, a Delaware corporation and indirect wholly-owned
subsidiary of Capstar.
(hhhh) "Permits" means permits, registrations, licenses,
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authorizations, and the like.
(iiii) "Permitted Liens" means, with respect to any person, Liens
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for taxes, assessments or other governmental charges with reserve or levies that
are not yet due or payable or that are being contested in good faith by such
person in an appropriate proceeding, statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen, repairmen and other Liens
imposed by law and on a basis consistent with past practice for amounts not yet
due, Liens incurred or deposits made in the ordinary course of business and on a
basis consistent with past practice in connection with workers' compensation,
unemployment insurance or other types of social security, nonconsensual Liens
incurred in the ordinary course of business and on a basis consistent with past
practice securing obligations or liabilities which are not material individually
or in the aggregate to the conduct of the business of such persons and prior to
the applicable Closing, Liens related to or arising out of the Capstar Credit
Agreement.
(jjjj) "person" means an individual, corporation, limited liability
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company, partnership, joint venture, association, trust, unincorporated
organization or other entity.
(kkkk) "Personal Property" means all of the machinery, equipment,
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computer programs, computer software, tools, furniture, furnishings, leasehold
improvements, office equipment, inventories, supplies, plant, spare parts, and
other tangible or intangible personal property, whether owned or leased, which
are principally used or held for principal use in the business or operations of
any of the Contributed Franchises, including the personal property listed on
Schedule 1.1(kkkk) hereto, together with any additions thereto between the date
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hereof and the Closing Date.
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(llll) "Referee" has the meaning set forth in Section 2.4(i).
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(mmmm) "Registration Rights Agreement" means the Second Amended and
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Restated Registration Rights Agreement to be entered into at the First Closing
among ACN Holdings, MEM Holdings, LLC, Capstar and the other parties named
therein in substantially the form attached as Exhibit C hereto.
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(nnnn) "SCA Lease Agreement" means the SCA Lease Agreement to be
-------------------
entered into by and between an indirect wholly-owned subsidiary of Capstar and
ACN or to the successor entity of the MLP Merger, which will be a wholly-owned
Subsidiary of ACN Holdings, in substantially the form attached as Exhibit D
---------
hereto.
(oooo) "Second Closing" has the meaning set forth in Section 6.1.
--------------
(pppp) "Second Closing Date" has the meaning set forth in Section
-------------------
6.1.
(qqqq) "Securityholders Agreement" means the Securityholders
-------------------------
Agreement to be entered into at the First Closing among ACN Holdings, MEM
Holdings, LLC and Capstar in substantially the form attached as Exhibit E
---------
hereto.
(rrrr) "Securities Act" means the Securities Act of 1933.
--------------
(ssss) "Subsidiary" means, with respect to any person, any person
----------
of which such person owns, directly or indirectly, fifty percent (50%) or more
of the equity securities the holders of which are generally entitled to vote for
the election of the board of directors or similar governing body of such person.
(tttt) "Taxes" means taxes, charges, fees, imposts, levies,
-----
interest, penalties, additions to tax or other assessments or fees of any kind
(including any such assessments or fees imposed upon a transferee or successor
in interest to assets), including, but not limited to, income, corporate,
capital, excise, property, sales, use, turnover, value added and franchise
taxes, deductions, withholdings and customs duties, imposed by any Governmental
Entity and any payments with respect thereto required under any tax-sharing
agreement.
(uuuu) "Triathlon Acquisition" means Capstar's pending acquisition
---------------------
of Triathlon Broadcasting Company pursuant to that certain Agreement and Plan of
Merger dated as of July 23, 1998, as amended, among Capstar Radio Broadcasting
Partners, Inc., TBC Radio Acquisition Corp. and Triathlon Broadcasting Company.
(vvvv) "Transaction Documents" means, collectively, this Agreement,
---------------------
the LLC Agreement, the Registration Rights Agreement, the Securityholders
Agreement, the Omaha Lease Agreement, the SCA Lease Agreement(s) and each other
agreement, certificate or other instrument as is required to be executed and
delivered in accordance herewith or therewith.
10
(wwww) "WC Adjustment Amount" means an amount equal to the sum of
--------------------
the WC Difference and the WC Target Difference, which sum shall be increased or
decreased, as applicable, to give effect to any payment made by Capstar or ACN
Holdings pursuant to Section 2.4(d), in the case of the First Closing, or
Section 2.4(e), in the case of the Second Closing.
(xxxx) "WC Difference" means (i) for the First Closing, an amount
-------------
equal to the Estimated First Closing Capstar Working Capital minus the Final
First Closing Capstar Working Capital and (ii) for the Second Closing, an amount
equal to the Estimated Second Closing Capstar Working Capital minus the Final
Second Closing Capstar Working Capital.
(yyyy) "WC Target Difference" means (i) for the First Closing, an
--------------------
amount equal to the Capstar Final First Closing WC Target minus the Capstar
Estimated First Closing WC Target and (ii) for the Second Closing, an amount
equal to the Capstar Final Second Closing WC Target minus the Capstar Estimated
Second Closing WC Target.
(zzzz) "Working Capital" means, as of the applicable date, with
---------------
respect to each Contributed Franchise, without duplication, the sum of the
current assets of the Contributed Franchise (excluding any current assets
described in Section 2.2) minus the sum of the ordinary course current
-----
liabilities of the Contributed Franchise being assumed by ACN Holdings
(including an appropriate reserve for any fees payable retroactively to
Broadcast Music, Inc. under the Broadcast Music, Inc. Agreement referred to on
Schedule 2.1) and with respect to ACN Holdings and its Subsidiaries, without
- ------------
duplication, the sum of the current assets of ACN Holdings and its Subsidiaries
of the business acquired from Audio Communications Network, Inc. and its
Subsidiaries on October 6, 1998 (the "ACN Business"), pursuant to the Asset
------------
Purchase Agreement dated as of October 6, 1998, between ACN and DMA Holdings
Statutory Trust (including in such amount any current assets of a nature similar
to that described in Section 2.2(a)), minus the sum of the current liabilities
-----
of ACN Holdings and its Subsidiaries of the ACN Business, excluding from such
amount (i) any expenses incurred but not paid by ACN Holdings and its
Subsidiaries in connection with the MLP Merger and any amounts payable to
Capstar in accordance with Section 2.4 or 9.2 and (ii) all amounts payable under
the Bridge Loan other than the Bridge Loan Payment, and the Bridge Loan Payment.
Working Capital for ACN shall exclude intercompany receivables and payables.
Except as otherwise provided herein, items included in the calculation of
Working Capital shall be determined in accordance with GAAP.
11
ARTICLE II
CONTRIBUTION OF ASSETS
----------------------
2.1 Agreement to Contribute.
-----------------------
(a) Subject to the terms and conditions set forth in this
Agreement, Capstar shall contribute, assign, transfer and deliver to ACN
Holdings, and ACN Holdings shall accept and acquire, at the times indicated
below, all of the Assets (the "Contribution"):
------------
(i) at the First Closing, all of the Assets of the Atlanta
Muzak Franchise, the Ft. Myers Muzak Franchise and, if the Triathlon Acquisition
has been consummated before the First Closing Date, the Omaha Muzak Franchise;
and
(ii) at the Second Closing, all of the Assets of the Omaha
Muzak Franchise if such Assets were not previously contributed to ACN Holdings
at the First Closing.
(b) The Assets to be assigned, transferred and delivered by
Capstar hereunder shall include the following:
(i) All current assets of the Contributed Franchises as
determined in accordance with GAAP;
(ii) All Personal Property;
(iii) All Leased Real Property;
(iv) All Licenses;
(v) All Assumed Contracts;
(vi) All Intellectual Property;
(vii) Each Contributed Franchise's technical information and
data, machinery and equipment warranties (to the extent such warranties are
assignable), if any, maps, plans, diagrams, blueprints and schematics relating
to such Contributed Franchise, if any, including filings with any Governmental
Entity which relate to the Contributed Franchise, and goodwill relating to the
foregoing;
(viii) All books and records principally relating to each
Contributed Franchise, including (A) an executed copy of each Assumed Contract,
or if no executed agreement exists, summaries of each Assumed Contract
transferred pursuant to clause (v) above and (B) all records, if any, required
by any Governmental Entity to be kept by a Contributed Franchise, subject to the
right of Capstar to copy and have such books and records made reasonably
available to Capstar
12
for tax and other legitimate organization purposes for a period of four years
after the applicable Closing;
(ix) To the extent assignable, all computer programs and
software, and all rights and interests of Capstar in and to any computer
programs and software principally used or held for principal use in connection
with the business or operations of the Contributed Franchises;
(x) All Choses in Action; and
(xi) All intangible assets of Capstar principally relating to
the Contributed Franchises not specifically described above, including goodwill,
and all other assets principally used or held for principal use in connection
with the business or operations of the Contributed Franchises.
2.2 Excluded Assets. The Excluded Assets shall consist of the
---------------
following:
(a) Capstar's and its Subsidiaries' cash on hand and all other
cash in any of Capstar's and its Subsidiaries' bank or savings accounts; notes
receivable, letters of credit or other similar items of Capstar and its
Subsidiaries; any stocks, bonds, certificates of deposit and similar investments
of Capstar and its Subsidiaries; and any other cash equivalents of Capstar and
its Subsidiaries;
(b) Capstar's books and records relating to internal corporate
matters and any other books and records not related to any Contributed Franchise
or the business or operations of any Contributed Franchise;
(c) Any claims, rights and interest of Capstar in and to any
refunds of Taxes or fees of any nature whatsoever, which, in each case, relate
solely to any period ending prior to the applicable Closing Date;
(d) All Employee Benefit Plans and all assets or funds held in
trust, or otherwise, associated with or used in connection with the Employee
Benefit Plans;
(e) All Choses in Action, if any, relating to Taxes;
(f) All tangible and intangible personal property disposed of or
consumed in the ordinary course of business consistent with past practice
between the date of this Agreement and the applicable Closing Date, or as
otherwise permitted hereunder; and
(g) Any collective bargaining agreement, any other Contract not
included in the Assumed Contracts, and all Contracts that have terminated or
expired prior to the applicable Closing Date in the ordinary course of business
consistent with past practice and as otherwise permitted hereunder.
13
2.3 Issuance of Class A Units.
-------------------------
(a) At the First Closing, ACN Holdings shall deliver to Capstar a
certificate or certificates representing a number of Class A Units against
Capstar's transfer to ACN Holdings of the Assets of the Atlanta Muzak Franchise
and the Ft. Myers Muzak Franchise and, if applicable, the Omaha Muzak Franchise
in exchange therefor. The number of Class A Units that Capstar shall be entitled
to receive (without duplication) shall be such number of Class A Units as may be
necessary to represent the Capstar Combined MRR Ratio of the number of fully-
diluted Class A Units outstanding immediately after the First Closing and
calculated after giving effect to (x) the issuance of additional Class A Units
to MEM Holdings, LLC, Joseph Koff and David Unger as contemplated by Notes A, B,
and C to Schedule 3.2(d), (y) the Bridge Loan Conversion and the issuance of
---------------
other Class A Units pursuant to Section 4.5 and (z) the issuance of Class A
Units to Capstar hereunder (including the Class A Units which would be issued to
Capstar if the Assets of the Omaha Muzak Franchise were transferred to ACN
Holdings at the First Closing whether or not such Assets are transferred to ACN
Holdings at the First Closing), but excluding from such fully-diluted Class A
Units any Common Units (as defined in the LLC Agreement) issued or to be issued
by ACN Holdings pursuant to Section 2.3 of the MLP Merger Agreement and any
Class A Units issued or to be issued to William Boyd or any other employee of
Muzak Limited Partnership (in the case of any other employee of Muzak Limited
Partnership, after consultation with Capstar) as contemplated herein or in a
schedule hereto; provided that if the Assets of the Omaha Muzak Franchise are
not transferred to ACN Holdings at the First Closing, then the number of Class A
Units otherwise issuable to Capstar under this Section 2.3(a) shall be reduced
by the number of Class A Units related to the contribution of the Omaha Muzak
Franchise.
(b) At the Second Closing, if any, ACN Holdings shall deliver to
Capstar a certificate or certificates representing a number of Class A Units
against Capstar's transfer to ACN Holdings of the Assets of the Omaha Muzak
Franchise in exchange therefor. The number of Class A Units that Capstar shall
be entitled to receive shall equal the number of Class A Units that were
withheld from issuance to Capstar at the First Closing because the Assets of the
Omaha Muzak Franchise were not then contributed to ACN Holdings.
2.4 Working Capital Adjustment.
--------------------------
(a) No later than the close of business on the fifth Business Day
before the First Closing Date, Capstar shall deliver to ACN Holdings an
estimated balance sheet, as of immediately prior to the First Closing Date, for
the Contributed Franchises being contributed at the First Closing, which balance
sheet shall only be required to reflect a reasonable, good faith estimate of the
assets, liabilities and the other line items on the balance sheet included in
the calculation of Working Capital for the Contributed Franchises being
contributed at the First Closing, as of immediately prior to the First Closing
Date (the "Capstar Estimated First Closing Balance Sheet"). Capstar (after good
---------------------------------------------
faith consultation with ACN Holdings and the Capstar Accountants) shall make a
reasonable, good faith estimate of Working Capital for such Contributed
Franchises based on the Capstar Estimated First Closing Balance Sheet
("Estimated First Closing Capstar Working Capital") as soon as reasonably
-----------------------------------------------
practicable, but in no event later than the close of business on the third
Business Day prior to the First Closing Date. The Estimated First Closing
Capstar Working Capital shall be set forth in a
14
written statement executed by Capstar (the execution and delivery of which shall
not in any manner prejudice the rights of any party under this Agreement). The
Capstar Estimated First Closing Balance Sheet shall be prepared by Capstar in
accordance with GAAP, subject to adjustments that would be made after audit,
except as otherwise contemplated by this Agreement. ACN Holdings shall, and ACN
Holdings shall request the ACN Accountants, to consult in good faith with
Capstar and the Capstar Accountants, when preparing the Capstar Estimated First
Closing Balance Sheet.
(b) If the Omaha Muzak Franchise is not contributed to ACN
Holdings at the First Closing, then no later than the close of business on the
fifth Business Day before the Second Closing Date, Capstar shall deliver to ACN
Holdings an estimated balance sheet, as of immediately prior to the Second
Closing Date, for the Omaha Muzak Franchise, which balance sheet shall only be
required to reflect a reasonable, good faith estimate of the assets, liabilities
and the other line items on the balance sheet included in the calculation of
Working Capital for the Omaha Muzak Franchise to be contributed at the Second
Closing, as of immediately prior to the Second Closing Date (the "Capstar
-------
Estimated Second Closing Balance Sheet"). Capstar (after good faith consultation
- --------------------------------------
with ACN Holdings and the Capstar Accountants) shall make a reasonable, good
faith estimate of Working Capital for the Omaha Muzak Franchise based on the
Capstar Estimated Second Closing Balance Sheet ("Estimated Second Closing
------------------------
Capstar Working Capital") as soon as reasonably practicable, but in no event
- -----------------------
later than the close of business on the third Business Day prior to the Second
Closing Date. The Estimated Second Closing Capstar Working Capital shall be set
forth in a written statement executed by Capstar (the execution and delivery of
which shall not in any manner prejudice the rights of any party under this
Agreement). The Capstar Estimated Second Closing Balance Sheet shall be prepared
by Capstar in accordance with GAAP, subject to adjustments that would be made
after audit, except as otherwise contemplated by this Agreement. ACN Holdings
shall, and ACN Holdings shall request the ACN Accountants, to consult in good
faith with Capstar and the Capstar Accountants, when preparing the Capstar
Estimated Second Closing Balance Sheet.
(c) No later than the close of business on the fifth Business Day
before the First Closing Date, ACN Holdings shall deliver to Capstar an
estimated balance sheet for ACN Holdings and its Subsidiaries as of immediately
prior to the First Closing Date, which balance sheet shall only be required to
reflect a reasonable, good faith estimate of the assets, liabilities and the
other line items on the balance sheet included in the calculation of Working
Capital for ACN Holdings and its Subsidiaries, as of immediately prior to the
First Closing Date (except that such balance sheet shall reflect the Bridge Loan
Payment) (the "ACN Estimated Closing Balance Sheet"). ACN Holdings (after good
-----------------------------------
faith consultation with Capstar and the ACN Accountants) shall make a
reasonable, good faith estimate of Working Capital for ACN Holdings and its
Subsidiaries based on the ACN Estimated Closing Balance Sheet ("Estimated ACN
-------------
Working Capital") as soon as reasonably practicable, but in no event later than
- ---------------
the close of business on the third Business Day prior to the First Closing Date.
The Estimated ACN Working Capital shall be set forth in a written statement
executed by ACN Holdings (the execution and delivery of which shall not in any
manner prejudice the rights of any party under this Agreement). The ACN
Estimated Closing Balance Sheet shall be prepared by ACN in accordance with
GAAP, subject to adjustments that would be made after audit, except as otherwise
contemplated by this Agreement. Capstar shall, and Capstar shall request the
Capstar Accountants, to consult in good faith with ACN Holdings and the ACN
Accountants, when preparing the ACN Estimated Closing Balance Sheet.
15
(d) At the First Closing, (i) if the Estimated First Closing
Capstar Working Capital exceeds the Capstar Estimated First Closing WC Target,
then ACN Holdings shall pay to Capstar an amount in cash equal to the amount of
such excess and (ii) if the Capstar Estimated First Closing WC Target exceeds
the Estimated First Closing Working Capital, then Capstar shall pay to ACN
Holdings an amount in cash equal to the amount of such excess.
(e) At the Second Closing, if any, (i) if the Estimated Second
Closing Capstar Working Capital exceeds the Capstar Estimated Second Closing WC
Target (or, if known, the Capstar Final Second Closing WC Target), then ACN
Holdings shall pay to Capstar an amount in cash equal to the amount of such
excess and (ii) if the Capstar Estimated Second Closing WC Target (or, if known,
the Capstar Final Second Closing WC Target) exceeds the Estimated Second Closing
Capstar Working Capital, then Capstar shall pay to ACN Holdings an amount in
cash equal to the amount of such excess.
(f) No later than thirty (30) days after the First Closing Date,
ACN Holdings shall cause to be prepared and delivered to Capstar a balance sheet
for the Contributed Franchises that were contributed at the First Closing as of
immediately prior to the First Closing Date (but not giving effect to any
payment made pursuant to Section 2.4(d)), which balance sheet shall only be
required to reflect the assets, liabilities and the other line items on the
balance sheet included in the calculation of Working Capital for the Contributed
Franchises that were contributed to ACN Holdings at the First Closing, which
shall be reviewed by the ACN Accountants (the "Final First Closing Capstar
---------------------------
Balance Sheet") which review shall include therein a statement of Working
- --------------
Capital for such Contributed Franchises (the "Capstar First Closing Working
-----------------------------
Capital Statement"). The Final First Closing Capstar Balance Sheet shall be
- -----------------
prepared in accordance with GAAP, except as otherwise contemplated by this
Agreement, and shall fairly present the financial position, as of immediately
prior to the First Closing Date, of the Contributed Franchises that were
contributed to ACN Holdings at the First Closing (but not giving effect to any
payment made pursuant to Section 2.4(d)).
(g) No later than thirty (30) days after the First Closing Date,
ACN Holdings shall cause to be prepared and delivered to Capstar a balance sheet
for ACN Holdings and its Subsidiaries as of immediately prior to the First
Closing (except that such balance sheet shall reflect the Bridge Loan Payment),
which balance sheet shall only be required to reflect the assets, liabilities
and the other line items on the balance sheet included in the calculation of
Working Capital for ACN Holdings and its Subsidiaries, which shall be reviewed
by the ACN Accountants (the "Final ACN Balance Sheet") which review shall
------------------------
include therein a statement of Working Capital for ACN Holdings and its
Subsidiaries (the "ACN Working Capital Statement"). The Final ACN Balance Sheet
-----------------------------
shall be prepared in accordance with GAAP, except as otherwise contemplated by
this Agreement, and shall fairly present the financial position of ACN Holdings
and its Subsidiaries as of immediately prior to the First Closing (except that
such balance sheet shall reflect the Bridge Loan Payment).
(h) If the Omaha Muzak Franchise is not contributed to ACN
Holdings at the First Closing, then no later than thirty (30) days after the
Second Closing Date, ACN Holdings shall cause
16
to be prepared and delivered to Capstar a balance sheet for the Omaha Muzak
Franchise as of immediately prior to the Second Closing Date (but not giving
effect to any payment made pursuant to Section 2.4(e)), which balance sheet
shall only be required to reflect the assets, liabilities and the other line
items on the balance sheet included in the calculation of Working Capital for
the Omaha Muzak Franchise, which shall be reviewed by the ACN Accountants (the
"Final Second Closing Capstar Balance Sheet") which review shall include therein
------------------------------------------
a statement of Working Capital for the Omaha Muzak Franchise (the "Capstar
-------
Second Closing Working Capital Statement"). The Final Second Closing Capstar
- ----------------------------------------
Balance Sheet shall be prepared in accordance with GAAP, except as otherwise
contemplated by this Agreement, and shall fairly present the financial position,
as of immediately prior to the Second Closing Date, of the Omaha Muzak Franchise
(but not giving effect to any payment made pursuant to Section 2.4(e)).
(i) If within fifteen (15) days following delivery of each of the
Capstar First Closing Working Capital Statement, the ACN Working Capital
Statement and the Capstar Second Closing Working Capital Statement to Capstar,
Capstar has not given ACN Holdings written notice of its objection to such
statement (such notice must contain a statement describing, in reasonable
detail, the amount in dispute and the basis of such objection), then the Working
Capital reflected thereon shall be deemed final and conclusive and shall be the
"Final First Closing Capstar Working Capital," the "Final ACN Working Capital"
------------------------------------------- -------------------------
and the "Final Second Closing Capstar Working Capital," respectively. If Capstar
--------------------------------------------
gives such written notice of objection within such 15-day period, then, unless
the parties reach an agreement with respect to the issues in dispute within 20
days after such notice, the issues in dispute will be submitted for resolution
to a "big five" accounting firm to be selected jointly by Capstar and ACN
Holdings within the following fifteen days (after such five day period) or, if
they fail to agree, such accounting firm shall be the Seattle, Washington office
of Deloitte & Touche (the "Referee"). The Referee shall determine the Final
-------
First Closing Capstar Working Capital, the Final ACN Working Capital and/or the
Final Second Closing Capstar Working Capital, as the case may be, within thirty
(30) days after the dispute is submitted to it. If issues in dispute are
submitted to the Referee for resolution, each party will furnish to the Referee
such work papers and other documents and information relating to the disputed
issues as the Referee may request and are available to that party or its
subsidiaries (or its independent public accountants) and will be afforded the
opportunity to present to the Referee any material relating to the determination
of the Final First Closing Capstar Working Capital, the Final ACN Working
Capital or the Final Second Closing Capstar Working Capital, as the case may be,
and to discuss such determination with the Referee and the determination by the
Referee of the Final First Closing Capstar Working Capital, the Final ACN
Working Capital and the Final Second Closing Capstar Working Capital, as set
forth in a written notice delivered to all parties by the Referee, will be
binding and conclusive on the parties.
(j) Within five Business Days after the final determination of the
Final First Closing Capstar Working Capital and Final ACN Working Capital, (i)
if the WC Adjustment Amount for the First Closing is a positive number, then
Capstar shall pay to ACN Holdings an amount in cash equal to such WC Adjustment
Amount and (ii) if the WC Adjustment Amount for the First Closing is a negative
number, then ACN Holdings shall pay to Capstar an amount in cash equal to the
absolute value of such WC Adjustment Amount.
17
(k) Within five Business Days after the final determination of the
Final ACN Working Capital and Final Second Closing Capstar Working Capital, (i)
if the WC Adjustment Amount for the Second Closing is a positive number, then
Capstar shall pay to ACN Holdings an amount in cash equal to such WC Adjustment
Amount and (ii) if the WC Adjustment Amount for the Second Closing is a negative
number, then ACN Holdings shall pay to Capstar an amount in cash equal to the
absolute value of such WC Adjustment Amount.
(l) Capstar and ACN Holdings agree to give each other reasonable
access to relevant records, facilities and personnel of the other and, as
applicable, to cause their respective auditors to permit the other party and its
authorized representatives to examine all working papers, schedules and other
documentation used or prepared by such auditors in regard to the calculations
described in this Section 2.4; provided, however, that prior to the consummation
-------- -------
of the Triathlon Acquisition, such rights of access and to information shall be
limited in respect of the Omaha Muzak Franchise to the contractual rights of
access and to information regarding the Omaha Muzak Franchise that Capstar or an
Affiliate thereof has with Triathlon Broadcasting Company.
2.5 Acceptance of Assets As Is. ACN Holdings shall accept from
--------------------------
Capstar, and Capstar shall contribute the Assets free and clear of all Liens,
except Permitted Liens, but otherwise AS IS, and, except as expressly provided
herein, without any representation or warranty as to the condition,
merchantability or suitability for a particular purpose of any of the Assets,
and ACN Holdings acknowledges that Capstar, except as expressly provided herein,
is not making any representation or warranty of any kind with respect thereto.
2.6 Assumption of Liabilities and Obligations. As of the applicable
-----------------------------------------
Closing Date, ACN Holdings shall assume and undertake to pay, discharge and
perform all current liabilities of the Contributed Franchises as determined in
accordance with GAAP but only to the extent included in the Final First Closing
Capstar Working Capital and/or the Final Second Closing Capstar Working Capital,
as applicable, and the obligations and liabilities of Capstar under the Assumed
Contracts, whether or not relating to the time period beginning on or arising
out of events occurring on or after the applicable Closing Date. Notwithstanding
the foregoing sentence, the following obligations and liabilities of Capstar and
its Subsidiaries shall remain and be the obligation and liability solely of
Capstar and its Subsidiaries: obligations or liabilities under any Contract not
included in the Assumed Contracts, obligations or liabilities under any Assumed
Contract for which a Consent, if required, has not been obtained as of the
applicable Closing Date, and any unpaid Taxes or Employee Benefit Plan
obligations. Other than as specified in the first sentence of this Section 2.6,
ACN Holdings, directly or indirectly, shall assume no liabilities or obligations
of Capstar and shall not be liable therefor. This Section 2.6 is not intended to
and shall not benefit any person other than Capstar and ACN Holdings. Nothing in
this Section 2.6 shall create or be construed as creating any third party
beneficiary right in any person. Notwithstanding anything contained herein to
the contrary, none of the liabilities or obligations to be assumed by ACN
Holdings pursuant to the terms of this Agreement (including pursuant to the
assumption of the obligations and liabilities under the Assumed Contracts) shall
include any liabilities or obligations arising out of indebtedness for borrowed
money, installment payment or deferred purchase price liabilities or
obligations, liabilities or obligations evidenced by any note, bond, debenture
or other debt security or capital lease liabilities or obligations.
18
2.7 Deemed Assignment of Contracts. To the extent that the assignment
------------------------------
hereunder of any of the Assumed Contracts shall require the Consent of any other
party which has not been obtained (or in the event that any of the same shall be
non-assignable), neither this Agreement nor any actions taken hereunder shall
constitute an assignment or an agreement to assign if such assignment or
attempted assignment would constitute a breach thereof or result in a loss or
diminution thereof; provided, however, that Capstar shall cooperate, at ACN
Holdings' expense, with ACN Holdings to establish a reasonable arrangement
designed to provide ACN Holdings with the benefits and burdens of any Assumed
Contract, including appointing ACN Holdings to act as its agent to perform all
of Capstar's obligations under such Assumed Contract and to collect and promptly
remit to ACN Holdings all compensation received by Capstar or any of its
Subsidiaries pursuant to such Assumed Contract and to enforce, for the account
and benefit of ACN Holdings, any and all rights of Capstar or any of its
Subsidiaries against any other person arising out of the breach or cancellation
of such Assumed Contract by such other person or otherwise (any and all of which
arrangements shall constitute, as between the parties hereto, a deemed
assignment or transfer); provided, that from and after Closing, Capstar shall
have no liability to ACN Holdings in the event that any Assumed Contract
requiring Consent to assignment hereunder (or which by its terms is non-
assignable) is terminated. Upon transfer of the Assets to ACN, all references to
ACN Holdings in this Section 2.7 shall thereafter refer to the successor entity
of the MLP Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties of Capstar. Capstar represents and
-----------------------------------------
warrants to ACN Holdings as follows:
(a) Organization, Standing and Power. Capstar is a corporation
--------------------------------
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and authority
to own, lease, and operate its properties and to carry on its business as
now being conducted.
(b) Power; Authority; and Enforceability. Capstar has all
------------------------------------
requisite corporate power and authority to enter into each Transaction
Document to which it is or will be a party and to consummate the
transactions contemplated by each such Transaction Document. Capstar's
execution, delivery and performance of each Transaction Document to which
it is or will be a party has been duly and validly authorized by all
necessary corporate action on the part of Capstar. Each Transaction
Document to which Capstar is or will be a party has been duly executed and
delivered or, when executed and delivered in accordance herewith or
therewith, will be duly executed and delivered by Capstar and, assuming
such Transaction Document constitutes or, upon execution and delivery,
will constitute a valid and binding obligation of the other party(ies)
thereto (if any), enforceable against Capstar in accordance with its
terms, except to the extent that such enforcement may be subject to (i)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, (ii) general principles of equity, including
19
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether such enforcement is sought in a proceeding at law
or in equity) and in the case of the Registration Rights Agreement,
federal and state securities laws and public policy considerations as to
any rights to indemnity or contribution thereunder.
(c) No Conflict; Required Filings and Consents. The execution and
------------------------------------------
delivery of the Transaction Documents by Capstar do not and the
performance by Capstar of the transactions contemplated hereby or thereby
will not, subject to obtaining the consents, approvals, authorizations,
and permits and making the filings described in this Section 3.1(c),
Section 4.2 or on Schedule 2.1, violate, conflict with, or result in any
------------
breach of any provision of Capstar's amended and restated certificate of
incorporation or bylaws, except for the execution, delivery and
performance of the Omaha Lease Agreement, violate, conflict with, or
result in a violation or breach of, or constitute a default (with or
without due notice or lapse of time or both) under, or permit the
termination of, or result in the acceleration of, or entitle any party to
accelerate any obligation, or result in the loss of any benefit, or give
any person the right to require any security to be repurchased, or give
rise to the creation of any Lien, upon any of the Assets under any of the
terms, conditions, or provisions of any loan or credit agreement, note,
bond, mortgage, indenture, or deed of trust, or any license, lease,
agreement, or other instrument or obligation to which Capstar or any of
its Subsidiaries is a party or by which or to which it or any of the
Assets may be bound or subject, or violate any order, writ, judgment,
injunction, decree, statute, law, rule, or regulation, of any Governmental
Entity applicable to Capstar or any of its Subsidiaries or by which or to
which any of the Assets is bound or subject, except as would not
reasonably be expected to have a Material Adverse Effect with respect to
the Contributed Franchises, taken as a whole, or materially impair the
ability of Capstar to consummate the transactions contemplated by the
Transaction Documents in accordance with the terms hereof and thereof. No
Consent of any Governmental Entity is required by or with respect to
Capstar in connection with the execution and delivery of this Agreement or
any of the other Transaction Documents by Capstar or the consummation of
the transactions contemplated hereby or thereby, except for (i) the filing
of a premerger notification report under the HSR Act and the expiration or
termination of any waiting period in connection therewith, (ii) the FCC
Consents (as contemplated by Section 4.3 hereof) and notification to the
FCC upon consummation of the transactions contemplated by this Agreement
and (iii) applicable requirements, if any, of the Securities Act and the
Exchange Act and the rules and regulations thereunder and state securities
or blue sky laws.
(d) Title and Sufficiency of Assets. Immediately prior to each
-------------------------------
Closing, Capstar will have good title to, or a valid leasehold or license
interest in, all of the Assets to be contributed to ACN Holdings at such
Closing, and, at the applicable Closing, none of the Assets to be
contributed to ACN Holdings at such Closing, will be subject to any Liens,
except for Permitted Liens. The Assets and Excluded Assets include all
assets that are principally used or held for principal use in the business
or operations of the Contributed Franchises as currently conducted.
20
(e) Third Party Consents. Schedule 2.1 identifies as to each Assumed
-------------------- ------------
Contract as of the date hereof whether the consent of the other party
thereto is required to consummate the transactions contemplated hereby.
(f) Affiliate Relationships. Except for the agreements listed on
-----------------------
Schedule 3.1(f), as of the date hereof there are no agreements or other
---------------
arrangements involving any of the Contributed Franchises and Capstar or any
of its Affiliates. True and complete copies of any such agreements have
been provided to ACN Holdings, and, as of the date hereof, neither Capstar
nor any of its Affiliates has entered into or agreed to any amendment or
modification of or material waiver of rights under such agreements or
arrangements.
(g) No Brokers. No person acting on behalf of Capstar in connection
----------
with the transactions contemplated herein or in any other Transaction
Document is or will be entitled to any brokerage fee, commission, finder's
fee or financial advisory fee, directly or indirectly, from Capstar.
(h) MRR. The Capstar Atlanta-Ft. Myers MRR and the Capstar Omaha MRR
---
reflect monthly recurring revenue earned in the ordinary course of
business, excluding revenues which are distributed to other franchises, by
the Contributed Franchises as of October 15, 1998.
(i) Employees. None of the employees who are employed in the
---------
operation of the Contributed Franchises are subject to any collective
bargaining agreement or any similar type of agreement.
(j) Financial Statements. Capstar has delivered to ACN Holdings
--------------------
copies of (i) the unaudited balance sheet of the Atlanta Muzak Franchise
and the Ft. Myers Muzak Franchise as of December 31, 1998, (ii) the
unaudited balance sheet of the Omaha Muzak Franchise as of December 31,
1998, and (iii) the unaudited statement of income of the Contributed
Franchises for the year ending December 31, 1998 (collectively, the
"Contributed Franchise Financial Statements"). The Contributed Franchise
------------------------------------------
Financial Statements were prepared, in all material respects, in accordance
with GAAP, consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments.
(k) No Other Representations and Warranties. Except for the
---------------------------------------
representations and warranties made by Capstar as expressly set forth in
this Agreement or in any certificate or document delivered pursuant to this
Agreement, neither Capstar nor any of its Affiliates has made and shall not
be construed as having made to ACN Holdings or to any Affiliate thereof any
representation or warranty of any kind.
3.2. Representations and Warranties of ACN Holdings. ACN Holdings
----------------------------------------------
represents and warrants to Capstar as follows:
(a) Organization, Standing and Power. ACN Holdings is a limited
--------------------------------
liability company duly organized, validly existing and in good standing
under the laws of the State
21
of Delaware and has all requisite power and authority to own, lease, and
operate its properties and to carry on its business as now being conducted.
(b) Power; Authority; and Enforceability. ACN Holdings has all
------------------------------------
requisite power and authority to enter into each Transaction Document to
which it is or will be a party and to consummate the transactions
contemplated by each such Transaction Document. ACN Holdings' execution,
delivery and performance of each Transaction Document to which it is or
will be a party has been duly and validly authorized by all necessary
limited liability company action on the part of ACN Holdings. Each
Transaction Document to which ACN Holdings is or will be a party has been
duly executed and delivered or, when executed and delivered in accordance
herewith or therewith, will be duly executed and delivered by ACN Holdings
and, assuming such Transaction Document constitutes or, upon execution and
delivery, will constitute a valid and binding obligation of the other
party(ies) thereto (if any), enforceable against ACN Holdings in accordance
with its terms, except to the extent that such enforcement may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether such enforcement is sought in a proceeding at law or in equity) and
in the case of the Registration Rights Agreement, federal and state
securities laws and public policy considerations as to any rights to
indemnity or contribution thereunder.
(c) No Conflict; Required Filings and Consents. The execution and
------------------------------------------
delivery of the Transaction Documents by ACN Holdings do not and the
performance by ACN Holdings of the transactions contemplated hereby or
thereby will not, subject to obtaining the consents, approvals,
authorizations, and permits and making the filings described in this
Section 3.2(c), (i) violate, conflict with, or result in any breach of any
provision of ACN Holdings' certificate of formation, limited liability
company agreement, members agreement or other constitutive documents, (ii)
violate, conflict with, or result in a violation or breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or result in the acceleration of, or
entitle any party to accelerate any obligation, or result in the loss of
any benefit, or give any person the right to require any security to be
repurchased, or give rise to the creation of any Lien, upon any of the
properties of ACN Holdings or any of its Subsidiaries under any of the
terms, conditions, or provisions of any loan or credit agreement, note,
bond, mortgage, indenture, or deed of trust, or any license, lease,
agreement, or other instrument or obligation to which ACN Holdings or any
of its Subsidiaries is a party or by which or to which it or any of its
properties may be bound or subject, or (iii) violate any order, writ,
judgment, injunction, decree, statute, law, rule, or regulation, of any
Governmental Entity applicable to ACN Holdings or any of its Subsidiaries
or by which or to which any of its properties is bound or subject, except
as would not reasonably be expected to (A) have a Material Adverse Effect
with respect to ACN Holdings and its Subsidiaries, taken as a whole or (B)
materially impair the ability of ACN Holdings to consummate the
transactions contemplated by the Transaction Documents in accordance with
the terms hereof and thereof. No Consent of any Governmental Entity is
required by or with respect to ACN Holdings in connection with the
execution and
22
delivery of this Agreement or any of the other Transaction Documents by ACN
Holdings or the consummation of the transactions contemplated hereby or
thereby, except for (i) the filing of a premerger notification report under
the HSR Act and the expiration or termination of any waiting period in
connection therewith, (ii) the FCC Consents (as contemplated by Section 4.3
hereof) and notification to the FCC upon consummation of the transactions
contemplated by this Agreement and (iii) applicable requirements, if any,
of the Securities Act and the Exchange Act and the rules and regulations
thereunder and state securities or blue sky laws.
(d) Capitalization. The capitalization of ACN Holdings immediately
--------------
after the First Closing and assuming the closing of the MLP Merger has
occurred shall be as set forth on Schedule 3.2(d) hereto. Except as
---------------
expressly provided in this Agreement and except for the Transaction
Documents and the ACN Documents (as herein defined), as of the date hereof,
there is no existing option, warrant, call, right, commitment or other
agreement to which ACN Holdings or any of its Affiliates is a party
requiring, and there is no membership interest or other equity security of
ACN Holdings outstanding which upon conversion or exchange would require,
the issuance by ACN Holdings or any of its Affiliates of any additional
membership interests or other equity securities of ACN Holdings or ACN or
other securities convertible into, exchangeable for or evidencing the
rights to subscribe for or purchase, a membership interest or other equity
security of ACN Holdings or ACN. The Class A Units issuable to Capstar
pursuant to the terms hereof, when issued, will be duly authorized, validly
issued, fully paid and nonassessable; will not be issued in violation of
any preemptive or similar rights; and, upon execution and delivery to the
Secretary of ACN Holdings of the LLC Agreement or a written undertaking to
be bound by the terms and conditions of the LLC Agreement, Capstar will be
a member of ACN Holdings and deemed listed as such on the books and records
of ACN Holdings.
(e) Financial Statements. ACN Holdings has delivered to Capstar
--------------------
copies of the unaudited balance sheet of ACN as of December 31, 1998,
together with the unaudited statement of operations of ACN for the period
from October 7, 1998 through December 31, 1998 (collectively, the "ACN
---
Financial Statements"). The ACN Financial Statements were prepared, in all
--------------------
material respects, in accordance with GAAP, consistently applied, subject
to the absence of footnote disclosures and to normal year-end adjustments.
(f) Absence of Certain Changes or Events. ACN Holdings and ACN were
------------------------------------
organized for the purpose of acquiring the assets formerly of Audio
Communications Network, Inc. and its Subsidiaries pursuant to the terms and
conditions of the Asset Purchase Agreement dated as of October 6, 1998,
between ACN and DMA Holdings Statutory Trust, and prior to the consummation
of such acquisition neither ACN Holdings nor ACN were engaged in any other
business or operating activities. Since October 6, 1998 to the date hereof,
except as set forth on Schedule 3.2(f) or as contemplated by this
---------------
Agreement, neither ACN Holdings nor ACN has done any of the following:
(i) (A) declared, set aside or paid any distributions (whether
in cash, equity securities or other property) in respect of its
membership interests or other equity securities; or (B) except from
current or former employees of ACN Holdings
23
or ACN, redeemed, purchased or otherwise acquired any of its
membership interests or other equity securities or any other
securities or obligations convertible into or exercisable or
exchangeable for any such membership interests or equity securities;
(ii) entered into any material transaction with ABRY, its
partners or employees or any of their respective Affiliates (other
than David Unger, Joseph Koff, ACN Holdings or any of ACN Holdings'
Subsidiaries); or
(iii) incurred any indebtedness for borrowed money or issued any
debt securities or assumed, granted, guaranteed or endorsed, or
otherwise as an accommodation become responsible for, the obligations
of any person, or made any loans or advances (other than advances of
expenses to employees in the ordinary course of business) of cash in
excess of $100,000 in the aggregate.
(g) ABRY Investments. Schedule 3.2(g) sets forth all equity or debt
---------------- ---------------
investments made by ABRY and its Affiliates (other than David Unger, Joseph
Koff, ACN Holdings or any of ACN Holdings' Subsidiaries) in ACN Holdings
and ACN through the date hereof.
(h) Material Contracts. Except for the agreements on Schedule 3.2(h)
------------------ ---------------
and the Transaction Documents (collectively, the "ACN Documents"), as of
-------------
the date hereof there are no agreements or other arrangements with respect
to the voting, sale or transfer of any membership interests or other equity
securities of ACN Holdings or ACN to which ACN Holdings, ACN or, to the
knowledge of ACN Holdings, any member of ACN Holdings is a party. True and
complete copies of the ACN Documents have been provided to Capstar, and, as
of the date hereof, neither ACN Holdings nor ACN has entered into or agreed
to any amendment or modification of or material waiver of rights under,
except as expressly provided in the MLP Merger Agreement, as expressly
provided herein or as set forth on Schedule 3.2(h), the ACN Documents.
---------------
(i) Pending and Completed Acquisitions. Schedule 3.2(i) sets forth a
---------------------------------- ---------------
true and complete list of all pending and completed acquisitions of Muzak
franchises (other than the MLP Merger) since October 6, 1998 to the date
hereof, including the cash purchase price and transaction costs incurred or
expected to be incurred in connection therewith (the "Acquisition Costs").
-----------------
(j) MRR. The ACN MRR reflects monthly recurring revenue earned in
---
the ordinary course of business, excluding revenues which are distributed
to other franchises, by ACN as of October 15, 1998.
(k) Tax Matters. Except as set forth on Schedule 3.2(k), (i) all
----------- ---------------
material returns, statements, reports and forms relating to Taxes required
to be filed with any taxing authority by, or with respect to ACN Holdings
and/or ACN (collectively, the "ACN Returns") have been duly and timely
filed in accordance with applicable laws; (ii) ACN Holdings and/or ACN have
timely paid all material Taxes due and payable, whether or not shown on any
ACN Return, and the ACN Returns, in all material respects, currently and
completely reflect
24
the income, business, assets, operations, activities and the status of ACN
Holdings and ACN; (iii) ACN Holdings and ACN have made, in all material
respects, provision for all Taxes payable by ACN Holdings and/or ACN for
which no ACN Return has yet been filed; (iv) as of the date hereof, there
are no material Liens for Taxes upon any property or asset of ACN Holdings
or ACN, except for Liens for Taxes not yet due or with respect to matters
being contested by ACN Holdings or ACN in good faith; (v) the charges,
accruals and reserves for Taxes with respect to ACN Holdings and ACN as
reflected in the ACN Financial Statements were adequate under GAAP to cover
the liabilities for Taxes accruing through the date thereof; and (vi) as of
the date hereof, there is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to ACN Holdings or ACN in
respect of any Tax where there is a reasonable possibility of an adverse
determination which could reasonably be expected to have a Material Adverse
Effect with respect to ACN Holdings and its Subsidiaries, taken as a whole.
(l) No Brokers. No person acting on behalf of ACN Holdings or any of
----------
its Affiliates in connection with the transactions contemplated herein or
in any other Transaction Document is or will be entitled to any brokerage
fee, commission, finder's fee or financial advisory fee, directly or
indirectly, from ACN Holdings.
(m) No Other Representations and Warranties. Except for the
---------------------------------------
representations and warranties made by ACN Holdings as expressly set forth
in this Agreement or in any certificate or document delivered pursuant to
this Agreement, neither ACN Holdings nor any of its Affiliates has made and
shall not be construed as having made to Capstar or to any Affiliate
thereof any representation or warranty of any kind.
ARTICLE IV.
COVENANTS
---------
4.1 Conduct of Business.
-------------------
(a) Except as contemplated by this Agreement or to the extent that
Capstar or ACN Holdings, as the case may be, shall otherwise consent in writing
(which consent shall not be unreasonably withheld), (x) from the date of this
Agreement until the First Closing, Capstar and ACN Holdings shall, and shall
cause their Subsidiaries to, carry on their respective businesses in the
ordinary course of business consistent with past practice and (y) from the date
of the consummation of the Triathlon Acquisition until the Closing in which
Capstar contributes the Assets of the Omaha Muzak Franchise to ACN Holdings,
Capstar shall and shall cause its Subsidiaries to carry on the business of the
Omaha Muzak Franchise in the ordinary course of business consistent with past
practice.
(b) Except as set forth on Schedules 3.2(f) and 4.1(b) or as
---------------- ------
otherwise contemplated by this Agreement or the MLP Merger Agreement or to the
extent that Capstar shall otherwise consent in writing (which consent shall not
be unreasonably withheld), from the date of
25
this Agreement until the First Closing, ACN Holdings covenants and agrees that
it shall not and it shall cause its Subsidiaries not to:
(i) declare, set aside or pay any dividends or distributions
(whether in cash, equity securities, membership interests or other
property) in respect of its capital stock, membership interests or equity
securities; redeem, purchase or otherwise acquire any of its capital stock,
membership interests or equity securities or any other securities or
obligations convertible into or exercisable or exchangeable for any such
capital stock, membership interests or equity securities; issue, sell or
encumber any of its capital stock, membership interests or equity
securities or any securities or obligations convertible into or exercisable
or exchangeable for any such capital stock, membership interests or equity
securities; and sell, assign, transfer, lease or otherwise dispose of any
assets other than the sale of inventory in the ordinary course of business,
except in connection with the sale or other disposition or replacement of
used or obsolete equipment in the ordinary course of business consistent
with past practice;
(ii) except in connection with the financing of the transactions
contemplated by the MLP Merger Agreement, mortgage, pledge, or subject to
any material Lien, other than Permitted Liens, any of the assets of its
business;
(iii) except in connection with the financing of the transactions
contemplated by the MLP Merger Agreement, incur any indebtedness for
borrowed money or issue any debt securities or assume, grant, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances (other than
advances of expenses to employees in the ordinary course of business) of
cash in excess of $100,000 in the aggregate;
(iv) except in the ordinary course of business consistent with
past practice, take any action with the intention of causing a material
reduction in capital expenditures;
(v) finance the MLP Merger with other than borrowings under
additional long-term indebtedness of ACN Holdings or any of its
Subsidiaries;
(vi) enter into any material transaction with ABRY, its partners
or employees or any of their respective Affiliates (other than ACN Holdings
or any of ACN Holdings' Subsidiaries); or
(vii) agree in writing or otherwise take any action inconsistent
with any of the foregoing.
(c) Except as set forth on Schedule 4.1(c) or as otherwise
---------------
contemplated by this Agreement or to the extent that ACN Holdings shall
otherwise consent in writing (which consent shall not be unreasonably withheld),
(x) from the date of this Agreement until the First Closing, Capstar covenants
and agrees that, with respect to the businesses of the Atlanta Muzak Franchise
and the Ft. Myers Muzak Franchise and (y) from the date of the consummation of
the Triathlon
26
Acquisition until the Closing in which Capstar contributes the Assets of the
Omaha Muzak Franchise to ACN Holdings, it shall not and it shall cause its
Subsidiaries not to:
(i) sell, assign, transfer, lease or otherwise dispose of any
assets other than the sale of inventory in the ordinary course of business,
except in connection with the sale or other disposition or replacement of
used or obsolete equipment in the ordinary course of business consistent
with past practice;
(ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, grant, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances (other than advances of expenses to employees in
the ordinary course of business) or distributions of cash;
(iii) except in the ordinary course of business consistent with
past practice, take any action with the intention of causing a material
reduction in capital expenditures;
(iv) enter into any transaction with an Affiliate; or
(v) agree in writing or otherwise take any action inconsistent
with any of the foregoing.
4.2. Third Party Consents; Release of Liens. After the date hereof and
--------------------------------------
prior to each Closing, Capstar shall use all commercially reasonable efforts to
obtain the written Consent from any party to an agreement or instrument
identified in Schedule 2.1 or any other Assumed Contract which is required to
------------
permit the consummation of the transactions contemplated by such Closing and the
release of all Liens on the Assets to be transferred to ACN Holdings pursuant to
such Closing, including those related to or arising out of the Capstar Credit
Agreement, except Permitted Liens. As promptly as reasonably practicable after
the date hereof and prior to the First Closing, Capstar shall use commercially
reasonable efforts to obtain any Consent required under the Capstar Credit
Agreement in order to consummate the transactions contemplated hereby.
4.3. Governmental Consents. Promptly following the execution of this
---------------------
Agreement, the parties shall proceed to prepare and file with the appropriate
Governmental Entities such requests, reports, or notifications as may be
required in connection with this Agreement and shall diligently and
expeditiously prosecute, and shall cooperate fully with each other in the
prosecution of, such matters. Without limiting the foregoing, promptly following
the execution of this Agreement, the parties (a) shall file with the Federal
Trade Commission and the Antitrust Division of the Department of Justice the
notifications and other information (if any) required to be filed under the HSR
Act with respect to the transactions contemplated hereby and shall use their
commercially reasonable efforts to cause all applicable waiting periods under
the HSR Act to expire or be terminated as of the earliest possible date, (c)
file with the FCC all necessary applications to permit the transfer of the FCC
Licenses to ACN and shall use their commercially reasonable efforts to
diligently prosecute such applications and obtain the FCC's consent to transfer
the FCC Licenses to ACN (the "FCC Consents") and (c) make all necessary filings
------------
and, thereafter, make any other
27
required submissions with respect to the transactions contemplated hereby under
the Securities Act and the rules and regulations thereunder and any other
applicable federal or state securities laws. Each party hereto shall provide the
other party copies of all applications in advance of filing or submission of
such applications to any Governmental Entity in connection with this Agreement.
4.4. Membership Agreements. At the First Closing,
---------------------
(a) Capstar shall execute and deliver to ACN Holdings and ACN
Holdings shall cause there to be executed and delivered to Capstar by each party
thereto other than Capstar, the LLC Agreement, or if the LLC Agreement has been
executed and delivered previously to ACN Holdings by the other parties to the
LLC Agreement, then Capstar and ACN Holdings shall execute and deliver to each
other a written joinder to the LLC Agreement in substantially the form attached
as Exhibit C to the LLC Agreement.
(b) Capstar shall execute and deliver to ACN Holdings and ACN
Holdings shall execute and deliver and cause there to be executed and delivered
to Capstar by each party thereto other than Capstar, the Securityholders
Agreement.
(c) Capstar shall execute and deliver to ACN Holdings and ACN
Holdings shall execute and deliver and cause there to be executed and delivered
to Capstar by the parties thereto that are required for such agreement to be a
valid and binding obligation of ACN Holdings with respect to Capstar, the
Registration Rights Agreement.
4.5 Bridge Loan Conversion. At the First Closing, ACN Holdings shall
----------------------
directly or indirectly convert into Class A Units (the "Bridge Loan Conversion")
----------------------
an amount of the then outstanding principal amount of the Bridge Loan (such
amount, the "Conversion Principal Amount") equal to (x) the principal amount of
---------------------------
the Bridge Loan then outstanding minus (y) the sum of (i) the Acquisition Costs
-----
and (ii) any cash payment to be made at the First Closing to ABRY in excess of
the Acquisition Costs in partial payment of principal then outstanding on the
Bridge Loan (the "Bridge Loan Payment"), and ACN Holdings shall cause all
-------------------
interest accrued on the Conversion Principal Amount from October 6, 1998 through
and including the date of the Bridge Loan Conversion to be discharged in
exchange for the payment in kind by ACN Holdings of Class A Units on the capital
contributions represented (or deemed to be represented) by the Bridge Loan
Conversion in satisfaction of the 15% annual "yield" thereon as described in
clause (z) of Note A on Schedule 3.2(d). ACN Holdings shall notify Capstar in
---------------
writing of the amount of the Bridge Loan Payment at least five Business Days
prior to the First Closing.
4.6 Transaction Structure. The parties hereto acknowledge and agree that
---------------------
this Agreement contemplates that the First Closing shall occur contemporaneously
with the consummation of the MLP Merger. Accordingly, the parties agree that if
the First Closing does not occur contemporaneously with the consummation of the
MLP Merger, then the parties hereto shall negotiate in good faith with each
other to amend this Agreement in accordance with Section 9.3, such that the
parties hereto shall receive substantially similar rights and benefits, economic
or otherwise, as contemplated hereby.
28
4.7 Employee Matters.
----------------
(a) At the applicable Closing, ACN Holdings and its Subsidiaries
shall extend an offer of employment to each employee of Capstar who is solely or
in part employed by Capstar or any of its Subsidiaries as of the applicable
Closing Date in the operation of the Contributed Franchises being contributed at
such Closing (each a "Continuing Employee"); provided, however, that nothing in
-------------------
this Agreement shall limit ACN Holdings or any of its Subsidiaries' right to
terminate any Continuing Employee after the applicable Closing. The terms and
conditions of each employment offer shall, in the aggregate, be at least
substantially as favorable to the Continuing Employee as the terms and
conditions of employment of such Continuing Employee preceding the applicable
Closing Date. Schedule 4.7(a) sets forth a list of the Continuing Employees as
---------------
of the date hereof.
(b) ACN Holdings shall take such action as may be necessary so that
on and after the applicable Closing, Continuing Employees shall be provided
employee benefits, plans and programs (including but not limited to incentive
compensation, deferred compensation, pension, life insurance, medical), profit
sharing (including 401(k), severance, salary continuation and fringe benefits),
which are no less favorable in the aggregate than those generally available to
similarly situated employees of ACN Holdings and its Subsidiaries. Each such
plan, arrangement or policy shall be offered to the Continuing Employees (and,
if applicable, their dependents) with recognition for period of service under
corresponding benefit plans of Capstar and its Subsidiaries prior to the
applicable Closing for purposes of eligibility, vesting, any waiting period,
pre-existing conditions or insurability (other than any waiting period, pre-
existing conditions of lack of insurability that constituted a restriction or
limitation with respect to the benefits available to a Continuing Employee
immediately prior to the applicable Closing), and ACN Holdings and its
Subsidiaries shall credit the Continuing Employees with any co-payments or
deductibles satisfied in the current plan year to the same extent as if such
amounts had been paid under such plan, arrangement or policy. Capstar and its
Subsidiaries shall fully vest each Continuing Employee in his or her accrued
benefits under each Employee Benefit Plan under which such Continuing Employee
participated prior to the Closing Date.
(c) ACN Holdings shall permit and, as applicable, shall cause its
Subsidiaries to permit, each Continuing Employee to retain and take any paid
vacation days accrued but not taken or lost under Capstar's and its
Subsidiaries' vacation policies prior to the applicable Closing.
4.8 Access and Information. Until the First Closing, each party hereto
----------------------
shall afford to the other party hereto and its representatives (including
accountants and counsel) and until the Second Closing, Capstar shall afford ACN
Holdings and its representatives (including accountants and counsel), in each
case, full access, during normal business hours, upon reasonable notice and in
such manner as will not unreasonably interfere with the conduct of the business
of the party, to all properties, books, and records of the party and all other
information with respect to its business, together with the opportunity to make
copies of such books, records, and other documents and to discuss the business
of the party with such officers, directors, accountants, consultants, and
counsel for the party as the other party deems reasonably necessary or
appropriate for the purposes of familiarizing itself with the party and its
business. In furtherance of the foregoing, the party shall
29
authorize and instruct its independent public accountants to meet with the other
party and its representatives, including the other party's independent public
accountants, to discuss the business and accounts of the party. Prior to the
consummation of the Triathlon Acquisition, the rights of access and to
information provided in this Section 4.8 shall be limited in respect of the
Omaha Muzak Franchise to the contractual rights of access and to information
regarding the Omaha Muzak Franchise that Capstar or an Affiliate thereof has
with Triathlon Broadcasting Company.
4.9 Notification of Certain Events. Each of the parties hereto shall use
------------------------------
its commercially reasonable efforts to notify the other parties hereto in
writing of the occurrence of any event, change or condition that results in the
breach of a representation or warranty or covenant of such party under this
Agreement.
4.10 Public Announcements. Except for statements made or press releases
--------------------
issued pursuant to the Securities Act or the Exchange Act, pursuant to any
listing agreement with any national securities exchange or the National
Association of Securities Dealers, Inc., or as otherwise required by law,
Capstar and ACN Holdings shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated hereby.
4.11 Assistance. If ACN Holdings requests, Capstar will cooperate, and
----------
will cause its accountants to cooperate, in all reasonable respects with any
financing efforts of ACN Holdings or its Affiliates (including providing
assistance in the preparation of one or more offering circulars, private
placement memoranda, registration statements or other offering documents
relating to debt and/or equity financing) and any other filings that may be made
by ACN Holdings or its Affiliates with the Securities and Exchange Commission,
all at the sole expense of ACN Holdings. Capstar shall furnish to its
independent accountants (or, if requested by ACN Holdings, to ACN Holdings'
independent public accountants), such customary management representation
letters as its accountants may require of Capstar as a condition to its
execution of any required accountants' consents necessary in connection with the
delivery of any "comfort" letters requested by financing sources of ACN Holdings
or its Affiliates and shall furnish to ACN Holdings all financial statements
(audited and unaudited) and other information in the possession of Capstar or
its representatives or agents as ACN Holdings shall reasonably determine are
necessary or appropriate in connection with such financing. ACN Holdings will
indemnify and hold harmless Capstar and its officers, directors, and controlling
persons (except, with respect to Capstar or any of its officers, directors or
controlling persons, in his or its capacity as a direct or indirect holder or
owner of any equity securities of ACN Holdings (or any of its successors))
against any and all claims, losses, liabilities, damages, costs, or expenses
(including reasonable attorneys' fees and expenses) that may arise out of or
with respect to the financing efforts by ACN Holdings or its Affiliates,
including any registration statement, prospectus, offering documents, and other
filings related thereto; provided, however, that subject to the limitations and
provisions of this Agreement, nothing herein shall prevent ACN Holdings from
asserting any claim for breach of representation or warranty under this
Agreement.
4.12 MLP Merger Agreement. Except for the amendment described on Schedule
-------------------- --------
3.2(h) hereto, ACN Holdings and its Subsidiaries shall not amend the MLP Merger
- ------
Agreement in any
30
respect or (b) waive, in whole or in part, (i) the satisfaction of any
conditions precedent to the consummation of the MLP Merger or (ii) the
performance of any obligations required to be performed or complied with under
the MLP Merger Agreement by the parties thereto, in each case, without the prior
written consent of Capstar, which consent shall not be unreasonably withheld.
4.13 Additional Agreements. Subject to the terms and conditions of this
---------------------
Agreement, each of the parties hereto will use its commercially reasonable
efforts to do, or cause to be taken all action and to do, or cause to be done,
all things necessary, proper, or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement.
4.14 Receivables. If any party hereto (or any Affiliate thereof) at any
-----------
time receives any funds or other property from any third party that are properly
payable to the other party hereto (or any Affiliate thereof), the party
receiving such funds or other property (or whose Affiliate has received such
funds or other property) shall promptly remit such funds or other property to
the person entitled to such funds or other property.
4.15 Osborn Healthcare Division. If requested by Capstar, Capstar and ACN
--------------------------
Holdings shall negotiate in good faith the terms of a sublease agreement of
office space for the Osborn Healthcare Division of Capstar in the offices of the
Atlanta Muzak Franchise located at 4754-B North Royal Atlanta Drive, Tucker,
Georgia 30084, the terms of which shall be substantially similar to the terms of
the Omaha Lease Agreement.
4.16 SCA Lease Agreement. Prior to the First Closing, Capstar and ACN
-------------------
Holdings shall negotiate in good faith the terms of Exhibits A and B to the SCA
---------- -
Lease Agreement and such other modifications to the form of the SCA Lease
Agreement attached as Exhibit D hereto as Capstar and ACN Holdings may mutually
---------
agree.
ARTICLE V
CLOSING CONDITIONS
------------------
5.1 Conditions to each Party's Obligations. The obligations of each party
--------------------------------------
hereto to effect the Contribution and the other transactions contemplated hereby
are subject to the satisfaction or waiver of the following conditions on or
before the applicable Closing:
(a) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the transactions contemplated under this Agreement at
such Closing shall be in effect.
(b) No Action. No action shall have been taken nor any statute,
---------
rule, or regulation shall have been enacted by any Governmental Entity that
makes the consummation of the transactions contemplated under this
Agreement at such Closing illegal.
31
(c) Proceedings or Investigations. No litigation or administrative
-----------------------------
proceeding or investigation (whether formal or informal) shall be pending
or, to either party's knowledge, threatened which challenges the
transactions contemplated hereby at such Closing.
(d) HSR Act. The waiting period (and any extension thereof)
-------
applicable to the Contribution under the HSR Act shall have been terminated
or shall have otherwise expired.
(e) Governmental and Regulatory Consents. All required
------------------------------------
authorizations, consents, orders, or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
Governmental Entity necessary for the consummation of the transactions
contemplated by this Agreement at such Closing, including, without
limitation, the FCC Consents, shall have been filed, occurred, or been
obtained and shall be final and nonappealable (except for the FCC Consents
which shall have been granted and shall be effective) and in form and
substance reasonably satisfactory.
5.2 Conditions to Obligations of Capstar. The obligations of Capstar to
------------------------------------
effect the Contribution and the other transactions contemplated hereby are
further subject to the satisfaction of the following conditions on or before the
applicable Closing unless waived, in whole or in part, by Capstar:
(a) Representations and Warranties. The representations and
------------------------------
warranties of ACN Holdings set forth in this Agreement shall be true and
correct, in each case as of the date of this Agreement and as of the
applicable Closing Date as though made on and as of the applicable Closing
Date, except to the extent such representations and warranties are made as
of a specified date, in which case the same shall continue on the
applicable Closing Date to be true and correct as of the specified date,
and except to the extent that the failure of such representations and
warranties (without giving effect to any materiality standard contained in
such representations and warranties) to be true and correct could not
reasonably be expected to have a Material Adverse Effect on ACN Holdings
and its Subsidiaries, taken as a whole, and Capstar shall have received a
certificate of an officer of ACN Holdings to such effect.
(b) Performance of Obligations. ACN Holdings shall have performed and
--------------------------
complied in all material respects with all obligations required to be
performed or complied with by ACN Holdings on or before the Closing Date,
and Capstar shall have received a certificate of an officer of ACN Holdings
to such effect.
(c) Senior Lender Consent. All necessary Consents under the Capstar
---------------------
Credit Agreement in order to consummate the transactions contemplated by
this Agreement at such Closing shall have been obtained.
(d) Triathlon Acquisition. In respect of Capstar's obligation to
---------------------
transfer the Assets of the Omaha Muzak Franchise to ACN Holdings, whether
at the First Closing or the Second Closing, the Triathlon Acquisition shall
have been consummated.
32
(e) Legal Opinion. Capstar shall have received from Kirkland & Ellis,
-------------
counsel to ACN Holdings, an opinion in a form and substance reasonably
acceptable to Capstar, dated the applicable Closing Date.
(f) Closing Deliveries. All documents, instruments, certificates or
------------------
other items required to be delivered by ACN Holdings pursuant to Section
6.2(b), in the case of the First Closing, or Section 6.3(b), in the case of
the Second Closing, shall have been delivered.
5.3 Conditions to Obligation of ACN Holdings. The obligations of ACN
----------------------------------------
Holdings to effect the Contribution and the other transactions contemplated
hereby are further subject to the satisfaction of the following conditions on or
before the applicable Closing unless waived, in whole or in part, in writing by
ACN Holdings:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Capstar set forth in this Agreement shall be true and
correct, in each case as of the date of this Agreement and as of the
applicable Closing Date as though made on and as of the applicable Closing
Date, except to the extent such representations and warranties are made as
of a specified date, in which case the same shall continue on the
applicable Closing Date to be true and correct as of the specified date,
and except to the extent that the failure of such representations and
warranties (without giving effect to any materiality standard contained in
such representations and warranties) to be true and correct could not
reasonably be expected to have a Material Adverse Effect on the Contributed
Franchises, and ACN Holdings shall have received a certificate of an
officer of Capstar to such effect.
(b) Performance of Obligations. Capstar shall have performed and
--------------------------
complied in all material respects with all obligations required to be
performed or complied with by Capstar on or before the Closing Date, and
ACN Holdings shall have received a certificate of an officer of Capstar to
such effect.
(c) Third Party Consents. ACN Holdings shall have been furnished with
--------------------
evidence reasonably satisfactory to it of the Consent of each person that
is a party to an agreement or instrument identified in Schedule 2.1 or any
------------
other Assumed Contract which is required for the valid assignment of such
agreement, instrument or Assumed Contract, as the case may be, at such
Closing and such consent or approval shall be in form and substance
reasonably satisfactory to ACN Holdings.
(d) Legal Opinion. ACN Holdings shall have received from Vinson &
-------------
Elkins L.L.P., counsel to Capstar, an opinion in a form and substance
reasonably acceptable to ACN Holdings, dated the applicable Closing Date.
(e) Closing Deliveries. All documents, instruments, certificates or
------------------
other items required to be delivered by Capstar pursuant to Section 6.2(a),
in the case of the First Closing, or Section 6.3(a), in the case of the
Second Closing, shall have been delivered.
33
ARTICLE V
CLOSINGS
--------
6.1 Closings. Subject to the satisfaction or waiver of the conditions set
--------
forth in Article V, the closing of the Contribution may take place at two
closings (each a "Closing"). The closing of the contribution of Assets pursuant
-------
to Section 2.1(a)(i) (the "First Closing") shall occur at the offices of
-------------
Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022-4675, on the
closing date of the MLP Acquisition and contemporaneously with the closing of
the MLP Acquisition, or if the MLP Merger Agreement is terminated or is
otherwise not consummated by April 30, 1999, at 9:00 a.m., New York time, on the
second business day following any date on or after April 30, 1999 upon which
each of the conditions to the obligations of the parties hereto to effect the
transactions to occur at the First Closing have been satisfied or waived,
unless, in either case, another date, time or place is agreed to in writing by
the parties hereto (the "First Closing Date"). The closing of the contribution
------------------
of Assets pursuant to Section 2.1(a)(ii), if any (the "Second Closing"), shall
--------------
occur at the offices of Kirkland & Ellis, at 9:00 a.m., New York time, on the
second business day following any date on or after the First Closing Date upon
which each of the conditions to the obligations of the parties hereto to effect
the transactions to occur at the Second Closing have been satisfied or waived,
unless another date, time or place is agreed to in writing by the parties hereto
(the "Second Closing Date;" and any reference herein to "Closing Date" shall
------------------- ------------
mean the First Closing Date or the Second Closing Date, as applicable). All
proceedings to be taken and all documents to be executed and delivered by all
parties hereto at the First Closing shall be deemed to have been taken, executed
and delivered simultaneously, and all proceedings to be taken and all documents
to be executed and delivered by all parties hereto at the Second Closing shall
be deemed to have been taken, executed and delivered simultaneously, and, at
each Closing, no proceedings shall be deemed taken nor any documents executed or
delivered until all have been taken, executed and delivered.
6.2 Actions to Occur at the First Closing.
-------------------------------------
(a) At the First Closing, Capstar shall deliver to ACN Holdings the
following:
(i) Officer's Certificates. The certificates described in
----------------------
Sections 5.3(a) and 5.3(b);
(ii) Working Capital Adjustment. The amount, if any, payable by
--------------------------
Capstar pursuant to Section 2.4(d), by wire transfer of immediately
available funds to an account of ACN Holdings or at the direction of ACN
Holdings;
(iii) LLC Agreement. A duly executed counterpart of the LLC
-------------
Agreement or a written joinder to the LLC Agreement in substantially the
form attached as Exhibit C to the LLC Agreement;
(iv) Securityholders Agreement. A duly executed counterpart of
-------------------------
the Securityholders Agreement;
34
(v) Registration Rights Agreement. A duly executed counterpart
-----------------------------
of the Registration Rights Agreement;
(vi) Transfer Documents. A duly executed counterpart of a Bill
------------------
of Sale and Assignment in substantially the form attached as Exhibit F
hereto, together with such other assignments and other transfer documents
as reasonably requested by ACN Holdings;
(vii) Assumption Agreement. A duly executed counterpart of an
--------------------
Assumption Agreement in substantially the form attached as Exhibit G
hereto;
(viii) Third Party Consents. The original of each Consent
--------------------
referred to in Section 5.3(c) insofar as it relates to the Assets being
contributed at the First Closing;
(ix) Legal Opinion. The opinion of Vinson & Elkins L.L.P.
-------------
referred to in Section 5.3(d);
(x) Release of Liens. Evidence reasonably satisfactory to ACN
----------------
Holdings of an agreement on the part of the applicable lienholder(s) to
release all Liens other than Permitted Liens on the Assets of the Atlanta
Muzak Franchise, the Ft. Myers Muzak Franchise and, if applicable, the
Omaha Muzak Franchise (including all Liens on such Assets related to or
arising out of the Capstar Credit Agreement), including UCC-3 termination
statements to be filed in connection therewith;
(xi) Licenses, Permits, Contracts, Business Records, Etc. To the
---------------------------------------------------
extent they are in the possession of Capstar, copies of all Licenses,
Permits, Assumed Contracts, blueprints, schematics, working drawings,
plans, projections, statistics, engineering records and all files and
records used by Capstar in connection with the Contributed Franchises, the
Assets of which are contributed at the First Closing, which copies shall be
available at the First Closing or at the principal business offices of the
Contributed Franchises;
(xii) Omaha Lease Agreement. If the Assets of the Omaha Muzak
---------------------
Franchise are contributed to ACN Holdings at the First Closing, a duly
executed counterpart of the Omaha Lease Agreement;
(xiii) SCA Lease Agreement. If the Assets of the Omaha Muzak
-------------------
Franchise are contributed to ACN Holdings at the First Closing, a duly
executed counterpart of one or more SCA Lease Agreements; and
(xiv) Other Documents, Instruments, Etc. Such other documents or
---------------------------------
instruments as ACN Holdings may reasonably request.
(b) At the First Closing, ACN Holdings shall deliver to Capstar the
following:
(i) Class A Units. A certificate or certificates representing
-------------
the number of Class A Units described in Section 2.3(a);
35
(ii) Capstar's Expenses. An amount equal to Capstar's Expenses
------------------
incurred through the First Closing in connection with the transactions
contemplated hereby for such First Closing as provided in Section 9.2 by
wire transfer of immediately available funds to an account of Capstar or at
the direction of Capstar, but only to the extent Capstar delivers a written
list of the amount of such Capstar Expenses, in reasonable detail, to ACN
Holdings at least two business days prior to the First Closing;
(iii) Working Capital Adjustment. The amount, if any, payable
--------------------------
by ACN Holdings pursuant to Section 2.4(c), by wire transfer of immediately
available funds to an account of Capstar or at the direction of Capstar;
(iv) Officer's Certificates. The certificates described in
----------------------
Sections 5.2(a) and 5.2(b);
(v) LLC Agreement. A counterpart of the LLC Agreement duly
-------------
executed by all parties thereto other than Capstar or a written joinder to
the LLC Agreement in substantially the form attached as Exhibit C to the
LLC Agreement and an original duly executed LLC Agreement attached thereto;
(vi) Schedule B to LLC Agreement. Schedule B to the LLC
---------------------------
Agreement, which has been amended to reflect the issuance of Class A Units
to Capstar at the First Closing and the issuance of the additional Common
Units (as defined in the LLC Agreement) to MEM Holdings, LLC, Joseph Koff
and David Unger as described in Schedule 3.2(d);
---------------
(vii) Securityholders Agreement. A counterpart of the
-------------------------
Securityholders Agreement duly executed by all parties thereto other than
Capstar;
(viii) Registration Rights Agreement. A counterpart of the
-----------------------------
Registration Rights Agreement duly executed by all parties thereto other
than Capstar that are required for such agreement to be a valid and binding
obligation of ACN Holdings with respect to Capstar;
(ix) Transfer Documents. A duly executed counterpart of a Bill
------------------
of Sale and Assignment in substantially the form attached as Exhibit F
---------
hereto;
(x) Assumption Agreement. A duly executed counterpart of an
--------------------
Assumption Agreement in substantially the form attached as Exhibit G
---------
hereto;
(xi) Legal Opinion. The opinion of Kirkland & Ellis referred
-------------
to in Section 5.2(d);
(xii) Bridge Loan Conversion. Evidence reasonably satisfactory
----------------------
to Capstar of the Bridge Loan Conversion referred to in Section 4.5;
36
(xiii) Omaha Lease Agreement. If the Assets of the Omaha Muzak
---------------------
Franchise are contributed to ACN Holdings at the First Closing, a duly
executed counterpart by the successor entity of the MLP Merger of the Omaha
Lease Agreement;
(xiv) SCA Lease Agreement. If the Assets of the Omaha Muzak
-------------------
Franchise are contributed to ACN Holdings at the First Closing, a duly
executed counterpart by the successor entity of the MLP Merger of one or
more SCA Lease Agreements; and
(xv) Other Documents, Instruments, Etc. Such other documents
---------------------------------
or instruments as Capstar may reasonably request.
6.3 Actions to Occur at the Second Closing.
--------------------------------------
(a) At the Second Closing, Capstar shall deliver to ACN Holdings the
following:
(i) Working Capital Adjustment. The amount, if any, payable by
--------------------------
Capstar pursuant to Section 2.4(e), by wire transfer of immediately
available funds to an account of ACN Holdings or at the direction of ACN
Holdings;
(ii) Officer's Certificates. The certificates described in
----------------------
Sections 5.3(a) and 5.3(b) ;
(iii) Transfer Documents. A duly executed counterpart of a Bill
------------------
of Sale and Assignment in substantially the form attached as Exhibit H
hereto, together with such any other assignments and other transfer
documents as reasonably requested by ACN Holdings;
(iv) Assumption Agreement. A duly executed counterpart of an
--------------------
Assumption Agreement in substantially the form attached as Exhibit I
---------
hereto;
(v) Third Party Consents. The original of each Consent
--------------------
referred to in Section 5.3(c) insofar as it relates to the Assets being
contributed at the Second Closing;
(vi) Legal Opinion. The opinion of Vinson & Elkins L.L.P.
-------------
referred to in Section 5.3(d);
(vii) Release of Liens. Evidence reasonably satisfactory to ACN
----------------
Holdings of an agreement on the part of the applicable lienholder(s) to
release all Liens other than Permitted Liens on the Assets of the Omaha
Muzak Franchise (including all Liens on such Assets related to or arising
out of the Capstar Credit Agreement), including, without limitation, UCC-3
termination statements to be filed in connection therewith;
(viii) Licenses, Permits, Contracts, Business Records, Etc. To
---------------------------------------------------
the extent they are in the possession of Capstar, copies of all Licenses,
Permits, Assumed Contracts, blueprints, schematics, working drawings,
plans, projections, statistics, engineering records
37
and all files and records used by Capstar in connection with the
Contributed Franchises, the Assets of which are contributed at the Second
Closing, which copies shall be available at the Second Closing or at the
principal business offices of the Contributed Franchises; and
(ix) Omaha Lease Agreement. A duly executed counterpart of the
---------------------
Omaha Lease Agreement;
(x) SCA Lease Agreement. A duly executed counterpart of one or
-------------------
more SCA Lease Agreements; and
(xi) Other Documents, Instruments, Etc. Such other documents or
---------------------------------
instruments as ACN Holdings may reasonably request.
(b) At the Second Closing, ACN Holdings shall deliver to Capstar the
following:
(i) Class A Units. A certificate or certificates representing
-------------
the number of Class A Units described in Section 2.3(b);
(ii) Working Capital Adjustment. The amount, if any, payable by
--------------------------
ACN Holdings pursuant to Section 2.4(e), by wire transfer of immediately
available funds to an account of Capstar or at the direction of Capstar;
(iii) Capstar's Expenses. An amount equal to Capstar's Expenses
------------------
incurred from the First Closing through the Second Closing in connection
with the transactions contemplated hereby as provided in Section 9.2 by
wire transfer of immediately available funds to an account of Capstar or at
the direction of Capstar, but only to the extent Capstar delivers a written
list of the amount of such Capstar Expenses, in reasonable detail, to ACN
Holdings at least two business days prior to the Second Closing.
(iv) Officer's Certificates. The certificates described in
----------------------
Sections 5.2(a) and 5.2(b);
(v) Schedule B to LLC Agreement. Schedule B to the LLC
---------------------------
Agreement, which has been amended to reflect the issuance of Class A Units
to Capstar at the Second Closing;
(vi) Transfer Documents. A duly executed counterpart of a Bill
------------------
of SAle and Assignment in substantially the form attached as Exhibit H
hereto;
(vii) Assumption Agreement. A duly executed counterpart of an
--------------------
Assumption Agreement in substantially the form attached as Exhibit I
hereto;
(viii) Legal Opinion. The opinion of Kirkland & Ellis referred to
-------------
in Section 5.2(d);
38
(ix) Omaha Lease Agreement. A duly executed counterpart by the
---------------------
successor entity of the MLP Merger of the Omaha Lease Agreement;
(x) SCA Lease Agreement. A duly executed counterpart by the
-------------------
successor entity of the MLP Merger of one or more SCA Lease Agreements; and
(xi) Other Documents, Instruments, Etc. Such other documents or
---------------------------------
instruments as Capstar may reasonably request.
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Agreement may be terminated prior to either Closing:
-----------
(a) by mutual consent of Capstar and ACN Holdings;
(b) by either Capstar or ACN Holdings;
(i) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set forth
in Sections 5.2(a) and 5.2(b) or Sections 5.3(a) and 5.3(b), as applicable,
and (B) cannot be or has not been cured within 20 days (the "Cure Period")
-----------
following receipt by the breaching party of written notice of such breach;
(ii) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree, or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining, or
otherwise prohibiting the transactions contemplated by this Agreement and
the other Transaction Documents, and such order, decree, ruling, or other
action shall have become final and nonappealable; or
(iii) if the First Closing shall not have occurred by the later
of (A) June 30, 1999 or (B) the date to which the First Closing is extended
pursuant to Section 6.1; provided, however, that the right to terminate
this Agreement under this clause (iii) shall not be available to any party
whose breach of this Agreement has been the cause of, or resulted in, the
failure of the First Closing to occur on or before such date; or
(iv) if the Second Closing shall not have occurred by the later
of (A) July 31, 1999 or (B) the date to which the Second Closing is
extended pursuant to Section 6.1; provided, however, that the right to
terminate this Agreement under this clause (iv) shall not be available to
any party whose breach of this Agreement has been the cause of, or resulted
in, the failure of the Second Closing to occur on or before such date; or
39
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
employees, accountants, consultants, legal counsel, agents, or other
representatives whether prior to or after the execution of this Agreement.
Notwithstanding anything in the foregoing to the contrary, no party that is in
material breach of this Agreement shall be entitled to terminate this Agreement
except with the consent of the other party.
7.2 Effect of Termination. In the event of a termination of this Agreement
---------------------
by either Capstar or ACN Holdings as provided in Section 7.1, this Agreement
(except for the provisions of this Section 7.2, which shall survive termination)
shall forthwith become null and void. Subject to the provisions of Section 9.2,
in the event of a termination of this Agreement by either Capstar or ACN
Holdings as provided in Section 7.1, there shall be no liability on the part of
Capstar or ACN Holdings, except for any liability arising out of a breach of, or
misrepresentation under, this Agreement which occurs prior to the termination of
this Agreement. A termination of this Agreement after the First Closing shall
only be effective as to the transactions to occur hereunder at the Second
Closing and the provisions relating thereto and all other provisions of this
Agreement shall survive any such termination.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Indemnification of ACN Holdings. Subject to the provisions of this
-------------------------------
Article VIII, from and after the First Closing Date, Capstar agrees to indemnify
and hold harmless the ACN Indemnified Parties from and against any and all ACN
Indemnified Costs.
8.2 Indemnification of Capstar. Subject to the provisions of this Article
--------------------------
VIII, from and after the First Closing Date, ACN Holdings agrees to indemnify
and hold harmless the Capstar Indemnified Parties from and against any and all
Capstar Indemnified Costs.
8.3 Defense of Third-Party Claims. An Indemnified Party shall give prompt
-----------------------------
written notice to any person who is obligated to provide indemnification
hereunder (an "Indemnifying Party") of the commencement or assertion of any
------------------
action, proceeding, demand, or claim by a third party (collectively, a "third-
-----
party action") in respect of which such Indemnified Party shall seek
- ------------
indemnification hereunder. Any failure so to notify an Indemnifying Party shall
not relieve such Indemnifying Party from any liability that it, he, or she may
have to such Indemnified Party under this Article VIII except to the extent that
the failure to give such notice materially and adversely prejudices such
Indemnifying Party. The Indemnifying Party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action (provided, however,
that the Indemnifying Party shall
40
pay the attorneys' fees of the Indemnified Party if (i) the employment of
separate counsel shall have been authorized in writing by any such
Indemnifying Party in connection with the defense of such third-party
action, (ii) the Indemnifying Parties shall not have employed counsel
reasonably satisfactory to the Indemnified Party to have charge of such
third-party action, (iii) counsel to the Indemnified Party shall have
reasonably concluded that there may be defenses available to the
Indemnified Party that are different from or additional to those
available to the Indemnifying Party or (iv) counsel to the Indemnified
Party shall have advised the Indemnified Party in writing, with a copy
delivered to the Indemnifying Party, that there is a conflict of interest
that could make it inappropriate under applicable standards of
professional conduct to have common counsel);
(b) The Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such third-
party action or any liability in respect thereof if, pursuant to or as a
result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the
Indemnified Party or if, in the opinion of the Indemnified Party, such
settlement, compromise, admission, or acknowledgment could have a
material adverse effect on its business;
(c) No Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each Indemnified
Party of a release from all liability in respect of such third-party
action; and
(d) The Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of),
and the Indemnified Party shall be entitled to have sole control over,
the defense or settlement, compromise, admission, or acknowledgment of
any third-party action as to which the Indemnifying Party fails to assume
the defense within a reasonable length of time; or to the extent the
third-party action seeks an order, injunction, or other equitable relief
against the Indemnified Party which, if successful, would materially
adversely affect the business, operations, assets, or financial condition
of the Indemnified Party; provided, however, that the Indemnified Party
shall make no settlement, compromise, admission, or acknowledgment that
would give rise to liability on the part of any Indemnifying Party
without the prior written consent of such Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article VIII and, in
connection therewith, shall furnish such records, information, and testimony and
attend such conferences, discovery proceedings, hearings, trials, and appeals as
may be reasonably requested.
8.4 Direct Claims. In any case in which an Indemnified Party seeks
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indemnification hereunder which is not subject to Section 8.3 because no third-
party action is involved, the Indemnified Party shall notify the Indemnifying
Party in writing of any Indemnified Costs which such Indemnified Party claims
are subject to indemnification under the terms hereof. The failure of
41
the Indemnified Party to exercise promptness in such notification shall not
amount to a waiver of such claim except to the extent that the resulting delay
materially prejudices the position of the Indemnifying Party with respect to
such claim.
8.5 Limitation on Indemnification. Notwithstanding anything to the
-----------------------------
contrary contained herein, in no event shall the ACN Indemnified Parties be
entitled to recover any ACN Indemnified Costs pursuant to the breach by Capstar
of representations and warranties under this Agreement in excess of the value of
the consideration received by Capstar, which for purposes of this Agreement
shall equal the product of the number of Class A Units received by Capstar
multiplied by $1,000.
ARTICLE IX
MISCELLANEOUS
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9.1 Survival of Representations and Warranties. Regardless of any
------------------------------------------
investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, each of the representations
and warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the applicable Closing. Except as
otherwise provided in the next two sentences, the representations and warranties
set forth in this Agreement shall terminate on the second anniversary of the
later to occur of the First Closing and the Second Closing, except that this
time limitation shall not apply to any claims for fraud pursuant to Section 9.15
or claims for breaches of the representations and warranties contained in
Sections 3.1(a), 3.1(b), 3.2(a), 3.2(b), 3.2(d) and 3.2(k), which
representations and warranties shall survive until the expiration of the
applicable statute of limitations. Following the date of termination of a
representation or warranty, no claim can be brought with respect to a breach of
such representation or warranty, but such termination shall not affect any claim
for a breach of a representation or warranty that was asserted before the date
of termination. To the extent that such are performable after the applicable
Closing, each of the covenants and agreements contained in each of the
Transaction Documents shall survive such Closing indefinitely.
9.2 Fees and Expenses. At or after each Closing, ACN Holdings shall pay
-----------------
to, or at the direction of, Capstar an amount equal to all reasonable out-of-
pocket fees, costs and expenses incurred by Capstar in connection with the
transactions contemplated hereby for such Closing, including fees, costs and
expenses of its accountants and financial and legal advisors and counsel and
fees paid to any Governmental Entity (collectively, "Capstar's Expenses"). If
------------------
this Agreement is terminated, except as otherwise expressly provided in this
Agreement or as provided by law, all costs and expenses incurred by Capstar in
connection with the transactions contemplated in this Agreement or in the other
related documents shall be borne solely and entirely by Capstar. Except as
otherwise expressly provided in this Agreement or as provided by law, all costs
and expenses incurred by ACN Holdings in connection with the transactions
contemplated in this Agreement or in the other related documents shall be borne
solely and entirely by ACN Holdings. In the event of a dispute between the
parties in connection with this Agreement and the transactions contemplated
hereby, each of the parties hereto agrees that the prevailing party shall be
entitled to reimbursement
42
by the other party of reasonable legal fees and expenses incurred in connection
with any action or proceeding.
9.3 Assignment; Amendment. Neither this Agreement nor any of the rights,
---------------------
interests or obligations hereunder shall be assigned, whether by operation of
law or otherwise without the prior written consent of the other party hereto. In
the event of such an assignment, the provisions of this Agreement shall inure to
the benefit of and be binding on the assigns of the assignor. No amendment,
waiver of compliance with any provision or condition hereof or consent pursuant
to this Agreement shall be effective unless evidenced by an instrument in
writing signed by the party against whom enforcement of any waiver, amendment or
consent is sought.
9.4 Waiver of Compliance. Any failure of Capstar on the one hand, or ACN
--------------------
Holdings, on the other hand, to comply with any obligation, covenant, agreement,
or condition contained herein may be waived only if set forth in an instrument
in writing signed by the party to be bound thereby, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
other failure.
9.5 Specific Performance. The parties recognize that, in the event any
--------------------
party should refuse to perform under the provisions of this Agreement, monetary
damages alone will not be adequate. Each party shall therefore be entitled, in
addition to any other remedies which may be available, including money damages,
to obtain specific performance of the terms of this Agreement. In the event of
any action to enforce this Agreement specifically, each party hereby waives the
defense that there is an adequate remedy at law.
9.6 Parties in Interest. This Agreement shall be binding upon and, except
-------------------
as provided below, inure solely to the benefit of each party hereto and their
successors and assigns, and nothing in this Agreement, except as set forth
below, express or implied, is intended to confer upon any other person (other
than the Indemnified Parties as provided in Article VIII) any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
9.7 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, telecopied or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
43
(a) If to Capstar, to:
Capstar Broadcasting Corporation
600 Congress, Suite 1400
Austin, Texas 78701
Attention: William S. Banowsky, Jr.
Facsimile: (512) 340-7890
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: A. Winston Oxley
Facsimile: (214) 999-7891
(b) If to ACN Holdings, to:
ACN Holdings, LLC
c/o ABRY Partners, Inc.
18 Newbury Street
Boston, MA 02116
Attention: Royce Yudkoff
Peni Garber
Facsimile: (617) 859-8797
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: John L. Kuehn
W. Brian Raftery
Facsimile: (212) 446-4900
9.8 Entire Agreement. This Agreement (which term shall be deemed to
----------------
include the other certificates, documents and instruments delivered hereunder)
constitutes the entire agreement of the parties hereto and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. There are no representations or
warranties, agreements, or covenants other than those expressly set forth in
this Agreement.
9.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REFERENCE TO ITS
RULES AS TO CONFLICTS OF LAW).
44
9.10 Interpretation. All references in this Agreement to Articles,
--------------
Sections, subsections, and other subdivisions refer to the corresponding
Articles, Sections, subsections, and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any Articles,
Sections, subsections or other subdivision of this Agreement are for convenience
only, do not constitute any part of such Articles, Sections, subsections, or
other subdivisions, and shall be disregarded in construing the language
contained therein. The words "this Agreement," "herein," "hereby," "hereunder,"
and "hereof," and words of similar import, refer to this Agreement as a whole
and not to any particular subdivision unless expressly so limited. The word
"including" (in its various forms) means "including without limitation."
Pronouns in masculine, feminine, or neuter genders shall be construed to state
and include any other gender and words, terms, and titles (including terms
defined herein) in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise expressly requires. Unless the
context otherwise requires, all defined terms contained herein shall include the
singular and plural and the conjunctive and disjunctive forms of such defined
terms. The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
9.11 Counterparts. This Agreement may be executed and delivered (including
------------
by facsimile transmission) in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.12 Further Assurances. From time to time following either Closing, the
------------------
parties hereto shall execute and deliver such other instruments of assignment,
transfer and delivery and shall take such other actions as the other reasonably
may request in order to consummate, complete and carry out the transactions
contemplated by this Agreement.
9.13 Severability. If any term or other provision of this Agreement is
------------
determined by a court of competent jurisdiction to be invalid, illegal, or
incapable of being enforced by any rule of applicable law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated herein are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated herein are consummated as originally
contemplated to the fullest extent possible.
9.14 No Liability. The parties hereto agree that no stockholder, director
------------
or officer of Capstar or ACN Holdings or their respective Affiliates (other than
Capstar or ACN Holdings) shall have any personal or individual liability for the
obligations of Capstar or ACN Holdings under this Agreement or any other
agreement entered into in connection with this Agreement other than as an
assignee of this Agreement.
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9.15 No Waiver Relating to Claims for Fraud. The liability of any party
--------------------------------------
under Article VIII shall be in addition to, and not exclusive of any other
liability that such party may have at law or equity based on such party's
fraudulent acts or omissions. None of the provisions set forth in this Agreement
shall be deemed a waiver by any party to this Agreement of any right or remedy
which such party may have at law or equity based on any other party's fraudulent
acts or omissions, nor shall any such provisions limit, or be deemed to limit,
the amounts of recovery sought or awarded in any such claim for fraud, the time
period during which a claim for fraud may be brought, or the recourse which any
such party may seek against another party with respect to a claim for fraud;
provided, that with respect to such rights and remedies at law or equity, the
parties further acknowledge and agree that none of the provisions of this
Section 9.15, nor any reference to this Section 9.15 throughout this Agreement,
shall be deemed a waiver of any defenses which may be available in respect of
actions or claims for fraud, including but not limited to, defenses of statutes
of limitations or limitations of damages.
[Remainder of page intentionally left blank]
46
IN WITNESS WHEREOF, ACN Holdings and Capstar have each caused this
Agreement to be executed on their behalf by a duly authorized officer effective
as of the date first written above.
CAPSTAR:
CAPSTAR BROADCASTING CORPORATION
By: /s/ William S. Banowsky, Jr.
----------------------------------
Name: William S. Banowsky
--------------------------------
Title: Executive Vice President
-------------------------------
ACN HOLDINGS:
ACN HOLDINGS, LLC
By: _________________________________
Name: _______________________________
Title: ______________________________
IN WITNESS WHEREOF, ACN Holdings and Capstar have each caused this
Agreement to be executed on their behalf by a duly authorized officer effective
as of the date first written above.
CAPSTAR:
CAPSTAR BROADCASTING CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
ACN HOLDINGS:
ACN HOLDINGS, LLC
By: /s/ Royce Yudkoff
----------------------------------
Name: Royce Yudkoff
--------------------------------
Title: Executive Vice President
-------------------------------