<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number: 0-7762
AUDIO COMMUNICATIONS NETWORK, INC.
(Name of Small Business Issuer in its Charter)
FLORIDA 59-0690530
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1000 LEGION PLACE, SUITE 1515 (407) 649-8877 32801
ORLANDO, FLORIDA (Registrant's (Zip Code)
(Address of principal executive offices) telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.25 PER SHARE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO __
-
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)
The Issuer's revenues for its most recent fiscal year were $17,552,024.
As of March 31, 1998, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was approximately $7,366,206 based on the
closing sales price of the Common Stock on the American Stock Exchange of $4
7/16 on March 31, 1998.
As of March 31, 1998, 4,502,135 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one): YES __ NO X
-
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC.
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1. Description of Business.......................................... 1
General.......................................................... 1
Muzak(R) Products................................................ 2
Marketing........................................................ 3
Competition...................................................... 3
Employees........................................................ 3
Item 2. Description of Property.......................................... 3
Item 3. Legal Proceedings................................................ 3
Item 4. Submission of Matters to a Vote of Security-Holders.............. 4
PART II
Item 5. Market for Common Equity and Related Stockholder Matters...........5
Item 6. Management's Discussion and Analysis or Plan of Operation........ 5
Item 7. Financial Statements............................................. 12
Item 8. Disagreements on Accounting and Financial Disclosure............. 12
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act..................................................... 28
Item 10. Executive Compensation........................................... 31
Item 11. Security Ownership of Certain Beneficial Owners and Management... 34
Item 12. Certain Relationships and Related Transactions................... 36
Item 13. Exhibits and Reports on Form 8-K................................. 38
</TABLE>
-i-
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report including, without
limitation, statements containing the words "believes," "anticipates," "may,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company (or industry results, performance or
achievements) expressed or implied by such forward-looking statements to be
substantially different from those predicted. Such factors include, among
others, the following: general economic and business conditions, both
nationally and in the regions in which the Company operates; competition;
changes in business strategy or development plans; and the Company's inability
to obtain sufficient financing to continue operations, if necessary. Certain of
these factors are discussed in more detail elsewhere in this Annual Report.
-ii-
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Audio Communications Network, Inc. (the "Company" or "Audio") owns and
operates MUZAK(R) franchises. The Company currently owns franchises located in
and around Baltimore, Maryland and the Delmarva peninsula area encompassing the
Maryland Eastern Shore, and Kansas City and St. Louis, Missouri, Jacksonville,
Florida and central California, including Fresno. The Company also services
large portions of Arizona and North and South Carolina, including Phoenix,
Charlotte, Raleigh-Durham, Winston-Salem, Greensboro and Greenville. The Company
distributes business music programming of MUZAK(R) and a wide range of ancillary
products and services, including broadcast and data delivery, video, audio
marketing and in store advertising services.
The Company was incorporated in Florida in 1953, and originally operated as
a manufacturer of various types of electronic equipment used for the
transmission and reception of specialized communications systems used
principally by the background music industry. In 1989, the Company ceased its
manufacturing efforts.
In 1985, the Company acquired its first MUZAK(R) franchise when it
purchased the assets of the Maryland Music Corporation, the franchisee for the
Baltimore, Maryland area. In 1986, the Company purchased the assets of Delmarva
Music, the MUZAK(R) franchisee for the Delmarva peninsula area, and acquired the
stock of Music Services, Inc., the MUZAK(R) franchisee for the area in and
around Kansas City, Missouri. In 1988, the Company continued its expansion with
the purchase of the assets of Wired Music, Inc., the MUZAK(R) franchisee for St.
Louis, Missouri. In May 1992, the Company acquired certain assets of Business
Music of America in St. Louis, Missouri. This acquisition was incorporated into
the Company's MUZAK(R) franchise in St. Louis and further strengthened the
Company's position in the St. Louis market.
In January 1994, the Company purchased additional subscriber accounts in
the Delmarva peninsula area from an independent music supplier for the Baltimore
franchise. Additionally, in March 1994, the Company acquired all the
outstanding stock of American Music Network, Inc. ("AMN") in exchange for newly
issued shares of the Company's common stock in a related party transaction. AMN
is based in Fresno, California and serves central California, including Fresno,
Modesto, Salinas, and the Monterey peninsula.
On January 2, 1996, the Company acquired the assets of Florida Sound
Engineering Company ("Florida Sound") holder of the Jacksonville, Florida
MUZAK(R) franchise. In addition to the MUZAK(R) franchise, the Company also
acquired the assets of Florida Sound's Pro Sound Division enabling it to install
complex and extensive communication systems, such as the system
<PAGE>
at the Jacksonville Municipal Stadium. The area of operations extends beyond
Jacksonville to Gainesville, Ocala, St. Augustine, and into southern Georgia,
including Brunswick.
On May 30, 1997, the Company acquired the assets of Suncom Communications,
L.L.C., a Delaware limited liability company ("Suncom"), holder of the MUZAK(R)
franchises in Hillsborough and Charlotte, North Carolina and Phoenix, Arizona,
through a business combination (the "Combination") with Suncom which was
accounted for as a reverse acquisition. Under the terms of the Combination, the
Company, through its wholly owned subsidiary, Suncom, Inc., acquired the assets
and business of Suncom, in exchange for which the Company issued 2.1 million
shares of Common Stock to Suncom, which represented approximately 48% of the
Company's then outstanding shares of Common Stock. Suncom is the MUZAK(R)
affiliate serving large portions of the Carolinas, including Charlotte,
Raleigh/Durham, Winston-Salem, Greensboro and Greenville, as well as large
portions of Arizona, including Phoenix. Also on May 30, 1997, Suncom acquired
597,986 shares of Common Stock from A.J. Schell, Chairman of the Board of
Directors of the Company. As a result of the foregoing transactions, Suncom is
currently the owner of approximately 2.7 million shares of Common Stock,
representing approximately 60% of the outstanding shares of Common Stock of the
Company.
MUZAK(R) PRODUCTS
Through its network of MUZAK(R) franchises, the Company distributes
business music programming of MUZAK(R) to a wide range of businesses. MUZAK(R)
is used primarily as a management tool to increase productivity and efficiency
and to enhance sales environments. The programs are delivered by means of
direct broadcast satellite (DBS), FM SCA (Subsidiary Communication
Authorization) and radio transmissions. Distribution by DBS enables the
dissemination of up to 60 digital music channels from classical to urban rock,
as well as data and video.
The Company also provides certain ancillary products such as audio/video
systems and equipment, data services whereby a business distributes data to
multiple locations through the Company's communications systems, and messaging
on hold whereby advertisements are delivered while a telephone caller is on
hold. The Company also uses its communications systems to provide in-store
advertising services and advertising services produced by MUZAK(R).
The audio, video and other equipment needed to receive MUZAK(R) and
ancillary products may be provided to the customer by the Company or other
suppliers. The Company also provides equipment installation services. The
Company sells music for use in public places, such as retail stores and
restaurants, and in work areas, such as business offices, and warehouse and
manufacturing facilities.
2
<PAGE>
MARKETING
The Company serves over 20,000 business locations. Customers are billed
monthly under long-term service agreements which provide the recurring revenue
base for the Company. The Company is not dependent on one or a few major
customers.
All MUZAK(R) affiliates operate under an exclusive 10-year franchise
agreement with MUZAK(R) for distribution of products. The Company, like all
MUZAK(R) franchisees, pays to MUZAK(R) a set market fee and a royalty based on
its gross billings for music services.
COMPETITION
Although the Company competes with independent distributors of other music
products in each of its current markets, the Company is the leading distributor
of music products in these markets. The Company believes its leading position
is attributable to the superior service and equipment provided to the customer
and the availability of additional audio products. Also MUZAK(R) has the only
national distribution network through the Company and its other MUZAK(R)
affiliates, and this network provides continuity of product for MUZAK(R)
subscribers with multiple locations around the country.
EMPLOYEES
The Company employs approximately 162 persons, all of whom are full-time
employees. The service and installation employees of the MUZAK(R) franchise in
Kansas City, Missouri are members of Communications Workers of America AFL/CIO.
These employees are currently working under a negotiated agreement which expires
September 30, 1999. Additionally, the employees of the St. Louis, Missouri
franchise are working under a negotiated agreement with the International
Brotherhood of Electrical Workers (IBEW). This agreement became effective on
the 1st day of September 1995 and continues through the 31 st day of August 1998
and automatically renews itself from year to year thereafter, unless either the
Company or IBEW serves written notice upon the other 60 days prior to the
expiration date or 60 days prior to any subsequent anniversary date.
ITEM 2. DESCRIPTION OF PROPERTY.
The headquarters of the Company are located in Orlando, Florida and occupy
approximately 3,300 square feet of leased space. MUZAK(R) franchises are
operated from leased facilities within major cities in each franchise area.
ITEM 3. LEGAL PROCEEDINGS.
None.
3
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not Applicable.
4
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) Price Range of Common Stock
---------------------------
The Company's Common Stock began trading on the American Stock Exchange on
December 10, 1997 under the symbol "ANI." Prior thereto, the Company's Common
Stock was traded in the over-the-counter market under the symbol "AUCM". All
over-the-counter prices are quotes supplied by the National Association of
Securities Dealers through the NASD OTC Bulletin Board, its automated system for
reporting non-NASDAQ quotes. Quotations reflect inter-dealer prices, without
retail markup, markdown or commission, and may not represent actual
transactions.
<TABLE>
<CAPTION>
BID PRICES
-------------
HIGH LOW
----- -----
<S> <C> <C>
1996
- ----
First Quarter 2-1/8 2-1/8
Second Quarter 2-3/8 2
Third Quarter 2-1/2 2-3/8
Fourth Quarter 2-7/8 2-1/2
1997
- ----
First Quarter 3.25 2.83
Second Quarter 3.50 3.25
Third Quarter 3.44 2.88
Fourth Quarter (through December 10, 1997)/*/ 3.63 2.94
SALES PRICES
-------------
HIGH LOW
----- -----
1997
- ----
Fourth Quarter (December 10, 1997 4.25 3
through December 31, 1997)/*/
</TABLE>
- ------------
/*/ The Company's Common Stock began trading on the American Stock Exchange on
December 10, 1997.
5
<PAGE>
(B) Approximate Number of Equity Security Holders
---------------------------------------------
As of April 13, 1998, there were approximately 505 shareholders of the
Company's Common Stock.
(C) Dividends
---------
No dividends have been paid on the Company's Common Stock since 1973.
Payment of dividends are within the discretion of the Company's Board of
Directors and will depend on, among other factors, earnings, capital
requirements and the operating and financial condition of the Company. Also,
the Company's banking facility prohibits the Company from paying dividends
without the prior written consent of the lender.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Set forth below is a discussion of the Company's financial condition,
changes in financial condition and results of operations for the periods
indicated.
GENERAL
- -------
On May 30, 1997, the Company completed a business combination (the
"Combination") with Suncom Communications L.L.C., a Delaware limited liability
company ("Suncom"). Under the terms of the Combination, the Company, through
its wholly owned subsidiary, Suncom, Inc., acquired the assets and business of
Suncom, in exchange for which the Company issued 2.1 million shares of its
Common Stock to Suncom. The Combination was accounted for as a reverse
acquisition (the "Reverse Acquisition") under generally accepted accounting
principles, as a result of which Suncom is considered to be the acquiring legal
entity and ACN the acquired entity for accounting purposes, even though ACN is
the surviving legal entity. As a result of this reverse purchase accounting
treatment, (i) the historical financial statements of the Company for periods
prior to the date of the Combination are no longer the historical financial
statements of ACN, and therefore, are no longer presented; (ii) the historical
financial statements of the Company for periods prior to the date of the
Combination are those of Suncom; (iii) all references to the financial
statements of the "Company" apply to the historical financial statements of
Suncom prior to the Combination and to the consolidated financial statements of
ACN subsequent to the Combination; and (iv) any reference to ACN applies solely
to Audio Communications Network, Inc. and its financial statements prior to the
Combination.
SUMMARY
- -------
The following table sets forth for the periods indicated, certain items
from the Company's Consolidated Statements of Operations expressed as a
percentage of operating revenues.
6
<PAGE>
Percentage of Revenues
----------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Revenues from Operations 100% 100% 100%
Operating Costs and Expenses 70.0% 63.2% 68.0%
---- ---- -----
Income from Operations before 30.0% 36.8% 32.0%
Depreciation and Amortization
Depreciation and Amortization 23.1% 23.3% 41.8%
---- ---- -----
Income before Other Income 6.9% 13.5% (9.8%)
(Expense) and Income Taxes
Other Income (Expense), net 14.8% 18.9% 18.9%
---- ---- -----
Income Before Income Taxes (7.9%) (5.4%) (28.7%)
Provision for Income Taxes 0.2% 0.0% 0.0%
---- ---- -----
Net Income (8.1%) (5.4%) (28.7%)
---- ---- -----
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Revenues
- ------------
Consolidated net revenues for the year ended December 31, 1997 were
$17,552,024, compared to revenues of $10,122,175 for 1996, representing a 73%
increase in revenues. 89% of such increase is attributable to the Reverse
Acquisition with the remaining increase attributable to internal growth from the
Suncom franchises.
Costs and Expenses
- ------------------
Costs and expenses for 1997 were $12,282,381, compared to costs and
expenses of $6,396,575 for 1996, representing an 92% increase in costs and
expenses. 97% of such increase is attributable to the Reverse Acquisition, with
the remaining increase attributable to increases in the operating expenses of
the Suncom franchises.
Depreciation and Amortization
- -----------------------------
7
<PAGE>
Depreciation and Amortization for 1997 was $4,057,052, compared to
depreciation and amortization of $2,356,185 for 1996, representing a 72%
increase. Such increase is attributable to the Reverse Acquisition.
Other Income and Expense
- ------------------------
Other Income and Expense for 1997 was $2,589,378, compared to $1,914,578
for 1996, representing a 35% increase. Such increase was primarily due to the
additional senior debt incurred by the Company in connection with the Reverse
Acquisition. See "Liquidity and Capital Resources."
Income Taxes
- ------------
At December 31, 1997, the Company had net operating loss carryforwards for
federal tax purposes of approximately $3,215,000. Such loss carryforwards expire
in 2004 through 2012.
Net Loss
- --------
Net loss for 1997 was $1,403,137 compared to net loss of $545,343 in 1996.
Loss per share for 1997 was $.32 compared to $.13 for 1996, an increase of 19%
or $.05 per share.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
General
- -------
As previously described, the results of operations of the Company for 1996
and 1995 reflect the historical results of operations of Suncom and do not
include historical results of operations of ACN.
SunCom commenced operations in September 1995 and, accordingly, results of
operations of SunCom for 1995 reflect operations for less than one fiscal
quarter.
Net Revenues
- ------------
Consolidated net revenues for the year ended December 31, 1996 were
$10,122,175 compared to revenues of $2,969,797 for 1995, representing a 241%
increase in revenues.
Costs and Expenses
- ------------------
8
<PAGE>
<PAGE>
Costs and expenses for 1996 were $6,396,575 compared to costs and expenses
of $2,019,019 for 1995, representing a 217% increase in expense.
Depreciation and Amortization
- -----------------------------
Depreciation and Amortization for 1996 were $2,356,185 compared to
depreciation and amortization of $1,240,210 for 1995 representing a 90% increase
in such expenses.
Other Income and Expense
- ------------------------
Other Income and Expense for 1996 were $1,914,578 compared to other income
and expense of $560,681 for 1995, representing a 241% increase.
Net Loss
- --------
Net loss for 1996 was $545,343 compared to a net loss of $850,123 for 1995.
This improvement in net income is the result of proportionately lower
depreciation and amortization costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Operating cash flows (computed as net income plus interest, taxes,
depreciation, and amortization) were $5,349,425 in 1997 as compared to
$3,736,394 for 1996, an increase of $1,613,031 or 43%. All loan payments of
interest and principal have been made on a timely basis in both years.
On May 30, 1997, contemporaneously with the consummation of the
Combination, the Company entered into a new Credit Agreement with PNC Bank,
National Association individually and as Agent, SunTrust Bank, Central Florida,
N.A. and Lehman Commercial Paper Inc. Pursuant to the Credit Agreement, the
Company has the ability to borrow monies on a revolving basis until May 2004.
Initially, the Company can borrow up to $32,000,000 and the maximum available
decreases at quarterly intervals. As of April 1, 1998, the Company had
$3,800,000 of available borrowings and $28,200,000 outstanding under the Credit
Agreement. Loans bear interest based on either the rate of interest announced
by the Agent from time to time as its prime rate or the London inter bank
offered rate quoted from time to time by the British Bankers' Association, as
selected by the Company at the time of each borrowing. Interest is payable
quarterly in arrears on the last business day of March, June, September and
December. The Company must make annual payments of principal equal to 75% of
"excess cash flow" for 1997
9
<PAGE>
and 50% thereafter in addition to mandatory payments upon certain sales of
assets or stock. The Company did not make any payments of principal in respect
of "excess cash flow" for 1997.
The Company's obligations under the Credit Agreement are secured by a lien
on substantially all of its assets, including its stock in all of its
subsidiaries, and is further secured by a guaranty by all of its subsidiaries
which guaranty is, in turn, secured by a lien on substantially all of the assets
of all such subsidiaries.
The Credit Agreement sets forth a variety of affirmative, negative and
financial covenants which the Company has agreed to including, without
limitation, (a) prohibitions against dividends, the incurrence of additional
debt or liens, the disposition or acquisition of assets, the issuance of
additional stock and a material change in business, (b) requirements that the
Company not exceed certain levels of capital expenditures and that the Company
meet certain fixed charges coverage, maximum leverage and minimum interest
coverage ratios, and (c) requirements that the Company provide the lenders with
certain financial statements and other information on an ongoing basis, all as
more fully set forth in the Credit Agreement.
The Company borrowed approximately $25,250,000 under the new Credit
Agreement on May 30, 1997, the proceeds of which were used to pay off the
Company's then existing borrowings from SunTrust Bank Central Florida N.A. and
Suncom's then existing term loan with PNC Bank N.A. as successor to Midlantic
Bank N.A. and to pay a variety of fees and expenses in connection with the
consummation of the Combination, the Credit Agreement and related transactions.
Pursuant to the terms and provisions of the Combination, among other
things, the Company agreed to assume all of Suncom's liabilities. In
furtherance thereof, the Company and Suncom, Inc. agreed to jointly and
severally assume Suncom's subordinated indebtedness in the original principal
amount of $4,750,000 to Midwest Mezzanine Fund L.P. ("Midwest"), a member of
Suncom. The subordinated debt to Midwest bears interest at the rate of 12.27%
per annum payable quarterly on the first day of January, April, July and
October. Quarterly principal installments in the amount of $250,000 each are to
begin January 1, 2000. The obligations of the Company and Suncom Inc. with
respect to the subordinated debt is secured by a guaranty executed and delivered
by the Company's other subsidiaries.
To evidence the assumption of the subordinated debt, the Company and Suncom
Inc. executed and delivered a Note Assumption Agreement dated May 30, 1997 with
Midwest and further executed and delivered an allonge to the existing
subordinated note. Pursuant to the documentation with Midwest, the Company has
agreed to certain affirmative, negative and financial covenants including,
without limitation (a) prohibitions against the incurrence of additional debt or
liens, restrictions on mergers, acquisitions or sales of assets and restrictions
on transactions with affiliates, dividends and payments, (b) limits on capital
expenditures and maintenance of certain coverage and leverage ratios and (c)
allowing Midwest to have a
10
<PAGE>
representative present to observe all meetings of the Boards of Directors of the
Company and its subsidiaries.
IMPACT OF YEAR 2000 ISSUE
- -------------------------
An issue exists for all companies that rely on computers as the year 2000
approaches. The "Year 2000" problem is the result of past practices in the
computer industry of using two digits rather than four to identify the
applicable year. This practice will result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999. The Company anticipates that it will be able to test its
entire system using its internal programming staff and outside computer
consultants and intends to make any necessary modifications to prevent
disruption to its operations. Costs in connection with any such modifications
are not expected to be material.
11
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
Index to Financial Statements
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 13
FINANCIAL STATEMENTS:
Consolidated Balance Sheets, December 31, 1997 and 1996 14
Consolidated Statements of Operations for the Years Ended 16
December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the Years 17
Ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended 18
December 31, 1997 and 1996
Notes to Consolidated Financial Statements for the Years Ended 20
December 31, 1997 and 1996
</TABLE>
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
12
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Audio Communications Network, Inc.:
We have audited the accompanying consolidated balance sheets of Audio
Communications Network, Inc. and its subsidiaries (the "Company") as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1997
and 1996, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Orlando, Florida
March 31, 1998
-13-
<PAGE>
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------------------------------
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 680,195 $ 132,565
Accounts receivable - trade (less allowance for doubtful
accounts of $484,227 in 1997 and $105,797 in 1996) 2,159,163 839,442
Inventories (Note 1) 1,150,133 443,969
Prepaid expenses and other current assets 196,891 124,372
----------- -----------
Total current assets 4,186,382 1,540,348
----------- -----------
PROPERTY - At cost: (Notes 1 and 4)
Leasehold improvements 79,459 55,572
Equipment 14,797,638 6,651,052
Furniture and fixtures 523,598 122,647
----------- -----------
Total 15,400,695 6,829,271
Less accumulated depreciation (2,271,197) (920,839)
----------- -----------
Property - net 13,129,498 5,908,432
----------- -----------
OTHER ASSETS:
Subscriber contract rights and other intangible assets
(net of accumulated amortization of approximately
$5,095,000 in 1997 and $2,678,000 in 1996) (Note 1) 19,984,882 14,921,299
Goodwill (net of accumulated amortization of approximately
$377,000 in 1997 and $49,000 in 1996) (Note 1) 7,974,059 653,666
Deposits and other 30,819 80,349
----------- -----------
Total other assets 27,989,760 15,655,314
----------- -----------
TOTAL $45,305,640 $23,104,094
=========== ===========
(Continued)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- ----------------------------------------------------------- -----------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4) $ 556,830 $ 1,468,420
Accounts payable 1,739,800 1,530,200
Royalties payable 660,264 -
Accrued liabilities (Note 3) 1,775,590 359,429
----------- -----------
Total current liabilities 4,732,484 3,358,049
----------- -----------
LONG-TERM DEBT (Note 4) 32,395,375 17,197,865
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Note 5):
Preferred stock, $.001 par value, authorized 1,000,000
shares in 1997, -0- in 1996; issued and outstanding,
-0- shares in 1997 and 1996 - -
Common stock, $.25 par value, authorized, 12,000,000
shares in 1997, -0- in 1996; issued and outstanding,
4,502,135 shares in 1997 and -0- shares in 1996 1,125,534 -
Contributed capital in excess of par value 9,850,850 -
Investment - 3,750,000
Contributed capital - preferred warrants - 193,646
Accumulated deficit (2,798,603) (1,395,466)
----------- -----------
Total stockholders' equity 8,177,781 2,548,180
----------- -----------
TOTAL $45,305,640 $23,104,094
=========== ===========
</TABLE>
See notes to consolidated financial statements.
(Concluded)
15
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
1997 1996
REVENUES $17,552,024 $10,122,175
----------- -----------
COSTS AND EXPENSES:
Cost of sales 7,168,978 3,412,161
Selling, general and administrative expenses 5,113,403 2,984,414
Depreciation and amortization 4,057,052 2,356,185
----------- -----------
Total 16,339,433 8,752,760
----------- -----------
INCOME BEFORE OTHER INCOME (EXPENSE)
AND INCOME TAXES 1,212,591 1,369,415
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 20,221 10,794
Interest expense (Note 4) (2,669,160) (1,925,552)
Other 59,561 -
----------- -----------
Other - net (2,589,378) (1,914,758)
----------- -----------
LOSS BEFORE INCOME TAXES (1,376,787) (545,343)
PROVISION FOR INCOME TAXES (Notes 1 and 6) 26,350 -
----------- -----------
NET LOSS $(1,403,137) $ (545,343)
=========== ===========
LOSS PER COMMON SHARE (Note 1) $ (.32) $ (.13)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONTRIBUTED CONTRIBUTED
CAPITAL - CAPITAL TOTAL
PREFERRED COMMON IN EXCESS ACCUMULATED STOCKHOLDERS'
INVESTMENT WARRANTS STOCK OF PAR DEFICIT EQUITY
BALANCE, DECEMBER 31, 1995 $ 3,750,000 $ 193,646 $ - $ - $ (850,123) $ 3,093,523
Net loss - - - - (545,343) (545,343)
----------- --------- ----------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1996 3,750,000 193,646 - - (1,395,466) 2,548,180
Merger-related activity (3,750,000) (193,646) 1,102,300 9,682,920 - 6,841,574
Stock issued to directors and employees
in lieu of cash compensation - - 9,978 110,778 - 120,756
Stock purchased by employees under
stock purchase plan - - 756 10,042 - 10,798
Stock options exercised - - 12,500 47,110 - 59,610
Net loss - - - - (1,403,137) (1,403,137)
----------- --------- ----------- ----------- ------------ ----------
BALANCE, DECEMBER 31, 1997 $ - $ - $ 1,125,534 $ 9,850,850 $ (2,798,603) $ 8,177,781
=========== ========= =========== =========== ============ ===========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,403,137) $ (545,343)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 4,259,207 2,407,341
Interest accrued to amortize discount on subordinated debt - 21,270
Stock issued to directors and employees in lieu of cash compensation 120,756 -
Deferred commissions (712,373) (474,780)
Loss on disposal of fixed assets 45,400 -
(Increase) decrease in operating assets and increase (decrease)
in operating liabilities - net of business acquired:
Accounts receivable (1,054,796) (184,720)
Inventories (3,389,917) (1,065,402)
Prepaid expenses and other (41,037) 169,616
Accounts payable (998,670) 585,394
Royalties payable 660,264 (83,257)
Accrued liabilities 575,695 24,150
Other - net 34,895 (75,625)
------------ -----------
Net cash (used in) provided by operating activities (1,903,713) 778,644
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of certain assets and liabilities of Chambers, Inc.
and SunCom Group, Inc. - (810,842)
Capital expenditures - net (296,169) (1,344,264)
Proceeds from the sale of intangible assets 185,908 -
Cash acquired in the acquisition 876,068 -
Purchase of subscriber rights and other intangibles (295,180) -
------------ -----------
Net cash provided by (used in) investing activities 470,627 (2,155,106)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 25,534,420 750,000
Principal payments under capital lease obligations (113,764) (37,479)
Debt issuance costs - (3,750)
Repayment of long-term debt (23,510,348) -
Proceeds from sale of stock 70,408 -
------------ -----------
Net cash provided by financing activities 1,980,716 708,771
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 547,630 (667,691)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 132,565 800,256
------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 680,195 $ 132,565
============ ===========
(Continued)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES - Cash paid during the year for:
Interest $ 2,175,692 $2,064,190
============ ==========
Income taxes $ - $ -
============ ==========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Inventory leased to customers and reclassified to property during the year $ 3,187,000 $ 969,000
============ ==========
Capital expenditures financed through increase in debt $ 38,000 $ -
============ ==========
Acquisition:
Fair value of assets acquired $ 21,081,000 $ -
Intangible assets $ 7,305,000 $ -
Liabilities assumed $(11,935,000) $ -
Notes issued $ (1,304,000) $ -
See notes to consolidated financial statements.
</TABLE>
19
<PAGE>
AUDIO COMMUNICATIONS NETWORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -
On May 30, 1997, Suncom Communications LLC ("SCL") sold its net assets to
Audio Communications Network, Inc. ("ACN") (the "Merger"). In connection with
the Merger, ACN issued to SCL an aggregate of 2,100,000 shares of ACN's
common stock, and 597,986 shares were purchased from ACN's chairman by SCL.
Upon completion of the Merger, SCL held securities having an aggregate of
approximately 60% of outstanding voting power of ACN. As noted below, the
Merger was accounted for as a reverse acquisition with SCL being the
acquiring company.
REVERSE PURCHASE METHOD OF ACCOUNTING - As described above, SCL owned an
aggregate of approximately 60% of the outstanding voting power of ACN
immediately following the Merger. Accordingly, the Merger has been accounted
for as a reverse purchase under generally accepted accounting principles as a
result of which SCL is considered to be the acquiring entity and ACN the
acquired entity for accounting purposes, even though ACN is the surviving
legal entity. As a result of this reverse purchase accounting treatment, (i)
the historical financial statements of the Company for periods prior to the
date of the Merger are no longer the historical financial statements of ACN,
and therefore, are no longer presented; (ii) the historical financial
statements of the Company for periods prior to the date of the Merger are
those of SCL; (iii) all references to the financial statements of the
"Company" apply to the historical financial statements of SCL prior to the
Merger and to the consolidated financial statements of ACN subsequent to the
Merger; and (iv) any reference to ACN applies solely to Audio Communications
Network, Inc. and its financial statements prior to the Merger.
DESCRIPTION OF BUSINESS - The Company owns and operates MUZAK (R) franchises,
which provide background music programming and ancillary services to
customers, in seven major metropolitan areas, as its single line of business.
All intercompany balances and transactions are eliminated in these
consolidated financial statements.
SIGNIFICANT ACCOUNTING POLICIES -
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION - Revenues for equipment sales and installations are
recognized at the point of sale. Revenues from music services are recognized
on a straight-line basis over the term of the customer contracts. Contracts
are typically for a five-year period with renewal options for an additional
five years.
20
<PAGE>
FINANCIAL INSTRUMENTS - Management believes the book value of financial
instruments (cash and cash equivalents, accounts receivable, accounts
payable, royalties payable, accrued liabilities, and long-term debt)
approximates fair value.
INVENTORIES - Inventories, which consist of equipment held for sale or lease
and supplies, are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method.
PROPERTY - Property is recorded at cost. Depreciation is provided on the
straight-line method over estimated useful lives of 3 to 10 years.
GOODWILL AND INTANGIBLE ASSETS - Goodwill, the excess of the purchase price
over the fair value of net assets of businesses acquired, is amortized over
20 years using the straight-line method. Other intangible assets acquired,
principally subscriber contract rights, are amortized using the straight-line
method over various periods from three to ten years. Management evaluates
the recoverability of goodwill and other intangible assets quarterly and
annually based on current operating trends in relation to the recorded
intangible values.
INCOME TAXES - Prior to the Merger, the Company was a limited liability
corporation, and, as such, for federal and state income tax purposes, income
and losses of the Company passed through to the members of the Company for
inclusion in their income tax returns. In connection with the Merger, the
Company became a taxable entity and accounts for income taxes in accordance
with Statement of Financial Accounting Standards No. 109 ("FAS 109"),
Accounting for Income Taxes. A significant provision of FAS 109 is the use
of the liability method of computing deferred income taxes. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under FAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date. Additionally, under FAS 109,
the Company recognizes, subject to a valuation allowance regarding asset
realization, the future tax benefits of expenses which have been recognized
in the consolidated financial statements.
LOSS PER COMMON SHARE - Loss per common share is computed by dividing net
loss by the weighted average number of shares of common stock outstanding
during the year. Common stock equivalents for purposes of diluted loss per
share include shares issuable on the exercise of employee stock options under
the incentive stock option plan adopted in May 1984 and amended in February
1991. The weighted average number of common shares outstanding were
4,352,134 for 1996 (assuming retroactive treatment of the reverse
acquisition) and 4,447,251 for 1997. Diluted loss per common share has been
excluded since the effect of including the options would be antidilutive.
CASH EQUIVALENTS - Cash equivalents include demand and interest-bearing
deposits due from banks with original maturities of 90 days or less.
CONCENTRATIONS OF CREDIT RISK - The Company performs ongoing credit
evaluations of its customers and generally requires no collateral from the
customers. Management feels that the Company's credit risk is somewhat
lessened due to the fact that its customers operate in a wide range of
industries.
There are no single customers that individually had billings greater than 5%
of net operating revenues for the years ended December 31, 1997 and 1996.
21
<PAGE>
MANAGEMENT AGREEMENT - Prior to the Merger, the Company had a management
agreement in which the Company paid certain members of management a monthly
fee of 1.75% - 3.5% of gross operating revenues. The amount of the fee
depended on the results of operations as compared to projected cumulative
results. In addition to these fees, certain expenses incurred by management
were reimbursed by the Company. Such reimbursements were not to exceed .5% of
the Company's gross operating revenues for the period. The management
agreement was terminated in connection with the Merger.
Total management fees included in selling, general and administrative expense
during the years ended December 31, 1997 and 1996 were approximately $202,000
and $440,000.
RECLASSIFICATIONS - Certain amounts shown in 1996 have been reclassified to
conform to the 1997 presentation.
2. THE MERGER
A summary of the Merger is as follows:
THE MERGER - As described in Note 1 herein, the Merger was accounted for as a
reverse acquisition, utilizing the purchase method of accounting, in which
SCL acquired control of ACN for accounting purposes.
The total purchase price of the Merger was $7,647,874, which represents the
number of shares of ACN's common stock outstanding immediately prior to the
Merger valued at the market price of such shares as of the date of the
signing of the merger agreement. This amount was allocated to the assets of
ACN acquired and liabilities assumed, based on their estimated fair value as
of May 30, 1997. At May 30, 1997, assets acquired and liabilities assumed
were deemed to have fair values substantially equal to their historic book
values, except for certain intangible assets.
PRO FORMA RESULTS OF OPERATIONS - The following represents the summary
unaudited pro forma results of operations as if the Merger had occurred at
the beginning of 1996 and 1997. The pro forma results are not necessarily
indicative of the results that will occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
<S> <C> <C>
1997 1996
Revenues $ 21,725,000 $21,173,000
Net loss $ (2,425,000) $ (365,000)
Loss per share $ (.55) $ (.08)
</TABLE>
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
Accrued interest $ 506,300 $ -
Unearned revenue 696,051 271,042
Amount due to SCL 500,000 -
Other 73,239 88,387
---------- -----------
$1,775,590 $ 359,429
========== ===========
</TABLE>
22
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Credit agreement, interest rate varies $26,700,000 $ -
Term loan, interest rate varies; repaid in 1997 - 14,000,000
Subordinated promissory note to a limited partner of SCL;
interest payable quarterly at a per annum rate of 12.27%
through July 1, 2004; principal payments of $250,000 payable
quarterly commencing January 1, 2000 and due July 1, 2004;
principal may be subject to mandatory prepayments under
certain conditions. 4,750,000 4,584,136
Note payable to director; noninterest bearing, payments of
$500,000 due annually commencing January 1998, net of discount
(at 10%) of $118,202 at December 31, 1997. 1,381,798 -
Other long-term debt 120,407 82,149
----------- -----------
Total 32,952,205 18,666,285
Less current portion 556,830 1,468,420
----------- -----------
Long-term portion $32,395,375 $17,197,865
=========== ===========
</TABLE>
Long-term debt matures as follows:
YEAR
1998 $ 566,830
1999 527,754
2000 1,410,553
2001 1,006,539
2002 1,000,529
Thereafter 28,450,000
-----------
Total $32,952,205
===========
CREDIT AGREEMENT - In connection with the Merger, the Company entered into a
new Credit Agreement with PNC Bank, National Association, individually and as
Agent, SunTrust Bank, Central Florida, N.A., and Lehman Commercial Paper Inc.
on May 30, 1997. Pursuant to the Credit Agreement, the Company has the
ability to borrow monies on a revolving basis until May 2004. Initially, the
Company can borrow up to $32,000,000 and the maximum available decreases at
quarterly intervals. Loans bear interest based on either the rate of
interest announced by the Agent periodically as its prime rate or the London
interbank offered rates quoted periodically by the British Bankers'
Association, as selected by the Company at the time of each borrowing.
Interest is payable quarterly in arrears on the last business day of March,
June, September, and December. The Company must make annual payments of
principal equal to 75% of "excess cash flow" for 1997 and 50% thereafter in
addition to mandatory payments upon certain sales of assets or stock. No
principal payments were required in 1997. For purposes of the debt maturity
schedule above, the expected maturity date is assumed to be 2004.
23
<PAGE>
The Company's obligations under the Credit Agreement are secured by a lien on
substantially all of its assets, including its stock in all of its
subsidiaries, and is further secured by a guaranty by all of its subsidiaries
which guaranty is, in turn, secured by a lien on substantially all of the
assets of all such subsidiaries.
The Credit Agreement sets forth a variety of affirmative, negative, and
financial covenants which the Company has agreed to, including, without
limitation (a) prohibitions against dividends, the incurrence of additional
debt or liens, the disposition or acquisition of assets, the issuance of
additional stock, and a material change in business, (b) requirements that
the Company not exceed certain levels of capital expenditures and that the
Company meet certain fixed charge coverage, maximum leverage, and minimum
interest coverage ratios, and (c) requirements that the Company provide the
lenders with certain financial statements and other information on an ongoing
basis, all as more fully set forth in the Credit Agreement.
TERM LOAN - Of the aggregate principal balance due at December 31, 1996,
interest on $7,000,000 was payable at a rate equal to the sum of the weekly
average yield on U.S. Treasury securities adjusted to a constant maturity
mutually agreed-upon between the financial institution and the Company,
subject to certain restrictions, plus 3.5%. The interest rate was 9.35% at
December 31, 1996.
Interest on $7,000,000 of the aggregate principal balance due at December 31,
1996, was payable at a rate equal to the sum of the London interbank
Eurodollar market rate, subject to certain adjustments, plus 4.0%. The
interest rate was 9.38% at December 31, 1996. All portions of the loan were
repaid with proceeds from the Credit Agreement.
5. STOCKHOLDERS' EQUITY
The Company has two stock-based compensation plans, which are described
below. The Company applied APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for the plans. Had
compensation cost for the Company's two stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the Company's
1997 net loss and loss per common share would have changed to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
<S> <C>
Net loss:
As reported $(1,403,000)
Pro forma $(1,526,000)
Loss per common share assuming no dilution:
As reported $ (.32)
Pro forma $ (.34)
</TABLE>
24
<PAGE>
The Company has an incentive stock option plan (the "Plan") with 200,000
shares of common stock authorized to be granted thereunder. The Plan
provides for the options to be granted to key employees, requires expiration
within ten years of date of grant, allows the options to be exercised two
years from the date of the grant, and requires the option price to be at
least the fair market value, as determined by the Board of Directors, of the
common stock on the date of grant. All options granted under the plan have
been for five-year terms. The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: no dividend yield, expected
volatility of 154%, risk-free interest rate of 6.15%, and expected lives of
five years.
Stock option activity for the year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
<S> <C> <C>
ACN outstanding at May 30, 1997 111,000 $1.26
Granted 48,500 $3.38
Exercised (50,000) $1.19
-------
Outstanding at December 31, 1997
(51,000 exercisable at December 31, 1997) 109,500 $2.26
=======
</TABLE>
The Company also has an employee stock purchase and bonus plan with up to
500,000 shares of common stock authorized to be issued thereunder. This plan
provides for the purchase of up to 200,000 shares of common stock at fair
value by eligible participants, as defined under the plan (up to 10,000
shares per participant), and for the remainder of the shares to be awarded as
bonuses to key employees. During the years ended December 31, 1997, 3,022
shares were purchased by participants under this plan.
6. INCOME TAXES
The components of the provision for income taxes for the year ended December
31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Current:
Federal $ -
State 26,350
-------
$26,350
=======
</TABLE>
25
<PAGE>
The Company's effective tax rate differs from the statutory federal income
tax rate for the following reasons:
<TABLE>
<S> <C>
Computed statutory amount $ (477,000)
Increases (decreases):
State income taxes, net of benefit of federal taxes 17,000
Nondeductible expenses 253,000
Increase in valuation allowance 294,000
Other - net (60,650)
----------
$ 26,350
==========
</TABLE>
The components of the Company's net deferred tax asset are as follows:
<TABLE>
<S> <C>
Noncurrent liabilities - depreciation $ 462,000
----------
Noncurrent assets:
Net operating loss carryforwards 1,093,000
Other 171,000
----------
Total noncurrent assets 1,264,000
----------
Net deferred tax asset - before valuation allowance 802,000
Valuation allowance for deferred tax asset (802,000)
----------
Net deferred tax asset $ -
==========
</TABLE>
It is more likely than not that realization of the net deferred tax asset
through future taxable income within the carryforward periods will not occur.
Accordingly, the net deferred tax asset has been fully reserved with a
valuation allowance at December 31, 1997.
At December 31, 1997, the Company has net operating loss carryforwards for
federal tax purposes approximating $3,215,000. Such loss carryforwards will
expire in 2002 through 2012.
7. EMPLOYEE BENEFIT PLANS
Effective January 1, 1996, the Company instituted a profit-sharing plan which
covers all employees of the Company who have at least one-half year of
service. Contributions to the plan by employees may be at least 1% but not
more than 15% of annual salary, subject to certain restrictions.
Contributions by the Company to the plan are discretionary. Employees are
always 100% vested in employee contributions; no vesting in employer
contributions occurs prior to the first two years of service and 100% vesting
occurs after the third year of service. Contribution expense for the years
ended December 31, 1997 and 1996, was $-0- and $24,507, respectively.
ACN has a noncontributory defined contribution pension plan covering
substantially all ACN employees who have met certain age and length of
service qualifications. The Company's policy is to fund pension cost with
annuity contracts. Pension expense amounted to approximately $32,000 for
1997.
26
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
Certain equipment and office and warehouse facilities are held under
noncancelable operating leases. The Company has also entered into various
agreements with broadcasting companies in order to transmit music service to
its customers through the broadcasting companies' subchannels. Expense under
the operating leases and broadcasting agreements was approximately $733,000
and $420,000 during the years ended 1997 and 1996, respectively.
Future minimum payments under the leases and broadcasting agreements are as
follows:
<TABLE>
<CAPTION>
YEAR
<S> <C>
1998 $ 512,427
1999 475,798
2000 421,672
2001 197,676
2002 148,778
Thereafter 170,411
----------
Total minimum lease payments $1,926,762
==========
</TABLE>
The Company has entered into employment agreements with its Chairman,
President, and Chief Financial Officer. The agreements provide for the
employees to receive a stated minimum annual salary. The agreements, which
contain renewal provisions, expire from May 1998 through May 2000.
******
27
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The names, ages and respective positions of the Executive Officers and
Directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
A.J. Schell 62 Chairman of the Board
Mitchell Kleinhandler 49 President and Director
David W. Unger 42 Executive Vice President
and Director
Doris K. Krummenacker 70 Secretary/*/
Robert Davidoff 71 Director
Patrick J. Dougherty 53 Director
Robert Dyer 65 Director
David Gezon 40 Director
William Landman 45 Director
C. Lee Maynard 57 Director
Ralph L. Weber 83 /*/
Nat M. Turnbull 83 /*/
Ben B. Moss 75 /*/
</TABLE>
________________________
/*/ Resigned as a Director effective May 30, 1997.
A.J. SCHELL has served as Chairman of the Board since June 1990 and as the
Company's President and Chief Executive Officer from May 1987 through May 30,
1997.
MITCHELL KLEINHANDLER has served as President, Chief Operating Officer and
as a Director of the Company since May 30, 1997. Since September 1995, Mr.
Kleinhandler has served as President of Suncom. Prior thereto, Mr. Kleinhandler
was the President of Consolidated Cable Properties Inc., a cable television
management company.
DAVID W. UNGER has served as Executive Vice President, Assistant Secretary
and a Director of the Company since May 30, 1997. Since September 1995, Mr.
Unger has served as Chairman of Suncom. From 1993 to 1995, Mr. Unger served as
President of D Squared Productions, Inc., Mr. Unger's personal investment
company. Prior thereto, Mr. Unger served
28
<PAGE>
as a Vice President of Communications Equity Associates, a merchant banking firm
specializing in the merchant communications industry.
DORIS K. KRUMMENACKER has served as Secretary of the Company since 1990.
Ms. Krummenacker served as the Company's Treasurer and a Vice President from
1974 through May 30, 1997 and as a Director of the Company from 1990 through May
30, 1997.
ROBERT DAVIDOFF has served as a Director of the Company since August 21,
1997. Mr. Davidoff has served as the Managing Director of Carl Marks & Co.,
Inc., an investment company which is an affiliate of CMNY Capital II, L.P.,
since 1950.
PATRICK J. DOUGHERTY has served as a Director of the Company since May
1988. Mr. Dougherty has been a certified public accountant since 1970, and has
served as the President of Patrick J. Dougherty, CPA, PA, since 1982.
ROBERT DYER has served as a Director of the Company since May 1988. Mr.
Dyer has been a practicing attorney since 1961, and has been a partner in the
Orlando law firm of Allen, Dyer, Doppelt, Franjola & Milbrath since November
1980.
DAVID GEZON has served as a Director of the Company since May 30, 1997.
Mr. Gezon has served as the President of Midwest Mezzanine Fund, L.P., an
investment fund which is a member of Suncom, since August 1992.
WILLIAM LANDMAN has served as a Director of the Company since May 30, 1997.
Mr. Landman has been a Principal of CMS Companies, a private investment company
which is an affiliate of CMS Interactive Communications Partners, L.P., a member
of Suncom, since 1986. Mr. Landman currently serves as a director of Russ
Berrie Co.
C. LEE MAYNARD has served as a Director of the Company since May 1985. Mr.
Maynard has been a private real estate investor since 1992. From 1987 through
1992, Mr. Maynard served as the Chairman of the Board and Chief Executive
Officer of Enterprise National Bank of Tampa.
RALPH L. WEBER served as a Director of the Company from 1956 through May
30, 1997. Mr. Weber served as a consultant to the Company from June 1990 to
1994. Prior thereto, Mr. Weber was the Chairman of the Board and Chief
Executive Officer of the Company.
NAT M. TURNBULL served as a Director of the Company from 1959 through May
30, 1997. Mr. Turnbull also served as a Vice President and Secretary of the
Company from 1969 to June 1990. Mr. Turnbull has been a practicing attorney
since 1948 and is a senior member of the law firm of Turnbull, Abner & Daniels.
29
<PAGE>
BEN B. MOSS served as Director of the Company from 1965 through May 30,
1997. Since 1964, Mr. Moss has been the President of Florida Brace Corp., a
company engaged in the business of manufacturing and distributing orthopedic
appliances.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
- -----------------------------------------------------
All Directors hold office until the expiration of their terms and the
election and qualification of their successors. During the fiscal year ended
December 31, 1997 ("Fiscal 1997"), the Board of Directors held a total of five
meetings. No Director during Fiscal 1997 attended fewer than 75 percent of the
aggregate of: (1) the total number of meeting of the Board of Directors and (2)
the total number of meetings held by all committees on which he served.
Officers serve at the discretion of the Board of Directors.
For Fiscal 1997, the Company maintained three standing committees: an
Audit, Compensation and Nominating Committee. The Audit Committee met one time
in Fiscal 1997. Until May 30, 1997, the Audit Committee was comprised of
Messrs. Schell, Dougherty and Maynard. On May 31, 1997, the Board of Directors
established a new Audit Committee, consisting of Messrs. Dougherty, Gezon, Dyer,
Schell and Unger. The Audit Committee has the following duties and
responsibilities: (a) to recommend to the Board the accounting firm to be
selected by the Board or to be recommended by it for shareholder approval as the
independent auditor of the Company, (b) to meet and review with the independent
auditors, the chief internal auditor and the appropriate corporate officers
regarding matters relating to corporate financial reporting and accounting
procedures and policy, the adequacy of financial, accounting and operating
controls for the Company and the scope of the respective audits of the
independent auditors and the internal auditor, (c) to report the results of the
foregoing to the Board and to further submit to the Board any recommendations
which the committee may have, from time to time, with respect to financial
reporting and accounting practices and policies and financial, accounting and
operation controls and safeguards, and (d) to perform such further services as
delegated by the Board.
The Compensation Committee held one meeting in Fiscal 1997. Until May 30,
1997, the Compensation Committee was comprised of Messrs. Dyer, Schell and
Dougherty. On May 31, 1997, the Board of Directors established a new
Compensation Committee consisting of Messrs. Gezon, Kleinhandler and Landman.
The Compensation Committee has the following duties and responsibilities: (a)
to periodically review the compensation (including salary, bonus and benefits)
of all of the executive officers of the Company and its subsidiaries, (b) to
review and recommend to the Board matters relating to employee compensation and
employee benefit plans and incentives generally, and (c) such other duties and
responsibilities as may, from time to time, be designated by the Board.
The Nominating Committee held one meeting in Fiscal 1997 and included
Messrs. Schell, Maynard, Turnbull and Weber. The Nominating Committee met for
the purpose of nominating and recommending the selection of Directors to
comprise the Company's Board of Directors for
30
<PAGE>
the ensuing year. The Company currently does not have a nominating committee or
another committee performing a similar function.
COMPLIANCE WITH 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers, Directors and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
Directors and ten percent shareholders are required by regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on the
Company's copies of such forms received or written representations from certain
reporting persons that no Form 5's were required for those persons, the Company
believes that, during Fiscal 1997, all filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth compensation awarded to, earned by and paid
to the Company's Chief Executive Officer and each other executive officer of the
Company whose total annual salary and bonus exceeded $100,000 for services
rendered to the Company for the three years ended December 31, 1997 (the "Named
Executive Officers").
(a) SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------
Other
Name of Individual Fiscal Annual
and Principal Position Year Salary($) Bonus($)(2) Compensation($)
- ---------------------------- ----- --------- ----------- ---------------
<S> <C> <C> <C> <C>
A.J. Schell 1997 $211,363 $150,000 $ --
Chairman(1) 1996 $350,000 $ 50,000 $ --
1995 $232,650 $ 50,000 $ --
Mitchell Kleinhandler 1997 $122,917 $ 0 $ --
President and COO (5)
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------------------------------
Awards Payouts
------------------------------ --------------------------------
Long-Term
Restricted Securities Incentive All
Name of Individual Fiscal Stock Underlying Plan Other
and Principal Position Year Awards($) Options/SARs(#) Payouts($) Compensation($)(3)
- ---------------------------- ----- --------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
A.J. Schell 1997 -- -- $ -- $ 30,000(4)
Chairman(1) 1996 -- 30,000 $ -- $ 4,557(4)
1995 -- -- $ -- $ 23,607(4)
Mitchell Kleinhandler 1997 -- -- $ -- $ --
President and COO (5)
</TABLE>
- ------------------------------
(1) Mr. Schell served as President and Chief Executive Officer of the Company
through May 30, 1997.
(2) Bonus amounts are shown in the year for which they were awarded.
(3) Does not include Common Stock received in such individual's capacity as a
Director of the Company for attendance at Board of Directors' meetings.
See "(e) Directors Compensation" below.
(4) Represents amount contributed by the Company for Mr. Schell's account in
the Company's target benefit pension plan.
31
<PAGE>
(5) Mr. Kleinhandler has served as President and Chief Operating Officer of the
Company since May 30, 1997, and did not receive any compensation from the
Company prior thereto.
(b) OPTION/SAR GRANTS IN LAST FISCAL YEAR
No options or SARs were granted to any Named Executive Officer during the
year ended December 31, 1997.
(c) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Stock Options/SARs Options/SARs
Acquired on Value at Fiscal Year End (#) at Fiscal Year End ($)
Name of Individual Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------- ---------- ---------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
A.J. Schell 30,000 $60,390(1) $0 $0
</TABLE>
________________________
(1) Based on the closing bid price of the Common Stock on the date such options
were exercised.
(d) LONG-TERM INCENTIVE PLAN AWARDS
The Company has no long-term incentive plans as such term is defined in
Item 402(a)(6)(iii) of Regulation S-B.
(e) DIRECTORS COMPENSATION
For Fiscal 1997, the Company compensated its Directors at a rate of $1,000
per Board meeting attended, payable in cash or Common Stock. Twelve/*/
Directors elected to receive their fees in stock, totalling 9,910 shares of
Common Stock. The number of shares issuable was determined by the fair market
value of the shares on the date of the meetings. One director elected to
receive cash for all five meetings he attended, for a total of $5,000, and one
director elected to receive cash for two of the five meetings he attended, for a
total of $2,000.
- -----------------------
/*/ Includes five people who served as Directors prior to the Combination, five
people who served as Directors after the Combination, and one person who served
as a Director prior to and after the Combination. See "Item 1. -- Description
of Business -- General."
32
<PAGE>
(f) EMPLOYMENT CONTRACTS
The Company has written Employment Agreements with three of its executive
officers: A.J. Schell, Chairman of the Board; Mitchell Kleinhandler, President
and Chief Operating Officer and David Unger, Executive Vice President. All of
the Employment Agreements were entered into as of May 30, 1997,
contemporaneously with the closing of the Combination.
Mr. Schell's Employment Agreement replaces his 1989 employment contract
with the Company. The new Agreement is for a three year term (subject to early
termination in certain specified events) and provides for a salary at the rate
of $100,000 per annum. In addition, however, in recognition of certain
obligations of the Company to Mr. Schell under his former employment contract,
which obligations were triggered by the closing of the Combination, the Company
has agreed to pay Mr. Schell, and Mr. Schell has agreed to accept, the sum of
$1,500,000 in three equal annual installments commencing in January, 1998. The
Company's obligations to Mr. Schell with respect to such additional payments are
secured by a pledge by Suncom of the stock which it purchased from Mr. Schell
contemporaneously with the closing of the Combination.
The employment agreements for Mr. Kleinhandler and Mr. Unger are one-year
arrangements which provide for a base salary of $200,000 per annum plus a bonus
of $50,000 if the Company achieves or exceeds "plan" as defined in their
respective employment agreements. However, effective September 1, 1997, Mr.
Unger made an election under his employment agreement to reduce his time
commitment to the Company to 40% of his business time, as a result of which,
pursuant to the terms of his employment agreement, his base salary was reduced
to $100,000 per annum, he is no longer entitled to a bonus and his employment
agreement was extended for a period of one year. In addition, as a result of
this election by Mr. Unger, Mr. Kleinhandler's base salary and potential bonus
were each increased by $25,000 per annum pursuant to the terms of Mr.
Kleinhandler's employment agreement.
(g) REPORT ON REPRICING OF OPTIONS/SARS
The Company did not reprice any stock options or SARs previously rewarded
during Fiscal 1997.
33
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1998, certain information
concerning those persons known to the Company, based on information obtained
from such persons, with respect to the beneficial ownership (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of Common
Stock, $.25 par value, of the Company by (i) each person known by the Company to
be the owner of more than 5% of the outstanding shares of Common Stock, (ii)
each Director and executive officer of the Company, (iii) each executive officer
named in the Summary Compensation Table and (iv) all Officers and Directors as a
group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership(1) Class (2)
- ---------------- ---------------------- --------
<S> <C> <C>
A.J. Schell (3) 30,000 *
Mitchell Kleinhandler (3) 2,698,898(4) 59.9%
David Unger (3) 2,705,898(5) 60.1%
Robert Davidoff 2,698,590(6) 59.9%
C/O Carl Marks & Co., Inc.
135 East 57th Street
New York, NY 10022
David Gezon 2,697,986(7) 59.9%
C/O Midwest Mezzanine Fund L.P.
208 S. LaSalle St., Suite 510
Chicago, IL 60604
William Landman 2,698,898(8) 59.9%
C/O CMS Companies
1926 Arch Street
Philadelphia, PA 19103
Patrick J. Dougherty (3) 15,729 *
Robert Dyer (3) 72,003 1.6%
C. Lee Maynard (3) 31,816 *
Suncom Communications L.L.C. 2,697,986(9) 59.9%
4059 Yancey Road
Charlotte, NC 28217
All Directors and Officers 2,842,145(10) 63.1%
as a Group (9 persons)
</TABLE>
34
<PAGE>
- ----------------------------
* Represents less than one percent ownership.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole investment power with respect to all Common Stock
beneficially owned by them. A person is deemed to be the beneficial owner
of securities that can be acquired by such person within 60 days from the
date hereof upon the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by any other
person) and which are exercisable within 60 days from the date hereof have
been exercised.
(2) Based on 4,502,135 shares of Common Stock as of March 31, 1998.
(3) The address of this person is Audio Communications Network, Inc., 1000
Legion Place, Suite 1515, Orlando, Florida 32801.
(4) Includes 2,697,986 shares of Common Stock owned by Suncom. Excludes
1,000,000 shares of Common Stock issuable to Suncom pursuant to an option
granted in connection with the Combination (the "Suncom Option"). Mr.
Kleinhandler disclaims beneficial ownership of all securities owned by
Suncom except to the extent of his pecuniary interest therein. See
Footnote 10, infra. Also excludes Common Stock held by relatives of Mr.
Kleinhandler; Mr. Kleinhandler does not have any power to direct the vote
or disposition of such stock and therefore disclaims any beneficial
ownership.
(5) Includes 2,697,986 shares of Common Stock owned by Suncom. Excludes
1,000,000 shares of Common Stock issuable to Suncom pursuant to the Suncom
Option. Mr. Unger disclaims beneficial ownership of all securities owned
by Suncom except to the extent of his pecuniary interest therein. See
Footnote 9, infra.
(6) Includes 2,697,986 shares of Common Stock owned by Suncom. Excludes
1,000,000 shares of Common Stock issuable to Suncom pursuant to the Suncom
Option. Mr. Davidoff is the Managing Director of Carl Marks & Co., Inc.,
an affiliate of CMNY Capital II, L.P. ("CMNY"). CMNY is a member of
Suncom. Mr. Davidoff disclaims beneficial ownership of all securities
owned by Suncom except to the extent of his pecuniary interest therein.
See Footnote 9, infra.
(7) Includes 2,697,986 shares of Common Stock owned by Suncom. Excludes
1,000,000 shares of Common Stock issuable to Suncom pursuant to the Suncom
Option. Mr. Gezon is the President of Midwest Mezzanine Fund, L.P.
("Midwest"), which is a member of Suncom. Mr. Gezon disclaims beneficial
ownership of all securities owned by Suncom except to the extent of his
pecuniary interest therein. See Footnote 9, infra.
35
<PAGE>
(8) Includes 2,697,986 shares of Common Stock owned by Suncom. Excludes
1,000,000 shares of Common Stock issuable to Suncom pursuant to the Suncom
Option. Mr. Landman is a Vice President of the corporate general partners
of CMS Interactive Communications Partners, L.P. ("CMS"), which is a member
of Suncom. Mr. Landman disclaims beneficial ownership of all securities
owned by Suncom except to the extent of his pecuniary interest therein. See
Footnote 9, infra.
(9) Excludes 1,000,000 shares of Common Stock issuable to Suncom pursuant to
the Suncom Option. Members of Suncom include Suncom Management L.L.C.
("Suncom Management"), Midwest, CMS and CMNY. Suncom Management is
controlled by Messrs. Kleinhandler and Unger. Midwest is ultimately
controlled by ABN AMRO Bank. CMS is controlled ultimately by MSPS/ICP,
Inc., and CMS 1994, Inc., both affiliates of CMS Companies, a private
investment company. CMNY is controlled by Carl Marks & Co., Inc.
(10) Includes 2,697,986 shares of Common Stock owned by Suncom. Excludes
1,000,000 shares of Common Stock issuable to Suncom pursuant to the Suncom
Option.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See "Item 10. Executive Compensation" for information concerning the terms
of employment agreements and stock options granted during Fiscal 1997 to certain
Officers and Directors of the Company.
Pursuant to the terms and provisions of the Combination, among other
things, the Company agreed to assume all of Suncom's liabilities. In
furtherance thereof, the Company and Suncom, Inc. agreed to jointly and
severally assume Suncom's subordinated indebtedness in the original principal
amount of $4,750,000 to Midwest, a member of Suncom. The subordinated debt to
Midwest bears interest at the rate of 12.27% per annum payable quarterly on the
first day of January, April, July and October. Quarterly principal installments
in the amount of $250,000 each are to begin January 1, 2000. The obligations of
the Company and Suncom Inc. with respect to the subordinated debt is secured by
a guaranty executed and delivered by the Company's other subsidiaries. See
"Item 6. Management's Discussion and Analysis or Plan of Operation."
On May 30, 1997, in connection with the Combination, Suncom acquired
597,986 shares of Common Stock from A.J. Schell, the Company's Chairman of the
Board.
Immediately following the Combination, Mr. Schell resigned as the Company's
President and Chief Executive Officer. Mitchell Kleinhandler and David Unger,
both affiliates of Suncom, were elected President and Executive Vice President
of the Company, respectively. In addition, four members of the Board of
Directors resigned and such vacancies were filled by four designees of Suncom.
In August 1997, the shareholders of the Company voted to amend the By-Laws of
36
<PAGE>
the Company to provide for a Board of not less than seven and not more than nine
members, with an initial setting of nine.
During Fiscal 1997, the Company paid approximately $10,762 to the law firm
of Turnbull, Abner & Daniels, of which former Director Nat M. Turnbull is a
partner. In addition, approximately $45,306 was paid for accounting and tax
services to Patrick J. Dougherty, CPA, PA, of which Patrick J. Dougherty, a
Director of the Company, is a principal.
37
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(A) Exhibits
-----------
<C> <S>
2.2 Agreement and Plan of Share Exchange dated March 1, 1994 among
Registrant, American Music Network, Inc. and A.J. Schell (incorporated
herein by reference to Exhibit 2 of Form 8-K/A filed March 17, 1994).
2.3 Agreement of Sale dated October 19, 1995 among Registrant and Florida
Sound Engineering Company (incorporated by reference to Exhibit I of
Form 8-K dated March 15, 1996).
3.1 Articles of Incorporation, as amended through September 17, 1982
(incorporated herein by reference to Exhibit 3.1 to Amendment No. 1 on
Form 8 dated May 9, 1990, amending the Annual Report on Form 10-K
for the year ended December 31, 1989).
3.1(a) Amendment to Articles of Incorporation, effective June 11, 1991
(incorporated herein by reference to Exhibit 3.1(a) of the Annual Report
on Form 10-K for the year ended December 31, 1991).
3.1(b) Articles of Amendment to Articles of Incorporation, dated September 11, 1997**
3.2 Amended and Restated By-Laws (incorporated herein by reference to
Exhibit 3.2 of the Quarterly Report on Form 10-QSB for the fiscal quarter
ended June 30, 1997).
3.2(a) Amended and Restated Bylaws, adopted May 30, 1997 and as subsequently amended**
10.17 Employment Agreement dated July 18, 1989, with A.J. Schell
(incorporated herein by reference to Exhibit 10.3 to Amendment No.1 on
Form 8 dated May 9, 1990, amending the Annual Report on Form 10-K
for the year ended December 31, 1989).*
10.3 Deferred Compensation Agreement Dated January 5, 1983 with Doris K.
Krummenacker (incorporated herein by reference to Exhibit 10.5 to
Amendment No. 1 on Form 8 dated May 9, 1990, amending the Annual
Report on Form 10-K for the year ended December 31, 1989).*
10.4 Second Amended and Restated Loan Agreement by and between
Registrant and SunTrust Bank, Central Florida, N.A. dated December 21,
1995 effective January 2, 1996.
10.6 Incentive Stock Option Plan (incorporated herein by reference to Exhibit
10.8 of the Annual Report on Form 10-K for the year ended December
31, 1991).*
10.7 1993 Employee Stock Purchase and Stock Bonus Plan (incorporated by
reference to Exhibit 10.7 of Form 10-KSB for the year ended December
31, 1992).*
</TABLE>
38
<PAGE>
<TABLE>
<C> <S>
10.8 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and Registrant dated January 1, 1992 (incorporated by
reference to Exhibit 10.8 of Form 10-KSB for the year ended December
31, 1992).
10.9 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and Registrant dated January 1, 1991 (incorporated by
reference to Exhibit 10.9 of Form 10-KSB for the year ended December
31, 1992).
10.10 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and Registrant dated January 1, 1991 (incorporated by
reference to Exhibit 10.10 of Form 10-KSB for the year ended December
31, 1992).
10.11 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and American Music Network, Inc. dated March 1, 1991
(incorporated by reference to Exhibit 10.11 of the Annual Report on Form
10-KSB for the year ended December 31, 1993).
10.12 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and Florida Sound Engineering Company dated January 1,
1991 (incorporated by reference to Exhibit III of Form 8-K dated March
15, 1996).
10.13 Amendment and Supplement to Employment Agreement, dated September
1, 1993, between the Registrant and A.J. Schell (incorporated by
reference to Exhibit 1 of Form 10-QSB for the period ended September
30 ,1993).*
10.14 Employment Agreement dated May 30, 1997 with A.J. Schell
(incorporated herein by reference to Exhibit 10.15 of the Quarterly Report
on Form 10-QSB for the fiscal quarter ended June 30, 1998).
10.15 Employment Agreement dated May 30, 1997 with Mitchell Kleinhandler
(incorporated herein by reference to Exhibit 10.16 of the Quarterly Report
on Form 10-QSB for the fiscal quarter ended June 30, 1998).
10.16 Employment Agreement dated May 30, 1997 with David Unger
(incorporated herein by reference to Exhibit 10.17 of the Quarterly Report
on Form 10-QSB for the fiscal quarter ended June 30, 1998).
10.17 Asset Purchase Agreement dated as of November 19, 1996 between
Registrant and Suncom Communications L.L.C. (incorporated by
reference to Exhibit on Form 8-K dated November 26, 1996)
10.18 Press release of the Registrant, dated May 30, 1997 (incorporated by
reference to Exhibit 99.1 on Form 8-K dated June 16, 1997).
10.19 Note Assumption Agreement and Note, dated as of May 30, 1997, by and
among the Registrant, Suncom, Inc. and Midwest Mezzanine Fund, L.P.
(incorporated by reference to Exhibit 99.2 on Form 8-K dated June 16,
1997).
</TABLE>
39
<PAGE>
<TABLE>
<C> <S>
10.20 Credit Agreement, dated as of May 30, 1997, by and among the
Registrant, PNC Bank, National Association individually and as Agent,
SunTrust Bank, Central Florida, N.A. and Lehman Commercial Paper
Inc. (incorporated by reference to Exhibit 99.3 on Form 8-K dated
June 16, 1997).
10.21 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and SunCom Communications, L.L.C. re: Charlotte, NC
dated February 1, 1996**
10.22 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and SunCom Communications, L.L.C. re: Phoenix, AZ
dated February 1, 1996**
10.23 MUZAK(R) License Agreement by and between MUZAK Limited
Partnership and SunCom Communications, L.L.C. re: Hillsborough NC
dated February 1, 1996**
21 Subsidiaries of the Registrant.
27 Financial Data Schedule**
</TABLE>
--------------------------------
* Management contract or compensatory plan or arrangement.
** Filed herewith
(B) Reports on Form 8-K
-------------------
No Reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this Annual Report on Form 10-KSB.
40
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AUDIO COMMUNICATIONS NETWORK, INC.
(Registrant)
/s/ A.J. Schell
By: __________________________________
A.J. Schell
Chairman of the Board of Directors
Date: April 14, 1998
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mitchell Kleinhandler President, Director April 14, 1998
- ---------------------------------- (principal executive officer)
Mitchell Kleinhandler
/s/ David Unger Executive Vice President, Director April 14, 1998
- ---------------------------------- (principal financial and accounting officer)
David Unger
/s/ A.J. Schell Chairman of the Board April 14, 1998
- ----------------------------------
A.J. Schell
/s/ Robert Dyer Director April 14, 1998
- ----------------------------------
Robert Dyer
Director
- ----------------------------------
C. Lee Maynard
/s/ Robert Davidoff Director April 14, 1998
- ----------------------------------
Robert Davidoff
/s/ David Gezon Director April 14, 1998
- ----------------------------------
David Gezon
/s/ William Landman Director April 14, 1998
- ----------------------------------
William Landman
/s/ Patrick J. Dougherty Director April 14, 1998
- ----------------------------------
Patrick J. Dougherty
</TABLE>
41
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
AUDIO COMMUNICATIONS NETWORK, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(present name)
Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended, added
or deleted) Article III is hereby amended to read as follows:
Article III: (a) The Corporation is authorized to issue thirteen million
(13,000,000) shares consisting of twelve million (12,000,000) Common Shares,
$.25 par value ("Common Shares"), and one million (1,000,000) Preferred Shares,
$.001 par value ("Preferred Shares").
(b) The Preferred Shares shall be issued from time to time in one or more
series, with such distinctive serial designations, preferences, limitations, and
relative rights, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such shares from time to time adopted by
the Board of Directors; and in such resolution or resolutions providing for the
issue of shares of each particular series the Board of Directors is expressly
authorized to fix the annual rate or rates of dividends for the particular
series; the dividend payment date for the particular series and the date, if
any, from which dividends on all shares of such series issued prior to the
record date for the first dividend payment date shall be cumulative; the
redemption price for the particular series; sinking fund provisions, if any, for
the particular series; the voting rights, if any, for the particular series; the
rights, if any, of holders of the shares of the particular series to convert or
exchange the same into shares of any other series or class or other securities
of the Corporation or of any other corporation, with any provisions for the
subsequent adjustment of such conversion rights; the preference for the
particular series in the event of voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, and to classify or reclassify any
unissued Preferred Shares by fixing or altering from time to time any of the
foregoing rights, privileges and qualifications.
All the Preferred Shares of any one series shall be identical with each
other in all respects, except that the shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall be
cumulative. Except as to the particulars fixed by the Board as hereinabove
provided or as provided in the description of the series, all Preferred Shares
shall otherwise be of equal rank, regardless of series, and shall be identical
in all respects.
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment itself, are as follows:
The issued shares shall not change. The authorized and unissued shares shall
increase by four million (4,000,000) Common Shares, $.25 par value, from eight
million (8,000,000) previously authorized to twelve million (12,000,000)
currently authorized Common Shares, $.25 par value. The authorized and unissued
shares shall also include one million (1,000,000) Preferred Shares, $.001 par
value, whereas no Preferred Shares were previously authorized.
<PAGE>
THIRD: The date of each amendment's adoption: August 21, 1997.
---------------
FOURTH: Adoption of Amendment(s) (CHECK ONE)
[x] The amendment(s) was/were approved by the shareholders. The number of
votes cast for the amendment(s) was/were sufficient for approval.
[_] The amendment(s) was/were approved by the shareholders through voting
groups. The following statement must be separately provided for each
voting group entitled to vote separately on the amendment(s):
"The number of votes cast for the amendment(s) was/were sufficient for
approval by ________________________________________________________."
voting group
[_] The amendment(s) was/were adopted by the board of directors without
shareholder action and shareholder action was not required.
[_] The amendment(s) was/were adopted by the incorporators without
shareholder action and shareholder action was not required.
Signed this 11th day of September, 1997.
------ ---------- --
Signature /s/ MITCHELL KLEINHANDLER
-----------------------------------------------------
Mitchell Kleinhandler
(By Chairman or Vice Chairman of the Board of Directors, President
or other officer if adopted by the shareholders)
OR
(By a director if adopted by the directors)
OR
(By an incorporator if adopted by the incorporators)
Mitchell Kleinhandler
----------------------------------------
Typed or printed name
President
----------------------------------------
Title
<PAGE>
EXHIBIT 3.2(a)
AMENDED AND RESTATED
BYLAWS
OF
AUDIO COMMUNICATIONS NETWORK, INC.
ADOPTED MAY 30, 1997
AND AS SUBSEQUENTLY AMENDED
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
AUDIO COMMUNICATIONS NETWORK, INC.
ADOPTED MAY 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I MEETINGS OF SHAREHOLDERS.................................. 1
1.1 Place of Meeting.......................................... 1
1.2 Annual Meetings........................................... 1
1.3 Special Meetings.......................................... 1
1.4 Notice.................................................... 1
1.5 Quorum.................................................... 2
1.6 Fixing Record Date........................................ 2
1.7 Voting.................................................... 3
1.8 Action by Shareholders Without a Meeting.................. 4
1.9 Order of Business......................................... 4
1.10 Inspectors of Elections................................... 4
ARTICLE II DIRECTORS................................................. 5
2.1 Powers.................................................... 5
2.2 Nominations for Directors................................. 5
2.3 Numbers................................................... 5
2.4 Term of Offices........................................... 5
2.5 Resignations.............................................. 5
2.6 RESERVED.................................................. 5
2.7 Compensation.............................................. 5
2.8 Annual Meetings........................................... 6
2.9 Regular Meetings.......................................... 6
2.10 Special Meetings.......................................... 6
2.11 Place of Meeting.......................................... 6
2.12 Adjourned Meetings........................................ 6
2.13 Waiver of Notice.......................................... 7
2.14 Organization.............................................. 7
2.15 Action by the Board....................................... 7
ARTICLE III COMMITTEES OF THE BOARD................................... 8
ARTICLE IV OFFICERS.................................................. 8
4.1 Election.................................................. 8
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
4.2 Term of Office........................................... 8
4.3 Resignations............................................. 8
4.4 Removal.................................................. 9
4.5 Duties of Officers may be Delegated...................... 9
4.6 Salaries................................................. 9
4.7 Voting Shares in Other Corporations...................... 9
4.8 Chairman of the Board; Vice Chairman..................... 9
4.9 Chief Executive Officer.................................. 10
4.10 Chief Financial Officer.................................. 10
4.11 President................................................ 10
4.12 Vice President........................................... 10
4.13 Treasurer................................................ 11
4.14 Secretary................................................ 11
ARTICLE V CERTIFICATE AND TRANSFER OF STOCK........................ 12
5.1 Shares................................................... 12
5.2 Certificates............................................. 12
5.3 Recording of Shares...................................... 12
5.4 Registered Shareholders.................................. 12
5.5 Transfer of Stock........................................ 12
5.6 Transfer Agents.......................................... 13
5.7 Restriction on Transfer of Stock......................... 13
5.8 Closing of Transfer Books................................ 13
5.9 Lost Certificate......................................... 13
ARTICLE VI DIVIDENDS................................................ 14
ARTICLE VII OFFICES, BOOKS AND RECORDS............................... 14
7.1 Offices.................................................. 14
7.2 Books and Records........................................ 14
7.3 Form of Records.......................................... 14
7.4 Inspection of Books and Records.......................... 15
ARTICLE VIII NOTICES.................................................. 15
ARTICLE IX AMENDMENTS............................................... 15
ARTICLE X NONAPPLICABILITY OF CERTAIN FLORIDA STATUTES............. 15
ARTICLE XI INDEMNIFICATION.......................................... 16
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE XII MISCELLANEOUS............................................ 16
12.1 Indebtedness of Shareholders............................. 16
12.2 Checks, Etc.............................................. 16
12.3 Fiscal Year.............................................. 17
12.4 Seal..................................................... 17
</TABLE>
-iii-
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
AUDIO COMMUNICATIONS NETWORK, INC.
ADOPTED MAY 30, 1997
AND AS SUBSEQUENTLY AMENDED
ARTICLE I
MEETINGS OF SHAREHOLDERS
MEETINGS OF SHAREHOLDERS
------------------------
1.1 Place of Meeting. All meetings of the Shareholders shall be held at
----------------
the principal office of the Corporation in the State of Florida, or at such
other place as may be determined by the Board of Directors and designated in the
notice of such meeting.
1.2 Annual Meetings. The annual meeting of Shareholders shall be held on
---------------
such date as may be established by the Board of Directors. The annual meeting
shall be called by the Board of Directors for the purpose of electing Directors
for the ensuing year and for the transaction of such other general business of
the Corporation as may come before the meeting.
1.3 Special Meetings. Special meetings of Shareholders, for any purpose
----------------
other than those regulated by statute, may be called by the Board of Directors,
the Chief Executive Officer or by the President of the Corporation, or by the
holders of at least one-third of all the outstanding shares entitled to vote at
the meeting.
1.4 Notice.
------
a. Notice of Annual Meetings. Notice of the annual meeting of
-------------------------
Shareholders shall be mailed or otherwise given to each holder of record of the
stock entitled to vote at such meeting, at his address, as the same appears on
the books of the Corporation, at least 10 days but no more than 60 days prior to
such meeting. Such notice need not specify the business to be transacted but
shall state the place, day and hour of such meeting.
b. Notice of Special Meetings. Written or printed notice of each
--------------------------
special meeting of Shareholders, stating the place, day and hour of such meeting
and business proposed to be transacted, shall be mailed, postage prepaid, or
otherwise given to each holder of record of the stock entitled to vote at such
meeting, at his address as the same appears on the books of the Corporation, at
least 10 days but no more than 60 days prior to such meeting. Notice of and all
expenses relating to a special meeting of Shareholders, called by a Shareholder
on his own initiative, shall be the sole responsibility and expense of said
Shareholder. No business other than that specified in the notice of special
meeting of Shareholders shall be transacted at any special meeting.
-2-
<PAGE>
c. Waiver of Notice of Meetings. Whenever any notice is required to
----------------------------
be given under the provisions of any law of this State or under the provisions
of the Articles of Incorporation of this Corporation or by these Bylaws, waiver
in writing, signed by the person or persons entitled to such notice, or by his
or their proxy or proxies, whether before or after the time fixed for the giving
of such notice, shall be deemed equivalent to such notice. If a person or
persons entitled to notice of a meeting shall attend such meeting, either in
person or by proxy, such attendance shall constitute a waiver of notice of the
meeting, except in case the attendance is for the express purpose of objecting
to the transaction of any business because the meeting shall not have been
lawfully called or convened.
1.5 Quorum. Except as otherwise required by law, by the Certificate of
------
Incorporation of this Corporation, or by these Bylaws, the presence, in person
or by proxy, of Shareholders entitled to cast a majority in number of the
aggregate number of shares of Common Stock to be voted, shall constitute a
quorum of all meetings of the Shareholders. After a quorum has been established
at a Shareholders meeting, a withdrawal of shareholders that reduces the number
of shareholders entitled to vote at the meeting below the number required for a
quorum does not affect the validity of any action taken prior thereto. In any
case where the presence of the aforesaid number of the holders of Common Stock
shall be necessary to constitute a quorum, and if such number shall not be
represented at any meeting, the Shareholders entitled to vote, present in person
or by proxy, shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
amount of voting stock shall be present.
1.6 Fixing Record Date. For the purpose of determining the Shareholders
------------------
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment thereof, or to express consent to any corporate action in writing
without a meeting, or for the purpose of determining Shareholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a date as the record date for any such determination of
Shareholders. Such date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action. If
no such record date is fixed:
a. The record date for determining Shareholders entitled to notice
of or to vote at a meeting of Shareholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
b. The record date for determining Shareholders entitled to express
consent to any corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first written
consent is expressed.
-3-
<PAGE>
c. The record date for determining Shareholders for any purpose other
than those specified in Sections 1.6a and b above shall be at the close of
business on the day on which the Board adopts the resolution relating thereto.
When a determination of Shareholders entitled to notice of or to vote
at any meeting of Shareholders has been made as provided in this Section 1.6,
such determination shall apply to any adjournment thereof, unless the Board
fixes a new record date for the adjourned meeting.
1.7 Voting.
------
a. Voting. If a quorum is present, the affirmative vote of a
------
majority of the shares present in person or by proxy at such meeting is the act
of the Shareholders unless otherwise provided in the Certificate of
Incorporation, these By-laws or by law. Each Shareholder shall be entitled to
one vote for each share of Common Stock standing in his name on the books of the
Corporation.
b. Proxies. Any Shareholders entitled to vote at any meeting of
-------
Shareholders may be represented and vote by proxy appointed by an instrument in
writing subscribed by such Shareholder and bearing a date not more than three
months prior to such meeting, unless such proxy shall, on its face, provide a
longer period in which it is to remain in force. The validity and
enforceability of any proxy shall be determined in accordance with the
provisions of the Florida Business Corporation Act ("FBCA").
c. Vote by Ballot. All elections of directors shall be by written
--------------
ballot unless otherwise provided in the Certificate of Incorporation. In voting
on any other question on which a vote by ballot is required by law or is
demanded at the commencement of the meeting by any Shareholder entitled to vote,
the voting shall be by ballot. Each ballot shall be signed by the Shareholder
voting or by his proxy, and shall state the number of shares voted. On all
other questions, the voting shall be by voice vote. Every Shareholder entitled
to vote at a meeting of Shareholders may authorize another person or persons to
act for him by proxy.
d. List of Shareholders. The Secretary of the Corporation shall
--------------------
prepare at least 10 days prior to each election of directors, a complete list of
the Shareholders entitled to vote, arranged in alphabetical order, with the
residence of and the number of voting shares held by each Shareholder, which
shall be open for the examination of any Shareholder, at the place where said
election is to be held, for 10 days prior to such election, and shall be kept
available for the inspection by any Shareholder during such meeting.
e. Other provisions. Authorized but unissued shares including those
----------------
redeemed or otherwise reacquired by the Corporation, and shares of stock of the
Corporation owned by another corporation the majority of the voting stock of
which is owned or controlled by the Corporation, directly or indirectly, at any
meeting shall not be counted in determining the total number of outstanding
shares at any time. The president, any vice president, the
-4-
<PAGE>
secretary and the treasurer of a corporate shareholder are presumed to possess,
in that order, authority to vote shares standing in the name of a corporate
shareholder, absent a bylaw or other instrument of the corporate shareholder
designating some other officer, agent or proxy to vote the shares. Shares held
by an administrator, executor, guardian or conservator may be voted by him
without a transfer of the shares into his name. A trustee may vote shares
standing in his name, but no trustee may vote shares that are not transferred
into his name. If he is authorized to do so by an appropriate order of the
court by which he was appointed, a receiver may vote shares standing in his name
or held by or under his control, without transferring the shares into his name.
A Shareholder whose shares are pledged may vote the shares until the shares have
been transferred into the name of the pledgee, and thereafter the pledgee or his
nominee shall be entitled to vote the shares unless the instrument creating the
pledge provides otherwise.
1.8 Action by Shareholders Without a Meeting. Any action required or
----------------------------------------
permitted by law, these Bylaws, or the Certificate of Incorporation of the
Corporation to be taken at any annual or special meeting of Shareholders, may be
taken without a meeting, without prior notice and without a vote, if one or more
consents in writing, setting forth the action so taken, are dated and signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote on such action were present and voted and
delivered to the principal place of business of the Corporation or the Secretary
within 60 days of the date of the earliest dated consent. Within 10 days after
obtaining such authorization by written consent, notice of the action so taken
shall be given in accordance with applicable law to those Shareholders who have
not so consented or who are not entitled to vote on the action.
1.9 Order of Business. a. Generally. The Board may adopt such rules and
----------------- ---------
regulations, not inconsistent with the Corporation's Certificate of
Incorporation or the Bylaws or applicable laws, as it may deem proper for the
conduct of any meetings of the shareholders of the Corporation.
b. Nominations and Other Business Proposed by Shareholders. For
-------------------------------------------------------
nominations or other business to be properly brought before an annual meeting by
a Shareholder, the Shareholder must comply with the Securities Act of 1934 and
the rules and regulations promulgated thereunder.
1.10 Inspectors of Elections. The Board by resolution shall appoint one or
-----------------------
more inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at a meeting of
Shareholders and make a written report thereof. One or more persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate has been appointed to act, or if all inspectors or
alternates who have been appointed are unable to act at a meeting of
shareholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
-5-
<PAGE>
impartiality and according to the best of his ability. The inspectors shall
have the duties prescribed by the laws of the State of Florida.
ARTICLE II
DIRECTORS
---------
2.1 Powers. Except as otherwise provided in the Certificate of
------
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors (the "Board"). The Board may
adopt such rules and regulations, not inconsistent with the Certificate of
Incorporation or the Bylaws or applicable laws, as it may deem proper for the
conduct of its meetings and the management of the Corporation. In addition to
the powers expressly conferred by the Bylaws, the Board may exercise all powers
and perform all acts which are not required by the Bylaws or the Certificate of
Incorporation or by law to be exercised and performed by the Shareholders.
2.2 Nominations for Directors. Nominations for election to the Board may
-------------------------
be made by the Board or in accordance with section 1.9b above. A director need
not be a Shareholder.
2.3 Numbers./*/ The Board shall consist of a number not less than seven
-------
(7) nor more than nine (9) members elected by the Shareholders. The number of
Directors shall be fixed, from time to time, by the Bylaws. Until the number of
Directors shall be changed or altered, as herein provided for, the Board shall
consist of nine (9) members. The provisions of this section relating to the
number of Directors constituting the Board may be amended, changed or altered by
the Board of Directors or by vote of the holders of a majority of the common
stock present and entitled to vote at any duly convened meeting of such
Shareholders at which a quorum is present.
2.4 Term of Offices. Except as otherwise provided in the Certificate of
---------------
Incorporation of the Corporation, each Director shall be elected to serve until
the next annual meeting of Shareholders and until his successor is chosen and
qualified or until his earlier death, resignation or removal. In case one or
more vacancies shall occur in the Board, the remaining Directors, although less
than a quorum, may, by a majority vote, elect a successor or successors to fill
the vacancy for the unexpired term or terms.
2.5 Resignations. Any Director may resign at any time by written notice
------------
to the Corporation. Such resignation shall take effect at the time specified in
such notification, and, unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective.
- ---------------------
/*/ reflects amendment adopted at the August 21, 1997 Annual Shareholders
Meeting.
-6-
<PAGE>
2.6 RESERVED
2.7 Compensation. Each Director, in consideration of his service as such,
------------
shall be entitled to receive from the Corporation such amount per annum or such
fees for attendance at Directors' meetings, or both, as the Board may from time
to time determine, together with reimbursement for the reasonable expenses
incurred by him in connection with the performance of his duties. Each Director
who shall serve as a member of any committee of Directors shall be entitled to
such additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable expenses incurred by him in the performance of
his duties. Nothing contained in this section shall preclude any Director from
serving the Corporation or its subsidiaries in any other capacity and receiving
proper compensation for such service.
2.8 Annual Meetings. On the day when and at the place where the annual
---------------
meeting of Shareholders for the election of Directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in these Bylaws
for special meetings of the Board or in a waiver of notice of meeting.
2.9 Regular Meetings. Regular meetings of the Board may be held at such
----------------
times and places as may be fixed from time to time by the Board. Unless
otherwise required by the Board, regular meetings of the Board may be held
without notice. If any day fixed for a regular meeting of the Board shall be a
Saturday or Sunday or a legal holiday at the place where such meeting is to be
held, then such meeting shall be held at the same hour at the same place on the
first business day thereafter which is not a Saturday, Sunday or legal holiday.
2.10 Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the Chief Executive Officer, the President or by any three
(3) Directors. Notice of each special meeting of the Board shall, if mailed, be
addressed to each Director at the address designated by him for that purpose or,
if none is designated, at his last known address at least two days before the
date on which the meeting is to be held; or such notice shall be sent to each
Director at such address by facsimile, telegraph, cable or wireless, or be
delivered to him personally, not later than the day before the date on which
such meeting is to be held. Every such notice shall state the time and place of
the meeting but need not state the purposes of the meeting, except to the extent
required by law.
2.11 Place of Meeting. The Board may hold its meetings either within or
----------------
outside of the State of Florida, at such place or places as it may from time to
time determine.
2.12 Adjourned Meetings. A majority of the Directors present at any
------------------
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Notice of any
adjourned meeting of the Board need not be given to any Director whether or not
present at the time of the adjournment. Any business may
-7-
<PAGE>
be transacted at any adjourned meeting that might have been transacted at the
meeting originally called.
2.13 Waiver of Notice. Whenever notice is required to be given to any
----------------
Director or member of a committee of Directors under any provision of the FBCA
or under the Certificate of Incorporation or Bylaws, a written waiver, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Directors, or members of a committee of
Directors, need be specified in any written waiver of notice.
2.14 Organization. At each meeting of the Board, the Chairman of the
------------
Corporation, or in the absence of the Chairman, the Vice Chairman, if any, the
Chief Executive Officer or the President shall preside. The Secretary shall act
as secretary at each meeting of the Board. In case the Secretary shall be
absent from any meeting of the Board, an Assistant Secretary shall perform the
duties of secretary at such meeting; and in the absence from any such meeting of
the Secretary and all Assistant Secretaries, the person presiding at the meeting
may appoint any person to act as secretary of the meeting.
2.15 Action by the Board.
-------------------
a. Written Consents. All corporate action taken by the Board or any
----------------
committee of the Board shall be taken at a meeting of the Board, or of such
committee, as the case may be, except that any action required or permitted to
be taken at any meeting of the Board, or of any committee of the Board, may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or such committee.
b. Conference Call. Members of the Board, or any committee
---------------
designated by the Board, may participate in a meeting of the Board, or of such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
c. Voting. Except as otherwise provided by the Certificate of
------
Incorporation or by law, the vote of a majority of the Directors present
(including those who participate by means of conference telephone or similar
communications equipment) at the time of the vote, if a quorum is present at
such time, shall be the act of the Board or of such committee, as the case may
be.
-8-
<PAGE>
ARTICLE III
COMMITTEES OF THE BOARD
-----------------------
The Board may, by resolution passed by a majority of the full Board,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation. The Board may designate one or more Directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not absent or disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
Except as otherwise provided by applicable law, any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise all
the powers and authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it.
ARTICLE IV
OFFICERS
--------
4.1 Election. The officers of the Corporation shall be a President, one
--------
or more Vice-Presidents, a Treasurer, a Secretary, and, if desired, a Chairman
of the Board, a Vice Chairman, a Chief Executive Officer and/or a Chief
Financial Officer and one or more Assistant Secretaries and Assistant
Treasurers, all of whom shall be elected by the Board. None of the officers,
except the Chairman and Vice Chairman of the Board and, if required by the
Certificate of Incorporation, the President, need be a Director. The officers
shall be elected at the first meeting of the Board after each annual meeting of
Shareholders.
a. Hold Two Offices. Any two or more of the offices of the
----------------
Corporation, except those of Chairman and Vice Chairman, President and Vice-
President, and Secretary and President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity, if such instrument is required by law or by these Bylaws to be
executed, acknowledged or verified by any two or more officers.
4.2 Term of Office. The officers of the Corporation shall hold office for
--------------
one year or until their successors are chosen and qualified. Any vacancy
occurring among the officers shall be filled by the Board, but the person so
elected to fill the vacancy shall hold office only until the first meeting of
the Board after the next annual meeting of Shareholders and until his successor
is chosen and qualified.
4.3 Resignations. Any officer may resign at any time by so notifying the
------------
Board or the President in writing. Such resignation shall take effect at the
date of receipt of such notice
-9-
<PAGE>
or at such later time as is therein specified, and, unless otherwise specified,
the acceptance of such resignation shall not be necessary to make it effective.
The resignation of an officer shall be without prejudice to the contract rights
of the Corporation, if any.
4.4 Removal. Any officer chosen by the Board may be removed at any time,
-------
with or without cause, by the affirmative vote of a majority of the directors
then in office, whether acting at a meeting or by the written consent of such
majority. The removal of an officer without cause shall be without prejudice to
his contract rights, if any. The election or appointment of an officer shall
not of itself create contract rights.
4.5 Duties of Officers may be Delegated. In case of the absence or
-----------------------------------
disability of any officer of the Corporation, or for any other reason that the
Board may deem sufficient, the Board, by majority vote, may delegate the powers
or duties or any officer to any other officer or to any Director or to any other
person. The Board may appoint such agents as it may deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
4.6 Salaries. The salaries of all officers and agents of the Corporation
--------
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that he is also a Director.
4.7 Voting Shares in Other Corporations. Unless otherwise provided by
-----------------------------------
resolution of the Board, the Chief Executive Officer or the President may, from
time to time, appoint one or more attorneys or agents of the Corporation, in the
name and on behalf of the Corporation, to cast the votes which the Corporation
may be entitled to cast as a stockholder or otherwise in any other corporation,
any of whose shares or securities may be held by the Corporation, at meetings of
the holders of stock or other securities of such other corporation, or to
consent in writing to any action by any such other corporation, and may instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent, and may execute or cause to be executed on behalf of the
Corporation and under its corporate seal, or otherwise, such written proxies,
consents, waivers or other instruments as he may deem necessary or proper in the
premises; or the President may himself attend any meeting of the holders of the
stock or other securities of any such other corporation and thereat vote or
exercise any or all other powers of the Corporation as the holder of such stock
or other securities of such other corporation.
4.8 Chairman of the Board; Vice Chairman.
------------------------------------
a. The Chairman of the Board shall preside at all meetings of the
Shareholders and of the Board. The Chairman shall make reports to the Board and
the Shareholders, and shall perform all such other duties as are properly
required of him by the Board.
-10-
<PAGE>
b. The Vice Chairman shall have such powers and perform such duties
as from time to time may be assigned to him by the Board. In the absence of the
Chairman, the Vice Chairman, if any, shall preside at all meetings of the
Shareholders and of the Board.
4.9 Chief Executive Officer. The Chief Executive Officer shall be
-----------------------
responsible for the general management of the affairs of the Corporation and
shall perform all duties incidental to the Chief Executive Officer's office
which may be required by law and all such other duties as are properly required
of him by the Board. The Chief Executive Officer shall see that all orders and
resolutions of the Board and of any committee thereof are carried into effect.
4.10 Chief Financial Officer. The Chief Financial Officer shall have
-----------------------
general supervision, direction and control of the financial affairs of the
Corporation and shall have such other powers and duties as may be prescribed by
the Board, the Chief Executive Officer, or these Bylaws. In the absence of a
named Treasurer, the Chief Financial Officer shall also have the powers and
duties of the Treasurer as hereinafter set forth and shall be authorized and
empowered to sign as Treasurer in any case where such officer's signature is
required.
4.11 President. The President shall act in a general executive capacity
---------
and shall assist the Chairman of the Board or the Chief Executive Officer in the
administration and operation of the Corporation's business, and the general
supervision of its policies and affairs, subject, however, to the control of the
Chief Executive Officer, the Board and of any duly authorized committee of
Directors. He may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts and other instruments authorized by the Board,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board or by the Bylaws to some other officer or agent of the
Corporation, or shall otherwise be required by law to be signed or executed.
The President shall perform all duties incident to the office of President and
such other duties as from time to time may be assigned to him by the Board or
the Chief Executive Officer.
4.12 Vice President. The Vice Presidents, in the order of their seniority,
--------------
shall have and exercise all the powers and duties of the President in case of
his absence or inability to act when requested to do so by the Board, and shall
possess such other powers as shall be assigned to them by the Board or by the
President with the approval of the Board. The Board shall also determine the
order in which the Vice Presidents shall assume the authority of the President
in his absence. Any Vice President may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts or other instruments authorized
by the Board, except in cases where the signing and execution thereof shall be
expressly delegated by the Board or by the Bylaws to some other officer or agent
of the Corporation, or shall be required by law to be signed or executed
otherwise. Each Vice President shall perform such other duties as from time to
time may be assigned to him by the Board, the Chief Executive Officer or by the
President.
-11-
<PAGE>
4.13 Treasurer.
---------
a. General. The Treasurer shall perform all duties and exercise all
-------
powers as shall be assigned to him by the Board, the Chief Executive Officer,
the Chief Financial Officer or the President.
b. Custody of Funds. The Treasurer shall have the custody of the
----------------
corporate funds and securities, and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositories as may be designated by the Board.
c. Disbursements. The Treasurer shall disburse the funds of the
-------------
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements. He shall render to the President and Directors at the regular
meetings an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
d. Bond. He shall give the Corporation a bond, if required by the
----
Board, in a sum and with one or more securities satisfactory to the Board, for
the faithful performance of the duties of his office and for the restoration to
the Corporation in case of his death, resignation, retirement or removal from
office of all books, papers, vouchers, moneys and other property of whatever
kind in his possession or under his control belonging to the Corporation.
e. Assistant Treasurer. The Assistant Treasurer shall perform all
-------------------
the duties and responsibilities of the Treasurer on such occasions on which the
Treasurer shall be unable to perform all the duties of the office and shall
perform all other duties and exercise all other powers as shall be assigned to
him by the Board or by the Chief Executive Officer, the Chief Financial Officer,
the President or the Treasurer.
4.14 Secretary.
---------
a. Responsibilities. The Secretary shall attend all meetings of the
----------------
Board and all meetings of the Shareholders and shall record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. He shall give or
cause to be given notice of all meetings of the Shareholders and of the Board,
and he shall keep the seal of the Corporation in safe custody. The Secretary
shall have charge of the stock ledger and also of the other books, records and
papers of the Corporation relating to its organization and management as a
Corporation, and shall see that the reports, statements and other documents
required by law are properly kept and filed; and shall, in general, perform all
the duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him by the Board, the Chief Executive Officer,
the Chief Financial Officer, or by the President.
-12-
<PAGE>
b. Assistant Secretary. The Assistant Secretary shall perform all
-------------------
the duties and responsibilities of the Secretary on such occasions on which the
Secretary shall be unavailable to perform the duties of the office and shall
perform all other duties and exercise all other powers as shall be assigned him
by the Board, the Chief Executive Officer, the Chief Financial Officer, the
President or the Secretary.
ARTICLE V
CERTIFICATE AND TRANSFER OF STOCK
---------------------------------
5.1 Shares. The interest of each Shareholder of the Corporation shall be
------
evidenced by certificates of shares of stock, certifying the number of shares
represented thereby and in such form as is consistent with the Certificate of
Incorporation and as the Board may from time to time prescribe.
5.2 Certificates. The certificates of stock shall be signed by the
------------
Chairman of the Board, Chief Executive Officer, President or a Vice President
and by the Secretary or an Assistant Secretary or Treasurer or Assistant
Treasurer, and sealed with the corporate seal of the Corporation. Such seal may
be a facsimile, engraved or printed. Where any certificate is manually signed
by a transfer agent or a transfer clerk and registrar, the signature of the
Chairman of the Board, the Chief Executive Officer, the President or a Vice
President and the Secretary or an Assistant Secretary or Treasurer or Assistant
Treasurer, upon such certificate may be facsimiles, engraved or printed. In
case any officer who has signed or whose facsimile signature has been placed
upon any certificate, shall have ceased to be such officer before the
certificate is issued, it may be issued by the Corporation with the same effect
as if such officer had not ceased to be such at the time of its issue.
5.3 Recording of Shares. The certificates of stock of the Corporation
-------------------
shall be numbered and shall be entered in the books of the Corporation as they
are issued. They shall exhibit the holder's name and certify the number of
shares owned by him.
5.4 Registered Shareholders. The Corporation shall be entitled to treat
-----------------------
the holder of record of any share or shares of stock as the holder in fact
thereof and shall not be bound to recognize any equitable or other claims to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as expressly provided by
the laws of the State of Florida.
5.5 Transfer of Stock. Transfers of shares of stock of the Corporation
-----------------
shall be made only on the books of the Corporation by the registered owner
thereof, or by his duly authorized attorney, or with a transfer agent appointed
as provided in these Bylaws, and on surrender of the certificate, or
certificates for such shares, properly endorsed and accompanied by the payment
for all taxes.
-13-
<PAGE>
5.6 Transfer Agents. The Board may appoint one or more transfer agents
---------------
and one or more registrars, and may require all certificates for shares to bear
the signature or signatures of any of them.
5.7 Restriction on Transfer of Stock. A written restriction on the
--------------------------------
transfer or registration of transfer of capital stock of the Corporation and
noted conspicuously on the certificate representing such capital stock, may be
enforced against the holder of the restricted capital stock or any successor or
transferee of the holder including an executor, administrator, trustee, guardian
or other fiduciary entrusted with like responsibility for the person or estate
of the holder. Unless noted conspicuously on the certificate representing such
capital stock, a restriction shall be ineffective except against a person with
actual knowledge of the restriction. A restriction on the transfer or
registration of transfer of capital stock of the Corporation may be imposed
either by the Certificate of Incorporation or by an agreement among any number
of Shareholders or among such Shareholders and the Corporation. No restriction
so imposed shall be binding with respect to capital stock issued prior to the
adoption of the restriction unless the holders of such capital stock are parties
to an agreement or voted in favor of the restriction.
5.8 Closing of Transfer Books. The Board shall have power to close the
-------------------------
stock transfer books of the Corporation for a period not exceeding 60 days
preceding the date of any meeting of Shareholders, or the date for payment of
any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board are authorized to fix in advance a date, not exceeding the
date for the payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go
into effect, as a record date for the determination of the Shareholders entitled
to notice, and to vote at any such meeting, or entitled to receive payment of
any such dividend, or to any such allotment of rights, or to exercise the rights
in respect of any change, conversion or exchange of capital stock, and in such
case only such Shareholders as shall be Shareholders of record on the date so
fixed shall be entitled to notice of, and to vote at, such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be notwithstanding any transfer of any
stock on the books of the Corporation after such record date has been fixed.
5.9 Lost Certificate. No certificate for shares of stock in the
----------------
Corporation shall be issued in place of any certificate alleged to have been
lost, destroyed or stolen, except on production of evidence satisfactory to the
Board of such loss, destruction or theft and, if the Board so requires, upon the
furnishing of bond satisfactory to the Corporation and to the transfer agent, if
any, in such sum as the Board may direct as indemnity against any claim that may
be made against the Corporation or the transfer agent, if any, with respect to
the certificate alleged to have been lost, destroyed or stolen before a new
certificate may be issued with the same tenor for the same number of shares as
the one alleged to have been lost, destroyed or stolen.
-14-
<PAGE>
ARTICLE VI
DIVIDENDS
---------
6.1 Subject to the provisions of the Certificate of Incorporation and the
FBCA, the Board:
a. May declare and pay dividends or make other distributions on the
outstanding shares of capital stock in such amounts and at such time or times
as, in its discretion, the condition of the affairs of the Corporation shall
render advisable;
b. May use and apply, in its discretion, any of the surplus of the
Corporation in purchasing or acquiring any shares of capital stock of the
Corporation, or purchase warrants therefor, in accordance with law, or any of
its bonds, debentures, notes or other securities or evidences of indebtedness;
and
c. May set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best interests of
the Corporation.
ARTICLE VII
OFFICES, BOOKS AND RECORDS
--------------------------
7.1 Offices. The principal office of the Corporation shall be located in
-------
the City of Orlando, County of Orange in the State of Florida, or at such other
place in the State of Florida as the Board shall determine. The Corporation may
have other offices, either within or outside the State of Florida, at such place
or places as the Board may from time to time determine.
7.2 Books and Records. The Corporation shall keep correct and complete
-----------------
books and records of account and shall keep minutes of the proceedings of the
Shareholders, the Board and any committee of the Board. The Corporation shall
keep at the office designated in the Certificate of Incorporation or at the
office of the transfer agent or registrar of the Corporation, a record
containing the names and addresses of all Shareholders, the number and class of
shares held by each and the dates when they respectively became the owners of
record.
7.3 Form of Records. Any records maintained by the Corporation in the
---------------
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into
-15-
<PAGE>
clearly legible written form within a reasonable time. The Corporation shall so
convert any records so kept upon the request of any person entitled to inspect
the same.
7.4 Inspection of Books and Records. Except as otherwise provided by law,
-------------------------------
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations, the accounts, books, minutes and other
records of the Corporation, or any of them, shall be open to the inspection of
the Shareholders.
ARTICLE VIII
NOTICES
-------
Whenever notice is required to be given by the Certificate of Incorporation
or by these Bylaws it shall not be construed to mean personal notice, but such
notice, except as otherwise provided by law or by these Bylaws, may be given by
depositing the same in a post office, letter box or mail chute, in a postpaid
sealed wrapper addressed to the Shareholder, officer or director, as the case
may be, at such address as appears on the books of the Corporation.
ARTICLE IX
AMENDMENTS
----------
Except as in these Bylaws hereinbefore otherwise provided with respect to
any amendment changing the number of the members of the Board, these Bylaws may
be repealed, altered, amended, added to, or modified by the Board by a vote of a
majority of the same, or at any special meeting of the Board, when notice of the
proposed amendment has been given.
ARTICLE X
NONAPPLICABILITY OF
CERTAIN FLORIDA STATUTES
------------------------
The Corporation and its shareholders hereby expressly elect not to be
governed by the provisions of Section 607.0902 of the Florida Statutes if and to
the extent that such provisions are applicable to them. If and to the extent
that a court of competent jurisdiction may hold that Section 607.0902 of the
Florida Statutes applies to the Corporation and its Shareholders, then the
Corporation and its Shareholders hereby expressly provide that such provision
shall not apply to any "control-share acquisition" (as defined therein) of
shares of capital stock of the Corporation.
-16-
<PAGE>
ARTICLE XI
INDEMNIFICATION
---------------
Any person, his heirs or personal representative made, or threatened to be
made, a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, because he is or was a
director, officer, employee or agent of the Corporation or serves or served any
other corporation or other enterprise in any capacity at the request of the
Corporation, shall, in the case of a director or officer, or may, in the case of
an employee or agent, be indemnified by the Corporation, and the Corporation may
advance his related expenses, to the full extent permitted by Florida law,
provided that the advancement of such expenses shall be made only after receipt
of an undertaking by the indemnitee to repay all amounts advanced if it should
be ultimately determined that the indemnitee is not entitled to be indemnified
under this Article or otherwise. In discharging his duty, any director,
officer, employee or agent, when acting in good faith, may rely upon
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by (1) one or more
officers or employees of the Corporation whom the director, officer, employee or
agent reasonably believes to be reliable and competent in the matters presented,
(2) counsel, public accountants or other persons as to matters that the
director, officer, employee or agent believes to be within that person's
professional or expert competence, or (3) in the case of a director, a committee
of the board of directors upon which he does not serve, duly designated
according to law, as to matters within its designated authority, if the director
reasonably believes that the committee is competent. The foregoing right of
indemnification or reimbursement shall not be exclusive of other rights to which
the person, his heirs or personal representatives may be entitled. The
Corporation shall obtain and maintain directors' and officers' liability
insurance at its expense. Notwithstanding the preceding sentence, the
Corporation shall have no obligation to obtain and maintain such insurance if
the Corporation determines in good faith that such insurance is not reasonably
available, premium cost and coverage provided to be considered.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Indebtedness of Shareholders. The Corporation shall have a first lien
----------------------------
on all the shares of its capital stock and upon all dividends declared upon the
same for any sum due to the Corporation, either on account of the subscription
to its stock or for any other indebtedness due from the Shareholder.
12.2 Checks, Etc. All checks, drafts, acceptances, notes and other orders,
------------
demands, or instruments in respect to the payment of money, shall be signed or
endorsed on behalf of the
-17-
<PAGE>
Corporation by the Chief Executive Officer, Chief Financial Officer, President
and/or Secretary or by any other officers whom the Board may from time to time
designate.
12.3 Fiscal Year. The fiscal year of the Corporation shall begin January
-----------
1, and end on December 31 of such calendar year.
12.4 Seal. The corporate seal shall be circular in form and shall have
----
inscribed thereon the name of the Corporation, the year of its incorporation and
the words "Corporate Seal, Florida". The Secretary of the Corporation shall
have the custody of the corporate seal. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
-18-
<PAGE>
EXHIBIT 10.21
[Charlotte, NC]
MUZAK(R)
LICENSE AGREEMENT
Dated February 01, 1996
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. GRANT OF LICENSE.................................................. 3
1.1 As to Services.............................................. 3
1.2 As to Proprietary Marks..................................... 4
1.3 Rights Retained............................................. 4
II. PROVISION OF SERVICES............................................. 5
2.1 Services.................................................... 6
2.2 Satellite-Delivered Services................................ 6
2.3 Delivery by Recorded Media.................................. 9
2.4 Adjunct Services............................................ 10
2.5 Alternate Delivery Means.................................... 10
2.6 Service Delivery Equipment.................................. 11
III. TERM.............................................................. 12
3.1 Term........................................................ 12
3.2 Renewal of Rights........................................... 13
3.3 Notice from Licensee........................................ 17
IV. EXCLUSIVITY....................................................... 17
4.1 In the Territory............................................ 17
4.2 Future Services............................................. 18
4.3 No Other Services........................................... 18
4.4 Promotion of All Services................................... 21
V. STANDARDS OF SERVICE AND TRAINING................................. 21
5.1 Operations in General....................................... 21
5.2 Sales....................................................... 22
5.3 Protection of Services...................................... 23
5.4 Training.................................................... 24
5.5 Confidentiality............................................. 25
VI. FEES AND ROYALTIES................................................ 26
6.1 Initial Fee................................................. 26
6.2 Market Fee.................................................. 27
6.3 Royalty Fee................................................. 28
6.4 DBS Surcharge............................................... 28
6.5 Recorded Media Charges...................................... 29
6.6 Adjunct Services Charges.................................... 29
6.7 Payment Schedule............................................ 29
6.8 Gross Billings.............................................. 30
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
VII. RECORDS, REPORTS, AND INSPECTIONS................................ 31
7.1 Records.................................................... 31
7.2 Reports.................................................... 32
7.3 Audit...................................................... 32
VIII. MARKETING AND PROMOTION.......................................... 35
8.1 Advertisements............................................. 35
8.2 Yellow-Pages Advertising................................... 36
8.3 Additional Assistance by Muzak............................. 36
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV................. 36
X. DEFAULT AND TERMINATION OF THIS AGREEMENT........................ 38
10.1 Default of Licensee........................................ 38
10.2 Default of Muzak........................................... 41
10.3 Additional Remedies........................................ 42
10.4 Force Majeure.............................................. 43
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR EXPIRATION OF
THIS AGREEMENT................................................... 43
11.1 Action Required of Licensee................................ 43
11.2 Action Required of Muzak................................... 44
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE...................... 45
12.1 By Licensee and its Owners................................. 45
12.2 Consent of Muzak........................................... 45
12.3 Collateral................................................. 47
12.4 Transfer to Family Member.................................. 48
12.5 By Muzak................................................... 48
XIII. PROPRIETARY MARKS................................................ 48
13.1 Ownership.................................................. 48
13.2 Infringement............................................... 49
13.3 Use........................................................ 49
13.4 Substitution of Proprietary Marks.......................... 50
XIV. MISCELLANEOUS.................................................... 51
14.1 Representations of Licensee................................ 51
14.2 Representations of Muzak................................... 51
14.3 Independent Contractor..................................... 52
14.4 Release.................................................... 52
14.5 No Waiver.................................................. 53
14.6 Notices.................................................... 54
14.7 Entire Agreement........................................... 55
14.8 Severability............................................... 55
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
14.9 Captions................................................... 55
14.10 Binding Effect............................................. 56
14.11 Counterparts............................................... 56
14.12 Attorney's Fees............................................ 56
14.13 Applicable Law............................................. 56
14.14 All Remedies............................................... 56
14.15 Limitation................................................. 57
14.16 No Warranties.............................................. 57
14.17 No Implied Rights.......................................... 58
14.18 Survival................................................... 58
14.19 Conversion................................................. 59
14.20 Most Favorable Terms....................................... 59
XV. ACKNOWLEDGEMENTS.................................................. 60
15.1 Independent Investigations................................. 60
15.2 Disclosure................................................. 60
15.3 Opportunity to Review...................................... 61
</TABLE>
EXHIBITS
- --------
Exhibit A - Music Services
Exhibit B - Adjunct Services (Music-Related and Other)
Exhibit C - Marks
Exhibit D - Technical Specifications
Exhibit E - Sales of Adjunct Services
Exhibit F - Adjunct Services Revenue Sharing
Exhibit G - MUZAK(R) Multi-Territory Accounts Program
Exhibit H - Agreements Not To Be Superseded
iii
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
THIS MUZAK(R) LICENSE AGREEMENT ("Agreement") is made and entered into this
_______ day of ___________________________________________, 19__, by and between
MUZAK LIMITED PARTNERSHIP, a Delaware limited partnership ("Muzak"), and SUNCOM
COMMUNICATIONS, L.L.C., a _____________ limited liability company ("Licensee") .
RECITALS:
--------
WHEREAS, Muzak has developed and owns a system (the "Muzak System") for the
production and delivery to licensees and subscribers of licensees of
subscription music services, adjunct communications services, and related
equipment, which system currently includes Muzak's unique software control
system for satellite distribution of multiple program services;
WHEREAS, the characteristics of the Muzak System also include, without
limitation, subscription music services, with certain unique and varied program
contents developed using distinctive and, in some cases, proprietary
program-scheduling techniques, which are set forth in Exhibit A attached hereto
and incorporated herein by reference (the "Music Services"); distinctive adjunct
services relating to the sequencing, changing, and switching of music-program
communications (the "Music-Related Adjunct Services") and to the delivery of
advertising, data and
1
<PAGE>
video communications (the "Other Adjunct Services"), (collectively the "Adjunct
Services"), which are set forth in Exhibit B attached hereto and incorporated
herein by reference; and delivery methods and procedures for both the Music
Services and the Adjunct Services (jointly, the "Services");
WHEREAS, Muzak identifies the Muzak System and the Services by means of
certain trade names, service marks, trademarks, logos, emblems, and indicia of
origin, including but not limited to the mark "MUZAK(R)," and such other trade
names, service marks, and trademarks as are set forth on Exhibit C attached
hereto and incorporated herein by reference (the "Proprietary Marks") , which
Proprietary Marks represent Muzak's high standards of quality and service; and
WHEREAS, Licensee desires to market and distribute the Services to
customers (the "Subscribers") who enter into agreements providing for receipt of
the Services at certain locations (the "Subscriber Premises"), and wishes to
obtain a license for that purpose from Muzak;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, hereby agree as
follows:
2
<PAGE>
I. GRANT OF LICENSE
----------------
1.1 As to Services.
--------------
(a) Subject to the terms and conditions herein contained, Muzak hereby
grants to Licensee an exclusive license, and Licensee hereby agrees, to engage
in the business of providing the Services to Subscribers at Subscriber Premises
located solely within the following areas (such areas being hereinafter referred
to as the "Territory"): the Counties of Banks, Elbert, Franklin, Habersham,
--------------------------------------------------
Hart, Madison, Rabun, Stephens, Towns, Union, and White in the State of Georgia:
- --------------------------------------------------------------------------------
the Counties of Alexander, Alleghany, Anson, Ashe, Avery, Buncombe, Burke,
- --------------------------------------------------------------------------
Cabarrus, Caldwell, Catawba, Cherokee, Clay, Cleveland, Gaston, Graham, Haywood,
- --------------------------------------------------------------------------------
Henderson, Iredell, Jackson, Lincoln, Macon, Madison, McDowell, Mecklenburg,
- ----------------------------------------------------------------------------
Mitchell, Montgomery, Polk, Richmond, Rowan, Rutherford, Scotland, Stanly,
- --------------------------------------------------------------------------
Swain, Transylvania, Union, Watuaga, Wilkes, and Yancey in the State of North
- -----------------------------------------------------------------------------
Carolina; and the Counties of Abbeville, Anderson, Cherokee, Chester,
- ---------------------------------------------------------------------
Chesterfield, Fairfield, Greenville, Greenwood, Lancaster, Laurens, McCormick,
- ------------------------------------------------------------------------------
Newberry, Oconee, Pickens, Saluda, Spartanburg, Union, and York in the State of
- -------------------------------------------------------------------------------
South Carolina. Except as specifically authorized by the Multi-Territory Sales
- --------------
Committee in connection with the Multi-Territory Accounts Program as described
in Article IX below and Exhibit G attached hereto, or by Muzak in connection
with certain Adjunct
3
<PAGE>
Services sales as described in Exhibit E attached hereto, Licensee shall not
provide the Services to Subscriber Premises located outside the Territory.
(b) Licensee and Muzak recognize that some outlying areas of the
Territory may at some future date be more efficiently served by a Muzak licensee
who operates in a territory adjoining the Territory. Licensee therefore shall
have the right at any time to present to Muzak a written request for
reallocation of such outlying areas of the Territory to an adjoining licensee.
Any such reallocation shall be effective upon the written consent thereto of
both Muzak and the adjoining licensee. Muzak's consent shall not be unreasonably
withheld.
1.2 As to Proprietary Marks. Subject to the terms and conditions herein
-----------------------
contained, Muzak grants to Licensee, and Licensee accepts, a license to use the
Proprietary Marks solely in connection with Licensee's provision of the Services
as provided in this Agreement. Licensee shall at all times seek to market and
sell the Services through use of the Proprietary Marks.
1.3 Rights Retained. The grant of rights in Sections 1.1 and 1.2 above does
---------------
not include the grant of the following rights, which are retained by Muzak:
4
<PAGE>
(a) The right to use, and to license others to use, the Muzak System
and the Proprietary Marks for the provision of the Services to Subscriber
Premises which are located outside the Territory.
(b) The right to provide the Services, and to use the Proprietary Marks
in connection therewith, to transportation common carriers (including, without
limitation, operators of automobiles, ships, airplanes, trains, or buses) which
sell or provide transportation common carrier services, in whole or in part,
within the Territory, it being understood that the reservation of such right
shall not be construed as limiting Licensee's right to provide the Services to
transportation common carriers located wholly within the Territory.
(c) The right to provide a foreground music service by Recorded Media
(as hereinafter defined) under the "YESCO(R)" name and trademark to existing
dealers of the "YESCO(R)" Foreground Music Service and their customers pursuant
to existing contractual obligations or agreements with such dealers; provided,
however, that Muzak shall not authorize such dealers to distribute any of the
Services or use the Proprietary Marks within the Territory.
II. PROVISION OF SERVICES
---------------------
5
<PAGE>
2.1 Services. Muzak shall supply Licensee with the Services for and during
--------
the term hereof, for use by Licensee solely in accordance with the terms of this
Agreement. Muzak reserves the right to add a Service and, except with respect to
the "Environmental Music by MUZAK(R)" and the "Foreground Music One(R)" Music
Services, to substitute a different Service or discontinue the distribution of a
Service, if Muzak reasonably determines that such addition, substitution, or
discontinuation will be beneficial to its business and the business of its
licensees in general and gives Licensee at least six (6) months' prior notice of
such addition, substitution or discontinuation. Any such addition, substitution
or discontinuation will be reflected in an amendment of Exhibit A or Exhibit B,
as the case may be, and will not affect the validity of this Agreement, which
shall, in all respects, be deemed modified to provide for such addition,
substitution, or discontinuation.
2.2 Satellite-Delivered Services.
----------------------------
(a) Subject to Section 2.3, Licensee agrees to deliver the Music
Services to Subscribers by such means as meet the standards and technical
specifications set forth in Exhibit D attached hereto and incorporated herein by
reference and the other terms and conditions of this Agreement. Muzak may modify
the standards and specifications set forth in Exhibit D from time to time if
Muzak reasonably believes that such modifications are
6
<PAGE>
necessary to maintain or improve the quality of delivery of the Services to
Subscribers or to maintain or improve the effectiveness or quality, or reduce
the price, of the Service Delivery Equipment (as hereinafter defined); provided,
however, that no such modifications shall have the effect of rendering the
satellite receivers and associated antennae (collectively, the "Earth Stations")
then in use by Licensee or Subscribers in the Territory incapable of receiving
satellite transmissions, or any other equipment then in use by Licensee or
Subscribers in the Territory for the reception of the Services incapable of
receiving the Services, unless such modifications are necessitated by law or by
the exercise of the rights of third parties under the express terms of Muzak's
satellite-space contracts; and provided further, that Muzak shall provide
Licensee with six (6) months' prior notice of any changes to those standards and
specifications in Exhibit D that pertain to the Service Delivery Equipment and
Licensee's obligations under Section 2.6 below.
(b) In the event that the Services are delivered by "Direct-Broadcast
Satellite" ("DBS"), which permits the satellite transmission of Services by
Muzak directly to the premises of a Subscriber, the following shall apply:
(i) Muzak shall, promptly after receipt of written notice from
Licensee, commence DBS delivery of the
7
<PAGE>
Services to Subscribers who have Earth Stations suitable for receipt of such
delivery. Subject to the provisions of Exhibits E and G hereto, if Muzak
delivers Services by DBS directly to the Subscriber Premises, Muzak shall not
discontinue such delivery until the earlier of the following: (A) the date which
Licensee designates, or (B) one hundred eighty (180) days after the effective
date of the termination or expiration (without renewal of license rights) of
this Agreement. In the event Muzak discontinues delivery of Services in
violation of this subsection (b) (i), Muzak agrees to the granting of a
temporary injunction against it on the condition that the duration of such
injunction does not exceed ten (10) days. Such injunction may be granted on an
ex parte basis if Muzak fails to appear at the hearing following twelve (12)
hours' notice by telephone to the twenty-four (24) hour telephone number of the
Muzak DBS Division. During the ten (10) day temporary injunction period,
Licensee may seek to have such temporary relief converted to a permanent
injunction in a hearing on the merits following appropriate notice to Muzak.
(ii) During the above-referenced 180-day (or shorter, if Licensee so
designates) period, Licensee shall remain obligated to perform the duties and be
subject to the restrictions applicable to it under the terms of this Agreement
with respect to such continuing DBS delivery of
8
<PAGE>
the Services, including without limitation those terms which obligate
Licensee to pay royalties, fees, charges, and surcharges (but only with
respect to Gross Billings [as hereinafter defined] and fees and charges to
Subscribers served by means of DBS), but not including terms which require
Licensee to pay a market fee or which restrict Licensee from offering or
selling the services of others. During such 180-day (or shorter) period,
under no circumstances shall Licensee use the Proprietary Marks except as
necessary in association with the continuing provision of the Services by
DBS to Subscribers. In addition, during such period Muzak shall not be
precluded from appointing one or more distributors of the Services in the
Territory and from giving to such distributors any rights previously
accorded to Licensee under this Agreement or any related agreement.
2.3 Delivery by Recorded Media. Certain Services, as reasonably designated
--------------------------
by Muzak, may be delivered by means of, among other things, magnetic tape or
compact disc, in analog or digital form (the "Recorded Media"). Muzak shall at
all times retain title to, and all ownership rights in, any Recorded Media,
whether furnished to Licensee or to a Subscriber. Licensee shall not sell,
assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any
Recorded Media. Licensee shall (i) prohibit all Subscribers who receive Services
delivered by
9
<PAGE>
Recorded Media from selling, assigning, transferring, conveying, giving away,
pledging, mortgaging, or otherwise encumbering any of such Recorded Media, (ii)
promptly notify Muzak in the event it becomes aware that any Subscriber has
violated any such prohibition, (iii) cooperate with Muzak in the immediate
termination of the provision of Services to any Subscriber which has violated
any such prohibition, and (iv) take such further action as is requested by Muzak
(at Muzak's expense) to enforce such prohibition.
2.4 Adjunct Services. All sales of the Adjunct Services shall be conducted
----------------
in the manner provided in Exhibit E attached hereto and incorporated herein by
reference.
2.5 Alternate Delivery Means. In the event of a failure of Muzak's
------------------------
satellite transmissions of the Services, Muzak shall use its reasonable best
efforts promptly to restore such transmissions. In addition, by no later than 30
days after the date of this Agreement, Muzak shall provide Licensee with tape
cassettes (or other form of Recorded Media) containing 72 hours of
"Environmental Music by MUZAK(R)" programming and 72 hours of "Foreground Music
One(R)" programming, at no cost to Licensee, which Licensee shall retain for
emergency use in the event of a failure of Muzak's satellite transmissions of
the Music Services. Should any such failure of satellite transmissions continue
for a period in excess of 48 hours, Muzak shall use its reasonable best
10
<PAGE>
efforts promptly to provide Licensee with additional tape cassettes (or other
form of Recorded Media), at no cost to Licensee, to be used until such failure
has been corrected. All Recorded Media provided to Licensee or to Subscribers
under the terms of this Section 2.5 shall be subject to all other provisions of
this Agreement pertaining to Recorded Media, including, without limitation,
Section 2.3.
2.6 Service Delivery Equipment.
--------------------------
(a) Licensee, at its expense (except as provided in subsection
(b) below), shall obtain and maintain equipment (including, without limitation,
Earth Stations) to enable Licensee to receive and distribute the Services and
shall obtain and make available to the Subscribers equipment to enable the
Subscribers to receive the Services. (All equipment used to receive or
distribute the Services, including such equipment as is owned by Subscribers, is
hereinafter collectively referred to as the "Service Delivery Equipment.") The
Service Delivery Equipment, except Subscriber-owned equipment that is not sold
to the Subscriber by Licensee, shall conform to Muzak's standards and
specifications in effect on the date Licensee installs such Equipment at the
Subscriber Premises. The standards and specifications in effect as of the date
hereof are attached hereto in Exhibit D.
11
<PAGE>
(b) Muzak shall, at no cost to Licensee, provide Licensee with
two (2) Earth Stations for Licensee's use (at such locations in the Territory as
Licensee determines) in receiving the Services during the term of this
Agreement. Muzak shall at all times retain title to, and all ownership rights
in, the Earth Stations that it provides to Licensee, and Licensee shall not
under any circumstances sell, assign, transfer, convey, give away, pledge,
mortgage, or otherwise encumber such Earth Stations. Licensee shall, at Muzak's
expense (except with respect to the obtaining of any required permits, which
shall be at Licensee's expense up to $500 per Earth Station), install the Earth
Stations which Muzak provides to Licensee, and shall, at its own expense,
maintain such Earth Stations in good working condition; provided, however, that
in the event any Earth Station provided to Licensee is, through no negligent or
intentional act or failure to act of Licensee, defective or in need of
replacement parts or repair, Muzak, after receipt of notice thereof, shall
promptly provide or arrange for such replacement parts and repair as are
necessary to restore such Earth Station to good working order.
III. TERM
----
3.1 Term. Except as otherwise provided herein, the term of this
----
Agreement shall begin as of the date set forth in the introductory paragraph of
this Agreement and shall continue in
12
<PAGE>
full force and effect for a period of ten (10) years from such date.
3.2 Renewal of Rights.
-----------------
(a) If Muzak reasonably determines that the
performance of Licensee during the term stated in Section 3.1 is not
sufficiently satisfactory to warrant renewal of Licensee's license rights
hereunder, then, at least two years prior to the date of expiration described in
Section 3.1 of this Agreement, Muzak shall notify Licensee that it does not
intend to renew Licensee's license rights and provide the specific reasons for
such decision. Such notification is intended to give Licensee the opportunity to
assign its rights under this Agreement, or to make satisfactory its performance,
it being understood that any such assignment is subject to Muzak's prior
approval as provided in Article XII hereof.
(i) In determining whether or not to renew Licensee's
license rights, Muzak shall consider Licensee's performance under this
Agreement. In evaluating Licensee's performance, Muzak shall consider such
factors as, among others, the following: Licensee's total billings for all
Services, the trend of Licensee's new billings and cancellations (and the
reasons therefor), local market
13
<PAGE>
conditions and the degree of Licensee's market penetration in the
Territory.
(ii) In the event Muzak notifies Licensee that Muzak does not
intend to renew Licensee's license rights because Muzak has reasonably
determined that Licensee's performance is not sufficiently satisfactory to
warrant renewal of Licensee's license rights hereunder, Licensee shall have a
period of six months from the date of such notice to attempt to improve its
performance. At the end of such six-month period, Muzak shall reconsider the
adequacy of Licensee's performance and if such performance has sufficiently
improved so that it is no longer inadequate, Muzak shall rescind its notice of
intention not to renew Licensee's license rights. Conversely, if at the end of
such six-month period Muzak determines that Licensee's performance remains
inadequate, Muzak shall inform Licensee of the reasons for such determination
and send to Licensee a final notice of nonrenewal.
(b) Muzak shall also have the right not to renew Licensee's license
rights if Licensee engages in conduct which Muzak reasonably deems inimical to
the best interests of the Muzak System (including the interests of the MUZAK(R)
licensees in such System). The exercise of Muzak's rights as stated in this
subsection (b) shall be subject to the following conditions:
14
<PAGE>
(i) In the event such conduct constitutes a breach of this
Agreement, Muzak shall have the absolute right not to renew Licensee's license
rights, provided that Muzak has notified Licensee of such breach, such breach
occurred (or Muzak first became aware of such breach) no more than six months
before Muzak's nonrenewal notice to Licensee, and Licensee has neither cured nor
challenged such breach within the period specified in Section 10.1(c) hereof,
and provided further that Muzak's nonrenewal notice to Licensee states that it
constitutes a final notice of nonrenewal; and
(ii) In the event that such conduct does not constitute a
breach of this Agreement, Muzak shall notify Licensee within 90 days of its
discovery of the objectionable conduct that it considers such conduct to be
inimical to the best interests of the Muzak System (including the interests of
the MUZAK(R) licensees in such System). If, after two such notices, Licensee
again engages in conduct which Muzak reasonably deems to be inimical to the best
interests of the Muzak System (including the interests of the MUZAK(R) licensees
in such System), then (whether or not such conduct is similar to the conduct
referred to in either of the earlier notices) Muzak may notify Licensee of that
fact and of the further fact that as
15
<PAGE>
a result of such conduct, it does not intend to renew Licensee's
license rights. This notice shall constitute a final notice of nonrenewal.
(c) In the event that, in accordance with the provisions of
this Section 3.2, Muzak notifies Licensee of its intention not to renew
Licensee's license rights, then Muzak shall have no obligation to offer to renew
such license rights; provided, however, that if, in the case of the final
nonrenewal notice sent pursuant to subparagraph (a) or subparagraph (b) (ii)
above, Licensee challenges, by litigation commenced no later than 120 days after
the date of such final nonrenewal notice, the propriety of such notice, such
notice shall become effective only after such litigation is finally resolved in
favor of Muzak. It is understood and agreed that Licensee's right to challenge
the final nonrenewal notice sent under subparagraph (b) (i) of this Section 3.2
shall be exercised, if at all, by means of Licensee's challenge under Section
10.1 of this Agreement of the breach supporting such nonrenewal. For purposes
hereof, final resolution shall include Licensee's failure to make a timely
appeal of a court decision in favor of Muzak. If Muzak does not so notify
Licensee, then Muzak shall be required to offer to enter into a new license
agreement with Licensee upon expiration of this Agreement, which new license
agreement shall correspond to the form of license agreement which Muzak is then
bona fide offering to licensees (or prospective licensees) serving (or
16
<PAGE>
proposing to serve) licensed territories of comparable size to that proposed to
be licensed to Licensee under such new agreement.
3.3 Notice from Licensee. Notwithstanding Section 3.2, Muzak shall
--------------------
have no obligation to offer to renew Licensee's license rights unless, after
written notice from Muzak sent to Licensee no less than eight (8) and no more
than twelve (12) months prior to the date of expiration described in Section 3.1
of this Agreement advising Licensee of the effect of this Section 3.3, Licensee
shall have given Muzak written notice of its desire to renew its license rights
not less than six (6) months nor more than twelve (12) months prior to the date
of expiration described in Section 3.1 of this Agreement.
IV. EXCLUSIVITY
-----------
.1 In the Territory. Subject to the provisions of Sections 1.3 and 2.4
----------------
(including Exhibit E hereto) above, Article IX below (including Exhibit G
hereto), and the Licensee's InStore Advertising Agreement described in Exhibit H
attached hereto, during the term of this Agreement, Muzak shall not authorize
anyone other than Licensee to (i) provide the Services in the Territory or (ii)
use the Proprietary Marks in the Territory.
17
<PAGE>
.2 Future Services. Muzak shall conduct research and development to
---------------
maintain and improve the quality of the Services and the methods used to
distribute them. In the event that Muzak develops new subscription music
services, or new communications services in the nature of the Adjunct Services,
after the date hereof, Muzak shall amend Exhibit A or Exhibit B, as the case may
be, in the manner provided in Section 2.1 above (including the requirement of at
least six months' prior notice to Licensee of such amendment) to add such new
Services thereto, thereby giving Licensee the right and, subject to Exhibit E
hereto, the obligation to distribute such Services in the Territory under the
terms of this Agreement.
.3 No Other Services. During the term of this Agreement, except as
-----------------
otherwise approved in writing by Muzak, neither Licensee nor any of the persons
or entities holding (either directly, indirectly, or beneficially) a controlling
ownership interest in Licensee shall, either directly or indirectly, for itself,
or through, on behalf of, or in conjunction with any person or entity:
(a) Participate or permit any of its employees, officers, or
directors to participate, either directly or indirectly in the distribution in
the Territory of any communications service substantially the same as or similar
to the Adjunct Services (except a communications service distributed
18
<PAGE>
by any such person or entity pursuant to a contract or agreement in effect on
the date the Adjunct Service which is the same as or similar to such
communications service is first offered to Licensee by Muzak), or any
subscription music service other than the Music Services, including, without
limitation, a radio program service which is provided through special reception
devices tuned only to that station's signal and any music programming that is
provided to commercial or residential locations by means of cable television or
cable radio; provided, however, that the foregoing shall not become effective
with respect to such other subscription music services that are distributed by
Recorded Media until the later of (i) January 1, 1993, (ii) the first date
Licensee may cancel or otherwise terminate the agreement under which Licensee is
the distributor of such other music services without causing a breach of such
agreement (provided such agreement was in effect on March 1, 1990), or (iii)
with reference to the distribution of such music services to any particular
customer, the first date Licensee may either substitute the Music Services for
such other music services or cancel or terminate the agreement with such
customer without causing a breach of such agreement (provided such customer
agreement was in effect on September 1, 1990); and provided further, that if, as
a result of Licensee's acquisition of another music business or the assets
thereof during the term of this Agreement, Licensee becomes the assignee of a
customer agreement for such other music or communications services or an
19
<PAGE>
agreement under which Licensee is the distributor of such other music or
communications services and Licensee cannot substitute the Services for such
other services without causing a breach of such agreement, Licensee may provide
such other services to the customers receiving such services on the date of
assignment through the remaining term (without reference to renewal rights) of
such agreement. Indirect participation shall include participation as an
officer, director, owner (which term shall not include the holder of 5% or less
of the common stock of a publicly-held entity), partner, employee, or consultant
of an entity distributing such other communications or subscription music
service.
(b) Divert or permit any of its employees, officers, or
directors to divert any existing or prospective Subscriber to any competitor in
the Territory, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with Muzak, the Proprietary Marks, or the Services.
(c) Display in any location in the Territory any trade names,
trademarks, or service marks of any other business providing subscription music
services or providing communications services substantially similar to the
Adjunct Services except if permitted to sell or distribute such services in the
Territory pursuant to Paragraph (a) above.
20
<PAGE>
.4 Promotion of All Services. Throughout the term of this Agreement,
-------------------------
Licensee shall use its reasonable best efforts actively to promote, market, and
distribute each of the Services (except as otherwise provided in Article 4 of
Exhibit E hereto).
V. STANDARDS OF SERVICE AND TRAINING
---------------------------------
5.1 Operations in General. In order to maintain the reputation and goodwill
---------------------
of Muzak, the Services, and the Proprietary Marks, Licensee shall:
(a) Comply with all federal, state, and local laws, rules and
regulations, and timely obtain all permits, certificates, and licenses,
necessary in the reasonable judgment of Licensee for the proper conduct of the
business licensed hereunder (the "Business").
(b) Maintain an office in the Territory and promptly notify Muzak in
the event Licensee moves the office to a new location within the Territory;
provided, however, that if Licensee is also the Muzak licensee in a territory
adjacent to the Territory and maintains an office in that territory that
adequately serves Subscribers in both such territories, Licensee need not
maintain an office in the Territory.
21
<PAGE>
(c) Be responsible for paying for all performing rights licenses
necessary for the distribution of the Services; provided, however, that Muzak
shall be responsible for paying for the license with SESAC to the extent
required for Licensee's distribution of the Services.
(d) Be responsible for paying all applicable local, state and federal
taxes of whatever nature, now or hereafter enacted, relating to Licensee's
provision of the Services, and all accounts and other indebtedness of every kind
incurred by Licensee in the conduct of the Business.
(e) Hold itself out to the public as an independent contractor,
operating under a license from Muzak. In the event Licensee elects to exhibit
the MUZAK(R) name on its stationery or vehicles, such exhibition shall be in a
conspicuous place and only in juxtaposition with Licensee's corporate name.
5.2 Sales. Licensee (or, if Licensee is a corporate or partnership entity,
-----
those individuals responsible for managing the Business) shall devote full-time
and reasonable best efforts to the sale, distribution, and support of all the
Services (it being understood that such obligation shall not be construed as
prohibiting Licensee from selling goods and services in addition to the
Services, provided such sale does not violate Section 4.3 above, or requiring
Licensee to sell certain Adjunct Services as
22
<PAGE>
described in Article 4 of Exhibit E hereto). Without limiting the generality of
the foregoing, prior to the beginning of each consecutive twelve (12)-month
period during the term of this Agreement, with the first such period to begin on
the first anniversary of the date of this Agreement, Muzak and Licensee shall
mutually set a Services sales goal for Licensee. Such goal shall be based on the
amount of Gross Billings, plus the amount of billings for the sale of Recorded
Media and Adjunct Services, which Muzak and Licensee mutually believe can be
attained by Licensee during such twelve (12)-month period, taking into
consideration such factors as the size and other distinctive characteristics of
the Territory, the size and trend of Licensee's past Gross Billings and other
billings, Licensee's prior sales of each Service, and economic conditions
affecting the Territory. Licensee shall use its best efforts to meet such sales
goals during each respective twelve (12)-month period.
5.3 Protection of Services. Licensee shall not alter in any way the
Services or any products (including Service Delivery Equipment) owned by Muzak
and in the possession of Licensee. Without limiting the generality of the
foregoing, Licensee shall not substitute or add any musical selections or other
material in or to any Service (except in extraordinary circumstances, with the
prior written consent of Muzak, which in such circumstances shall not be
unreasonably withheld). Licensee shall not represent that any product or
equipment not produced by Muzak has
23
<PAGE>
been produced by Muzak; provided, however, that the foregoing shall not preclude
Licensee from displaying the MUZAK(R) name on items not produced by Muzak,
including promotional items, if Muzak has authorized such display. Licensee
shall report to Muzak any unauthorized reception of the Services promptly after
becoming aware of any such unauthorized reception, and shall further cooperate
with Muzak in protecting against and preventing the unauthorized reception of
the Services. Licensee shall not record, copy, or reproduce all or any part of
any Service and shall expressly prohibit, including by written agreement if
possible, Subscribers from recording, copying, or reproducing all or any part of
any Service.
5.4 Training. Muzak shall make available to Licensee and its employees
--------
training programs designed to maintain and improve Licensee's sales and delivery
of the Services; provided, however, that this obligation shall cease in the
event Muzak determines that such programs (or any sessions thereof) are not
cost-effective. For all such programs, Muzak shall provide instructors and
training materials, for which Muzak reserves the right to charge a reasonable
tuition fee. Licensee or its employees shall be responsible for any and all
other expenses incurred by them in connection with such training programs,
including without limitation the costs of transportation, lodging, meals, and
any wages.
24
<PAGE>
5.5 Confidentiality. During the term of this Agreement and thereafter,
---------------
neither Muzak nor Licensee (including any persons or entities listed on the last
page of this Agreement) shall use for its own purposes or divulge to any third
party any trade secrets or confidential information of the other. As used herein
(i) the term "third party" shall not include any party otherwise lawfully in
receipt of the trade secrets or confidential information to be divulged; or any
employee, attorney, accountant, or consulting engineer of Muzak or Licensee, as
the case may be, provided that such individual agrees not to further use or
disclose such trade secrets or confidential information; or any person or entity
providing credit or financing to Muzak or Licensee, as the case may be, provided
such person or entity (and any representative thereof) is similarly charged with
maintaining the confidence of such trade secrets and confidential information;
or any representative of a governmental authority or other person or entity to
whom disclosure is required by compulsion of law, provided notice of the demand
for such disclosure is given, within 48 hours of receipt of such demand, to the
party owning the confidential information or trade secrets required to be
disclosed; and (ii) the term "confidential information" means information
designated as such in writing by the party owning such information, as well as
customer lists and revenue data (without further designation), but does not
include information that has become part of the public domain through
publication or other similar communication. During the term of this Agreement
25
<PAGE>
Muzak shall not require that Licensee disclose to Muzak the name and address of
any Subscriber other than (i) for the purpose of participation in the
Multi-Territory Accounts Program, (ii) to permit delivery of the Services under
the Licensee's In-Store Advertising Agreement, and (iii) to permit delivery of
the Services by such technological means as require such information for such
delivery. Licensee understands and agrees that if Muzak is unable to perform any
of its obligations hereunder as a result of its inability to obtain such
Subscriber information, such nonperformance shall not be deemed a breach of this
Agreement.
VI. FEES AND ROYALTIES
------------------
6.1 Initial Fee. If this Agreement is entered into in connection with the
-----------
renewal or continuation (including amendments and adjustments of territories) of
rights granted under a prior agreement between Muzak (or its predecessor) and
Licensee (or its predecessor in the Territory), Licensee shall not be required
to pay any initial fee to Muzak. If this Agreement is not entered into in
connection with such renewal or continuation of rights granted under such a
prior agreement, Licensee shall pay to Muzak an initial fee of Five Thousand
Dollars, plus the amount, if any, paid by Muzak to purchase the rights of any
former licensee in the Territory in any Multi-Territory Contracts and certain
Adjunct Services Subscriber Agreements (as defined in Exhibits E and G hereto),
receipt of which initial fee is hereby
26
<PAGE>
acknowledged. The initial fee shall be deemed fully earned and nonrefundable
upon execution of this Agreement and assignment of such subscriber contracts and
agreements in consideration of the administrative and other expenses incurred by
Muzak in granting this license to Licensee.
6.2 Market Fee. Licensee shall pay to Muzak, in accordance with Section 6.7
----------
each calendar month, a market fee in the amount set forth below for Licensee
--------
Category A and based upon information then available in the report entitled
- ----------
County Business Patterns by State and a U.S. Summary, as published by the Bureau
- ----------------------------------------------------
of the Census, United States Department of Commerce or any successor publication
(the "U.S. Business Pattern Report") and, in the case of Category I below, the
population within the Territory.
<TABLE>
<CAPTION>
Licensee Number of Businesses and/or Monthly
Category Population Within Territory Market Fee
-------- --------------------------- ----------
<S> <C> <C>
A 70,000 or more businesses $950
B 60,000 through 69,999 businesses 900
C 50,000 through 59,999 businesses 850
D 40,000 through 49,999 businesses 770
E 30,000 through 39,999 businesses 690
F 20,000 through 29,999 businesses 610
G 10,000 through 19,999 businesses 530
H 5,000 through 9,999 businesses 450
I ("Junior 4,999 or fewer businesses or 350
Franchise") population of 100,000 or less
</TABLE>
Upon a determination by Muzak, based upon the information then available in the
U.S. Business Pattern Report (or, in the case of Category I, the U.S. Census),
that the number of businesses or population within the Territory has changed so
as to require the
27
<PAGE>
recategorization of the Business, Muzak will so notify Licensee. Any adjustment
in the market fee resulting from such recategorization shall become effective
for the calendar month immediately following the month in which such notice is
given. Cumulative adjustments in the market fee during the term of this
Agreement shall not exceed two (2) categories from that shown above in this
Section 6.2.
6.3 Royalty Fee. Licensee shall pay to Muzak each month a royalty fee in
-----------
the amount of ten percent (l0%) of Licensee's Gross Billings, as defined in
Section 6.8 below.
6.4 DBS Surcharge. In consideration of Muzak's development and
-------------
implementation of DBS, Licensee shall pay to Muzak a surcharge (the "DBS
Surcharge") throughout the term of this Agreement; provided, however, that
Licensee's obligation to pay the DBS Surcharge shall no longer exist after
Licensee (and/or any predecessor of Licensee in the Territory) has paid to Muzak
the DBS surcharge with respect to the Territory for a cumulative total of
ninety-six (96) consecutive calendar months (including any months preceding the
date of this Agreement during which Licensee [or its predecessor in the
Territory] paid such DBS Surcharge with respect to the Territory) . The DBS
Surcharge shall be equal to the following percentage of Licensee's Gross
Billings:
28
<PAGE>
<TABLE>
<CAPTION>
Calendar Months
(Including any applicable DBS Surcharge
months preceding the date (Percentage of
of this Agreement) Gross Billings)
------------------------- ---------------
<S> <C>
1 through 12 0.50%
13 through 24 l.25%
25 through 60 1.75%
61 through 96 1.00%
thereafter 0.00%
</TABLE>
6.5 Recorded Media Charges. Licensee shall pay Muzak's standard Recorded
----------------------
Media charges, as the same may be set forth by Muzak from time to time in
writing, for all Recorded Media distributed to Licensee or the Subscribers.
Muzak shall not increase such Recorded Media charges prior to January 1, 1993,
and increases thereafter shall not exceed ten percent (l0%) per annum.
6.6 Adjunct Services Charges. Licensee shall pay Muzak's Adjunct Services
------------------------
charges in accordance with the terms set forth in Exhibit F attached hereto and
incorporated herein by reference .
6.7 Payment Schedule. All monthly payments required by Sections 6.3 and 6.4
----------------
shall be paid within forty-five days of the end of the month in which the
applicable Services are provided to the Subscribers, and shall be submitted
together with any reports or statements required under Section 7.2 hereof. All
Market Fee charges required by Section 6.2, all Recorded Media charges required
by Section 6.5, and all Adjunct Services charges
29
<PAGE>
required by Section 6.6 shall be paid within forty-five days after the date of
Muzak's billing to Licensee. Any payment of fees due to Muzak that is not
actually received by Muzak by the due date shall be deemed overdue. If any
payment is deemed overdue, simple interest may be assessed on such overdue
payment. Such interest shall accrue on a daily basis from the due date until the
date of payment, at the lesser of (i) the prime rate of The First National Bank
of Chicago per annum in effect at the beginning of the calendar quarter, or (ii)
the highest rate of interest permitted by law in Licensee's State. Entitlement
to such interest shall not limit any other remedies available under law or this
Agreement as a result of the overdue payment.
6.8 Gross Billings. "Gross Billings" means all amounts billed or otherwise
charged to a Subscriber by Licensee in connection with (1) the provision of any
Music Service, and (2) the lease or rental (but not the sale) of Service
Delivery Equipment and other equipment used to receive and distribute such Music
Service but not including (i.e., excluding) equipment that is not used primarily
in the provision or reception of a Music Service. Notwithstanding the foregoing,
"Gross Billings" shall not include any amount billed or otherwise charged to a
Subscriber by Licensee for (a) the provision of any Music Service on Recorded
Media, (b) Music-Related Adjunct Services, or (c) the lease or rental of any
Service Delivery Equipment used with Recorded Media. "Gross Billings" also
shall not include (i) any
30
<PAGE>
amounts billed to Subscribers as (and separately stated on the billings or
otherwise separately determinable as) sales or similar excise taxes; (ii)
one-time installation charges billed not later than ninety (90) days following
completion of such installation; (iii) charges for service of Subscriber-owned
equipment, provided that such charges are separately determinable; (iv) ad hoc
(i.e., extraordinary) charges for service actually performed on
----
Subscriber-leased or Subscriber-owned equipment; and (v) late-payment penalties
or interest charges imposed by Licensee, provided that such penalties and
charges do not exceed standard industry practice. Licensee may deduct from its
Gross Billings (i) amounts paid by Licensee as performing rights fees to ASCAP,
BMI, or similar performing rights organizations with respect to the Music
Services other than those distributed by Recorded Media, and (ii) the amount of
any billings that were previously reported to Muzak as part of Licensee's Gross
Billings but which, in the month of the deduction, were written off by Licensee
as uncollectible in accordance with federal income tax standards of
uncollectibility.
VII. RECORDS, REPORTS, AND INSPECTIONS
---------------------------------
7.1 Records. Licensee shall prepare, and retain at its principal place of
-------
business for at least two (2) years thereafter, complete and accurate books,
records, and accounts of the Business. Such books, records, and accounts shall
fairly
31
<PAGE>
represent the results of operations of such business, as determined on an
accrual basis, and shall be kept in sufficient detail to permit the transactions
included in such operations to be clearly identifiable and traceable to
underlying documentation. Licensee shall make available such records and books
of account to Muzak or its representatives if requested by Muzak for inspection
and audit as provided in Section 7.3.
7.2 Reports. Licensee shall submit to Muzak, together with the payments
-------
described in Section 6.7, royalty and fees reports, in such detail as Muzak may
from time to time reasonably request, accurately reflecting all Gross Billings
during the periods to which such payments pertain.
7.3 Audit.
-----
(a) Muzak or its representatives may, upon giving Licensee 30 days' (or
10 days' in the case of an audit following a request for Muzak's consent to a
transfer under Article XII hereof) written notice, enter the premises of
Licensee (and of any person doing business [an "affiliated person"] controlling,
controlled by or under common control with Licensee) during normal business
hours for inspection and audit of the business and records of Licensee and of
such affiliated person, provided that such inspection and audit shall be no more
extensive than is required to verify that none of Licensee's or such affiliated
32
<PAGE>
person's revenues should have been reported as Gross Billings or as charges for
Recorded Media and Adjunct Services and that Licensee's payments to Muzak have
been properly computed in accordance with the provisions of Article VI of this
Agreement. Licensee shall cooperate with any such inspection and audit. Muzak
shall not assess Licensee for amounts found, as a result of such audit, to be
owing hereunder if such amounts derive from a reporting period that ended more
than two years prior to the date such audit commenced, provided that Licensee
has not knowingly maintained false books or records, or knowingly submitted
false reports to Muzak.
(b) During any audit hereunder, Muzak or its representatives (at Muzak's
cost and expense) may make mechanical copies of only those books and records of
Licensee that are necessary for the verification of Licensee's statements and
accountings to Muzak and were physically examined as part of the audit. Muzak
shall take reasonable precautions to safeguard the confidentiality of such
copies and shall destroy any such copies upon the mutually-confirmed completion
of the audit and payment in full of any royalties and other charges determined
to be owing to Muzak as a result of the audit. Nothing contained herein shall be
construed as in any way limiting Muzak's right manually to copy or make
abstracts of Licensee's or any affiliated person's books and records or to make
any notes or the like whatsoever; provided, however, that such manual copies or
33
<PAGE>
abstracts (and any copies thereof) shall be destroyed upon the mutually-
confirmed completion of the audit.
(c) In the event that any audit conducted by or on behalf of Muzak results
in a determination that there has been either an underpayment or overpayment of
the amounts due Muzak hereunder, then within 30 days after such determination,
Licensee or Muzak, as the case may be, shall pay to the other the amount of such
underpayment or overpayment; provided, however, that in the event that Licensee
disputes the results of any such audit, the parties shall attempt to resolve the
matter by conducting a new audit under the joint supervision of their respective
independent certified public accountants. In the event that such new audit
resolves the dispute, the cost of each party's independent certified public
accountants shall be borne by the respective party. In the event that such new
audit fails to resolve the dispute, the matter shall be resolved by arbitration
under the rules of the American Arbitration Association, and the losing party
shall pay both parties' entire costs of the second audit.
(d) If it is determined as a result of an audit that there has been an
underpayment of seventeen percent (17%) or more of the amounts due Muzak for any
given calendar year, Licensee shall pay to Muzak, within thirty (30) days after
such determination and in addition to all other amounts due under this
34
<PAGE>
Agreement, a penalty equal to fifteen percent (15%) of the underpayment for that
year. The foregoing remedies shall be in addition to any other remedies Muzak
may have for such underpayment.
(e) Muzak and Licensee shall confirm, at the conclusion of the audit and
following payment of any monies found owing as a result of the audit, that such
audit has been completed and that the periods audited shall not be audited again
absent a showing that Licensee knowingly maintained false books and records for
such period.
VIII. MARKETING AND PROMOTION
-----------------------
8.1 Advertisements. Licensee shall cooperate with any advertising or
--------------
promotional campaigns conducted by Muzak in accordance with sound business
practices. Licensee shall promptly discontinue any advertising or promotion
which Muzak informs Licensee is, in Muzak's judgment, inimical to Muzak's
reputation. Without limiting the generality of the foregoing, Licensee shall
submit to Muzak upon request samples of all advertising and promotional plans
and materials that Licensee proposes to use. Licensee shall amend any such plans
and materials as requested by Muzak upon receipt of notice from Muzak that such
plans or materials fail to comply with the requirements of this Section 8.1. In
the event that Muzak notifies Licensee
35
<PAGE>
to amend any advertising or promotional plans previously approved by Muzak's
predecessors-in-interest, Licensee shall have up to 180 days after the date of
such notice to make such amendments.
8.2 Yellow-Pages Advertising. Each year during the term of this Agreement,
------------------------
Licensee shall ensure that it is listed in at least one "trademark ad" under the
appropriate classification in the yellow pages of one major-market telephone
book in the Territory. Muzak will reimburse Licensee for the annual cost of one
such "trademark ad" within thirty (30) days after receipt from Licensee of the
invoice for the advertisement.
8.3 Additional Assistance by Muzak. Within the limits of its available
------------------------------
personnel, Muzak, when so requested by Licensee, shall make available technical
and marketing assistance to Licensee. The charges for such assistance shall be
mutually agreed upon by the parties.
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV
------------------------------------------------
9.1 Multi-Territory Accounts Program. Recognizing that potential
--------------------------------
Subscribers with substantial numbers of Subscriber Premises located throughout
the United States represent a significant potential market for Licensee and
other Muzak licensees marketing the Services, and that the effective marketing
of the Services to such accounts frequently requires a
36
<PAGE>
coordinated effort by Muzak and its licensees, Muzak, in conjunction with a
Multi-Territory Sales Committee, shall establish and maintain during the term of
this Agreement a Multi-Territory Accounts Program. The Multi-Territory Accounts
Program and the Multi-Territory Sales Committee are more fully described in
Exhibit G attached hereto and incorporated herein by reference. Licensee and
Muzak agree to participate in the Multi-Territory Accounts Program as set forth
in Exhibit G and otherwise to abide by the terms of Exhibit G. Without limiting
the generality of the foregoing, Licensee agrees to participate during the term
of this Agreement in all Multi-Territory Contracts (as defined in Exhibit G)
that pertain to Subscriber Premises in the Territory.
9.2 Cable Radio/TV. In the event that (i) a provider of cable television or
--------------
cable radio programming requests that Muzak provide music for such programming
that cannot otherwise be provided by Licensee utilizing the Music Services, and
(ii) such programming will be distributed to residences (but not to commercial
locations) in the Territory, then prior to Muzak's providing such music, Muzak
and Licensee shall jointly determine their respective interests in the revenues
deriving from the provision of such music to such provider.
37
<PAGE>
X. DEFAULT AND TERMINATION OF THIS AGREEMENT
-----------------------------------------
10.1 Default of Licensee.
-------------------
(a) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall, at the option of Muzak, immediately
terminate upon notice thereof to Licensee (without opportunity to cure), if at
any time:
(i) Licensee shall file in any court pursuant to any statute
either of the United States or of any State a petition in bankruptcy
or insolvency or for reorganization or for the appointment of a
receiver or trustee of all or a portion of Licensee's property, or if
there is commenced against Licensee any such petition which is not
opposed by Licensee or not dismissed within ninety days after such
filing, or if Licensee admits in writing its inability to pay its
debts or makes a general assignment for the benefit of creditors, or
if Licensee makes general application to Licensee's creditors to
settle, compromise, or extend the time of payment of all of Licensee's
obligations; or
(ii) there occurs a voluntary or involuntary transfer or purported
transfer of an interest in Licensee or in this Agreement in violation
of Article XII.
38
<PAGE>
(b) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall terminate, if any of the following events
shall occur and not be cured, in the time and manner provided in subsection (c)
below, following notice thereof from Muzak:
(i) if Licensee fails to comply with any of its obligations under
this Agreement and Muzak has been or is reasonably likely to be in any
way damaged thereby, or if any representation made by Licensee herein
is found to be untrue when and as made and Muzak has been or is
reasonably likely to be in any way damaged thereby; or
(ii) if Licensee ceases to distribute the Music Services or ceases
to operate or otherwise abandons the Business; or
(iii) if Licensee loses the right to transact business in any
jurisdiction included in the Territory and Licensee refuses to
surrender to Muzak its license rights hereunder with respect to such
jurisdiction; or
(iv) if Licensee knowingly maintains false books or records, or
submits false reports to Muzak.
39
<PAGE>
(c) Licensee shall have thirty (30) days after its receipt from Muzak
of a written notice of default within which to remedy any default as defined in
subsection (b) above (or, if the default cannot reasonably be cured within such
thirty (30) days, to initiate within that time substantial and continuing action
to cure the default) and to provide evidence thereof to Muzak. If any such
default is not cured within that time (or, if appropriate, substantial and
continuing action to cure the default is not initiated within that time), or
such longer period as applicable law may require, this Agreement shall terminate
following Licensee's receipt of a Notice of Termination reciting Licensee's
failure to cure or commence to cure and setting forth a definite termination
date, which shall be no sooner than 5 business days following Licensee's receipt
of such Notice or such longer period as applicable law may require; provided,
however, that in the event the existence of such default is disputed by
Licensee, and Licensee notifies Muzak of such dispute within 10 days after
receipt of Muzak's notice of default and thereafter promptly proceeds to take
all steps necessary to resolve such dispute, including (if necessary) the
commencement of litigation by no later than 30 days after receipt of Muzak's
notice of default, such termination shall not become finally effective until 10
days after the date such dispute is finally resolved in favor of Muzak. For
purposes hereof, final resolution shall include without limitation Licensee's
failure to make a timely appeal of a court decision in favor of Muzak.
Notwithstanding anything in
40
<PAGE>
this paragraph (c) to the contrary, in the event that the final resolution in
favor of Muzak of Licensee's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Licensee's legal challenge to the notice of default, Licensee had a
strong likelihood of success on the merits (without application by the court of
any balance-of-hardships tests), Licensee shall have 30 days from the date of
such final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.2 Default of Muzak. Muzak shall be deemed to be in default, and Licensee
----------------
shall have the right to terminate this Agreement, if Muzak fails to comply with
any of its obligations under this Agreement, and Licensee has been or is
reasonably likely to be in any way damaged thereby, and such failure is not
cured within thirty (30) days after Muzak's receipt of a written notice of
default from Licensee (or, if the default cannot reasonably be cured within such
thirty (30) days, if such cure has not been initiated and is not continuing
within that time); provided, however, that in the event the existence of such
default is disputed by Muzak, and Muzak notifies Licensee of such dispute within
10 days after receipt of Licensee's notice of default and thereafter promptly
proceeds to take all steps necessary to resolve such dispute, including (if
necessary) the
41
<PAGE>
commencement of litigation by no later than 30 days after receipt of Licensee's
notice of default, such termination shall not become effective until 10 days
after the date such dispute is finally resolved in favor of Licensee. For
purposes hereof, final resolution shall include Muzak's failure to make a timely
appeal of a court decision in favor of Licensee. Notwithstanding anything in
this Section 10.2 to the contrary, in the event that the final resolution in
favor of Licensee of Muzak's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Muzak's legal challenge to the notice of default, Muzak had a strong
likelihood of success on the merits (without application by the court of any
balance-of-hardships tests), Muzak shall have 30 days from the date of such
final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.3 Additional Remedies. No termination of this Agreement shall affect any
-------------------
obligation, including any obligation arising as a result of a default of this
Agreement, of any party accrued up to the date of termination or limit any
additional rights or remedies provided the nondefaulting party under this
Agreement or under law.
42
<PAGE>
10.4 Force Majeure. Neither Muzak nor Licensee shall have any liability to
-------------
the other or to any other person as a result of the failure of either of such
parties to perform its obligations hereunder, nor shall such failure be
considered a breach of this Agreement, if such failure is due to fire, flood,
other act of God, strike or other event or situation beyond the control of such
party acting in accordance with sound business practices.
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR EXPIRATION OF THIS AGREEMENT
----------------------------------------------------------------------------
11.1 Action Required of Licensee. Upon termination or expiration (without
---------------------------
renewal of license rights) of this Agreement, Licensee shall, subject to Section
2.2(b), Section 2.4 (including Exhibit E), and Article IX (including Exhibit G),
immediately
(a) Cease to distribute the Services to Subscribers and shall not
thereafter, directly or indirectly, represent itself to the public or hold
itself out as a licensee of Muzak;
(b) Cease to use, in any manner whatsoever, the Services and the
Proprietary Marks. Without limiting the generality of the foregoing, Licensee
shall immediately cancel any assumed name or equivalent registration which
contains the mark "MUZAK(R)" or any other service mark or trademark of Muzak, or
otherwise permit Muzak to effect such cancellation;
43
<PAGE>
(c) Sell to Muzak at Licensee's cost of acquisition, if any, all
manuals, instructions, sales literature, and other materials related to the
Services or the Proprietary Marks and retain no copy or record of any of the
foregoing except Licensee's copies of this Agreement and any other document
which Licensee reasonably needs for compliance with specific provisions of state
or federal law;
(d) Dismantle (if necessary) and dispose of as Muzak requests (at
Muzak's cost) all Earth Stations, Recorded Media, and other equipment provided
Licensee by Muzak; and
(e) Promptly pay all sums indisputably owing to Muzak.
11.2 Action Required of Muzak. Upon termination or expiration (without
------------------------
renewal of License rights) of this Agreement, Muzak shall promptly pay all sums
indisputably owing to Licensee. Muzak shall not provide or directly or
indirectly make available to any successor licensee in the Territory (including
any owned affiliates) any of Licensee's customer lists or customer contract
termination dates or terms; provided, however, that Muzak may transfer to such
successor licensee any contract rights purchased by Muzak from Licensee under
the terms of Exhibits E and G hereto.
44
<PAGE>
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE
-------------------------------------------
12.1 By Licensee and its Owners. Muzak has entered into this Agreement in
--------------------------
reliance on the business skills, financial capacity, and personal character of
Licensee and its owners. Accordingly, Licensee shall not permit the transfer of
any interest in or of Licensee that would have the effect, alone or together
with other previous, simultaneous, or proposed transfers, of directly or
indirectly transferring a controlling interest (whether in stock, partnership
interests or otherwise) in this Agreement, Licensee, or a major portion of the
assets used in the Business without the prior written consent of Muzak and
without otherwise complying with the requirements of this Article XII. Any such
purported assignment or transfer, by operation of law or otherwise, not having
the written consent of Muzak and not otherwise complying with the requirements
of this Article XII shall be null and void and shall constitute a material
breach of this Agreement.
12.2 Consent of Muzak. Muzak shall not unreasonably withhold its consent to
----------------
a transfer described in Section 12.1; provided, however, that Muzak may require
any or all of the following as conditions of its approval:
(a) All of Licensee's accrued monetary obligations to Muzak shall have
been satisfied (or otherwise provided for to
45
<PAGE>
Muzak's satisfaction, including without limitation the escrowing with counsel at
closing of the full amount of such obligations);
(b) The transferee and its owners shall enter into a written
assignment, in a form reasonably satisfactory to Muzak, assuming and agreeing to
discharge all of Licensee's obligations under this Agreement;
(c) The transferee shall demonstrate to Muzak's reasonable
satisfaction that (i) the transferee has the personal character and the
financial resources to conduct the Business, (ii) the transferee personally has
the general business experience to conduct the Business or will employ during
the term of this Agreement a general manager with such business experience to
conduct the Business, and (iii) the transferee is not in a position to use the
information obtained as a licensee of Muzak in a manner that will be harmful to
Muzak outside the Territory; and
(d) The transferee shall pay Muzak a transfer fee as follows:
(i) For any transfer to an existing licensee of Muzak (or any
entity owned or controlled by or having common ownership with an
existing licensee of Muzak), the sum of $1,000; or
46
<PAGE>
(ii) For any other transfer, (A) the sum of $2,500 for a Business
having Gross Billings (as defined herein) of $20,000 per month or
less, and (B) the sum of $5,000 for a Business having Gross Billings
(as defined herein) in excess of $20,000 per month.
In the event Muzak fails to respond to any request for approval of a
transfer to another MUZAK(R) licensee within 20 business days and to all others
within 30 business days of its receipt of a completed application for transfer,
then the request shall be deemed approved, subject only to Muzak's receipt of
notification of the transferee's assumption of Licensee's obligations, and of
the assignment to the transferee of Licensee's rights, under this Agreement.
12.3 Collateral. Muzak will not require approval of the assignment,
----------
transfer, pledge, or hypothecation of all or any part of the assets of the
Business, excluding this Agreement, and, if Licensee is a corporation, all or
any part of the stock of said corporation, to banks or other lending
institutions as collateral security for loans made directly to or for the
benefit of the Business. However, such approval will be required for any
proposed assignment of this Agreement.
12.4 Transfer to Family Member. An individual may transfer his or her
-------------------------
interest in Licensee or this Agreement to a member of
47
<PAGE>
his or her immediate family or to a corporation controlled by such individual,
provided that the requirements set forth in paragraphs (a), (b), and (c) of
Section 12.2 are met. No transfer fee shall be required for any such transfer.
12.5 By Muzak. Muzak shall have the right to transfer or assign all or any
--------
part of its rights or duties hereunder to any person or entity. Muzak shall
promptly notify Licensee of any such transfer.
XIII. PROPRIETARY MARKS
-----------------
13.1 Ownership. Muzak represents that it is the owner of all right, title,
---------
and interest in and to the Proprietary Marks. Muzak will take all steps,
including the taking of legal action, reasonably necessary to preserve and
protect the ownership and validity in and of the Proprietary Marks. Licensee
shall not directly or indirectly contest the validity or Muzak's ownership of
the Proprietary Marks. In the event that litigation involving the Proprietary
Marks is instituted or threatened against Licensee, Licensee shall promptly
notify Muzak and shall cooperate in the defense or settlement of such
litigation, which Muzak shall have the right to control at its expense. Licensee
expressly understands and acknowledges that Muzak is the owner of all right,
title, and interest in and to the Proprietary Marks and the goodwill associated
with and symbolized by them.
48
<PAGE>
Licensee's use of the Proprietary Marks pursuant to this Agreement does not give
Licensee any ownership interest or other interest in or to the Proprietary
Marks, except the license granted by this Agreement.
13.2 Infringement. Licensee shall promptly notify Muzak of any suspected
------------
infringement of the Proprietary Marks, and of any challenge to Muzak's ownership
of, or Licensee's right to use, the Proprietary Marks. Subject to Section 13.1,
Muzak shall have the sole right to decide whether an administrative or judicial
proceeding, or other action, should be undertaken in response to any such
suspected infringement or challenge, and, if any such proceeding or action is to
be undertaken, to initiate and control such proceeding or action at its expense.
In the event Muzak elects to undertake any such proceeding or action, Licensee
agrees to cooperate with Muzak in such effort. Licensee shall have no right to
institute any litigation against a third party relating to the Proprietary Marks
without Muzak's prior written consent.
13.3 Use. Licensee's right to use the Proprietary Marks is limited to such
---
uses as are authorized under this Agreement. Licensee shall not use the
Proprietary Marks as part of its corporate or other legal name. Licensee shall
comply with Muzak's instructions at Muzak's cost in filing and maintaining the
requisite trade name or fictitious name registrations, and
49
<PAGE>
shall execute any documents reasonably deemed necessary by Muzak or its counsel
to obtain protection for the Proprietary Marks or to maintain their continued
validity and enforceability. Unless otherwise authorized or required by Muzak,
Licensee shall use the Proprietary Marks without prefix or suffix and shall
comply with Muzak's instructions regarding the use of the federal registration
symbol and other trademark or service mark designations.
13.4 Substitution of Proprietary Marks. Muzak reserves the right to add
---------------------------------
Proprietary Marks and, except with respect to the MUZAK(R) trademark, to
substitute different Proprietary Marks, or discontinue the use of Proprietary
Marks, for use in identifying the Services if Muzak's currently owned
Proprietary Marks no longer can be used, or if Muzak determines that such
addition, substitution, or discontinuation will be beneficial to its business
and provides to Licensee at least six (6) months' prior notice of such addition,
substitution or discontinuation. All such additions, substitutions or
discontinuations will be reflected in an amendment of Exhibit C and shall not
affect the validity of this Agreement, which shall, in all respects, be deemed
modified to provide for such addition, substitution or discontinuation.
50
<PAGE>
XIV. MISCELLANEOUS
14.1 Representations of Licensee. Licensee represents and warrants to Muzak
---------------------------
that, on the date of this Agreement:
(a) If Licensee is a trust, corporation, or partnership, it is duly
organized, in good standing, and qualified to do business in all jurisdictions
included in the Territory; all controlling ownership interests in Licensee are
directly and indirectly held by those persons and entities listed on the
signature pages hereof, and no other persons or entities own any controlling
interests in Licensee; and it has all necessary power and authority to execute,
deliver, and perform this Agreement.
(b) There are no actions, suits, proceedings, or investigations in any
court or before any governmental agency or instrumentality which affect or are
reasonably likely to affect Licensee's ability to perform its obligations under
this Agreement.
14.2 Representations of Muzak. Muzak represents and warrants to Licensee
------------------------
that, on the date of this Agreement, it is duly organized and in good standing
as a limited partnership under the laws of the State of Delaware and has all
necessary power and authority to execute, deliver, and perform this Agreement.
51
<PAGE>
14.3 Independent Contractor. Muzak and Licensee are independent contractors
----------------------
vis-a-vis each other and neither party, nor their respective employees and
agents, are or are to be construed to be either legal or implied agents,
servants or employees of the other party or to have authority to act for or on
behalf of the other party. No acts taken or assistance given by one party to the
other pursuant to this Agreement will be construed to alter this relationship.
Without limiting the generality of the foregoing, but subject to the terms of
the Multi-Territory Accounts Program as described herein, Section 2.4 (including
Exhibit E), the In-Store Advertising Agreement between Muzak and Licensee, and
any other written contract between Muzak and Licensee, nothing in this Agreement
shall authorize one party to make any contract, agreement, warranty or
representation on behalf of the other party or to incur any debt or obligation
in the other party's name, and the other party shall in no event assume
liability for, or be deemed liable hereunder as result of, any such action.
Without limiting the rights of a party to enforce its rights hereunder, a party
shall not be liable to a third party by reason of any action or omission of the
other party in the conduct of its business.
14.4 Release. Muzak and Licensee hereby release and forever discharge each
-------
other, and their respective predecessors, successors, representatives, assigns,
agents, owners, employees, officers, and directors ("Designees"), of and from
any claims,
52
<PAGE>
debts, liabilities, demands, obligations, costs, expenses, actions, and causes
of action of every nature, character, and description, vested or contingent,
which such releasing party now owns or holds, or has at any time heretofore
owned or held, or may at any time own or hold, against the other party or its
Designees, arising prior to and including the date of this Agreement and
relating to any prior franchise or license agreement; provided, however, that
this release shall not apply to any royalties or other monies owed, whether or
not previously reported as owing, from Licensee to Muzak; and further provided
that this release shall not apply to any claims, debts, liabilities, demands,
obligations, costs, expenses, actions and causes of action of every nature,
character and description, vested or contingent which are (i) at any time raised
or asserted by any party against the other party as a defense, counterclaim, or
crossclaim in any arbitration or litigation; (ii) of which the other party is
advised within 120 days of the date hereof; or (iii) the existence of which
could not now be reasonably known to a party and of which the other party is
advised within 120 days of the claiming party's knowledge thereof.
14.5 No Waiver. No failure of a party to exercise any right or power
---------
reserved to it in this Agreement or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of such
53
<PAGE>
party's rights to demand exact compliance with any of the terms of this
Agreement. Waiver by a party of any particular default shall not affect or
impair such party's right with respect to any subsequent default of the same or
of a different nature, and, except as otherwise expressly provided herein, any
delay, forbearance, or omission of a party to exercise any power or right
arising hereunder shall not affect or impair such party's right thereafter to
exercise that or any other power or right.
14.6 Notices. Unless otherwise expressly provided herein, any and all
-------
notices required or permitted under this Agreement shall be in writing and shall
be personally delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other party:
Notices to Muzak: MUZAK
400 North 34th Street, Suite 200
Seattle, WA 98103
Attention: ____________________
Notices to Licensee: SUNCOM COMMUNICATIONS, L.L.C.
/s/ David W. Unger
-----------------------------
David W. Unger
220 E. 54 Street, 11B
New York, NY 10022
Notice by certified or registered mail shall be deemed to have been given at the
date and time of receipt.
54
<PAGE>
14.7 Entire Agreement. This Agreement, the documents referred to herein,
----------------
and the exhibits and attachments hereto, constitute the entire, full, and
complete agreement between the parties concerning the subject matter hereof, and
supersede all prior agreements except those set forth in Exhibit H (the terms of
which shall remain in effect to the extent not expressly contradicted by the
terms hereof). Except for those amendments referred to in Sections 2.1, 2.2 and
13.4 and Exhibits E, F, and G, no amendment of this Agreement shall be binding
on either party unless mutually agreed to by the parties and executed by their
authorized officers or agents in writing.
14.8 Severability. Each portion, part, and term of this Agreement shall be
------------
considered severable, and if, for any reason, any portion, part, or term herein
is determined by a court or agency with valid jurisdiction to be contrary to any
existing or future law or regulation and invalid, it shall not impair the
operation of, or have any other effect upon, the other portions, parts, or terms
of this Agreement that remain otherwise intelligible.
14.9 Captions. All captions in this Agreement are for convenience only and
--------
do not in any way limit or amplify the provisions hereof.
55
<PAGE>
14.10 Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto and, subject to Article XII, their
respective heirs, executors, representatives, successors, and assigns.
14.11 Counterparts. This Agreement may be executed in several counterparts,
------------
and all of such counterparts together shall constitute one agreement binding on
all parties thereto, notwithstanding that all parties are not signatory to the
original or same counterpart.
14.12 Attorney's Fees. If any action or proceeding is brought for the
---------------
enforcement of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in the action or proceeding, in addition to any other relief to which it or they
may be entitled.
14.13 Applicable Law. This Agreement shall be interpreted and construed
--------------
under the laws of the State of Colorado without reference to conflicts of law.
14.14 All Remedies. No right or remedy conferred upon or reserved to Muzak
------------
or Licensee by this Agreement is intended to be exclusive of any other right or
remedy herein or by law or equity provided, but each shall be cumulative of
every other right or
56
<PAGE>
remedy. Without limiting the generality of the foregoing, Licensee acknowledges
that its violation of the terms of Sections 4.3, 5.5, or 11.1 will result in
irreparable injury to Muzak for which no adequate remedy at law may be
available, and Licensee accordingly agrees that Muzak may seek to obtain the
issuance of an injunction prohibiting any conduct by Licensee in violation of
such terms.
14.15 Limitation. Licensee shall commence any action relating to Muzak's
----------
offer or sale of license rights hereunder to Licensee, or the execution of this
Agreement by Licensee, within one (1) year from the later of the date of
execution of this Agreement or the date Licensee reasonably should have
discovered the event or non-occurrence of the event first giving rise to the
action, and Licensee shall commence any other action arising hereunder within
two (2) years from the date Licensee reasonably should have discovered the event
or non-occurrence of the event first giving rise to such action. Licensee agrees
that any such claim not commenced within such time periods shall be barred, it
being understood that the assertion of any such claim as a defense, counterclaim
or cross-claim shall not be barred by this paragraph.
14.16 No Warranties. Muzak makes no warranties or guarantees upon which
-------------
Licensee may rely, and assumes no liability or obligation to Licensee, by
providing any waiver, approval,
57
<PAGE>
consent or suggestion to Licensee in connection with this Agreement, or by
reason of any neglect, delay, or denial of any request therefor.
14.17 No Implied Rights. Except as expressly provided to the contrary
-----------------
herein, nothing in this Agreement is intended, nor shall be deemed, to confer
upon any person or legal entity other than Licensee, Muzak, Muzak's officers,
partners, and employees, and such of Licensee's and Muzak's respective
successors and assigns as may be contemplated (and, as to Licensee, permitted)
by Article XII hereof, any rights or remedies under or by reason of this
Agreement.
14.18 Survival. All provisions of this Agreement that pertain to Licensee's
--------
rights and duties regarding Licensee's delivery of the Services to certain
Subscribers after the date of expiration or termination of this Agreement shall
survive such expiration or termination to the extent necessary to give full
effect to such rights and duties. All other covenants and obligations of Muzak
or Licensee that are to be performed or observed after the expiration or
termination of this Agreement, including, without limitation, those set forth in
Sections 5.5 and 14.3, Article XI, and Exhibits E and G, shall also survive such
expiration or termination.
58
<PAGE>
14.19 Conversion. Upon the expiration or earlier termination of this
----------
Agreement, in the event the addressability feature of Muzak's DBS facilities
permits Muzak to switch Licensee's music subscribers to another subscription
music supplier and Muzak has received written permission from such music
supplier and blanket indemnification from Licensee, then within a reasonable
time following Licensee's written direction to Muzak, Muzak shall perform one
such switch with respect to each such subscriber at the following cost to
Licensee: the greater of (i) Muzak's standard switching charge then in effect,
or (ii) Muzak's incremental out-of-pocket costs directly attributable to the
making of such switches.
14.20 Most Favorable Terms. In the event that after September 1, 1990 Muzak
--------------------
grants for the first time (and not pursuant to or in renewal of any agreement in
existence at September 1, 1990) to any other U.S. licensee of Muzak (i.e., a
distributor of the Services in a territory within the United States) financial
or other material terms (other than temporary or transient adjustments and
accommodations) that are more favorable than the terms set forth herein, Muzak
must offer such more favorable terms to Licensee; provided, however, that if,
and to the extent, Muzak is required by the laws and regulations of the State in
which another licensee resides or operates its business to offer such other
licensee more favorable terms than those set forth herein, Muzak shall not be
required to offer such
59
<PAGE>
more favorable terms to Licensee but shall notify the then-president of the IPMA
of the imposition of such legal or regulatory requirement.
XV. ACKNOWLEDGEMENTS
----------------
15.1 Independent Investigations. Licensee acknowledges that it has
--------------------------
conducted an independent investigation of the business licensed hereunder, and
recognizes that the business venture contemplated by this Agreement involves
business risks and that its success will be largely dependent upon the ability
of Licensee as an independent person or entity. Muzak expressly disclaims the
making of, and Licensee acknowledges that it has not received, any warranty or
guarantee, express or implied, as to the potential volume, profits, or success
of the business venture contemplated by this Agreement.
15.2 Disclosure. Licensee acknowledges that it received a copy of this
----------
Agreement and all exhibits and attachments thereto, and agreements relating
thereto, at least five (5) business days prior to the date on which this
Agreement was executed. Licensee further acknowledges that it received the
disclosure documents required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" at
60
<PAGE>
least ten (10) business days prior to the date on which this Agreement was
executed.
15.3 Opportunity to Review. Licensee acknowledges that it has read and
---------------------
understands this Agreement and the exhibits and attachments hereto, and
agreements relating hereto, and that Muzak has accorded Licensee ample time and
opportunity to consult with advisors of Licensee's own choosing about the
potential benefits and risks of entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.
MUZAK LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/ John R. Jester
---------------------------
Name: John R. Jester
Title: President
Licensee:
SUNCOM COMMUNICATIONS, L.L.C.
a Delaware limited liablity Company
By: /s/ David W. Unger
---------------------------
Name: David W. Unger
Title: Chairman
61
<PAGE>
Each of the undersigned (i) owns, directly, indirectly, or
beneficially, a controlling interest in Licensee; (ii) has read this Agreement;
and (iii) agrees to be bound by those provisions of this Agreement that impose
obligations on the owners of controlling interests in Licensee.
- -------------------------------------------
(Typed Name)
- -------------------------------------------
Date:
-------------------------------------
Address:
----------------------------------
----------------------------------
- -------------------------------------------
(Typed Name)
- -------------------------------------------
Date:
-------------------------------------
Address:
----------------------------------
----------------------------------
- -------------------------------------------
(Typed Name)
- -------------------------------------------
Date:
-------------------------------------
Address:
----------------------------------
----------------------------------
- -------------------------------------------
(Typed Name)
- -------------------------------------------
Date:
-------------------------------------
Address:
----------------------------------
----------------------------------
<PAGE>
EXHIBIT A
---------
MUSIC SERVICES
I. BROADCAST SERVICES
Services intended for Direct Broadcast Subscribers or for local re-broadcast to
- -------------------------------------------------------------------------------
Subscribers (by means of telephone lines, FM Radio Subcarriers ("SCA"), 950 MHz
- -----------
(UHF), cable and MDS, as more fully set forth in Exhibit D, and such other means
as are authorized in writing from time to time by Muzak.)
1. ENVIRONMENTAL MUSIC BY MUZAK(R) (to be distributed by means of East and
West coast feeds for as long as Stimulus Progression(R)remains a valid
concept)
2. FOREGROUND MUSIC ONE(R)
3. HITLINE(R)
4. LIGHT CLASSICAL
5. CONTEMPORARY JAZZ FLAVORS (SM)
6. EXPRESSIONS (SM)
7. COUNTRY CURRENTS (SM)
8. JUKEBOX GOLD (SM)
9. HOT FM (SM)
10. CONTEMPORARY INSTRUMENTALS
11. LATINO
12. SPECIALTY CHANNELS (various formats, as designated by Muzak from
time to time)
II. RECORDED MEDIA SERVICES
1. TONES(R) (various formats, as designated by Muzak from time to time)
<PAGE>
EXHIBIT B
---------
ADJUNCT SERVICES
I. MUSIC-RELATED ADJUNCT SERVICES
------------------------------
1. DAYPARTING
DAYPARTING means that automatic program sequencing, utilizing
an in-place Muzak addressable receiver, of two or more program
formats on a regularly scheduled basis, with the same schedule
running without further change from the original format, each
day, for seven days per week.
2. WEEKPARTING
WEEKPARTING means that automatic program changing, utilizing
an in-place Muzak addressable receiver, of a single program
source with the option to change programs each day, seven days
per week.
3. COMBINED
COMBINED means a combination format of both dayparting and weekparting.
4. SWITCHING
SWITCHING means the controlled switching of a single program
Subscriber to another single program from the Muzak DBS
computer controlled headend utilizing the in-place Muzak
addressable receiver.
II. OTHER ADJUNCT SERVICES
----------------------
1. ADPARTING (various number of message inserts as designated by Muzak from
time to time)
ADPARTING means that audio promotion and messaging service provided
directly to the end user via an in-place Muzak addressable DBS system.
This service is designed for "spot" message inserts originating from the
Muzak DBS Operational Control Facility utilizing a computer control
head-end system.
2. BROADCAST DATA
BROADCAST DATA means that enhanced service which operates through the
in-place Muzak addressable DBS
B - 1
<PAGE>
receiver and provides a one-way data communication channel for
point-to-multipoint distribution. This service is designed for a
distribution of data files and/or text messaging originating through the
Muzak DBS Operational Control Facility utilizing a computer control
head-end system.
3. BROADCAST VIDEO
BROADCAST VIDEO means that occasional use non-dedicated one-way
point-to-multipoint direct broadcast service utilizing an in-place Muzak
addressable DBS system and adjunct video receiver. This service is
designed as a video broadcast distribution system for an end user's
private network and is managed and controlled through the Muzak DBS
Operational Control Facility.
B - 2
<PAGE>
EXHIBIT C
---------
MARKS
MUZAK(R) AUDIO MARKETING SERVICES(sm)
ADCASTER(R) DAYPARTING(sm)
ADPARTING(R) ENVIRONMENTAL MUSIC(sm)
FOREGROUND MUSIC ONE(R) FM ONE(sm)
FM-1(R) IN-STORE ADCASTING(sm)
HITLINE(R) UNICART(TM)
MARKETING ON HOLD(R)
MUSIC PLUS(R)
SOUND BUSINESS SOLUTIONS(R)
STIMULUS PROGRESSION(R)
TONES(R)
<PAGE>
EXHIBIT D
---------
TECHNICAL SPECIFICATIONS
I. LOCAL DISTRIBUTION SYSTEMS
--------------------------
Licensor and licensee acknowledge that the Muzak Program Services
should be delivered to the end subscriber at the highest fidelity
possible consistent with local conditions and reasonable business
judgment, therefore:
1. Telephone lines from central studio to Telco central office
and to broadcasting facilities should be equalized for a
minimum frequency response of 50-8000 Hz.
2. Telephone lines to individual subscribers from central offices
need not be equalized. If only low quality facilities are
available, consideration should be given to local equalization
at subscriber premises or replacement of Telco lines with SCA
or DBS delivery.
3. SCA contracts shall include the following minimum equipment
and performance standards particularly if the SCA generator is
not furnished by the licensee.
A. SCA Frequency Typically 67 kHz or 92
kHz
B. SCA Injection 91 +/- 0.5%
C. SCA Deviation +/- 6 kHz = 100%
modulation
D. SCA Frequency Response 50-5000 Hz +1, -3 dB
(95% of low pass
filter)
E. SCA Total Harmonic
Distortion Less than or equal to 1%
(unweighted)
F. SCA Signal To Noise Ratio Greater than or equal to
50 dB
G. AM Noise (referenced to
carrier) Greater than or equal to
-50 dB
H. Incidental AM Greater than or equal to
45 dB
I. Crosstalk (Main to Sub
Channel) Greater than or equal to
-40 dB
D - 1
<PAGE>
J. Pre-emphasis Curve 150 micro seconds
K. Automatic Muting Defeatable if desired
4. Local distribution may be made by UHF (950 MHz) transmitters
as authorized by the FCC. Maximum frequency range shall be
used whenever possible if full frequency range program
material is available at the transmitter.
5. Local distribution may be made by MDS transmitters as
authorized by the FCC. Maximum frequency range shall be used
whenever possible if full frequency range program material is
available at the transmitter.
6. Local distribution may be made by DBS. Receivers used, whether
designed or furnished by Muzak, shall be capable of receiving
and demodulating program material broadcast from Ku-band
satellite transponder in accordance with generally accepted
trade specifications and practice. Equipment utilized shall be
UL approved and conform to the specifications listed below.
The earth station consists of an antenna assembly and a Ku-
band addressable satellite audio receiver with tuning and
control instructions transmitted via the Network and Control
Data Channel.
The Muzak Ku-band addressable satellite audio receiver is
designed utilizing FM Squared subcarrier modulation and
operates with a fully saturated video transponder with tuning
and control instructions transmitted via the Network and
Control Data Channel. The system design has a margin equal to
or greater than 3 dB to allow for signal degradation due to
transponder variation, precipitation, pointing error or LNB
degradation.
Listed below are the DBS earth station technical
specifications as of July 1, 1990:
RECEIVER SPECIFICATIONS
-----------------------
Subcarrier Tuning 0.15 to 8.20 MHz
Tuning and Control 9600 Asynchronous FSK
data Channel Occupying
20 kHz
RF Input Level -30 to -65 dBm
D - 2
<PAGE>
RF Input Frequency 950 MHz to 1450 MHz
RX Threshold (click) 78.5 +/- 1 dB/Hz
IF Bandwidth 16 MHz
IF Frequency 70 MHz
Peak Deviation 30 kHz Peak
Audio Noise Reduction Panda I Adaptive Pre-
emphasis Expander or
Equivalent
ANTENNA AND LNB SPECIFICATIONS
------------------------------
1.0 Meter Antenna 1.2 Meter Antenna
--------------------- -----------------
Size: 1.0 Meter Offset Fed 1.2 Meter Offset Fed
Paraboloid Paraboloid
Gain: 40.7 dB at 12.0 GHz 42.3 dB at 12.5 GHz
VSWR: 1.3 Maximum 1.3 Maximum
LNB: 1.6 dB Minimum 1.6 dB Minimum
II. AUDIO DISTRIBUTION SYSTEM
-------------------------
In general, the 25 or 70 volt distribution system shall be used for
low level music and paging applications. Amplifiers shall be sized to
maintain less than 1% Total Harmonic Distortion throughout the system
with a minimum frequency response of 50-10,000 Hz +/- 3 dB.
Loudspeakers shall have the minimum power handling capacity of 10
watts. Matching transformers shall be multi-tap with a minimum
frequency response of 70-10,000 Hz. All amplifiers shall be UL
approved. All wiring and installations shall be made in accordance
with accepted standards of Broadcast Engineering Practice and the
National Electrical Code as well as local building codes that may
apply.
III. RECEPTION AND PLAYBACK EQUIPMENT
--------------------------------
All subscriber reception and playback equipment produced, either
directly or under subcontract by Muzak for sale to licensees, shall
conform to the standards and specifications of NAB, FCC and RIAA
reflecting the state of the art. All equipment shall be UL approved.
D - 3
<PAGE>
Detailed specifications of specific equipment currently in production
as of March 1990 will be furnished to licensee upon request.
Disclosure of proprietary information shall be limited to information
for the proper installation, operation and maintenance of the
respective equipment furnished.
IV. C-BAND SATELLITE RECEPTION EQUIPMENT
------------------------------------
If C-band satellite equipment is utilized for program reception, the
following general satellite system specification applies:
The satellite distribution system is designed to meet rigid
performance criteria. However, certain facets of the total system are
beyond the control of Muzak. These include, but are not limited to,
weather conditions at the transmit or receiver site, sun position
relative to the satellite position at the receiving location and
proper maintenance of the receiver site.
The single channel per carrier (SCPC) earth station consists of a
minimum 5 meter antenna, a Low Noise Amplifier (LNA) and a C-band
SCPC satellite audio receiver.
AUDIO CHARACTERISTICS
---------------------
Audio Output Impedance 600 ohms, balanced
Audio Output Level Adjustable, 0 to +18 dBm
Audio Noise Reduction 2:1 companding
Audio Signal-to-Noise Ratio Greater than 50 dB CCITT 468 Weighted
Audio Bandwidth 7.5 kHz
Frequency Response 50-7.5 kHz +/- 1.0 dB
Total Harmonic Distortion Less than or equal to 1%
RECEIVER SPECIFICATIONS
-----------------------
RF Input Level -30 dBm maximum
RF Input Frequency 3.7 to 4.2 GHz
RF Output Impedance 75 ohms, unbalanced
IF Frequency Range 52-88 MHz
Frequency Selection Synthesized in 25 kHz steps
Peak Deviation 30 kHz
Power Consumption 7 Watts 110V/60 Hz
D - 4
<PAGE>
EXHIBIT E
---------
SALES OF ADJUNCT SERVICES
Capitalized terms used but not defined in this Exhibit E shall have
the meanings set forth in the body of the MUZAK(R) License Agreement to which
this Exhibit is attached (the "License Agreement").
1. Contract Form; Earth Station. All sales of the Adjunct Services to
----------------------------
Subscribers in the Territory shall be reflected in a fully executed MUZAK(R)
Adjunct Services Subscriber Contract substantially in the form of Schedule 1
----------
attached hereto. Any material modification to said Contract form shall require
the prior written consent of (i) Muzak and Licensee for Subscribers located
within the Territory that are not Multi-Territory Accounts (as defined in
Exhibit G to the License Agreement) or (ii) the Multi-Territory Sales Committee
(as defined in Exhibit G) for Subscribers which are Multi-Territory Accounts
pursuant to Exhibit G. No such modification shall conflict with the License
Agreement (including without limitation the provisions of this Exhibit E).
Licensee shall provide Muzak with the Adjunct Services Subscriber Contract,
executed by the Subscriber, at the time Licensee requests Muzak to commence
delivery of one or more Adjunct Services to the Subscriber, and Muzak shall
provide Licensee with a copy of the Contract executed by Muzak for itself (to
the extent stated in such Contract) and as Licensee's agent. Licensee shall
ensure that prior to commencement of delivery of the Adjunct Services to a
Subscriber, an Earth Station has been installed at each Subscriber Premises in
the Territory where such Adjunct Services are to be received. Without limiting
the foregoing, the delivery of the Adjunct Services shall be by such means as
meet the technical specifications set forth in Exhibit D to the License
Agreement.
2. Additional Equipment. Muzak shall provide to each Subscriber
--------------------
receiving the "Data" Adjunct Service, data receiving equipment designed to
operate with the MUZAK(R) satellite receiver (the "Data Receiving Equipment")
and to each Subscriber receiving the "Video" Adjunct Service video receiving
equipment designed to operate with MUZAK(R) satellite equipment (the "Video
Receiving Equipment"). It is the parties' intent that if a Subscriber requires
an encrypting card, machine or other instrumentality, such Subscriber shall bear
the expense thereof. The Data Receiving Equipment and/or the Video Receiving
Equipment, as the case may be, shall be installed and maintained by Licensee as
directed by Muzak. All service and maintenance by Licensee to any Data Receiving
Equipment or Video Receiving Equipment shall be limited to "swap out"
replacement of a defective unit, and Muzak agrees to maintain an adequate supply
of such replacements for 24-hour delivery to Licensee. Muzak shall retain all
rights
E-1
<PAGE>
of ownership in the Data Receiving Equipment and the Video Receiving Equipment
and, at the termination of the applicable Adjunct Services Subscriber Contract,
Licensee shall remove the Data Receiving Equipment and the Video Receiving
Equipment and deliver each such item as directed by Muzak. Licensee shall not,
and shall use its reasonable best efforts not to permit any other person or
entity to, alter or reproduce in any way the Adjunct Services, the Data
Receiving Equipment, the Video Receiving Equipment, or any other equipment or
materials provided by Muzak in connection with the Adjunct Services.
3. Effect of Termination or Expiration of License Agreement.
--------------------------------------------------------
3.1 Multi-Territory Accounts. In the event the License
------------------------
Agreement terminates or expires (without renewal) prior to the termination of a
Multi-Territory Contract (as defined in Exhibit G) for Adjunct Services being
delivered in the Territory, Licensee's rights with respect to such Contract
shall be governed by Article 4 of said Exhibit G.
3.2 Subscribers That Are Not Multi-Territory Accounts.
-------------------------------------------------
a. Subject to paragraph b. below, in the event the License
Agreement terminates or expires prior to the termination of an Adjunct Services
Subscriber Contract for Services being delivered in the Territory and such
Contract is not a Multi-Territory Contract, then Licensee shall sell to Muzak
all of its rights in such Adjunct Services Subscriber Contract, together with
related equipment (including the Earth Station if applicable), for a price
determined in the manner set forth in this Section 3.2. Upon such sale, Muzak
shall assume all of Licensee's obligations relative to performance of such
Subscriber Contract and with respect to such related equipment accruing after
the date of transfer. In the event such termination or expiration of the License
Agreement is due to the bona fide, arm's length purchase of Licensee's
subscriber contracts for a price based on a multiple of Recurring Adjunct
Services Gross Billings (as hereinafter defined), Muzak's purchase price
hereunder shall be determined by multiplying 50% of such arm's length multiple
times the Recurring Adjunct Services Gross Billings attributable to the Adjunct
Services Subscriber Contract being purchased. In all other cases, Muzak's
purchase price hereunder shall be the result of multiplying 50% of the
Prevailing Adjunct Services Multiple (as hereinafter defined) times the
Recurring Adjunct Services Gross Billings attributable to such Contract. As used
herein, (i) the term "Recurring Adjunct Services Gross Billings" means the
average recurring monthly billings to a Subscriber for the Adjunct Services and
related equipment, net of sales taxes, and (ii) the term "Prevailing Adjunct
Services Multiple" means the average of the
E-2
<PAGE>
arm's length multiples used to determine the purchase prices of the three most
recently reported (to Muzak) sales of the businesses of MUZAK(R) licensees, to
the extent such prices were based on arm's length multiples of Recurring Adjunct
Services Gross Billings and such multiples can be independently verified as
such. Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of Licensee's rights under an Adjunct Services Subscriber
Contract, Licensee and/or Muzak have received formal notice that such Contract
will be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such termination of the Contract
is less than the Prevailing Adjunct Services Multiple, then the purchase price
of Licensee's rights in such Contract shall be determined by multiplying such
remaining number of months in the Contract term by 50% of the Recurring Adjunct
Services Gross Billings attributable to such Contract.
b. Licensee shall not be required to sell to Muzak its rights in any
Adjunct Services Subscriber Contract described in this Section 3.2 to the extent
such rights pertain to the Music-Related Adjunct Services. In addition, Licensee
shall not be required to sell to Muzak its rights in any Other Adjunct Services
Subscriber Contract that does not pertain to the provision of the Adjunct
Services to any Subscriber locations outside of Licensee's Territory. Section
2.2(b) (i) and (ii) of the License Agreement shall control with respect to the
rights retained by Licensee under this paragraph b.
3.3 Adjacent Territories. In the event of a termination of the MUZAK(R)
--------------------
License Agreement of a MUZAK(R) licensee operating in a territory that adjoins
Licensee's Territory, Licensee agrees to provide the Adjunct Services to
Subscribers in such adjoining territory upon the request of Muzak for such
period of time and upon such other terms as are then agreed to by Muzak and
Licensee.
4. Licensee's Inability to Provide Adjunct Services.
------------------------------------------------
4.1 Third-Party Contract. In the event that Licensee is
--------------------
offering in the Territory a communications service which is the same as or
similar to any Adjunct Service as a result of a third-party contract or
agreement in effect at the time Muzak first notifies Licensee that such Adjunct
Service has been added to Exhibit B to the License Agreement, Licensee shall
have no obligation under the License Agreement to market, offer, or sell such
Adjunct Service until Licensee ceases doing business with such third party.
4.2 Rights of Muzak and Adjacent Licensees. During such period as Licensee
--------------------------------------
is not marketing, offering or selling an
E-3
<PAGE>
Adjunct Service in the Territory for the reasons provided in Section 4.1 above,
either Muzak or, at the request of Muzak, a MUZAK(R) licensee operating from a
MUZAK(R) territory that adjoins the Territory shall have the right to market,
offer, and sell such Adjunct Service in the Territory. Licensee shall give Muzak
at least 30 days' prior written notice of the date on which Licensee will cease
doing business with the third party as referred to in Section 4.1 above. After
such date, (i) Licensee shall commence marketing, offering, and selling such
Adjunct Service in accordance with the License Agreement and (ii) Muzak and any
MUZAK(R) licensees operating in territories adjacent to the Territory shall no
longer have the right to market, offer, or sell such Adjunct Service in the
Territory except under the terms of a MUZAK(R) Adjunct Services Subscriber
Contract in effect on such date; provided, however, that Licensee shall have the
right to purchase from Muzak or such other MUZAK(R) licensee, as the case may
be, the licensee's rights under any such Adjunct Services Subscriber Contract,
as well as the related equipment, for a price determined in the manner set forth
in Section 3.2 above.
4.3 Adjacent Territories. In the event that a MUZAK(R)
--------------------
licensee operating in a territory that is adjacent to Licensee's Territory is
unable to market, offer, or sell an Adjunct Service for the reasons set forth in
Section 4.1 above, Licensee agrees (i) to market, offer, and sell such Adjunct
Service in such adjacent territory upon the request of Muzak for such period of
time and upon such other terms as are then agreed to by Muzak and Licensee, and
(ii) to sell to such adjacent licensee its rights in any Adjunct Services
Subscriber Contract described in Section 4.2 above upon the terms described in
said Section 4.2.
4.4 Use of Proprietary Marks. In the event that Muzak or an
------------------------
adjacent licensee (including Licensee in its capacity as such an adjacent
licensee) markets, offers, or sells an Adjunct Service under the conditions
described in Sections 4.1 through 4.3 above, none of the Proprietary Marks,
other than those associated specifically with such Adjunct Service (including
the "MUZAK(R)" Proprietary Mark if, and only to the extent that, it is
specifically associated with such Adjunct Service), shall be used for such
marketing, offering and sales purposes. Without limiting the generality of the
foregoing, in such case neither Muzak nor the adjacent licensee shall market
such Adjunct Service in the affected licensee's territory under the MUZAK(R)
yellow-pages listing.
5. Multi-Territory Accounts. In the event Adjunct Services are
------------------------
provided to a Multi-Territory Account under the Multi-Territory Accounts Program
described in Article IX and Exhibit G of the License Agreement, the terms of
such Program shall control over the terms set forth herein.
E-4
<PAGE>
Schedule 1
----------
MUZAK(R) ADJUNCT SERVICES [LOGO OF MUZAK APPEARS HERE]
SUBSCRIBER AGREEMENT
1. This Adjunct Services Subscriber Agreement ("Agreement") is made this
_______ day of _______, 19 between MUZAK LIMITED PARTNERSHIP, acting as
agent for the Servicing Muzak Affiliates listed in Exhibit A and Exhibit
B hereto as now existing or subsequently amended by MUZAK, and for
itself (specifically with respect to paragraphs 7, 8, 10, 11, and 12)
(collectively, "MUZAK" and________________________(the"Subscriber").
2. This Agreement shall remain in effect for a term of__________ months
from_______, 19__ and shall be automatically renewed for subsequent
________ -month terms unless terminated at the end of any term by either
party by written notice given to the other party at least ninety (90)
days prior to the end of such term. This Agreement shall become binding
when signed by Subscriber and accepted and approved by MUZAK. Subject to
the terms and conditions of this Agreement, MUZAK shall provide to the
Subscriber at the commercial locations ("Premises") set forth in Exhibit
B, one or more of the following services (the "Services") as indicated
below:
- --------------------------------------------------------------------------------
3. [_] ADPARTING(SM) SERVICES are delivered by Direct Broadcast Satellite
(DBS) to a MUZAK-supplied DBS Audio Receiver. (5 Spot Minimum.)
A. Number of Premises:________.
B. Number of spots per scheduled hour:________.
C. Message length: [_] 20 seconds: [_] 30 seconds.
D. Price per Premises per month: $________.
E. If AdParting(SM) Services are to be provided for less than term
described above, specify months of provision:
________________________________________________________________
F. Describe special needs relating to advertising (e.g.,
scheduling):
________________________________________________________________
________________________________________________________________
- --------------------------------------------------------------------------------
4. [_] BROADCAST DATA SERVICES are delivered by DBS to a MUZAK-supplied DBS
Audio Receiver equipped to receive MUZAK Data Services. Charges for
Broadcast Data Services are composed of a monthly charge per
Premises based on data transmissions totaling up to 500 kilobytes
(for all Premises) from the orginating location, plus a per-message
charge for additional kilobytes of transmission.
A. Number of Premises:____________.
B. Basic Monthly Data Charge per Premises: $________.
C. Per-message charge for additional kilobytes of transmission:
$_________.
D. Describe special needs and/or related charges for Broadcast Data
Services:______________________________
___________________________________________________________
- --------------------------------------------------------------------------------
5. [_] BROADCAST VIDEO SERVICES are delivered by DBS to a MUZAK-supplied
Video Receiver providing access to one-way video reception in
conjunction with a MUZAK-supplied DBS Antenna and Audio Receiver.
A. Basic Monthly Charge for Basic Broadcast Video Service as
described above is $ ______ per Premises.
Note: Monthly charge does not include costs for transponder time,
which will be charged separately to Subscriber on a per-use
basis. Subscriber assumes the responsibility and cost of video
production.
B. Describe special needs and/or related charges for transmission
and transponder services: ___________________
_____________________________________________________________
- --------------------------------------------------------------------------------
6. Monthly charges indicated herein are billed monthly in advance and
commence on completion of installation of appropriate reception
equipment as designated above. Subscriber agrees to pay all charges for
the Services as indicated herein.
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
Subscriber:________________________ MUZAK LIMITED PARTNERSHIP
___________________________________
(Print Name of Business Entity) By:___________________________
By:________________________________ Title:_________________________
Title:_____________________________
Address:___________________________ 400 North 34th Street, Suite 200
___________________________________ Seattle, WA 98103
INITIATING MUZAK AFFILIATE:
___________________________________
(Print Name of Business Entity)
By:________________________________
Title:_____________________________
Address:___________________________
<PAGE>
SUBSCRIBER MATERIALS, Subscriber shall provide to MUZAK at Subscriber's
sole expense and at such times and places and in such forms as are
reasonably requested by MUZAK, those data video, advertising, and other
materials (if any) which are to be incorporated in the Services prior to
transmission to the Premises. Such materials are hereinafter collectively
referred to as the "Subscriber Materials". Subscriber shall be solely
responsible for the content of all Subscriber Materials, but MUZAK reserves
the right to refuse to transmit any Subscriber Materials the content,
transmission, or broadcast of which it believes could infringe upon the
rights of others or otherwise be unlawful or the form of which does not
comply with MUZAK's requests as provided above. Subscriber shall comply
with all applicable governmental laws, rules, and regulations pertaining to
the Subscriber Materials and their use in the Services. Subscriber shall
indemnify and hold harmless MUZAK and its officers, agents, partners, and
employees from and against any and all claims, liabilities, losses,
damages, costs and expenses (including reasonable attorney's fees).
including without limitation claims for infringement of proprietary
rights,misrepresentation, and defamation, arising out of or attributable in
whole or in part to the Subscriber Materials. The indemnify shall survive
the expiration or earlier termination of this Agreement.
8. EQUIPMENT
a. With respect to any items of equipment that are provided hereunder to
Subscriber by MUZAK including but not limited to Earth Stations, MUZAK
shall maintain such items in good operating condition; provided, however,
that such maintenance shall be exclusively limited to that resulting from
ordinary and proper use of the equipment. All other maintenance, repair and
replacement of such equipment shall be paid by Subscriber in accordance
with MUZAK's customary charges therefor. MUZAK'S OBLIGATIONS UNDER THIS
PARAGRAPH ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED,
RELATING TO THE EQUIPMENT, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. Except for MUZAK's maintenance
obligations resulting from ordinary and proper use of the equipment as set
forth above, Subscriber shall indemnify MUZAK and hold it harmless from and
against any and all losses, claims, and expenses relating to the equipment
provided hereunder to Subscriber, including without limitation losses
caused by accident, fire, theft, or misuse of the equipment. Subscriber
shall provide electrical outlets and power as needed for the equipment.
b. Subscriber shall not, directly or indirectly, sell, mortgage, pledge, or
otherwise dispose of or encumber any MUZAK-owned equipment provided to
Subscriber, nor shall it change the location of, tamper with, or alter in
any manner such equipment. Subscriber shall execute such further documents
as are necessary or desirable to protect MUZAK's interest in such
equipment, shall adequately insure such equipment against damage or loss
and present evidence of such insurance to MUZAK upon request, and shall,
upon the expiration or earlier termination of this Agreement, promptly
return to MUZAK all of such equipment in good condition (or pay the full
replacement value thereof).
9. ADDITIONAL CHARGES.
a. In addition to the fees specified on the reverse side of this Agreement,
Subscriber shall pay to MUZAK any sales, use, excise, or other taxes or
governmental charges (except income taxes) arising under this Agreement.
Subscriber shall also pay to MUZAK any incremental increases in ASCAP, BMI
or other licensing fees resulting from the services supplied under this
Agreement.
b. Late payments of fees and charges due hereunder are subject to late-
payment and interest charges not to exceed the maximum rate permitted by
law.
c. MUZAK may increase any or all of the charges stated on the reverse side
of this Agreement on an annual basis by providing at least 15 days' prior
written notice to Subscriber; provided, however, that any such increase may
not exceed 10% of the then existing charge without the approval of
Subscriber. Should any such increase exceed 10% and not be approved by
Subscriber, MUZAK may elect to terminate this Agreement. Such termination
shall not release Subscriber from any obligations which accrued prior to
the time of such termination. Such termination shall not affect any other
agreement Subscriber may have with MUZAK.
10. ASSIGNMENT. Subscriber shall not assign its rights or delegate under this
Agreement without the prior written consent of MUZAK which consent shall
not be unreasonably withheld. Any assignment of this Agreement by
Subscriber without MUZAK'S written consent shall be void and shall at
MUZAK'S option constitute a breach hereof by Subscriber. In the event
Subscriber ceases to do business at any Premises, Subscriber shall return
to MUZAK in the manner designated by MUZAK all MUZAK-owned equipment
installed at such Premises; such cessation shall not, however, reduce
Subscriber's payment obligations hereunder unless MUZAK otherwise agrees in
writing. This Agreement shall be fully assignable by MUZAK. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors, representatives,
and assigns.
11. LIMITATION OF LIABILITY. In the event MUZAK fails to provide one or more of
the Services to any Premises for a period of twenty-four consecutive hours,
and Subscriber provides MUZAK with written notice thereof within 48 hours
after such failure, the following shall occur, Subscriber's account shall
be credited with an amount equal to one-thirtieth of the recurring monthly
charge for the affected Service for each such 24 hour reported period.
Notwithstanding the foregoing, in no event shall MUZAK be responsible or
liable (and no credit shall be given) for any failure of MUZAK to perform
its obligation hereunder due to Acts of God, strikes, emergencies,
mechanical failures, regulatory or other governmental action, or inaction
of Subscriber, its employees, agents, or invitees, a breach of this
Agreement by Subscriber, or any other cause beyond MUZAK's reasonable
control. In no event shall MUZAK be liable for incidental, consequential or
special damages arising out of or relating to this Agreement. Without
limiting the foregoing, under no circumstances will MUZAK be responsible
for the reception of the services by the Subscriber at any Premises or for
the accuracy or completeness of the information or other material included
in the Services.
12. TERMINATION BY MUZAK. If Subscriber fails to perform any of its obligations
hereunder and does not cure such failure within thirty days after written
notice thereof from MUZAK, or if Subscriber becomes insolvent or bankrupt,
MUZAK, in addition to all other rights it may have under law or this
Agreement, shall have the rights (i) to declare all amounts to be paid by
Subscriber during the remaining term hereof immediately due and payable
(ii) to cease providing the Services to Subscriber, and (iii) immediately
to enter the Premises and take possession of all MUZAK-owned equipment
without liability to Subscriber therefore and without relieving Subscriber
of its obligations under this Agreement. Subscriber shall reimburse MUZAK
for all costs and expenses, including reasonable attorneys' fees and court
costs, incurred in connection with MUZAK's exercise of its rights under
this Agreement. Muzak shall have the right to terminate this agreement in
the event that there is only one Servicing Muzak Affiliate providing
services to Subscriber hereunder and the Muzak(R) license rights of such
servicing Muzak Affiliate have expired or terminated without renewal.
13. SERVICING MUZAK AFFILIATES. Subscriber acknowledges and agrees that all
services to be provided by MUZAK hereunder shall be provided by the
Servicing Muzak Affiliate identified in Exhibit A as being responsible for
a particular Premises. Subscriber further acknowledges that MUZAK is
entering into and executing this Agreement on behalf of and as agent for
each such Servicing Muzak Affiliate with respect to each Premises served by
each such Servicing Muzak Affiliate and that the Xerographic copies of this
Agreement provided to each such Servicing Muzak Affiliate for each such
Premises shall be deemed for all purposes a counterpart original of this
Agreement.
14. APPLICABLE LAW. In the event of a dispute affecting Premises located in one
State, this Agreement shall be governed by and in accordance with the laws
of that State applicable to contracts made and to be performed wholly
within such State and venue shall rest with the court of general
jurisdiction located in the county where the subject servicing Muzak
Affiliate maintains its principal place of business. In the event of a
dispute affecting Premises located in more that one State, this Agreement
shall be governed by and in accordance with the laws of the State of
Washington applicable to contracts made and to be performed wholly within
such State, and Subscriber consents to the personal jurisdiction of the
State and federal courts of the State of Washington for purposes of
litigation affecting this Agreement. If any provision of this Agreement is
deemed unenforceable in whole or in part by a Court of competent
jurisdiction, the parties agree that such Court shall amend or alter such
provision so as to effectuate the intent of such provision and of this
Agreement to the maximum extent that is enforceable.
15. MISCELLANEOUS.
a. This Agreement constitutes the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior
conversations, representations, promises, and warranties, whether verbal or
written, with respect to such subject matter. No modification of this
Agreement shall be valid unless made in writing and signed by each party;
provided, however, that MUZAK shall have the right to modify or terminate
this Agreement to the extent necessitated by a modification or termination
of any license or lease agreement applicable to its provision of the
Services.
b. The waiver of a breach of any provision of this Agreement shall not be
construed as a waiver of any subsequent breach of the same or of a
different provision of this Agreement.
c. Each party represents and warrants that it has the power and authority
to enter into this Agreement and discharge its obligations hereunder, and
each person executing this Agreement on behalf of a party represents and
warrants that he or she has the power and authority to sign this Agreement
on behalf of such party.
d. All notices required under this Agreement shall be in writing
and personally delivered or sent, postage prepaid, by certified or
registered mail, return receipt requested to the parties at their addresses
set forth on the reverse side (or such other address as is hereafter,
provided by a party to the other party).
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT A
SERVICING MUZAK AFFILIATES
- --------------------------------------------------------------------------------
Alabama
Electronic Engineers, Birmingham, AL
Electro-Systems, Dothan, AL
Service Associates, Huntsville, AL
Business Sound, Mobile, AL
Electronic Engineers, Montgomery, AL
Alaska
Northern Television, Anchorage, AK
Background Music, Fairbanks, AK
Arkansas
Fitzhugh Communications, Fayetteville, AR
Tempo Sound, Harrison, AR
Business Music, Inc., Little Rock, AR
Arizona
SunCom Group, Scottsdale, AZ (Phoenix)
Tucson Music, Tucson, AZ
California
Muzak, Anaheim, CA
Serban Sound, Bakersfield, CA
Muzak, Burbank, CA (Los Angeles)
Attuned to Music, Chico, CA
American Music Network, Fresno, CA
American Music Network, Modesto, CA
Musi-Cal, Riverside, CA
American Music Network, Salinas, CA
Comcast, San Diego, CA
Muzak, San Francisco, CA
Muzicraft, Santa Barbara, CA
Muzicraft, Ventura, CA
Colorado
Comcast, Colorado Springs, CO
Comcast, Denver, CO
Connecticut
Comcast, Hartford, CT
Muzak, Milford, CT
District of Columbia
Music, Inc., Washington, DC
Florida
Osborn Sound, Ft. Myers, FL
Florida Sound, Jacksonville, FL
Melody, Inc., Miami, FL
Marion Music, Ocala, FL
Comcast, Orlando, FL
Electro-Systems, Panama City, FL
Electro-Systems, Tallahassee, FL
Tropical Music, Tampa, FL
Harmony Music & Sound, W. Palm Beach, FL (Palm Beach)
Georgia
Osborn Sound, Albany, GA
Osborn Sound, Atlanta, GA
Carolina-Georgia Sound, Augusta, GA
Background Music, Phenix City, AL (Columbus, GA)
Osborn Sound, Macon, GA
Georgia Music & Sound, Savannah, GA
Hawaii
Hawkins Audio Engineering, Honolulu, HI
Idaho
Mountain West Audio, Boise, ID
Idaho Mountain West, Idaho Falls, ID
Illinois
Muzak, Chicago, IL
Kickapoo Broadcasting, Danville, IL
WSOY, Decatur, IL
Comcast, Moline, IL
Comcast, Peoria, IL
Quincy Broadcasting, Quincy, IL
Springfield Advertising, Springfield, IL
Indiana
Service Associates, Evansville, IN
Comcast, Fort Wayne, IN
Comcast, Indianapolis, IN
Music Engineering, South Bend, IN
Iowa
Music Services, Inc., Des Moines, IA
Brite & Rich, Le Mars, IA (Sioux City)
D.B. Acoustics, Marion, IA (Cedar Rapids)
Kansas
McClelland Sound, Wichita, KS
Kentucky
P & M Electronics, Ashland, KY
Lexington Music & Sound, Lexington, KY
Planned Music of Kentucky, Louisville, KY
Louisiana
American Sound & Music, Baton Rouge, LA
Metro Communications, Lafayette, LA
Dixie Music, Lake Charles, LA
Business Sound, Metairie, LA (New Orleans)
Business Music, Shreveport, LA
Maine
PBC Sound Systems, Bangor, ME
Maryland
Audio Communications Network, Baltimore, MD
Massachusetts
Muzak, Waltham, MA (Boston)
Michigan
Muzi-Tronics, Cadillac, MI
Muzi-Tronics, Grand Rapids, MI
Muzi-Tronics, Kalamazoo, MI
Range Telecommunications, Marquette, MI
Blue Water Music, Port Huron, MI
MacDonald Broadcasting, Saginaw, MI
Comcast, Warren, MI (Detroit)
Minnesota
Business Music, Inc., Cold Spring, MN (St. Cloud)
Business Music Service, Duluth, MN
Muzak, Minneapolis, MN
Custom Communications, Rochester/Winona, MN
Business Music, Inc., Wilmar, MN
Mississippi
Melody Music Company, Columbus, MS
Mississippi Sound, Greenwood, MS
Metro Communications, Jackson, MS
Missouri
Towner Communications, Jefferson City, MO
Audio Acoustics, Joplin, MO
Audio Communications Network, Kansas City, MO
Audio Acoustics, Poplar Bluff, MO
Audio Communications Network, St. Louis, MO
Audio Acoustics, Springfield, MO
Montana
Shag Miller, Butte, MT
American Music, Great Falls, MT
Music Systems, Kalispell, MT
Nebraska
Parker Engineering, Kearney, NE
Business Music Inc., Lincoln, NE
Business Music, Inc., Omaha, NE
Nevada
Musaire, Inc., Las Vegas, NV
Dynamic Sound, Reno, NV
New Hampshire
Muzak, Exeter, NH
New Jersey
World Music, Springfield, NJ
New Mexico
Business Music, Inc., Albuquerque, NM
New Mexico
Business Music, Inc., Albuquerque, NM
New York
Comcast, Buffalo, NY
Arranged Sound, Johnson City, NY (Binghamton)
Functional Communications, Latham, NY (Albany)
Muzak, Long Island City, NY (New York City)
NCC Systems, Potsdam, NY
Accent Communications Systems, Poughkeepsie, NY
Functional Communications, Rochester, NY
Functional Communications, Syracuse, NY
NCC Systems, Watertown, NY
North Carolina
SunCom Group, Charlotte, NC
SunCom Group, Hillsborough, NC
Independence Communications, Kinston, NC
Warner Music & Communications, Rocky Mount, NC
Background Music, Wilmington, NC
North Dakota
Music Systems, Inc., Bismarck, ND
Music Systems, Inc., Fargo, ND
Ohio
Port Erie Communications, Ashtabula, OH
Ohio Musicue, Canton, OH
Muzak, Cincinnati, OH
Ohio Music Corporation, Cleveland, OH
Muzak, Columbus, OH
Audio Inc., Dayton, OH
Zaiser Communications, Toledo, OH
Hudix Music, Youngstown, OH
Oklahoma
Lawton Business Music, Lawton, OK
Business Music, Inc., Oklahoma, OK
Granite Sound, Tulsa, OK
Oregon
Muzak, Eugene, OR
Muzak, Medford, OR
Muzak, Portland, OR
Pennsylvania
Independence Communications, Harrisburg, PA
Comcast, Hollidaysburg, PA
Independence Communications, Norristown, PA
(Philadelphia)
Independence Communications, Pittsburg, PA
Comcast, Scranton, PA
South Carolina
Carolina Sound Communications, Charleston, SC
Background Music, Columbia, SC
Carolina Sound Communications, Myrtle Beach, SC
South Dakota
Music of Rapid City, Rapid City, SD
Midco Communications, Sioux Falls, SD
Tennessee
Belew Sound & Visual, Bristol, TN
Service Associates, Chattanooga, TN
Service Associates, Knoxville, TN
Mid-South Music & Sound, Memphis, TN
Service Associates, Nashville, TN
Texas
Audioplan, Abilene, TX
Business Music, Inc., Amarillo, TX
AVCOM, Austin, TX
Beaumont Business Music, Beaumont, TX
ABC Music, Big Spring, TX
Brownwood Business Music, Brownwood, TX
Gulf Business Music, Corpus Christi, TX
Comcast, Dallas, TX
Muzicom, El Paso, TX
Comcast, Ft. Worth, TX
T F M Sound, Harlingen, TX
Taft Broadcasting, Houston, TX
Business Music, Inc., Lubbock, TX
Pioneer Music, Midland, TX
W. Texas Business Music, San Angelo, TX
Texas Wired Music, San Antonio, TX
Whitsound, Texarkana, TX
Comcast, Tyler, TX
Wichita Business Music, Wichita Falls, TX
Utah
Mountain West Audio, Salt Lake City, UT
Vermont
Music Service of Vermont, Essex Junction, VT
(Burlington)
Virginia
Independence Communications, Charlottesville, VA
Independence Communications, Newport News, VA
Independence Communications, Richmond, VA
Business Communications, Roanoke, VA
Washington
Muzak, Seattle, WA
Muzak, Spokane, WA
Sousley Sound, Yakima, WA
West Virginia
Joe L. Smith, Beckley, WV
Wheeling Services, Wheeling, WV (Parkersburg/
Wheeling)
Wisconsin
Northern Musicast, Appleton, WI
Central Communications, Eau Clair, WI
Pridham Electronics, Madison, WI
Wisconsin Music Network, Milwaukee, WI
Forward Electronics, Plover, WI
Forward Electronics, Wausau, WI
Wyoming
Background Music, Cheyenne, WY
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
SERVICED PREMISES
List of all Serviced Premises (With Corresponding Reference to Muzak
Affiliate Responsible for each such Serviced Premises)
- --------------------------------------------------------------------------------
Serviced Premises Servicing Muzak Affiliates
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MSA-EB
<PAGE>
EXHIBIT F
---------
ADJUNCT SERVICES REVENUE SHARING
BROADCAST DATA SERVICES ("Data")
- --------------------------------
Revenues from the sale of Data under the terms of an Adjunct Services Subscriber
Contract shall be shared between Muzak and Licensee on a 60/40 basis for a
three-year period starting August 1, 1989. Muzak will receive the 60% share for
the three-year period. Commencing August 1, 1992, revenue for Data will be
shared between Muzak and Licensee on a 50/50 basis.
ADPARTING SERVICES ("AdParting")
- --------------------------------
Revenues from the sale of Adparting under the terms of an Adjunct Services
Subscriber Contract shall be shared between Muzak and Licensee on a 60/40 basis,
with Muzak receiving the 60% share.
BROADCAST VIDEO SERVICES ("Video")
- ----------------------------------
Revenues from the sale of Video under the terms of an Adjunct Services
Subscriber Contract shall be shared between Muzak and Licensee on a 60/40 basis,
with Muzak receiving the 60% share.
DAYPARTING, WEEKPARTING, COMBINED, AND SWITCHING
- ------------------------------------------------
Services will be provided at flat fee as published from time to time by Muzak,
The fees charged by Muzak for Dayparting, Weekparting and Switching services
will not be increased from the date of the MUZAK(R) License Agreement to which
this Exhibit is attached through December 31, 1993 and thereafter none of such
fees shall increase by more than 10% per annum.
Notes:
- -----
1. Licensee will pay all sales commissions to local sales personnel if the
above-mentioned Adjunct Services are sold by the Licensee. Muzak will pay
sales commissions to Muzak National Sales personnel if the above-mentioned
Adjunct Services are sold by Muzak National Sales personnel.
2. The 3% Multi-Territory Accounts sales commissions will not apply to the
Adjunct Services.
3. Whichever of Muzak and Licensee receives revenues from the Subscriber under
the terms of the applicable Adjunct Services Subscriber Contract shall,
within 45 days after receipt of each payment of such revenues, provide the
other party with a report showing the date and amount of such payment and
pay to the other party such other party's share
F-1
<PAGE>
of the revenues, as provided herein. The party that is responsible for the
collection of revenues from a Subscriber under the terms of the applicable
Adjunct Services Subscriber Contract shall use its best efforts to ensure that
payments are made in a complete and timely manner by such Subscriber and shall
be responsible for paying any federal, state, or local taxes relating to the
provision of the Adjunct Services to the Subscriber to the appropriate taxing
authority. All payments of such revenues shall be promptly remitted to the other
party, without credit, offset or deduction of any kind or nature whatsoever
except that the party responsible for collection of revenues from a Subscriber
may deduct the other party's pro rata share of any sales or similar taxes
required to be collected in connection with the provision of the Adjunct
Services, as well as such other deductions as have been agreed to by the
parties.
F-2
<PAGE>
EXHIBIT G
MUZAK(R) MULTI-TERRITORY ACCOUNTS PROGRAM
Muzak and various of its licensees, working through a "Multi-Territory
Sales Committee," have developed a Multi-Territory Accounts Program (the
"Program"), pursuant to which Muzak and its licensees will provide the Services
to certain Subscribers who own or operate Subscriber Premises located in the
MUZAK(R) territories of at least four MUZAK(R) licensees. The purpose of this
Exhibit G is to set forth the terms and conditions under which the Program will
operate. Capitalized terms used but not defined in this Exhibit G shall have the
meanings set forth in the body of the MUZAK(R) License Agreement to which this
Exhibit is attached.
1. Definitions. As used herein, the following terms shall have the meanings
-----------
set forth below:
1.1 Affiliate shall mean a person or entity (including Licensee) that
---------
has the right to offer and sell the Services under the terms of a license
agreement with Muzak, as well as an owned affiliate of Muzak.
1.2 Assigned Person shall have the meaning set forth in Section 1.7
---------------
below.
1.3 Commission shall mean 3% of the recurring gross billings to the
----------
Multi-Territory Account during the initial term of the Multi-Territory Contract
for Music Services (other than Music Services delivered either by Recorded Media
or in conjunction with in-store advertising provided by POP Radio Corporation)
provided to Subscriber Premises of the Multi-Territory Account located in
Licensee's Territory, plus 3% of the gross billings to the Multi-Territory
Account for certain equipment, as designated by the Committee, installed at such
Subscriber Premises; provided, however, that in calculating such gross billings
for purposes of determining the Commission, (i) a Multi-Territory Contract with
an initial term of more than 5 years shall be deemed to have a term of 5 years,
and (ii) there shall be taken into account only that portion (if any) of the
recurring gross billings for Music Services that exceeds the recurring gross
billings payable to Licensee under a contract that is superseded by the Multi-
Territory Contract.
1.4 Committee shall mean the "Multi-Territory Sales Committee" referred
---------
to above, as further described in Article 3 below.
G-1
<PAGE>
1.5 Licensee means the person or entity referred to as "Licensee" in the
--------
MUZAK(R) License Agreement to which this Exhibit is attached.
1.6 Multi-Territory Account shall mean a potential Subscriber that (a)
-----------------------
owns or operates 50 or more Subscriber Premises located in the MUZAK(R)
territories of at least four Affiliates, and (b) is set forth on the then-
current Multi-Territory Account List.
1.7 Multi-Territory Account List shall mean a document that is
----------------------------
periodically prepared by the Committee and disseminated to the Affiliates and
that specifies the Subscribers which meet the requirements of Section 1.6(a) and
the name of the respective person or entity who is assigned responsibility for
the multi-territory marketing of the Services to each such Multi-Territory
Account, which person or entity shall in each case be either Muzak or the
Affiliate licensed by Muzak to operate in the MUZAK(R) territory in which the
headquarters of the Multi-Territory Account are located. (Such person or entity
is referred to herein as the "Assigned Person"). Each such Multi-Territory
Account List shall remain in effect until a new Multi-Territory Account List is
prepared and disseminated. No Subscriber shall be added to the Multi-Territory
Account List without the prior written consent of the Affiliate in whose
MUZAK(R) territory the headquarters of such Subscriber are located. Licensee may
at any time and from time to time petition the Committee for removal of a
Subscriber from the Multi-Territory Account List if no multi-territory sale is
made to the Subscriber within 12 months of the inclusion of such Subscriber in
the Multi-Territory Account List.
1.8 Multi-Territory Contract shall have the meaning set forth in Section
------------------------
2.2 below.
1.9 MUZAK(R) territory shall mean a geographical area in the United
------------------
States in which an Affiliate has certain exclusive rights to offer and sell the
Services.
2. Procedures for Subscriber Contracts with Multi-Territory Accounts. The
-----------------------------------------------------------------
following procedures will apply with respect to Subscriber Contracts for
Services and related equipment and services provided to Multi-Territory
Accounts:
2.1 Marketing. The Assigned Person will oversee the marketing approaches
---------
to each respective Multi-Territory Account. Unless Licensee is the Assigned
Person with respect to such Account, Licensee will not independently approach a
MultiTerritory Account location for marketing purposes without the prior written
consent of the Assigned Person. Licensee will provide such marketing assistance
to the Assigned Person, with respect to a Multi-Territory Account that has its
headquarters or one or more Subscriber Premises in Licensee's Territory, as is
G-2
<PAGE>
reasonably requested by the Assigned Person. If Licensee is the Assigned Person,
Licensee shall market the Services to the Multi-Territory Account in a diligent
and proper manner. The Assigned Person shall not visit or otherwise contact the
headquarters of any Multi-Territory Account located in Licensee's Territory
without informing Licensee and soliciting Licensee's participation in such visit
or other contact.
2.2 Contract Form and Terms. Unless otherwise authorized in writing by
-----------------------
the Committee, all Subscriber Contracts with Multi-Territory Accounts for the
sale of the Music Services and related equipment and services shall be
substantially in the form of the MUZAK(R) Multi-Territory Music Service
Agreement that is attached as Schedule 1 to this Exhibit G and all Subscriber
----------
Contracts with Multi-Territory Accounts for the sale of Adjunct Services and
related equipment and services shall be substantially in the form of the
MUZAK(R) Adjunct Services Subscriber Contract described in Exhibit E of the
MUZAK(R) License Agreement to which this Exhibit is attached (either or both, as
the case may be, the "Multi-Territory Contract"). The specific terms (pricing,
length of contract period, etc.) set forth in the Multi-Territory Contract with
a specific Multi-Territory Account shall be as determined by the Committee,
subject to Section 3.2 below. Any material variations in the Multi-Territory
Contract shall require the prior consent of the Committee. Licensee understands
and agrees that, in performing its obligations and exercising its rights with
respect to a Multi-Territory Contract, Licensee shall be bound by the terms set
forth therein and shall have no right independently to amend or otherwise alter
any such terms.
2.3 Commissions.
-----------
(a) Licensee shall pay a Commission with respect to the Multi-
Territory Contract to the Assigned Person by no later than 60 days after
Licensee is provided with a copy of the fully executed Multi-Territory Contract.
(b) In the event that (1) Licensee is (A) invited by the Assigned
Person, (B) the licensee within whose territory the headquarters of such Account
are located, or (C) designated by the Committee to assist the Assigned Person in
the marketing of the Services to the Multi-Territory Account, and (2) the
Committee determines that Licensee (or an employee of Licensee) substantially
assisted the Assigned Person in such marketing (including for example by
maintaining contact with the Multi-Territory Account on behalf of the Assigned
Person and by delivery of the Multi-Territory Contract executed by the Multi-
Territory Account or the performance of other useful services), the Assigned
Person shall pay to Licensee (and not to any salesman or agent of Licensee in an
individual capacity) 1/3 of the Commission it receives. Such payment shall be
made in
G-3
<PAGE>
installments as the Subscriber Premises of the Multi-Territory Account commence
receiving the Services.
2.4 Insurance. To facilitate the marketing of the Services to Multi-
---------
Territory Accounts, each Affiliate, including Licensee, shall maintain in full
force and effect such workmen's compensation coverage and liability insurance
coverage as is reasonably required from time to time by the Committee, and shall
provide evidence of such coverage to the Committee from time to time as
requested.
3. The Committee.
-------------
3.1 Composition; Action.
-------------------
(a) The Committee shall at all times consist of six members, three
of whom shall be appointed annually by the International Planned Music
Association (or, in the event such Association is at any time not in existence,
such organization of the MUZAK(R) licensees as succeeds such Association) (the
"IPMA") and three of whom shall be appointed annually by Muzak. Of the three
members appointed by the IPMA, two shall be IPMA members and the third shall be
an Affiliate (or, in the case of a corporate or partnership Affiliate, an owner,
officer, or key employee of such Affiliate) who may be, but need not be, a
member of the IPMA. Of the three members appointed by Muzak, two shall be
officers or employees of Muzak and the third shall be an Affiliate (or, in the
case of a corporate or partnership Affiliate, an owner, officer, or key employee
of such Affiliate) who may be, but need not be, a member of the IPMA.
(b) The Committee shall meet as often as is necessary to maintain
the Program, but in no event less frequently than quarterly. All members of the
Committee shall be given reasonable prior written or telephone notice of any
Committee meeting. At any meeting of the Committee the presence of five or more
members (participating by phone or in person) shall constitute a quorum for the
transaction of business. All decisions of the Committee shall require the
affirmative vote of at least five members of the Committee during a Committee
meeting. Members may participate in a meeting of the Committee by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in the
meeting shall constitute presence of the person at such meeting.
(c) In the event a member retires from the Committee prior to the
end of his or her term of appointment, or is otherwise unable to serve until the
end of such term, the entity that appointed such member shall promptly appoint a
replacement member to serve until the end of such term.
G-4
<PAGE>
(d) Muzak shall bear the costs associated with the meetings of the
Committee and Muzak and the IPMA shall bear such other costs of the Committee as
they may from time to time agree.
3.2 Guidelines. The Committee shall adopt guidelines from time to time
----------
to govern its operations; provided, however, that such guidelines shall not
conflict with the provisions set forth in this Exhibit G. Such guidelines shall
include general pricing guidelines for Multi-Territory Contracts. After adoption
by the Committee, such guidelines (until revision by the Committee) shall be
binding on Muzak and all such Affiliates.
4. Cessation of Rights to Continue to Provide Services After Termination of
------------------------------------------------------------------------
License Agreement.
- -----------------
4.1 Cessation of Affiliate's Contract Rights. If the MUZAK(R) License
----------------------------------------
Agreement of an Affiliate (the "Terminating Affiliate") terminates or expires
(without a renewal) prior to the termination of a Multi-Territory Contract that
pertains to Subscriber Premises in the Terminating Affiliate's MUZAK(R)
territory, the Terminating Affiliate shall cease to have any right to provide
any music or other services to such Subscriber Premises during the remaining
term of such Multi-Territory Contract. Accordingly, in the event of a
termination of Licensee's MUZAK(R) License Agreement, Licensee shall sell to
Muzak all of its rights in all Multi-Territory Contracts, and all related
equipment, that pertain to Subscriber Premises in Licensee's Territory, with
such sale to be for the price(s) described in Section 4.2 below. Upon such sale,
Muzak shall assume all of Licensee's obligations relative to performance of such
Multi-Territory Contract and with respect to such related equipment accruing
after the date of transfer. In addition, in the event of a termination of the
MUZAK(R) License Agreement of an Affiliate in a MUZAK(R) territory that adjoins
Licensee's Territory, Licensee agrees to provide the Services to the Subscriber
Premises of the Multi-Territory Account in such adjoining territory upon the
request of Muzak for such period of time and upon such other terms as are then
agreed to by Muzak and Licensee.
4.2 Purchase of Contract Rights.
---------------------------
4.2.1 Music Services. In the event that Licensee is a Terminating
--------------
Affiliate, the price applicable to Muzak's purchase of the rights of Licensee in
a Multi-Territory Contract for the provision of Music Services (and the related
equipment, including the Earth Station) shall be determined as provided in this
subsection 4.2.1. In the event that the MUZAK(R) License Agreement of Licensee
has expired without renewal or is otherwise terminated due to the bona fide,
arm's length purchase of Licensee's subscriber contracts for a price based on a
multiple
G-5
<PAGE>
of Recurring Music Gross Billings (as hereinafter defined), Muzak's purchase
price hereunder shall be determined by multiplying such arm's length multiple
times the Recurring Music Gross Billings attributable to the Subscriber Premises
of the Multi-Territory Account located in the Territory. If, however, no such
arm's length multiple can be fairly or accurately determined under the
circumstances, Muzak's purchase price hereunder shall be the result of
multiplying the Prevailing Music Multiple (as hereinafter defined) times the
Recurring Music Gross Billings attributable to the Subscriber Premises of the
Multi-Territory Account located in the Territory. As used herein, (i) the term
"Recurring Music Gross Billings" means the average recurring monthly billings to
a Subscriber for the Music Services and related equipment, net of sales taxes
and (ii) the term "Prevailing Music Multiple" means the average of the arm's
length multiples used to determine the purchase prices of the three most
recently reported (to Muzak) sales of the businesses of MUZAK(R) licensees, to
the extent such prices were based on arm's length multiples of Recurring Music
Gross Billings and such multiples can be independently verified as such.
Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of Licensee's rights under a Multi-Territory Contract, Licensee
and/or Muzak have received formal notice that such Multi-Territory Contract will
expire or be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such expiration or termination of
the Contract is less than the above-described arm's length multiple or
Prevailing Music Multiple (as the case may be), then the purchase price of
Licensee's rights in such Multi-Territory Contract shall be determined by
multiplying such remaining number of months in the Contract term by the
Recurring Music Gross Billings attributable to such Contract. To facilitate the
determination of the Prevailing Music Multiple, if Licensee's MUZAK(R) business
is sold and the purchase price is determined wholly or in part by application of
a multiple to Licensee's Recurring Music Gross Billings, Licensee agrees to
inform Muzak of such multiple promptly after such sale occurs; if the purchase
price of such business is not determined by application of a multiple to
Licensee's Recurring Music Gross Billings, Licensee agrees to inform Muzak of
the amount of the purchase price, the amount of Licensee's Recurring Music Gross
Billings as of the date of closing and the method that was used to determine the
purchase price.
4.2.2 Adjunct Services. The price applicable to Muzak's purchase of the
----------------
rights of Licensee in a Multi-Territory Contract for the provision of the
Adjunct Services (and the related equipment, including the Earth Station) shall
be determined as provided in this subsection 4.2.2. In the event the termination
or expiration of the MUZAK(R) License Agreement of Licensee is due to the bona
fide, arm's length purchase of
G-6
<PAGE>
Licensee's subscriber contracts for a price based on a multiple of Recurring
Adjunct Services Gross Billings (as hereinafter defined), Muzak's purchase price
hereunder shall be determined by multiplying such arm's length multiple times
50% of the Recurring Adjunct Services Gross Billings attributable to the
Subscriber Premises of the Multi-Territory Account located in the Territory. In
all other cases, Muzak's purchase price hereunder shall be the result of
multiplying 50% of the Prevailing Adjunct Services Multiple (as hereinafter
defined) times the Recurring Adjunct Services Gross Billings attributable to the
Subscriber Premises of the Multi-Territory Account located in the Territory. As
used herein, (i) the term "Recurring Adjunct Services Gross Billings" means the
average recurring monthly billings to a Subscriber for the Adjunct Services and
related equipment, net of sales taxes and (ii) the term "Prevailing Adjunct
Services Multiple" means the average of the arm's length multiples used to
determine the purchase prices of the three most recently reported (to Muzak)
sales of the businesses of MUZAK(R) licensees, to the extent such prices were
based on arm's length multiples of Recurring Adjunct Services Gross Billings and
such multiples can be independently verified as such. Notwithstanding the
foregoing, in the event that (i) prior to the date of Muzak's purchase of
Licensee's rights under a Multi-Territory Contract pertaining to Adjunct
Services, Licensee and/or Muzak have received formal notice that such Contract
will be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such termination of the Contract
is less than the Prevailing Adjunct Services Multiple, then the purchase price
of Licensee's rights in such Multi-Territory Contract shall be determined by
multiplying such remaining number of months in the Contract term by 50% of the
Recurring Adjunct Services Gross Billings attributable to such Contract. To
facilitate the determination of the Prevailing Adjunct Services Multiple, if
Licensee's MUZAK(R) business is sold and the purchase price is determined wholly
or in part by application of a multiple to Licensee's Recurring Adjunct Services
Gross Billings, Licensee agrees to inform Muzak of such multiple promptly after
such sale occurs; if the purchase price of such business is not determined by
application of a multiple to Licensee's Recurring Adjunct Services Gross
Billings, Licensee agrees to inform Muzak of the amount of the purchase price,
the amount of Licensee's Recurring Adjunct Services Gross Billings as of the
date of closing and the method that was used to determine the purchase price.
4.3 Effect on License Agreement. To the extent there is an inconsistency
---------------------------
or conflict between the terms of this Article 4 and the provisions set forth in
the body of the MUZAK(R) License Agreement to which this Exhibit G is attached,
the provisions of this Article 4 shall control. Without limiting the generality
of the foregoing, this Exhibit G shall control over Section 2.2(b) (i) of said
License Agreement.
G-7
<PAGE>
5. Affiliate's Failure to Perform.
------------------------------
5.1 No Discontinuance of Services. Under no circumstances shall an
-----------------------------
Affiliate discontinue the distribution of the Services or provision of related
goods and services to a Multi-Territory Account without providing the Committee
at least 96 hours' written notice of its intention to discontinue such
distribution.
5.2 Effect of Failure. In the event that an Affiliate (the "Failing
-----------------
Affiliate") fails to perform its obligations under the terms of a Multi-
Territory Contract and does not cure such failure within 30 days after notice of
such failure by the Committee (or, if such cure cannot be accomplished within 30
days, if the Failing Affiliate does not promptly commence such cure and
diligently pursue it toward completion during such 30-day period and then
accomplish such cure as soon as reasonably possible thereafter), an Affiliate
operating from a MUZAK(R) territory that is adjacent to the Failing Affiliate's
MUZAK(R) territory, as selected by the Committee, shall thereafter be authorized
to perform the obligations and exercise the rights (including rights to receive
payments) of the Failing Affiliate under such Contract until the termination
thereof. Notwithstanding the foregoing, if at any time a Failing Affiliate fails
to provide the Services to a Subscriber Premises in accordance with a Multi-
Territory Contract and does not cure such failure within 72 hours after receipt
of actual or written notice from the Committee, an Affiliate operating from a
MUZAK(R) territory that is adjacent to the Failing Affiliate's MUZAK(R)
territory, as selected by the Committee, shall have the right immediately to
provide the Services to such Subscriber Premises, and the Failing Affiliate
shall reimburse such Affiliate for the costs associated therewith.
6. Disputes. Subject to the last sentence of this Section 6, all disputes
--------
of any kind, nature or description arising in connection with the operation of
the Program that after a reasonable period of time have not been resolved by
less formal means shall be submitted for resolution to a three-person panel
composed of the then-current President of the IPMA, the then-current President
of Muzak, and a third person selected by the two aforementioned individuals. The
dispute shall be resolved according to such rules as are established by such
panel, and the decision of the panel with respect to such dispute shall be
binding on Muzak and the Affiliates. In the event that (i) either Muzak or
Licensee does not wish to use such panel to resolve such dispute, (ii) it
becomes impossible to convene such a panel, or (iii) the panel is unable after a
reasonable period of time to resolve a dispute, the dispute shall be submitted
to the offices of the American Arbitration Association in Seattle, Washington,
Chicago, Illinois, or New York, New York (as determined by the Committee) for
resolution.
G-8
<PAGE>
7. Amendment. This Exhibit G may be amended by the action of the Committee,
---------
acting in accordance with the requirements of paragraph (b) of Section 3.1
(which such paragraph may not be amended without the prior written approval of
Licensee and Muzak); provided, however, that such amendment shall not take
effect until 30 days after the Committee provides written notice thereof to
Licensee and Muzak.
8. Distribution of Revenues. In the event that, under the terms of a Multi-
------------------------
Territory Contract, an Assigned Person collects recurring revenues from a Multi-
Territory Account that are then payable by the Assigned Person to one or more of
the Affiliates, the Assigned Person shall, within 30 days after receipt of each
payment of such revenues, provide such Affiliates with a report showing the date
and amount of such payment and pay to such Affiliates such Affiliates' share of
the revenues, without credit, offset or deduction of any kind or nature
whatsoever other than sales or similar taxes required to be collected in
connection with the provision of Services under the Multi-Territory Contract and
such other deductions as have been agreed to by such Affiliates.
9. Audit. In the event that, under the terms of a Multi-Territory Contract,
-----
the Assigned Person collects revenues from a Multi-Territory Account that are
then payable by the Assigned Person to one or more of the Affiliates, the
Committee shall have the right, upon 15 days' written notice, to audit those
books and records of the Assigned Person pertaining to the administration of
such Multi-Territory Contract for the sole purpose of verifying that such
payments were correctly calculated. During any such audit, the Committee may
make mechanical copies of only those books and records that are necessary for
the verification of such calculations and were physically examined as part of
the audit. The Committee shall take reasonable precautions to safeguard the
confidentiality of such copies and shall destroy any such copies on completion
of the audit and payment by the Assigned Person of any monies determined to be
owing as a result of the audit. Neither the Committee nor any Affiliate shall
assess the Assigned Person for amounts found, as a result of such audit, to be
owing if such amounts were first payable by the Assigned Person more than two
years prior to the date such audit commenced, provided that the Assigned Person
did not knowingly maintain false books and records regarding the Multi-Territory
Contract or knowingly make false payments to the Affiliates with respect to such
Multi-Territory Contract.
G-9
<PAGE>
Schedule 1
MUZAK MULTI TERRITORY ACCOUNT [LOGO OF MUZAK]
SERVICE AGREEMENT
This Agreement ("Agreement") is made as of the __ day ______________ 199__ by
and between MUZAK LIMITED PARTNERSHIP acting as agent for the Servicing Music
Suppliers listed on Exhibit "A" hereto as now existing or as subsequently
amended ("Supplier") and _______________________________ ("Subscriber"). The
parties agree as follows:
1. MUSIC SERVICES
Supplier provides MUZAK(R) subscription music programming (the "`Music
Service") to commercial establishments. Subscriber owns, operates,
franchises or controls the commercial establishments listed in Exhibit
"B" ("Serviced Premises"). The parties agree that, subject to paragraph
6 below, Supplier shall provide the Music Service to each of the
Serviced Premises. Music service description:__________________________
_______________________________________________________________________
2. EQUIPMENT
For the consideration set forth in Section 3 below, Supplier shall
provide the following equipment to each Serviced Premises:
a. Purchased Equipment:_________________________________________________
________________________________________________________________________
b. Other Equipment:_____________________________________________________
_______________________________________________________________________
(Subscriber may obtain additional equipment from Supplier on terms to be
negotiated on a location-by-location basis.)
3. FEES
In consideration of the services and equipment provided to Subscriber,
and in addition to the fees and charges referred to in Section 7 below,
Subscriber shall pay the following fees and charges to Supplier in the
manner set forth herein:
a. One-time charges:
Purchased Equipment (as specified above): $________
Equipment Installation $________
b. Recurring (monthly) charges:
MusIc Service and Equipment $________
4. TERM
This Agreement shall remain in effect for sixty (60) months from
________________ and shall be automatically renewed for subsequent sixty
(60) month period(s) unless terminated by either party by written notice
delivered to the other party at least ninety (90) days prior to the
expiration of the initial term or the applicable renewal term.
5. CONTINUATION OF AGREEMENT
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF the parties have entered into this Agreement as of the day
and year first above written.
Subscnber: Muzak Limited Partnership
________________________________________________ As Agent for the Servicing
Music Suppliers
By:_____________________________________________ By:________________________
Title:__________________________________________ Title:_____________________
Address:________________________________________ 400 North 34th Street,
Suite 200
Seattle, WA 98103
________________________________________________
- --------------------------------------------------------------------------------
MSA-1
<PAGE>
6. INSTALLATION AND MAINTENANCE OF EQUIPMENT
Subscriber hereby grants to Supplier (subject to any necessary governmental
or third party approvals) the right to install all necessary equipment for
receiving the Music Service, including but not limited to an exterior
antenna or a satellite receiver "dish". Supplier-owned equipment provided
to Subscriber hereunder shall be maintained by Supplier at no additional
cost to Subscriber; provided, however, that such maintenance shall be
limited to labor and repairs required by ordinary and proper use of such
equipment. Subscriber shall provide Supplier with reasonable access to the
Serviced Premises during normal business hours for purposes of performing
required maintenance. Supplier shall retain ownership of all equipment
provided hereunder that has not been purchased by Subscriber and Subscriber
shall not transfer, encumber or in any way alienate such equipment.
Subscriber shall be responsible for any loss or damage to the Supplier-
owned equipment (reasonable wear and tear excepted) while installed at a
Serviced Premises. If the Music Service is no longer provided to a Serviced
Premises. Subscriber shall provide Supplier with reasonable wear and tear
excepted) while installed at a Serviced Premises. If the Music Service is
no longer provided to a Serviced Premises. Subscriber shall provide
Supplier with reasonable access to such premises for purposes of removing
any Supplier-owned equipment. Upon the removal of any Supplier-owned
equipment. Supplier shall not be required to repair, replace or otherwise
reestablish the premises to their original condition.
7. PAYMENT TO SUPPLIER
With respect to each Serviced Premises. Subscriber shall pay the fees
specified herein. One-time charges shall be due and payable on a "Net 10
Days" basis. Recurring charges shall be payable monthly in advance and
shall be due on the first day of the calendar month to which the charges
relate. Additionally, Subscriber shall pay to Supplier the incremental cost
of any increase in copyright fees charged by ASCAP, BMI or other similar
entities beyond what is charged as of the date hereof and any sales, use,
excise, or other taxes or governmental charges (except income taxes)
arising from this Agreement. Late payments shall be subject to an interest
charge at the maximum rate permitted by law. Annually during the term of
this Agreement Supplier may increase the recurring charges on 30 days'
prior written notice to Subscriber by a percentage increase equal to the
percentage increase in the consumer Price Index. All Urban Consumers,during
the preceding year.
8. USE OF MUSIC SERVICE
Subscriber agrees that without the prior written consent of Supplier the
Music Service shall not be (i) performed in conjunction with commercial
announcements for which Subscriber or any other person receives
consideration of any kind or (ii) copied, recorded, dubbed or supplemented.
Subscriber further agrees that the Music Service shall not be amplified,
transmitted or retransmitted so as to be audible outside any Serviced
Premises.
9. FAILURE OR INTERRUPTION OF SERVICE
Supplier shall not be liable for any failure to perform its obligations
hereunder due to Acts of God strikes, emergencies, mechanical failure,
regulatory or other governmental action, action or inaction by Subscriber,
its licensees, contractors, employees, agents or invitees, a breach of this
Agreement by Subscriber or any other cause beyond Supplier's control. For
any failure or interruption of the Music Service which is not excused under
he preceding sentence, which exceeds 24 consecutive hours in duration, and
of which Supplier receives written notice within 48 hours of such failure
or interruption. Supplier shall credit Subscriber's account with respect to
the affected Serviced Premises by an amount equal to one thirteenth of the
recurring monthly charge for the Music Service for each 24-hour period
during which failure or interruption continues. Said credit shall be the
sole and exclusive remedy of Subscriber with respect to any interruption or
failure of the Music Service. Supplier shall not be liable for any
incidental or consequential damages whatsoever.
10. ADDITIONS AND DELETIONS
In the event Subscriber wishes to add a Serviced Premises it shall give
Supplier 30 days' prior written notice of such addition. Within 10 days of
Supplier's receipt of such notice it shall advise Subscriber in writing if
it accepts the addition. If the addition is accepted Supplier shall
promptly install any equipment to be provided by Supplier and commence
providing the Music Service at the added premises. In the event Subscriber
wishes to delete a Serviced Premises, it shall give Supplier 30 days' prior
written notice of the deletion. Supplier shall promptly remove from the
deleted premises any Supplier-owned equipment. Subscriber's obligations
with respect to such deleted premises shall not cease unless Supplier is
then provided the Music Service to at least 95% of the Serviced Premises
shown in Exhibit B and (i) Subscriber has closed the deleted premises or
(ii) Subscriber has sold the deleted premises to an unrelated and
unaffiliated third party.
11. SERVICING MUSIC SUPPLIER
Subscriber acknowledges and agrees that all services to be provided by
Supplier hereunder shall be provided by the Servicing Music Supplier
identified in Exhibit "B" as being responsible for a particular Serviced
Premises. Subscriber further acknowledges that Supplier is entering into
and executing this Agreement and behalf of and as agent for each such
Servicing Music Supplier; that is the express intent or both parties
hereto to establish privity of contract between Subscriber and each such
Servicing Music Supplier with respect to each Serviced Premises served by
each such Servicing Music Supplier and that the Xerographic copies of this
Agreement provided to each such Servicing Music Supplier for each such
Serviced Premises shall be deemed for all purposes a counterpart original
of this Agreement.
12. APPLICABLE LAW
In the event of a dispute affecting Serviced Premises located in one state
this Agreement shall be governed by an in accordance with the laws of that
state applicable to contracts made and to be performed wholly within such
state and venue shall rest with the court of general jurisdiction located
in the county where the subject Servicing Music Supplier maintains its
principal place of business. In the event of a dispute affecting Serviced
Premises located in more than one state this Agreement shall be governed by
and in accordance with the laws of the state where the Supplier which has
executed this Agreement as agent for the Servicing Music Suppliers
maintains as principal place of business, applicable to contracts made and
to be performed wholly within such state and venue shall rest with the
court of general jurisdiction located in the country where said Supplier
maintains such principal place of business. If any provision of this
Agreement is deemed unenforceable (in whole or in part) by a Court of
competent jurisdiction the parties agree that such Court shall amend or
delete such provision so as to effectuate the intent of such provision and
of this Agreement to the maximum extent that is enforceable.
13. SUCCESSORS AND ASSIGNS
This Agreement is fully assignable by Supplier but may not be assigned by
Subscriber without the prior written consent of Supplier, which consent
shall not be unreasonably withheld.
14. DEFAULT AND REMEDIES
Default in payment or violation of any material term of this Agreement by
Subscriber shall cause, at Supplier's option, the entire contract balance
to become immediately due and payable as liquidated damages and Supplier
shall have the right to enter any Serviced Premises, discontinued service,
and remove the Supplier-owned equipment. Subscriber shall reimburse
Supplier for all costs and expenses, including reasonable attorneys' fees
and costs, incurred in connection with Supplier's exercise of its rights
under this Agreement.
15. PREEXISTING CONTRACT
In the event a Servicing Music Supplier has a preexisting contract for a
Serviced Premises, then at the option of such Servicing Music Supplier such
contract shall remain in full force and effect until it expires (without
giving effect to any automatic renewal clause), but upon such expiration
this Agreement shall immediately take effect.
16. NOTICES
All notices required to be sent by either party shall be in writing and
shall be sent certified mail postage prepaid to the respective addresses
set forth below their signatures on the reverse side.
17. WHOLE AGREEMENT
This Agreement constitutes the entire Agreement between the parties with
respect to the subject matter hereof and supercedes all prior agreements,
conversations, representations, promises of warranties (express or implied)
whether verbal or written. Except for a modification of the list of
Servicing Music in Exhibits A and B, which may be made by Supplier, no
modification of this Agreement shall be valid unless made in writing and
signed by both parties.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
EXHIBIT A
SERVICING MUSIC SUPPLIERS
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Alabama Kentucky
Electronic Engineers, Birmingham, AL P & M Electronics, Ashland, KY
Electro-Systems, Dothan, AL Lexington Music & Sound, Lexington, KY
Service Associates, Huntsville, AL Planned Music of Kentucky, Louisville, KY
Business Sound, Mobile, AL
Electronic Engineer, Montgomery, Al Louisiana
American Sound & Music, Baton Rouge, LA
Alaska Metro Communications, Lafayette, LA
Northern Television, Anchorage, AK Dixie Music, Lake Charles, LA
Background Music, Fairbanks, AK Business Sound, Metairie, LA (New Orleans)
Business Music, Shreveport, LA
Arkansas
Fitzhugh Communications, Fayetteville, AR Maine
Tempo Sound, Harrison, AR PBC Sound Systems, Bangor, ME
Business Music, Inc., Little Rock, AR
Maryland
Arizona Audio Communications Network, Baltimore, MD
SunCom Group, Scottsdale, AZ (Phoenix)
Tucson Music, Tucson, AZ Massachusetts
Muzak, Waltham, MA (Boston)
California
Muzak, Anaheim, CA Michigan
Serban Sound, Bakersfield, CA Muzi-Tronics, Cadillac, MI
Muzak, Burbank, CA (Los Angeles) Muzi-Tronics, Grand Rapids, MI
Attuned to Music, Chico, CA Muzi-Tronics, Kalamazoo, MI
American Music Network, Fresno, CA Range Telecommunications, Marquette, MI
American Music Network, Modesto, CA Blue Water Music, Port Huron, MI
Musi-Cal, Riverside, CA MacDonald Broadcasting, Saginaw, MI
Muzak, Roseville, CA (Sacramento) Comcast, Warren, MI (Detroit)
American Music Network, Salinas, CA
Comcast, San Diego, CA Minnesota
Muzak, San francisco, CA Business MUsic, Inc., Cold Spring, MN (St. Cloud)
Muzicraft, Santa Barbara, CA Business Music Service, Duluth, MN
Muzicraft, Ventura, CA Muzak, Minneapolis, MN
Custom Communications, Rochester/Winona, MN
Colorado Business Music, Inc., Willmar, MN
Comcast, Colorado Springs, CO
Comcast, Denver, CO Mississippi
Melody Music Company, Columbus, MS
Connecticut Mississippi Sound, Greenwood, MS
Comcast, Hartford, CT Metro Communications, Jackson, MS
Muzak, Milford, CT
Missouri
District of Columbia Towner Communications, Jefferson City, MO
Music Inc., Washington, DC Audio Acoustics, Joplin, MO
Audio Communications Network, Kansas City, MO
Florida Audio Acoustics, Poplar Bluff, MO
Osborn Sound, Ft. Myers, FL Audio Communications Network, St. Louis, MO
Florida Sound, Jacksonville, FL Audio Acoustics, Springfield, MO
Melody Inc., Miami, FL
Marion Music, Ocala, FL Montana
Comcast, Orlando, FL Shaq Miller, Butte, MT
Electro-Systems, Panama City, FL American Music, Great Falls, MT
Electro-Systems, Tallahassee, FL Music Systems, Kalispell, MT
Tropical Music, Tampa, FL
Harmony Music & Sound, W. Palm Beach, FL Nebraska
(Palm Beach) Parker Engineering, Kearney, NE
Business Music Inc., Lincoln, NE
Georgia Business Music Inc., Omaha, NE
Osborn Sound, Albany, GA
Osborn Sound, Atlanta, GA Nevada
Carolina-Georgia Sound, Augusta, GA Musaire, Inc., Las Vegas, NV
Background Music, Phenix City, AL (Columbus, GA) Dynamic Sound, Reno, NV
Osborn Sound, Macon, GA
Georgia Music & Sound, Savannah, GA New Hampshire
Muzak, Exeter, NH
Hawaii
Hawkins Audio Engineering, Honolulu, HI New Jersey
World Music, Springfield, NJ
Idaho
Mountain West Audio, Boise, ID New Mexico
Idaho Mountain West, Idaho Falls, ID Business Music, Inc., Albuquerque, NM
Illinois New York
Muzak, Chicago, IL Comcast, Buffalo, NY
Kickapoo Broadcasting, Danville, IL Arranged Sound, Johnson City, NY (Binghamton)
WSOY, Decatur, IL Functional Communications, Latham, NY (Albany)
Comcast, Moline, IL Muzak, Long Island City, NY (New York City)
Comcast, Peoria, IL NCC Systems, Potsdam, NY
Quincy Broadcasting, Quincy, IL Accent Communication Systems, Poughkeepsie, NY
Springfield Advertising, Springfield, IL Functional Communications, Rochester, NY
Functional Communications, Syracuse, NY
Indiana NCC Systems, Watertown, NY
Service Associates, Evansville, IN
Comcast, Fort Wayne, IN North Carolina
Comcast, Indianpolis, IN SunCom Group, Charlotte, NC
Music Engineering, South Bend, IN SunCom Group, Hillsborough, NC
Independence Communications, Kinston, NC
Iowa Warner Music & Communications, Rocky Mount, NC
Music Services, Inc., Des Moines, IA Background Music, Wilmington, NC
Brite & Rich, Le Mars, IA (Sioux City)
D.B. Acoustics, Marion, IA (Cedar Rapids) North Dakota
Music Systems, Inc., Bismarck, ND
Kansas Music Systems, Inc., Fargo, ND
McClelland Sound, Wichita, KS
Ohio
Port Erie Communications, Ashtabula, OH
</TABLE>
- --------------------------------------------------------------------------------
EXHIBIT A
SERVICING MUSIC SUPPLIERS
- --------------------------------------------------------------------------------
Ohio
Ohio Musicue, Canton, OH
Muzak, Cincinnati, OH
Ohio Music Corporation, Cleveland, OH
Muzak, Columbus, OH
Audio Inc., Dayton, OH
Zaiser Communications, Toledo, OH
Hudix Music, Youngstown, OH
Oklahoma
Lawton Business Music, Lawton, OK
Business Music, Inc., Oklahoma, OK
Granite Sound, Tulsa, OK
Oregon
Muzak, Eugene, OR
Muzak, Medford, OR
Muzak, Portland, OR
Pennsylvania
Independence Communications, Harrisburg, PA
Comcast, Hollidaysburg, PA
Independence Communications, Norristown, PA
(Philadelphia)
Independence Communications, Pittsburgh, PA
Comcast, Scranton, PA
South Carolina
Carolina Sound Communications, Charleston, SC
Background Music, Columbia, SC
Carolina Sound Communications, Myrtle Beach, SC
South Dakota
Music of Rapid City, Rapid City, SD
Midoo Communications, Sioux Falls, SD
Tennessee
Belew Sound & Visual, Bristol, TN
Service Associates, Chattanooga, TN
Service Associates, Knoxville, TN
Mid-South Music & Sound, Memphis, TN
Mid-South Music & Sound, Memphis, TN
Service Associates, Nashville, TN
Texas
Audioplan, Abilene, TX
Business Music, Inc., Amarillo, TX
AVCOM, Austin, TX
Beaumont Business Music, Beaumont, TX
ABC Music, Big Spring, TX
Brownwood Business Music, Brownwood, TX
Gulf Business Music, Corpus Christi, TX
Comcast, Dallas, TX
Muzloom, El Paso, TX
Comcast, Ft. Worth, TX
TFM Sound, Harlingen, TX
Taft Broadcasting, Houston, TX
Business Music, Inc., Lubbock, TX
Pioneer Music, Midland, Tx
W. Texas Business Music, San Angelo, TX
Texas Wired Music, San Antonio, TX
Whitsound, Texarkana, TX
Comcast, Tyler, TX
Wichita Business Music, Wichita Falls, TX
Utah
Mountain West Audio, Salt Lake City, UT
Vermont
Music Services of Vermont, Essex Junction, VT
(Burlington)
Virginia
Independence Communications, Charlottesville, VA
Independence Communications, Newport News, VA
Independence Communications, Richmond, VA
Business Communications, Roanoke, VA
Washington
Muzak, Seattle, WA
Muzak, Spokane, WA
Sousley Sound, Yakima, WA
West Virginia
Joe L. Smith, Beckley, WV
Wheeling Service, Wheeling, WV (Parkersburg/
Wheeling)
Wisconsin
Northern Musicast, Appleton, WI
Central Communications, Eau Claire, WI
Pridham Electronics, Madison, WI
Wisconsin Music Network, Milwaukee, WI
Forward Electronics, Plover, WI
Forward Electronics, Wausau, WI
Wyoming
Background Music Cheyenne, WY
<PAGE>
EXHIBIT B
SERVICED PREMISES
List of all Serviced Premises (With Corresponding Reference to Muzak Affiliate
Responsible for each such Serviced Premises)
- --------------------------------------------------------------------------------
Serviced Premises Servicing Music Suppliers
- --------------------------------------------------------------------------------
MSA-EB
<PAGE>
EXHIBIT H
AGREEMENTS NOT SUPERSEDED
In-Store Advertising Agreement
<PAGE>
EXHIBIT 10.22
[Phoenix, AZ]
MUZAK(R)
LICENSE AGREEMENT
Dated February 01, 1996
-----------------
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
TABLE OF CONTENTS
I. GRANT OF LICENSE...................................... 3
1.1 As to Services................................. 3
1.2 As to Proprietary Marks........................ 4
1.3 Rights Retained................................ 4
II. PROVISION OF SERVICES.................................. 5
2.1 Services....................................... 5
2.2 Satellite-Delivered Services................... 6
2.3 Delivery by Recorded Media..................... 9
2.4 Adjunct Services............................... 10
2.5 Alternate Delivery Means....................... 10
2.6 Service Delivery Equipment..................... 11
III. TERM.................................................. 12
3.1 Term........................................... 12
3.2 Renewal of Rights.............................. 12
3.3 Notice from Licensee........................... 16
IV. EXCLUSIVITY........................................... 17
4.1 In the Territory............................... 17
4.2 Future Services................................ 17
4.3 No Other Services.............................. 18
4.4 Promotion of All Services...................... 20
V. STANDARDS OF SERVICE AND TRAINING..................... 21
5.1 Operations in General.......................... 21
5.2 Sales.......................................... 22
5.3 Protection of Services......................... 23
5.4 Training....................................... 24
5.5 Confidentiality................................ 24
VI. FEES AND ROYALTIES.................................... 26
6.1 Initial Fee.................................... 26
6.2 Market Fee..................................... 27
6.3 Royalty Fee.................................... 28
6.4 DBS Surcharge.................................. 28
6.5 Recorded Media Charges......................... 29
6.6 Adjunct Services Charges....................... 29
6.7 Payment Schedule............................... 29
6.8 Gross Billings................................. 30
i
<PAGE>
VII. RECORDS, REPORTS, AND INSPECTIONS..................... 31
7.1 Records........................................ 31
7.2 Reports........................................ 32
7.3 Audit.......................................... 32
VIII. MARKETING AND PROMOTION............................... 35
8.1 Advertisements................................. 35
8.2 Yellow-Pages Advertising....................... 36
8.3 Additional Assistance by Muzak................. 36
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV ..... 36
X. DEFAULT AND TERMINATION OF THIS AGREEMENT............. 38
10.1 Default of Licensee........................... 38
10.2 Default of Muzak.............................. 41
10.3 Additional Remedies........................... 42
10.4 Force Majeure................................. 43
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR
EXPIRATION OF THIS AGREEMENT.......................... 43
11.1 Action Required of Licensee................... 43
11.2 Action Required of Muzak...................... 44
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE........... 45
12.1 By Licensee and its Owners.................... 45
12.2 Consent of Muzak.............................. 45
12.3 Collateral.................................... 47
12.4 Transfer to Family Member..................... 48
12.5 By Muzak...................................... 48
XIII. PROPRIETARY MARKS..................................... 48
13.1 Ownership..................................... 48
13.2 Infringement.................................. 49
13.3 Use........................................... 49
13.4 Substitution of Proprietary Marks............. 50
XIV. MISCELLANEOUS......................................... 51
14.1 Representations of Licensee................... 51
14.2 Representations of Muzak...................... 51
14.3 Independent Contractor........................ 52
14.4 Release....................................... 52
14.5 No Waiver..................................... 53
14.6 Notices....................................... 54
14.7 Entire Agreement.............................. 55
14.8 Severability.................................. 55
ii
<PAGE>
14.9 Captions...................................... 55
14.10 Binding Effect................................ 56
14.11 Counterparts.................................. 56
14.12 Attorney's Fees............................... 56
14.13 Applicable Law................................ 56
14.14 All Remedies.................................. 56
14.15 Limitation.................................... 57
14.16 No Warranties................................. 57
14.17 No Implied Rights............................. 58
14.18 Survival...................................... 58
14.19 Conversion.................................... 59
14.20 Most Favorable Terms.......................... 59
XV. ACKNOWLEDGEMENTS...................................... 60
15.1 Independent Investigations.................... 60
15.2 Disclosure.................................... 60
15.3 Opportunity to Review......................... 61
EXHIBITS
- --------
Exhibit A - Music Services
Exhibit B - Adjunct Services (Music-Related and Other)
Exhibit C - Marks
Exhibit D - Technical Specifications
Exhibit E - Sales of Adjunct Services
Exhibit F - Adjunct Services Revenue Sharing
Exhibit G - MUZAK(R) Multi-Territory Accounts Program
Exhibit H - Agreements Not To Be Superseded
iii
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
THIS MUZAK(R) LICENSE AGREEMENT ("Agreement") is made and
entered into this ________ day of ______________________________,
19 , by and between MUZAK LIMITED PARTNERSHIP, a Delaware
limited partnership ("Muzak"), and SUNCOM COMMUNICATIONS, L.L.C.,
a ________________ limited liability company ("Licensee").
RECITALS:
--------
WHEREAS, Muzak has developed and owns a system (the "Muzak System") for the
production and delivery to licensees and subscribers of licensees of
subscription music services, adjunct communications services, and related
equipment, which system currently includes Muzak's unique software control
system for satellite distribution of multiple program services;
WHEREAS, the characteristics of the Muzak System also include, without
limitation, subscription music services, with certain unique and varied program
contents developed using distinctive and, in some cases, proprietary program-
scheduling techniques, which are set forth in Exhibit A attached hereto and
incorporated herein by reference (the "Music Services"); distinctive adjunct
services relating to the sequencing, changing, and switching of music-program
communications (the "Music-Related Adjunct Services") and to the delivery of
advertising, data and
1
<PAGE>
video communications (the "Other Adjunct Services"), (collectively the "Adjunct
Services"), which are set forth in Exhibit B attached hereto and incorporated
herein by reference; and delivery methods and procedures for both the Music
Services and the Adjunct Services (jointly, the "Services");
WHEREAS, Muzak identifies the Muzak System and the Services by means of
certain trade names, service marks, trademarks, logos, emblems, and indicia of
origin, including but not limited to the mark "MUZAK(R)," and such other trade
names, service marks, and trademarks as are set forth on Exhibit C attached
hereto and incorporated herein by reference (the "Proprietary Marks"), which
Proprietary Marks represent Muzak's high standards of quality and service; and
WHEREAS, Licensee desires to market and distribute the Services to
customers (the "Subscribers") who enter into agreements providing for receipt of
the Services at certain locations (the "Subscriber Premises"), and wishes to
obtain a license for that purpose from Muzak;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, hereby agree as
follows:
2
<PAGE>
I. GRANT OF LICENSE
----------------
1.1 As to Services.
--------------
(a) Subject to the terms and conditions herein contained, Muzak hereby
grants to Licensee an exclusive license, and Licensee hereby agrees, to engage
in the business of providing the Services to Subscribers at Subscriber Premises
located solely within the following areas (such areas being hereinafter referred
to as the "Territory"): the Counties of Apache, Coconino, Gila, Graham,
-----------------------------------------------
Greenlee, La Paz, Maricopa, Mohave, Navajo, Pinal, Yavapai, and Yuma, all in the
- --------------------------------------------------------------------------------
State of Arizona. Except as specifically authorized by the Multi-Territory Sales
- ----------------
Committee in connection with the Multi-Territory Accounts Program as described
in Article IX below and Exhibit G attached hereto, or by Muzak in connection
with certain Adjunct Services sales as described in Exhibit E attached hereto,
Licensee shall not provide the Services to Subscriber Premises located outside
the Territory.
(b) Licensee and Muzak recognize that some outlying areas of the
Territory may at some future date be more efficiently served by a Muzak licensee
who operates in a territory adjoining the Territory. Licensee therefore shall
have the right at any time to present to Muzak a written request for
reallocation of such outlying areas of the Territory to an
3
<PAGE>
adjoining licensee. Any such reallocation shall be effective upon the written
consent thereto of both Muzak and the adjoining licensee. Muzak's consent shall
not be unreasonably withheld.
1.2 As to Proprietary Marks. Subject to the terms and conditions herein
-----------------------
contained, Muzak grants to Licensee, and Licensee accepts, a license to use the
Proprietary Marks solely in connection with Licensee's provision of the Services
as provided in this Agreement. Licensee shall at all times seek to market and
sell the Services through use of the Proprietary Marks.
1.3 Rights Retained. The grant of rights in Sections 1.1 and 1.2 above does
---------------
not include the grant of the following rights, which are retained by Muzak:
(a) The right to use, and to license others to use, the Muzak System
and the Proprietary Marks for the provision of the Services to Subscriber
Premises which are located outside the Territory.
(b) The right to provide the Services, and to use the Proprietary
Marks in connection therewith, to transportation common carriers (including,
without limitation, operators of automobiles, ships, airplanes, trains, or
buses) which sell or provide transportation common carrier services, in whole or
in
4
<PAGE>
part, within the Territory, it being understood that the reservation of such
right shall not be construed as limiting Licensee's right to provide the
Services to transportation common carriers located wholly within the Territory.
(c) The right to provide a foreground music service by Recorded Media
(as hereinafter defined) under the "YESCO(R)" name and trademark to existing
dealers of the "YESCO(R)" Foreground Music Service and their customers pursuant
to existing contractual obligations or agreements with such dealers; provided,
however, that Muzak shall not authorize such dealers to distribute any of the
Services or use the Proprietary Marks within the Territory.
II. PROVISION OF SERVICES
---------------------
2.1 Services. Muzak shall supply Licensee with the Services for and during
--------
the term hereof, for use by Licensee solely in accordance with the terms of this
Agreement. Muzak reserves the right to add a Service and, except with respect to
the "Environmental Music by MUZAK(R)" and the "Foreground Music One(R)" Music
Services, to substitute a different Service or discontinue the distribution of a
Service, if Muzak reasonably determines that such addition, substitution, or
discontinuation will be beneficial to its business and the business of its
licensees in general and gives Licensee at least six (6) months'
5
<PAGE>
prior notice of such addition, substitution or discontinuation. Any such
addition, substitution or discontinuation will be reflected in an amendment of
Exhibit A or Exhibit B, as the case may be, and will not affect the validity of
this Agreement, which shall, in all respects, be deemed modified to provide for
such addition, substitution, or discontinuation.
2.2 Satellite-Delivered Services.
----------------------------
(a) Subject to Section 2.3, Licensee agrees to deliver the Music
Services to Subscribers by such means as meet the standards and technical
specifications set forth in Exhibit D attached hereto and incorporated herein by
reference and the other terms and conditions of this Agreement. Muzak may modify
the standards and specifications set forth in Exhibit D from time to time if
Muzak reasonably believes that such modifications are necessary to maintain or
improve the quality of delivery of the Services to Subscribers or to maintain or
improve the effectiveness or quality, or reduce the price, of the Service
Delivery Equipment (as hereinafter defined); provided, however, that no such
modifications shall have the effect of rendering the satellite receivers and
associated antennae (collectively, the "Earth Stations") then in use by
Licensee or Subscribers in the Territory incapable of receiving satellite
transmissions, or any other equipment then in use by Licensee or Subscribers in
the Territory for the reception of the Services incapable of
6
<PAGE>
receiving the Services, unless such modifications are necessitated by law or by
the exercise of the rights of third parties under the express terms of Muzak's
satellite-space contracts; and provided further, that Muzak shall provide
Licensee with six (6) months' prior notice of any changes to those standards and
specifications in Exhibit D that pertain to the Service Delivery Equipment and
Licensee's obligations under Section 2.6 below.
(b) In the event that the Services are delivered by "Direct-Broadcast
Satellite" ("DBS"), which permits the satellite transmission of Services by
Muzak directly to the premises of a Subscriber, the following shall apply:
(i) Muzak shall, promptly after receipt of written notice from
Licensee, commence DES delivery of the Services to Subscribers who have
Earth Stations suitable for receipt of such delivery. Subject to the
provisions of Exhibits E and G hereto, if Muzak delivers Services by DBS
directly to the Subscriber Premises, Muzak shall not discontinue such
delivery until the earlier of the following: (A) the date which Licensee
designates, or (B) one hundred eighty (180) days after the effective date
of the termination or expiration (without renewal of license rights) of
this Agreement. In the event Muzak discontinues delivery of Services in
violation of this subsection (b)(i),
7
<PAGE>
Muzak agrees to the granting of a temporary injunction against it on the
condition that the duration of such injunction does not exceed ten (10)
days. Such injunction may be granted on an ex parte basis if Muzak fails to
-- -----
appear at the hearing following twelve (12) hours' notice by telephone to
the twenty-four (24) hour telephone number of the Muzak DBS Division.
During the ten (10) day temporary injunction period, Licensee may seek to
have such temporary relief converted to a permanent injunction in a hearing
on the merits following appropriate notice to Muzak.
(ii) During the above-referenced 180-day (or shorter, if Licensee so
designates) period, Licensee shall remain obligated to perform the duties
and be subject to the restrictions applicable to it under the terms of this
Agreement with respect to such continuing DBS delivery of the Services,
including without limitation those terms which obligate Licensee to pay
royalties, fees, charges, and surcharges (but only with respect to Gross
Billings [as hereinafter defined] and fees and charges to Subscribers
served by means of DBS), but not including terms which require Licensee to
pay a market fee or which restrict Licensee from offering or selling the
services of others. During such 180-day (or shorter) period, under no
circumstances shall Licensee use the Proprietary Marks except as necessary
in association with the continuing
8
<PAGE>
provision of the Services by DBS to Subscribers. In addition, during such
period Muzak shall not be precluded from appointing one or more
distributors of the Services in the Territory and from giving to such
distributors any rights previously accorded to Licensee under this
Agreement or any related agreement.
2.3 Delivery by Recorded Media. Certain Services, as reasonably designated
--------------------------
by Muzak, may be delivered by means of, among other things, magnetic tape or
compact disc, in analog or digital form (the "Recorded Media"). Muzak shall at
all times retain title to, and all ownership rights in, any Recorded Media,
whether furnished to Licensee or to a Subscriber. Licensee shall not sell,
assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any
Recorded Media. Licensee shall (i) prohibit all Subscribers who receive Services
delivered by Recorded Media from selling, assigning, transferring, conveying,
giving away, pledging, mortgaging, or otherwise encumbering any of such Recorded
Media, (ii) promptly notify Muzak in the event it becomes aware that any
Subscriber has violated any such prohibition, (iii) cooperate with Muzak in the
immediate termination of the provision of Services to any Subscriber which has
violated any such prohibition, and (iv) take such further action as is requested
by Muzak (at Muzak's expense) to enforce such prohibition.
9
<PAGE>
2.4 Adjunct Services. All sales of the Adjunct Services shall be conducted
----------------
in the manner provided in Exhibit E attached hereto and incorporated herein by
reference.
2.5 Alternate Delivery Means. In the event of a failure of Muzak's
------------------------
satellite transmissions of the Services, Muzak shall use its reasonable best
efforts promptly to restore such transmissions. In addition, by no later than 30
days after the date of this Agreement, Muzak shall provide Licensee with tape
cassettes (or other form of Recorded Media) containing 72 hours of
"Environmental Music by MUZAK(R)" programming and 72 hours of "Foreground Music
One(R)" programming, at no cost to Licensee, which Licensee shall retain for
emergency use in the event of a failure of Muzak's satellite transmissions of
the Music Services. Should any such failure of satellite transmissions continue
for a period in excess of 48 hours, Muzak shall use its reasonable best efforts
promptly to provide Licensee with additional tape cassettes (or other form of
Recorded Media), at no cost to Licensee, to be used until such failure has been
corrected. All Recorded Media provided to Licensee or to Subscribers under the
terms of this Section 2.5 shall be subject to all other provisions of this
Agreement pertaining to Recorded Media, including, without limitation, Section
2.3.
10
<PAGE>
2.6 Service Delivery Equipment.
--------------------------
(a) Licensee, at its expense (except as provided in subsection (b)
below), shall obtain and maintain equipment (including, without limitation,
Earth Stations) to enable Licensee to receive and distribute the Services and
shall obtain and make available to the Subscribers equipment to enable the
Subscribers to receive the Services. (All equipment used to receive or
distribute the Services, including such equipment as is owned by Subscribers, is
hereinafter collectively referred to as the "Service Delivery Equipment.") The
Service Delivery Equipment, except Subscriber-owned equipment that is not sold
to the Subscriber by Licensee, shall conform to Muzak's standards and
specifications in effect on the date Licensee installs such Equipment at the
Subscriber Premises. The standards and specifications in effect as of the date
hereof are attached hereto in Exhibit D.
(b) Muzak shall, at no cost to Licensee, provide Licensee with two (2)
Earth Stations for Licensee's use (at such locations in the Territory as
Licensee determines) in receiving the Services during the term of this
Agreement. Muzak shall at all times retain title to, and all ownership rights
in, the Earth Stations that it provides to Licensee, and Licensee shall not
under any circumstances sell, assign, transfer, convey, give away, pledge,
mortgage, or otherwise encumber such Earth
11
<PAGE>
Stations. Licensee shall, at Muzak's expense (except with respect to the
obtaining of any required permits, which shall be at Licensee's expense up to
$500 per Earth Station), install the Earth Stations which Muzak provides to
Licensee, and shall, at its own expense, maintain such Earth Stations in good
working condition; provided, however, that in the event any Earth Station
provided to Licensee is, through no negligent or intentional act or failure to
act of Licensee, defective or in need of replacement parts or repair, Muzak,
after receipt of notice thereof, shall promptly provide or arrange for such
replacement parts and repair as are necessary to restore such Earth Station to
good working order.
III. TERM
----
3.1 Term. Except as otherwise provided herein, the term of this Agreement
----
shall begin as of the date set forth in the introductory paragraph of this
Agreement and shall continue in full force and effect for a period of ten (10)
years from such date.
3.2 Renewal of Rights.
-----------------
(a) If Muzak reasonably determines that the performance of Licensee
during the term stated in Section 3.1 is not sufficiently satisfactory to
warrant renewal of Licensee's
12
<PAGE>
license rights hereunder, then, at least two years prior to the date of
expiration described in Section 3.1 of this Agreement, Muzak shall notify
Licensee that it does not intend to renew Licensee's license rights and provide
the specific reasons for such decision. Such notification is intended to give
Licensee the opportunity to assign its rights under this Agreement, or to make
satisfactory its performance, it being understood that any such assignment is
subject to Muzak's prior approval as provided in Article XII hereof.
(i) In determining whether or not to renew Licensee's license
rights, Muzak shall consider Licensee's performance under this Agreement.
In evaluating Licensee's performance, Muzak shall consider such factors as,
among others, the following: Licensee's total billings for all Services,
the trend of Licensee's new billings and cancellations (and the reasons
therefor or), local market conditions and the degree of Licensee's market
penetration in the Territory.
(ii) In the event Muzak notifies Licensee that Muzak does not
intend to renew Licensee's license rights because Muzak has reasonably
determined that Licensee's performance is not sufficiently satisfactory to
warrant renewal of Licensee's license rights hereunder, Licensee shall have
a period of six months from the date of such
13
<PAGE>
notice to attempt to improve its performance. At the end of such six-month
period, Muzak shall reconsider the adequacy of Licensee's performance and
if such performance has sufficiently improved so that it is no longer
inadequate, Muzak shall rescind its notice of intention not to renew
Licensee's license rights. Conversely, if at the end of such six-month
period Muzak determines that Licensee's performance remains inadequate,
Muzak shall inform Licensee of the reasons for such determination and send
to Licensee a final notice of nonrenewal.
(b) Muzak shall also have the right not to renew Licensee's license
rights if Licensee engages in conduct which Muzak reasonably deems inimical to
the best interests of the Muzak System (including the interests of the MUZAK(R)
licensees in such System). The exercise of Muzak's rights as stated in this
subsection (b) shall be subject to the following conditions:
(i) In the event such conduct constitutes a breach of this
Agreement, Muzak shall have the absolute right not to renew Licensee's
license rights, provided that Muzak has notified Licensee of such breach,
such breach occurred (or Muzak first became aware of such breach) no more
than six months before Muzak's nonrenewal notice to Licensee, and Licensee
has neither cured nor challenged such breach within the period specified in
Section 10.1(c)
14
<PAGE>
hereof, and provided further that Muzak's nonrenewal notice to Licensee
states that it constitutes a final notice of nonrenewal; and
(ii) In the event that such conduct does not constitute a breach
of this Agreement, Muzak shall notify Licensee within 90 days of its
discovery of the objectionable conduct that it considers such conduct to be
inimical to the best interests of the Muzak System (including the interests
of the MUZAK(R) licensees in such System). If, after two such notices,
Licensee again engages in conduct which Muzak reasonably deems to be
inimical to the best interests of the Muzak System (including the interests
of the MUZAK(R) licensees in such System), then (whether or not such
conduct is similar to the conduct referred to in either of the earlier
notices) Muzak may notify Licensee of that fact and of the further fact
that as a result of such conduct, it does not intend to renew Licensee's
license rights. This notice shall constitute a final notice of nonrenewal.
(c) In the event that, in accordance with the provisions of this
Section 3.2, Muzak notifies Licensee of its intention not to renew Licensee's
license rights, then Muzak shall have no obligation to offer to renew such
license rights; provided, however, that if, in the case of the final nonrenewal
15
<PAGE>
notice sent pursuant to subparagraph (a) or subparagraph (b)(ii) above,
Licensee challenges, by litigation commenced no later than 120 days after the
date of such final nonrenewal notice, the propriety of such notice, such notice
shall become effective only after such litigation is finally resolved in favor
of Muzak. It is understood and agreed that Licensee's right to challenge the
final nonrenewal notice sent under subparagraph (b)(i) of this Section 3.2
shall be exercised, if at all, by means of Licensee's challenge under Section
10.1 of this Agreement of the breach supporting such nonrenewal. For purposes
hereof, final resolution shall include Licensee's failure to make a timely
appeal of a court decision in favor of Muzak. If Muzak does not so notify
Licensee, then Muzak shall be required to offer to enter into a new license
agreement with Licensee upon expiration of this Agreement, which new license
agreement shall correspond to the form of license agreement which Muzak is then
bona fide offering to licensees (or prospective licensees) serving (or proposing
to serve) licensed territories of comparable size to that proposed to be
licensed to Licensee under such new agreement.
3.3 Notice from Licensee. Notwithstanding Section 3.2, Muzak shall have no
--------------------
obligation to offer to renew Licensee's license rights unless, after written
notice from Muzak sent to Licensee no less than eight (8) and no more than
twelve (12) months prior to the date of expiration described in Section 3.1
16
<PAGE>
of this Agreement advising Licensee of the effect of this Section 3.3, Licensee
shall have given Muzak written notice of its desire to renew its license rights
not less than six (6) months nor more than twelve (12) months prior to the date
of expiration described in Section 3.1 of this Agreement.
IV. EXCLUSIVITY
-----------
.1 In the Territory. Subject to the provisions of Sections 1.3 and 2.4
----------------
(including Exhibit E hereto) above, Article IX below (including Exhibit G
hereto), and the Licensee's In-Store Advertising Agreement described in Exhibit
H attached hereto, during the term of this Agreement, Muzak shall not authorize
anyone other than Licensee to (i) provide the Services in the Territory or (ii)
use the Proprietary Marks in the Territory.
.2 Future Services. Muzak shall conduct research and development to
---------------
maintain and improve the quality of the Services and the methods used to
distribute them. In the event that Muzak develops new subscription music
services, or new communications services in the nature of the Adjunct Services,
after the date hereof, Muzak shall amend Exhibit A or Exhibit B, as the case may
be, in the manner provided in Section 2.1 above (including the requirement of at
least six months' prior notice to Licensee of such amendment) to add such new
Services thereto, thereby giving
17
<PAGE>
Licensee the right and, subject to Exhibit E hereto, the obligation to
distribute such Services in the Territory under the terms of this Agreement.
.3 No Other Services. During the term of this Agreement, except as
-----------------
otherwise approved in writing by Muzak, neither Licensee nor any of the persons
or entities holding (either directly, indirectly, or beneficially) a controlling
ownership interest in Licensee shall, either directly or indirectly, for itself,
or through, on behalf of, or in conjunction with any person or entity:
(a) Participate or permit any of its employees, officers, or directors
to participate, either directly or indirectly in the distribution in the
Territory of any communications service substantially the same as or similar to
the Adjunct Services (except a communications service distributed by any such
person or entity pursuant to a contract or agreement in effect on the date the
Adjunct Service which is the same as or similar to such communications service
is first offered to Licensee by Muzak), or any subscription music service other
than the Music Services, including, without limitation, a radio program service
which is provided through special reception devices tuned only to that station's
signal and any music programming that is provided to commercial or residential
locations by means of cable television or cable radio; provided,
--------
18
<PAGE>
however, that the foregoing shall not become effective with respect to such
- -------
other subscription music services that are distributed by Recorded Media until
the later of (i) January 1, 1993, (ii) the first date Licensee may cancel or
otherwise terminate the agreement under which Licensee is the distributor of
such other music services without causing a breach of such agreement (provided
such agreement was in effect on March 1, 1990), or (iii) with reference to the
distribution of such music services to any particular customer, the first date
Licensee may either substitute the Music Services for such other music services
or cancel or terminate the agreement with such customer without causing a breach
of such agreement (provided such customer agreement was in effect on September
1, 1990); and provided further, that if, as a result of Licensee's acquisition
-------- -------
of another music business or the assets thereof during the term of this
Agreement, Licensee becomes the assignee of a customer agreement for such other
music or communications services or an agreement under which Licensee is the
distributor of such other music or communications services and Licensee cannot
substitute the Services for such other services without causing a breach of such
agreement, Licensee may provide such other services to the customers receiving
such services on the date of assignment through the remaining term (without
reference to renewal rights) of such agreement. Indirect participation shall
include participation as an officer, director, owner (which term shall not
include the holder of 5% or less of the common stock of a
19
<PAGE>
publicly-held entity), partner, employee, or consultant of an entity
distributing such other communications or subscription music service.
(b) Divert or permit any of its employees, officers, or directors to
divert any existing or prospective Subscriber to any competitor in the
Territory, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with Muzak, the Proprietary Marks, or the Services.
(c) Display in any location in the Territory any trade names,
trademarks, or service marks of any other business providing subscription music
services or providing communications services substantially similar to the
Adjunct Services except if permitted to sell or distribute such services in the
Territory pursuant to Paragraph (a) above.
.4 Promotion of All Services. Throughout the term of this Agreement,
-------------------------
Licensee shall use its reasonable best efforts actively to promote, market, and
distribute each of the Services (except as otherwise provided in Article 4 of
Exhibit E hereto).
20
<PAGE>
V. STANDARDS OF SERVICE AND TRAINING
---------------------------------
5.1 Operations in General. In order to maintain the reputation and
---------------------
goodwill of Muzak, the Services, and the Proprietary Marks, Licensee shall:
(a) Comply with all federal, state, and local laws, rules and
regulations, and timely obtain all permits, certificates, and licenses,
necessary in the reasonable judgment of Licensee for the proper conduct of the
business licensed hereunder (the "Business").
(b) Maintain an office in the Territory and promptly notify Muzak in
the event Licensee moves the office to a new location within the Territory;
provided, however, that if Licensee is also the Muzak licensee in a territory
adjacent to the Territory and maintains an office in that territory that
adequately serves Subscribers in both such territories, Licensee need not
maintain an office in the Territory.
(c) Be responsible for paying for all performing rights licenses
necessary for the distribution of the Services; provided, however, that Muzak
shall be responsible for paying for the license with SESAC to the extent
required for Licensee's distribution of the Services.
21
<PAGE>
(d) Be responsible for paying all applicable local, state and federal
taxes of whatever nature, now or hereafter enacted, relating to Licensee's
provision of the Services, and all accounts and other indebtedness of every kind
incurred by Licensee in the conduct of the Business.
(e) Hold itself out to the public as an independent contractor,
operating under a license from Muzak. In the event Licensee elects to exhibit
the MUZAK(R) name on its stationery or vehicles, such exhibition shall be in a
conspicuous place and only in juxtaposition with Licensee's corporate name.
5.2 Sales. Licensee (or, if Licensee is a corporate or partnership entity,
-----
those individuals responsible for managing the Business) shall devote full-time
and reasonable best efforts to the sale, distribution, and support of all the
Services (it being understood that such obligation shall not be construed as
prohibiting Licensee from selling goods and services in addition to the
Services, provided such sale does not violate Section 4.3 above, or requiring
Licensee to sell certain Adjunct Services as described in Article 4 of Exhibit E
hereto) . Without limiting the generality of the foregoing, prior to the
beginning of each consecutive twelve (12)-month period during the term of this
Agreement, with the first such period to begin on the first anniversary of the
date of this Agreement, Muzak and Licensee shall mutually set a Services sales
goal for Licensee. Such goal
22
<PAGE>
shall be based on the amount of Gross Billings, plus the amount of billings for
the sale of Recorded Media and Adjunct Services, which Muzak and Licensee
mutually believe can be attained by Licensee during such twelve (12)-month
period, taking into consideration such factors as the size and other distinctive
characteristics of the Territory, the size and trend of Licensee's past Gross
Billings and other billings, Licensee's prior sales of each Service, and
economic conditions affecting the Territory. Licensee shall use its best efforts
to meet such sales goals during each respective twelve (12)-month period.
5.3 Protection of Services. Licensee shall not alter in any way the
----------------------
Services or any products (including Service Delivery Equipment) owned by Muzak
and in the possession of Licensee. Without limiting the generality of the
foregoing, Licensee shall not substitute or add any musical selections or other
material in or to any Service (except in extraordinary circumstances, with the
prior written consent of Muzak, which in such circumstances shall not be
unreasonably withheld). Licensee shall not represent that any product or
equipment not produced by Muzak has been produced by Muzak; provided, however,
that the foregoing shall not preclude Licensee from displaying the MUZAK(R) name
on items not produced by Muzak, including promotional items, if Muzak has
authorized such display. Licensee shall report to Muzak any unauthorized
reception of the Services promptly after becoming aware of any such unauthorized
reception, and shall
23
<PAGE>
further cooperate with Muzak in protecting against and preventing the
unauthorized reception of the Services. Licensee shall not record, copy, or
reproduce all or any part of any Service and shall expressly prohibit, including
by written agreement if possible, Subscribers from recording, copying, or
reproducing all or any part of any Service.
5.4 Training. Muzak shall make available to Licensee and its employees
--------
training programs designed to maintain and improve Licensee's sales and delivery
of the Services; provided, however, that this obligation shall cease in the
event Muzak determines that such programs (or any sessions thereof) are not
cost-effective. For all such programs, Muzak shall provide instructors and
training materials, for which Muzak reserves the right to charge a reasonable
tuition fee. Licensee or its employees shall be responsible for any and all
other expenses incurred by them in connection with such training programs,
including without limitation the costs of transportation, lodging, meals, and
any wages.
5.5 Confidentiality. During the term of this Agreement and thereafter,
---------------
neither Muzak nor Licensee (including any persons or entities listed on the last
page of this Agreement) shall use for its own purposes or divulge to any third
party any trade secrets or confidential information of the other. As used herein
(i) the term "third party" shall not include any party otherwise lawfully
24
<PAGE>
in receipt of the trade secrets or confidential information to be divulged; or
any employee, attorney, accountant, or consulting engineer of Muzak or Licensee,
as the case may be, provided that such individual agrees not to further use or
disclose such trade secrets or confidential information; or any person or entity
providing credit or financing to Muzak or Licensee, as the case may be, provided
such person or entity (and any representative thereof) is similarly charged with
maintaining the confidence of such trade secrets and confidential information;
or any representative of a governmental authority or other person or entity to
whom disclosure is required by compulsion of law, provided notice of the demand
for such disclosure is given, within 48 hours of receipt of such demand, to the
party owning the confidential information or trade secrets required to be
disclosed; and (ii) the term "confidential information" means information
designated as such in writing by the party owning such information, as well as
customer lists and revenue data (without further designation), but does not
include information that has become part of the public domain through
publication or other similar communication. During the term of this Agreement
Muzak shall not require that Licensee disclose to Muzak the name and address of
any Subscriber other than (i) for the purpose of participation in the Multi-
Territory Accounts Program, (ii) to permit delivery of the Services under the
Licensee's In-Store Advertising Agreement, and (iii) to permit delivery of the
Services by such technological means as require such information
25
<PAGE>
for such delivery. Licensee understands and agrees that if Muzak is unable to
perform any of its obligations hereunder as a result of its inability to obtain
such Subscriber information, such nonperformance shall not be deemed a breach of
this Agreement.
VI. FEES AND ROYALTIES
------------------
6.1 Initial Fee. If this Agreement is entered into in connection with the
-----------
renewal or continuation (including amendments and adjustments of territories) of
rights granted under a prior agreement between Muzak (or its predecessor) and
Licensee (or its predecessor in the Territory), Licensee shall not be required
to pay any initial fee to Muzak. If this Agreement is not entered into in
connection with such renewal or continuation of rights granted under such a
prior agreement, Licensee shall pay to Muzak an initial fee of Five Thousand
Dollars, plus the amount, if any, paid by Muzak to purchase the rights of any
former licensee in the Territory in any Multi-Territory Contracts and certain
Adjunct Services Subscriber Agreements (as defined in Exhibits E and G hereto),
receipt of which initial fee is hereby acknowledged. The initial fee shall be
deemed fully earned and nonrefundable upon execution of this Agreement and
assignment of such subscriber contracts and agreements in consideration of the
administrative and other expenses incurred by Muzak in granting this license to
Licensee.
26
<PAGE>
6.2 Market Fee. Licensee shall pay to Muzak, in accordance with Section
----------
6.7 each calendar month, a market fee in the amount set forth below for Licensee
--------
Category B and based upon information then available in the report entitled
- ----------
County Business Patterns by State and a U.S. Summary, as published by the Bureau
- ----------------------------------------------------
of the Census, United States Department of Commerce or any successor publication
(the "U.S. Business Pattern Report") and, in the case of Category I below, the
population within the Territory.
<TABLE>
<CAPTION>
Licensee Number of Businesses and/or Monthly
Category Population Within Territory Market Fee
- --------------- --------------------------------- ----------
<S> <C> <C>
A 70,000 or more businesses $950
B 60,000 through 69,999 businesses 900
C 50,000 through 59,999 businesses 850
D 40,000 through 49,999 businesses 770
E 30,000 through 39,999 businesses 690
F 20,000 through 29,999 businesses 610
G 10,000 through 19,999 businesses 530
H 5,000 through 9,999 businesses 450
I ("Junior 4,999 or fewer businesses or 350
Franchise") population of 100,000 or less
</TABLE>
Upon a determination by Muzak, based upon the information then available in the
U.S. Business Pattern Report (or, in the case of Category I, the U.S. Census),
that the number of businesses or population within the Territory has changed so
as to require the recategorization of the Business, Muzak will so notify
Licensee. Any adjustment in the market fee resulting from such recategorization
shall become effective for the calendar month immediately following the month in
which such notice is given. Cumulative adjustments in the market fee during the
term of this
27
<PAGE>
Agreement shall not exceed two (2) categories from that shown above in this
Section 6.2.
6.3 Royalty Fee. Licensee shall pay to Muzak each month a royalty fee in
-----------
the amount of ten percent (l0%) of Licensee's Gross Billings, as defined in
Section 6.8 below.
6.4 DBS Surcharge. In consideration of Muzak's development and
-------------
implementation of DBS, Licensee shall pay to Muzak a surcharge (the "DBS
Surcharge") throughout the term of this Agreement; provided, however, that
Licensee's obligation to pay the DBS Surcharge shall no longer exist after
Licensee (and/or any predecessor of Licensee in the Territory) has paid to Muzak
the DBS surcharge with respect to the Territory for a cumulative total of
ninety-six (96) consecutive calendar months (including any months preceding the
date of this Agreement during which Licensee [or its predecessor in the
Territory] paid such DBS Surcharge with respect to the Territory). The DBS
Surcharge shall be equal to the following percentage of Licensee's Gross
Billings:
28
<PAGE>
<TABLE>
<CAPTION>
Calendar Months
(Including any applicable DBS Surcharge
months preceding the date (Percentage of
of this Agreement) Gross Billings)
------------------------- ---------------
<S> <C>
1 through 12 0.50%
13 through 24 1.25%
25 through 60 1.75%
61 through 96 1.00%
thereafter 0.00%
</TABLE>
6.5 Recorded Media Charges. Licensee shall pay Muzak's standard Recorded
----------------------
Media charges, as the same may be set forth by Muzak from time to time in
writing, for all Recorded Media distributed to Licensee or the Subscribers.
Muzak shall not increase such Recorded Media charges prior to January 1, 1993,
and increases thereafter shall not exceed ten percent (l0%) per annum.
6.6 Adjunct Services Charges. Licensee shall pay Muzak's Adjunct Services
------------------------
charges in accordance with the terms set forth in Exhibit F attached hereto and
incorporated herein by reference.
6.7 Payment Schedule. All monthly payments required by Sections 6.3 and
----------------
6.4 shall be paid within forty-five days of the end of the month in which the
applicable Services are provided to the Subscribers, and shall be submitted
together with any reports or statements required under Section 7.2 hereof. All
Market Fee charges required by Section 6.2, all Recorded Media charges required
by Section 6.5, and all Adjunct Services charges
29
<PAGE>
required by Section 6.6 shall be paid within forty-five days after the date of
Muzak's billing to Licensee. Any payment of fees due to Muzak that is not
actually received by Muzak by the due date shall be deemed overdue. If any
payment is deemed overdue, simple interest may be assessed on such overdue
payment. Such interest shall accrue on a daily basis from the due date until the
date of payment, at the lesser of (i) the prime rate of The First National Bank
of Chicago per annum in effect at the beginning of the calendar quarter, or (ii)
the highest rate of interest permitted by law in Licensee's State. Entitlement
to such interest shall not limit any other remedies available under law or this
Agreement as a result of the overdue payment.
6.8 Gross Billings. "Gross Billings" means all amounts billed or otherwise
--------------
charged to a Subscriber by Licensee in connection with (1) the provision of any
Music Service, and (2) the lease or rental (but not the sale) of Service
Delivery Equipment and other equipment used to receive and distribute such Music
Service but not including (i.e., excluding) equipment that is not used primarily
in the provision or reception of a Music Service. Notwithstanding the foregoing,
"Gross Billings" shall not include any amount billed or otherwise charged to a
Subscriber by Licensee for (a) the provision of any Music Service on Recorded
Media, (b) Music-Related Adjunct Services, or (c) the lease or rental of any
Service Delivery Equipment used with Recorded Media. "Gross Billings" also shall
not include (i) any
30
<PAGE>
amounts billed to Subscribers as (and separately stated on the billings or
otherwise separately determinable as) sales or similar excise taxes; (ii) one-
time installation charges billed not later than ninety (90) days following
completion of such installation; (iii) charges for service of Subscriber-owned
equipment, provided that such charges are separately determinable; (iv) ad hoc
(i.e., extraordinary) charges for service actually performed on Subscriber-
----
leased or Subscriber-owned equipment; and (v) late-payment penalties or interest
charges imposed by Licensee, provided that such penalties and charges do not
exceed standard industry practice. Licensee may deduct from its Gross Billings
(i) amounts paid by Licensee as performing rights fees to ASCAP, BMI, or similar
performing rights organizations with respect to the Music Services other than
those distributed by Recorded Media, and (ii) the amount of any billings that
were previously reported to Muzak as part of Licensee's Gross Billings but
which, in the month of the deduction, were written off by Licensee as
uncollectible in accordance with federal income tax standards of
uncollectibility.
VII. RECORDS, REPORTS, AND INSPECTIONS
---------------------------------
7.1 Records. Licensee shall prepare, and retain at its principal place of
-------
business for at least two (2) years thereafter, complete and accurate books,
records, and accounts of the Business. Such books, records, and accounts shall
fairly
31
<PAGE>
represent the results of operations of such business, as determined on an
accrual basis, and shall be kept in sufficient detail to permit the transactions
included in such operations to be clearly identifiable and traceable to
underlying documentation. Licensee shall make available such records and books
of account to Muzak or its representatives if requested by Muzak for inspection
and audit as provided in Section 7.3.
7.2 Reports. Licensee shall submit to Muzak, together with the payments
-------
described in Section 6.7, royalty and fees reports, in such detail as Muzak may
from time to time reasonably request, accurately reflecting all Gross Billings
during the periods to which such payments pertain.
7.3 Audit.
-----
(a) Muzak or its representatives may, upon giving Licensee 30 days'
(or 10 days' in the case of an audit following a request for Muzak's consent to
a transfer under Article XII hereof) written notice, enter the premises of
Licensee (and of any person doing business [an "affiliated person"] controlling,
controlled by or under common control with Licensee) during normal business
hours for inspection and audit of the business and records of Licensee and of
such affiliated person, provided that such inspection and audit shall be no more
extensive than is required to verify that none of Licensee's or such affiliated
32
<PAGE>
person's revenues should have been reported as Gross Billings or as charges for
Recorded Media and Adjunct Services and that Licensee's payments to Muzak have
been properly computed in accordance with the provisions of Article VI of this
Agreement. Licensee shall cooperate with any such inspection and audit. Muzak
shall not assess Licensee for amounts found, as a result of such audit, to be
owing hereunder if such amounts derive from a reporting period that ended more
than two years prior to the date such audit commenced, provided that Licensee
has not knowingly maintained false books or records, or knowingly submitted
false reports to Muzak.
(b) During any audit hereunder, Muzak or its representatives (at
Muzak's cost and expense) may make mechanical copies of only those books and
records of Licensee that are necessary for the verification of Licensee's
statements and accountings to Muzak and were physically examined as part of the
audit. Muzak shall take reasonable precautions to safeguard the confidentiality
of such copies and shall destroy any such copies upon the mutually-confirmed
completion of the audit and payment in full of any royalties and other charges
determined to be owing to Muzak as a result of the audit. Nothing contained
herein shall be construed as in any way limiting Muzak's right manually to copy
or make abstracts of Licensee's or any affiliated person's books and records or
to make any notes or the like whatsoever; provided, however, that such manual
copies or
33
<PAGE>
abstracts (and any copies thereof) shall be destroyed upon the mutually-
confirmed completion of the audit.
(c) In the event that any audit conducted by or on behalf of Muzak
results in a determination that there has been either an underpayment or
overpayment of the amounts due Muzak hereunder, then within 30 days after such
determination, Licensee or Muzak, as the case may be, shall pay to the other the
amount of such underpayment or overpayment; provided, however, that in the event
that Licensee disputes the results of any such audit, the parties shall attempt
to resolve the matter by conducting a new audit under the joint supervision of
their respective independent certified public accountants. In the event that
such new audit resolves the dispute, the cost of each party's independent
certified public accountants shall be borne by the respective party. In the
event that such new audit fails to resolve the dispute, the matter shall be
resolved by arbitration under the rules of the American Arbitration Association,
and the losing party shall pay both parties' entire costs of the second audit.
(d) If it is determined as a result of an audit that there has been an
underpayment of seventeen percent (l7%) or more of the amounts due Muzak for any
given calendar year, Licensee shall pay to Muzak, within thirty (30) days after
such determination and in addition to all other amounts due under this
34
<PAGE>
Agreement, a penalty equal to fifteen percent (15%) of the underpayment for that
year. The foregoing remedies shall be in addition to any other remedies Muzak
may have for such underpayment.
(e) Muzak and Licensee shall confirm, at the conclusion of the audit
and following payment of any monies found owing as a result of the audit, that
such audit has been completed and that the periods audited shall not be audited
again absent a showing that Licensee knowingly maintained false books and
records for such period.
VIII. MARKETING AND PROMOTION
-----------------------
8.1 Advertisements. Licensee shall cooperate with any advertising or
--------------
promotional campaigns conducted by Muzak in accordance with sound business
practices. Licensee shall promptly discontinue any advertising or promotion
which Muzak informs Licensee is, in Muzak's judgment, inimical to Muzak's
reputation. Without limiting the generality of the foregoing, Licensee shall
submit to Muzak upon request samples of all advertising and promotional plans
and materials that Licensee proposes to use. Licensee shall amend any such plans
and materials as requested by Muzak upon receipt of notice from Muzak that such
plans or materials fail to comply with the requirements of this Section 8.1. In
the event that Muzak notifies Licensee
35
<PAGE>
to amend any advertising or promotional plans previously approved by Muzak's
predecessors-in-interest, Licensee shall have up to 180 days after the date of
such notice to make such amendments.
8.2 Yellow-Pages Advertising. Each year during the term of this Agreement,
------------------------
Licensee shall ensure that it is listed in at least one "trademark ad" under the
appropriate classification in the yellow pages of one major-market telephone
book in the Territory. Muzak will reimburse Licensee for the annual cost of one
such "trademark ad" within thirty (30) days after receipt from Licensee of the
invoice for the advertisement.
8.3 Additional Assistance by Muzak. Within the limits of its available
------------------------------
personnel, Muzak, when so requested by Licensee, shall make available technical
and marketing assistance to Licensee. The charges for such assistance shall be
mutually agreed upon by the parties.
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV
------------------------------------------------
9.1 Multi-Territory Accounts Program. Recognizing that potential
--------------------------------
Subscribers with substantial numbers of Subscriber Premises located throughout
the United States represent a significant potential market for Licensee and
other Muzak licensees marketing the Services, and that the effective marketing
of the Services to such accounts frequently requires a
36
<PAGE>
coordinated effort by Muzak and its licensees, Muzak, in conjunction with a
Multi-Territory Sales Committee, shall establish and maintain during the term of
this Agreement a Multi-Territory Accounts Program. The Multi-Territory Accounts
Program and the Multi-Territory Sales Committee are more fully described in
Exhibit G attached hereto and incorporated herein by reference. Licensee and
Muzak agree to participate in the Multi-Territory Accounts Program as set forth
in Exhibit G and otherwise to abide by the terms of Exhibit G. Without limiting
the generality of the foregoing, Licensee agrees to participate during the term
of this Agreement in all Multi-Territory Contracts (as defined in Exhibit G)
that pertain to Subscriber Premises in the Territory.
9.2 Cable Radio/TV. In the event that (i) a provider of cable television
--------------
or cable radio programming requests that Muzak provide music for such
programming that cannot otherwise be provided by Licensee utilizing the Music
Services, and (ii) such programming will be distributed to residences (but not
to commercial locations) in the Territory, then prior to Muzak's providing such
music, Muzak and Licensee shall jointly determine their respective interests in
the revenues deriving from the provision of such music to such provider.
37
<PAGE>
X. DEFAULT AND TERMINATION OF THIS AGREEMENT
-----------------------------------------
10.1 Default of Licensee.
-------------------
(a) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall, at the option of Muzak, immediately
terminate upon notice thereof to Licensee (without opportunity to cure), if at
any time:
(i) Licensee shall file in any court pursuant to any statute
either of the United States or of any State a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or
trustee of all or a portion of Licensee's property, or if there is
commenced against Licensee any such petition which is not opposed by
Licensee or not dismissed within ninety days after such filing, or if
Licensee admits in writing its inability to pay its debts or makes a
general assignment for the benefit of creditors, or if Licensee makes
general application to Licensee's creditors to settle, compromise, or
extend the time of payment of all of Licensee's obligations; or
(ii) there occurs a voluntary or involuntary transfer or
purported transfer of an interest in Licensee or in this Agreement in
violation of Article XII.
38
<PAGE>
(b) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall terminate, if any of the following events
shall occur and not be cured, in the time and manner provided in subsection (c)
below, following notice thereof from Muzak:
(i) if Licensee fails to comply with any of its obligations under
this Agreement and Muzak has been or is reasonably likely to be in any way
damaged thereby, or if any representation made by Licensee herein is found
to be untrue when and as made and Muzak has been or is reasonably likely to
be in any way damaged thereby; or
(ii) if Licensee ceases to distribute the Music Services or
ceases to operate or otherwise abandons the Business; or
(iii) if Licensee loses the right to transact business in any
jurisdiction included in the Territory and Licensee refuses to surrender to
Muzak its license rights hereunder with respect to such jurisdiction; or
(iv) if Licensee knowingly maintains false books or records,
or submits false reports to Muzak.
39
<PAGE>
(c) Licensee shall have thirty (30) days after its receipt from Muzak
of a written notice of default within which to remedy any default as defined in
subsection (b) above (or, if the default cannot reasonably be cured within such
thirty (30) days, to initiate within that time substantial and continuing action
to cure the default) and to provide evidence thereof to Muzak. If any such
default is not cured within that time (or, if appropriate, substantial and
continuing action to cure the default is not initiated within that time), or
such longer period as applicable law may require, this Agreement shall terminate
following Licensee's receipt of a Notice of Termination reciting Licensee's
failure to cure or commence to cure and setting forth a definite termination
date, which shall be no sooner than 5 business days following Licensee's receipt
of such Notice or such longer period as applicable law may require; provided,
however, that in the event the existence of such default is disputed by
Licensee, and Licensee notifies Muzak of such dispute within 10 days after
receipt of Muzak's notice of default and thereafter promptly proceeds to take
all steps necessary to resolve such dispute, including (if necessary) the
commencement of litigation by no later than 30 days after receipt of Muzak's
notice of default, such termination shall not become finally effective until 10
days after the date such dispute is finally resolved in favor of Muzak. For
purposes hereof, final resolution shall include without limitation Licensee's
failure to make a timely appeal of a court decision in favor of Muzak.
Notwithstanding anything in
40
<PAGE>
this paragraph (c) to the contrary, in the event that the final resolution in
favor of Muzak of Licensee's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Licensee's legal challenge to the notice of default, Licensee had a
strong likelihood of success on the merits (without application by the court of
any balance-of-hardships tests), Licensee shall have 30 days from the date of
such final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.2 Default of Muzak. Muzak shall be deemed to be in default, and
----------------
Licensee shall have the right to terminate this Agreement, if Muzak fails to
comply with any of its obligations under this Agreement, and Licensee has been
or is reasonably likely to be in any way damaged thereby, and such failure is
not cured within thirty (30) days after Muzak's receipt of a written notice of
default from Licensee (or, if the default cannot reasonably be cured within such
thirty (30) days, if such cure has not been initiated and is not continuing
within that time); provided, however, that in the event the existence of such
default is disputed by Muzak, and Muzak notifies Licensee of such dispute within
10 days after receipt of Licensee's notice of default and thereafter promptly
proceeds to take all steps necessary to resolve such dispute, including (if
necessary) the
41
<PAGE>
commencement of litigation by no later than 30 days after receipt of Licensee's
notice of default, such termination shall not become effective until 10 days
after the date such dispute is finally resolved in favor of Licensee. For
purposes hereof, final resolution shall include Muzak's failure to make a timely
appeal of a court decision in favor of Licensee. Notwithstanding anything in
this Section 10.2 to the contrary, in the event that the final resolution in
favor of Licensee of Muzak's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Muzak's legal challenge to the notice of default, Muzak had a strong
likelihood of success on the merits (without application by the court of any
balance-of-hardships tests), Muzak shall have 30 days from the date of such
final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.3 Additional Remedies. No termination of this Agreement shall affect
-------------------
any obligation, including any obligation arising as a result of a default of
this Agreement, of any party accrued up to the date of termination or limit any
additional rights or remedies provided the nondefaulting party under this
Agreement or under law.
42
<PAGE>
10.4 Force Majeure. Neither Muzak nor Licensee shall have any liability to
-------------
the other or to any other person as a result of the failure of either of such
parties to perform its obligations hereunder, nor shall such failure be
considered a breach of this Agreement, if such failure is due to fire, flood,
other act of God, strike or other event or situation beyond the control of such
party acting in accordance with sound business practices.
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR EXPIRATION OF THIS
------------------------------------------------------------------
AGREEMENT
---------
11.1 Action Required of Licensee. Upon termination or expiration (without
---------------------------
renewal of license rights) of this Agreement, Licensee shall, subject to Section
2.2(b), Section 2.4 (including Exhibit E), and Article IX (including Exhibit G),
immediately
(a) Cease to distribute the Services to Subscribers and shall not
thereafter, directly or indirectly, represent itself to the public or hold
itself out as a licensee of Muzak;
(b) Cease to use, in any manner whatsoever, the Services and the
Proprietary Marks. Without limiting the generality of the foregoing, Licensee
shall immediately cancel any assumed name or equivalent registration which
contains the mark "MUZAK(R)" or any other service mark or trademark of Muzak, or
otherwise permit Muzak to effect such cancellation;
43
<PAGE>
(c) Sell to Muzak at Licensee's cost of acquisition, if any, all
manuals, instructions, sales literature, and other materials related to the
Services or the Proprietary Marks and retain no copy or record of any of the
foregoing except Licensee's copies of this Agreement and any other document
which Licensee reasonably needs for compliance with specific provisions of state
or federal law;
(d) Dismantle (if necessary) and dispose of as Muzak requests (at
Muzak's cost) all Earth Stations, Recorded Media, and other equipment provided
Licensee by Muzak; and
(e) Promptly pay all sums indisputably owing to Muzak.
11.2 Action Required of Muzak. Upon termination or expiration (without
------------------------
renewal of License rights) of this Agreement, Muzak shall promptly pay all sums
indisputably owing to Licensee. Muzak shall not provide or directly or
indirectly make available to any successor licensee in the Territory (including
any owned affiliates) any of Licensee's customer lists or customer contract
termination dates or terms; provided, however, that Muzak may transfer to such
successor licensee any contract rights purchased by Muzak from Licensee under
the terms of Exhibits E and G hereto.
44
<PAGE>
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE
-------------------------------------------
12.1 By Licensee and its Owners. Muzak has entered into this Agreement in
--------------------------
reliance on the business skills, financial capacity, and personal character of
Licensee and its owners. Accordingly, Licensee shall not permit the transfer of
any interest in or of Licensee that would have the effect, alone or together
with other previous, simultaneous, or proposed transfers, of directly or
indirectly transferring a controlling interest (whether in stock, partnership
interests or otherwise) in this Agreement, Licensee, or a major portion of the
assets used in the Business without the prior written consent of Muzak and
without otherwise complying with the requirements of this Article XII. Any such
purported assignment or transfer, by operation of law or otherwise, not having
the written consent of Muzak and not otherwise complying with the requirements
of this Article XII shall be null and void and shall constitute a material
breach of this Agreement.
12.2 Consent of Muzak. Muzak shall not unreasonably withhold its consent
----------------
to a transfer described in Section 12.1; provided, however, that Muzak may
require any or all of the following as conditions of its approval:
(a) All of Licensee's accrued monetary obligations to Muzak shall
have been satisfied (or otherwise provided for to
45
<PAGE>
Muzak's satisfaction, including without limitation the escrowing with counsel at
closing of the full amount of such obligations);
(b) The transferee and its owners shall enter into a written
assignment, in a form reasonably satisfactory to Muzak, assuming and agreeing to
discharge all of Licensee's obligations under this Agreement;
(c) The transferee shall demonstrate to Muzak's reasonable
satisfaction that (i) the transferee has the personal character and the
financial resources to conduct the Business, (ii) the transferee personally has
the general business experience to conduct the Business or will employ during
the term of this Agreement a general manager with such business experience to
conduct the Business, and (iii) the transferee is not in a position to use the
information obtained as a licensee of Muzak in a manner that will be harmful to
Muzak outside the Territory; and
(d) The transferee shall pay Muzak a transfer fee as follows:
(i) For any transfer to an existing licensee of Muzak (or any
entity owned or controlled by or having common ownership with an existing
licensee of Muzak), the sum of $1,000; or
46
<PAGE>
(ii) For any other transfer, (A) the sum of $2,500 for a Business
having Gross Billings (as defined herein) of $20,000 per month or less, and
(B) the sum of $5,000 for a Business having Gross Billings (as defined
herein) in excess of $20,000 per month.
In the event Muzak fails to respond to any request for approval of a
transfer to another MUZAK(R) licensee within 20 business days and to all others
within 30 business days of its receipt of a completed application for transfer,
then the request shall be deemed approved, subject only to Muzak's receipt of
notification of the transferee's assumption of Licensee's obligations, and of
the assignment to the transferee of Licensee's rights, under this Agreement.
12.3 Collateral. Muzak will not require approval of the assignment,
----------
transfer, pledge, or hypothecation of all or any part of the assets of the
Business, excluding this Agreement, and, if Licensee is a corporation, all or
any part of the stock of said corporation, to banks or other lending
institutions as collateral security for loans made directly to or for the
benefit of the Business. However, such approval will be required for any
proposed assignment of this Agreement.
12.4 Transfer to Family Member. An individual may transfer his or her
-------------------------
interest in Licensee or this Agreement to a member of
47
<PAGE>
his or her immediate family or to a corporation controlled by such individual,
provided that the requirements set forth in paragraphs (a), (b), and (c) of
Section 12.2 are met. No transfer fee shall be required for any such transfer.
12.5 By Muzak. Muzak shall have the right to transfer or assign all or any
--------
part of its rights or duties hereunder to any person or entity. Muzak shall
promptly notify Licensee of any such transfer.
XIII. PROPRIETARY MARKS
-----------------
13.1 Ownership. Muzak represents that it is the owner of all right, title,
---------
and interest in and to the Proprietary Marks. Muzak will take all steps,
including the taking of legal action, reasonably necessary to preserve and
protect the ownership and validity in and of the Proprietary Marks. Licensee
shall not directly or indirectly contest the validity or Muzak's ownership of
the Proprietary Marks. In the event that litigation involving the Proprietary
Marks is instituted or threatened against Licensee, Licensee shall promptly
notify Muzak and shall cooperate in the defense or settlement of such
litigation, which Muzak shall have the right to control at its expense. Licensee
expressly understands and acknowledges that Muzak is the owner of all right,
title, and interest in and to the Proprietary Marks and the goodwill associated
with and symbolized by them.
48
<PAGE>
Licensee's use of the Proprietary Marks pursuant to this Agreement does not give
Licensee any ownership interest or other interest in or to the Proprietary
Marks, except the license granted by this Agreement.
13.2 Infringement. Licensee shall promptly notify Muzak of any suspected
------------
infringement of the Proprietary Marks, and of any challenge to Muzak's ownership
of, or Licensee's right to use, the Proprietary Marks. Subject to Section 13.1,
Muzak shall have the sole right to decide whether an administrative or judicial
proceeding, or other action, should be undertaken in response to any such
suspected infringement or challenge, and, if any such proceeding or action is to
be undertaken, to initiate and control such proceeding or action at its expense.
In the event Muzak elects to undertake any such proceeding or action, Licensee
agrees to cooperate with Muzak in such effort. Licensee shall have no right to
institute any litigation against a third party relating to the Proprietary Marks
without Muzak's prior written consent.
13.3 Use. Licensee's right to use the Proprietary Marks is limited to such
---
uses as are authorized under this Agreement. Licensee shall not use the
Proprietary Marks as part of its corporate or other legal name. Licensee shall
comply with Muzak's instructions at Muzak's cost in filing and maintaining the
requisite trade name or fictitious name registrations, and
49
<PAGE>
shall execute any documents reasonably deemed necessary by Muzak or its counsel
to obtain protection for the Proprietary Marks or to maintain their continued
validity and enforceability. Unless otherwise authorized or required by Muzak,
Licensee shall use the Proprietary Marks without prefix or suffix and shall
comply with Muzak's instructions regarding the use of the federal registration
symbol and other trademark or service mark designations.
13.4 Substitution of Proprietary Marks. Muzak reserves the right to add
---------------------------------
Proprietary Marks and, except with respect to the MUZAK(R) trademark, to
substitute different Proprietary Marks, or discontinue the use of Proprietary
Marks, for use in identifying the Services if Muzak's currently owned
Proprietary Marks no longer can be used, or if Muzak determines that such
addition, substitution, or discontinuation will be beneficial to its business
and provides to Licensee at least six (6) months' prior notice of such addition,
substitution or discontinuation. All such additions, substitutions or
discontinuations will be reflected in an amendment of Exhibit C and shall not
affect the validity of this Agreement, which shall, in all respects, be deemed
modified to provide for such addition, substitution or discontinuation.
50
<PAGE>
XIV. MISCELLANEOUS
-------------
14.1 Representations of Licensee. Licensee represents and warrants to
---------------------------
Muzak that, on the date of this Agreement:
(a) If Licensee is a trust, corporation, or partnership, it is duly
organized, in good standing, and qualified to do business in all jurisdictions
included in the Territory; all controlling ownership interests in Licensee are
directly and indirectly held by those persons and entities listed on the
signature pages hereof, and no other persons or entities own any controlling
interests in Licensee; and it has all necessary power and authority to execute,
deliver, and perform this Agreement.
(b) There are no actions, suits, proceedings, or investigations in any
court or before any governmental agency or instrumentality which affect or are
reasonably likely to affect Licensee's ability to perform its obligations under
this Agreement.
14.2 Representations of Muzak. Muzak represents and warrants to Licensee
------------------------
that, on the date of this Agreement, it is duly organized and in good standing
as a limited partnership under the laws of the State of Delaware and has all
necessary power and authority to execute, deliver, and perform this Agreement.
51
<PAGE>
14.3 Independent Contractor. Muzak and Licensee are independent
----------------------
contractors vis-a-vis each other and neither party, nor their respective
employees and agents, are or are to be construed to be either legal or implied
agents, servants or employees of the other party or to have authority to act for
or on behalf of the other party. No acts taken or assistance given by one party
to the other pursuant to this Agreement will be construed to alter this
relationship. Without limiting the generality of the foregoing, but subject to
the terms of the Multi-Territory Accounts Program as described herein, Section
2.4 (including Exhibit E), the In-Store Advertising Agreement between Muzak and
Licensee, and any other written contract between Muzak and Licensee, nothing in
this Agreement shall authorize one party to make any contract, agreement,
warranty or representation on behalf of the other party or to incur any debt or
obligation in the other party's name, and the other party shall in no event
assume liability for, or be deemed liable hereunder as result of, any such
action. Without limiting the rights of a party to enforce its rights hereunder,
a party shall not be liable to a third party by reason of any action or omission
of the other party in the conduct of its business.
14.4 Release. Muzak and Licensee hereby release and forever discharge each
-------
other, and their respective predecessors, successors, representatives, assigns,
agents, owners, employees, officers, and directors ("Designees"), of and from
any claims,
52
<PAGE>
debts, liabilities, demands, obligations, costs, expenses, actions, and causes
of action of every nature, character, and description, vested or contingent,
which such releasing party now owns or holds, or has at any time heretofore
owned or held, or may at any time own or hold, against the other party or its
Designees, arising prior to and including the date of this Agreement and
relating to any prior franchise or license agreement; provided, however, that
this release shall not apply to any royalties or other monies owed, whether or
not previously reported as owing, from Licensee to Muzak; and further provided
that this release shall not apply to any claims, debts, liabilities, demands,
obligations, costs, expenses, actions and causes of action of every nature,
character and description, vested or contingent which are (i) at any time raised
or asserted by any party against the other party as a defense, counterclaim, or
crossclaim in any arbitration or litigation; (ii) of which the other party is
advised within 120 days of the date hereof; or (iii) the existence of which
could not now be reasonably known to a party and of which the other party is
advised within 120 days of the claiming party's knowledge thereof.
14.5 No Waiver. No failure of a party to exercise any right or power
---------
reserved to it in this Agreement or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of such
53
<PAGE>
party's rights to demand exact compliance with any of the terms of this
Agreement. Waiver by a party of any particular default shall not affect or
impair such party's right with respect to any subsequent default of the same or
of a different nature, and, except as otherwise expressly provided herein, any
delay, forbearance, or omission of a party to exercise any power or right
arising hereunder shall not affect or impair such party's right thereafter to
exercise that or any other power or right.
14.6 Notices. Unless otherwise expressly provided herein, any and all
-------
notices required or permitted under this Agreement shall be in writing and shall
be personally delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other party:
Notices to Muzak: MUZAK
400 North 34th Street, Suite 200
Seattle, WA 98103
Attention: ____________________
Notices to Licensee: SUNCOM COMMUNICATIONS, L.L.C.
/s/ David W. Unger
--------------------------------
220 E. 54 St. #11B
--------------------------------
NYC, NY 10022
--------------------------------
Notice by certified or registered mail shall be deemed to have been given at the
date and time of receipt.
54
<PAGE>
14.7 Entire Agreement. This Agreement, the documents referred to herein,
----------------
and the exhibits and attachments hereto, constitute the entire, full, and
complete agreement between the parties concerning the subject matter hereof, and
supersede all prior agreements except those set forth in Exhibit H (the terms of
which shall remain in effect to the extent not expressly contradicted by the
terms hereof). Except for those amendments referred to in Sections 2.1, 2.2 and
13.4 and Exhibits E, F, and G, no amendment of this Agreement shall be binding
on either party unless mutually agreed to by the parties and executed by their
authorized officers or agents in writing.
14.8 Severability. Each portion, part, and term of this Agreement shall be
------------
considered severable, and if, for any reason, any portion, part, or term herein
is determined by a court or agency with valid jurisdiction to be contrary to any
existing or future law or regulation and invalid, it shall not impair the
operation of, or have any other effect upon, the other portions, parts, or terms
of this Agreement that remain otherwise intelligible.
14.9 Captions. All captions in this Agreement are for convenience only and
--------
do not in any way limit or amplify the provisions hereof.
55
<PAGE>
14.10 Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto and, subject to Article XII, their
respective heirs, executors, representatives, successors, and assigns.
14.11 Counterparts. This Agreement may be executed in several
------------
counterparts, and all of such counterparts together shall constitute one
agreement binding on all parties thereto, notwithstanding that all parties are
not signatory to the original or same counterpart.
14.12 Attorney's Fees. If any action or proceeding is brought for the
---------------
enforcement of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in the action or proceeding, in addition to any other relief to which it or they
may be entitled.
14.13 Applicable Law. This Agreement shall be interpreted and construed
--------------
under the laws of the State of Colorado without reference to conflicts of law.
14.14 All Remedies. No right or remedy conferred upon or reserved to Muzak
------------
or Licensee by this Agreement is intended to be exclusive of any other right or
remedy herein or by law or equity provided, but each shall be cumulative of
every other right or
56
<PAGE>
remedy. Without limiting the generality of the foregoing, Licensee acknowledges
that its violation of the terms of Sections 4.3, 5.5, or 11.1 will result in
irreparable injury to Muzak for which no adequate remedy at law may be
available, and Licensee accordingly agrees that Muzak may seek to obtain the
issuance of an injunction prohibiting any conduct by Licensee in violation of
such terms.
14.15 Limitation. Licensee shall commence any action relating to Muzak's
----------
offer or sale of license rights hereunder to Licensee, or the execution of this
Agreement by Licensee, within one (1) year from the later of the date of
execution of this Agreement or the date Licensee reasonably should have
discovered the event or non-occurrence of the event first giving rise to the
action, and Licensee shall commence any other action arising hereunder within
two (2) years from the date Licensee reasonably should have discovered the event
or non-occurrence of the event first giving rise to such action. Licensee agrees
that any such claim not commenced within such time periods shall be barred, it
being understood that the assertion of any such claim as a defense, counterclaim
or cross-claim shall not be barred by this paragraph.
14.16 No Warranties. Muzak makes no warranties or guarantees upon which
-------------
Licensee may rely, and assumes no liability or obligation to Licensee, by
providing any waiver, approval,
57
<PAGE>
consent or suggestion to Licensee in connection with this Agreement, or by
reason of any neglect, delay, or denial of any request therefor.
14.17 No Implied Rights. Except as expressly provided to the contrary
-----------------
herein, nothing in this Agreement is intended, nor shall be deemed, to confer
upon any person or legal entity other than Licensee, Muzak, Muzak's officers,
partners, and employees, and such of Licensee's and Muzak's respective
successors and assigns as may be contemplated (and, as to Licensee, permitted)
by Article XII hereof, any rights or remedies under or by reason of this
Agreement.
14.18 Survival. All provisions of this Agreement that pertain to
--------
Licensee's rights and duties regarding Licensee's delivery of the Services to
certain Subscribers after the date of expiration or termination of this
Agreement shall survive such expiration or termination to the extent necessary
to give full effect to such rights and duties. All other covenants and
obligations of Muzak or Licensee that are to be performed or observed after the
expiration or termination of this Agreement, including, without limitation,
those set forth in Sections 5.5 and 14.3, Article XI, and Exhibits E and G,
shall also survive such expiration or termination.
58
<PAGE>
14.19 Conversion. Upon the expiration or earlier termination of this
----------
Agreement, in the event the addressability feature of Muzak's DBS facilities
permits Muzak to switch Licensee's music subscribers to another subscription
music supplier and Muzak has received written permission from such music
supplier and blanket indemnification from Licensee, then within a reasonable
time following Licensee's written direction to Muzak, Muzak shall perform one
such switch with respect to each such subscriber at the following cost to
Licensee: the greater of (i) Muzak's standard switching charge then in effect,
or (ii) Muzak's incremental out-of-pocket costs directly attributable to the
making of such switches.
14.20 Most Favorable Terms. In the event that after September 1, 1990
--------------------
Muzak grants for the first time (and not pursuant to or in renewal of any
agreement in existence at September 1, 1990) to any other U.S. licensee of Muzak
(i.e., a distributor of the Services in a territory within the United States)
financial or other material terms (other than temporary or transient adjustments
and accommodations) that are more favorable than the terms set forth herein,
Muzak must offer such more favorable terms to Licensee; provided, however, that
if, and to the extent, Muzak is required by the laws and regulations of the
State in which another licensee resides or operates its business to offer such
other licensee more favorable terms than those set forth herein, Muzak shall not
be required to offer such
59
<PAGE>
more favorable terms to Licensee but shall notify the then-president of the IPMA
of the imposition of such legal or regulatory requirement.
XV. ACKNOWLEDGEMENTS
----------------
15.1 Independent Investigations. Licensee acknowledges that it has
--------------------------
conducted an independent investigation of the business licensed hereunder, and
recognizes that the business venture contemplated by this Agreement involves
business risks and that its success will be largely dependent upon the ability
of Licensee as an independent person or entity. Muzak expressly disclaims the
making of, and Licensee acknowledges that it has not received, any warranty or
guarantee, express or implied, as to the potential volume, profits, or success
of the business venture contemplated by this Agreement.
15.2 Disclosure. Licensee acknowledges that it received a copy of this
----------
Agreement and all exhibits and attachments thereto, and agreements relating
thereto, at least five (5) business days prior to the date on which this
Agreement was executed. Licensee further acknowledges that it received the
disclosure documents required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" at
60
<PAGE>
least ten (10) business days prior to the date on which this Agreement was
executed.
15.3 Opportunity to Review. Licensee acknowledges that it has read and
---------------------
understands this Agreement and the exhibits and attachments hereto, and
agreements relating hereto, and that Muzak has accorded Licensee ample time and
opportunity to consult with advisors of Licensee's own choosing about the
potential benefits and risks of entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on the day and year first above written.
MUZAK LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/John R. Jester
-----------------------------------------
Title: President
--------------------------------------
Licensee:
SUNCOM COMMUNICATIONS, L.L.C., a
Delaware limited liability company
----------
By: /s/ David W. Unger
-----------------------------------------
Title: Chairman
--------------------------------------
61
<PAGE>
Each of the undersigned (i) owns, directly, indirectly, or beneficially, a
controlling interest in Licensee; (ii) has read this Agreement; and (iii) agrees
to be bound by those provisions of this Agreement that impose obligations on the
owners of controlling interests in Licensee.
- ----------------------------------------
(Typed Name)
- ----------------------------------------
Date:
-----------------------------------
Address:
--------------------------------
--------------------------------
- ----------------------------------------
(Typed Name)
- ----------------------------------------
Date:
-----------------------------------
Address:
--------------------------------
--------------------------------
- ----------------------------------------
(Typed Name)
- ----------------------------------------
Date:
-----------------------------------
Address:
--------------------------------
--------------------------------
- ----------------------------------------
(Typed Name)
- ----------------------------------------
Date:
-----------------------------------
Address:
--------------------------------
<PAGE>
EXHIBIT A
---------
MUSIC SERVICES
I. BROADCAST SERVICES
Services intended for Direct Broadcast Subscribers or for local re-broadcast to
- -------------------------------------------------------------------------------
Subscribers (by means of telephone lines, FM Radio Subcarriers ("SCA"), 950 MHz
- -----------
(UHF), cable and MDS, as more fully set forth in Exhibit D, and such other means
as are authorized in writing from time to time by Muzak.)
1. ENVIRONMENTAL MUSIC BY MUZAK(R) (to be distributed by means of East
and West coast feeds for as long as Stimulus Progression(R) remains a
valid concept)
2. FOREGROUND MUSIC ONE(R)
3. HITLINE(R)
4. LIGHT CLASSICAL
5. CONTEMPORARY JAZZ FLAVORS(SM)
6. EXPRESSIONS(SM)
7. COUNTRY CURRENTS(SM)
8. JUKEBOX GOLD(SM)
9. HOT FM(SM)
10. CONTEMPORARY INSTRUMENTALS
11. LATINO
12. SPECIALTY CHANNELS (various formats, as designated by Muzak from time
to time)
II. RECORDED MEDIA SERVICES
1. TONES(R) (various formats, as designated by Muzak from time to time)
<PAGE>
EXHIBIT B
---------
ADJUNCT SERVICES
I. MUSIC-RELATED ADJUNCT SERVICES
------------------------------
1. DAYPARTING
DAYPARTING means that automatic program sequencing, utilizing an in-
place Muzak addressable receiver, of two or more program formats on a
regularly scheduled basis, with the same schedule running without
further change from the original format, each day, for seven days per
week.
2. WEEKPARTING
WEEKPARTING means that automatic program changing, utilizing an in-
place Muzak addressable receiver, of a single program source with the
option to change programs each day, seven days per week.
3. COMBINED
COMBINED means a combination format of both dayparting and
weekparting.
4. SWITCHING
SWITCHING means the controlled switching of a single program
Subscriber to another single program from the Muzak DBS computer
controlled headend utilizing the in-place Muzak addressable receiver.
II. OTHER ADJUNCT SERVICES
----------------------
1. ADPARTING (various number of message inserts as designated by Muzak
from time to time)
ADPARTING means that audio promotion and messaging service provided
directly to the end user via an in-place Muzak addressable DBS system.
This service is designed for "spot" message inserts originating from
the Muzak DBS Operational Control Facility utilizing a computer
control head-end system.
2. BROADCAST DATA
BROADCAST DATA means that enhanced service which operates through the
in-place Muzak addressable DBS
B - 1
<PAGE>
receiver and provides a one-way data communication channel for point-to-
multipoint distribution. This service is designed for a distribution of
data files and/or text messaging originating through the Muzak DBS
Operational Control Facility utilizing a computer control head-end system.
3. BROADCAST VIDEO
BROADCAST VIDEO means that occasional use non-dedicated one-way point-to-
multipoint direct broadcast service utilizing an in-place Muzak addressable
DBS system and adjunct video receiver. This service is designed as a video
broadcast distribution system for an end user's private network and is
managed and controlled through the Muzak DBS Operational Control Facility.
B - 2
<PAGE>
EXHIBIT C
---------
MARKS
MUZAK(R) AUDIO MARKETING SERVICES(SM)
ADCASTER(R) DAYPARTING(SM)
ADPARTING(R) ENVIRONMENTAL MUSIC(SM)
FOREGROUND MUSIC ONE(R) FM ONE(SM)
FM-1(R) IN-STORE ADCASTING(SM)
HITLINE(R) UNICART(TM)
MARKETING ON HOLD(R)
MUSIC PLUS(R)
SOUND BUSINESS SOLUTIONS(R)
STIMULUS PROGRESSION(R)
TONES(R)
<PAGE>
EXHIBIT D
---------
TECHNICAL SPECIFICATIONS
I. LOCAL DISTRIBUTION SYSTEMS
--------------------------
Licensor and licensee acknowledge that the Muzak Program Services should be
delivered to the end subscriber at the highest fidelity possible consistent
with local conditions and reasonable business judgment, therefore:
1. Telephone lines from central studio to Telco central office and to
broadcasting facilities should be equalized for a minimum frequency
response of 50-8000 Hz.
2. Telephone lines to individual subscribers from central offices need
not be equalized. If only low quality facilities are available,
consideration should be given to local equalization at subscriber
premises or replacement of Telco lines with SCA or DBS delivery.
3. SCA contracts shall include the following minimum equipment and
performance standards particularly if the SCA generator is not
furnished by the licensee.
<TABLE>
<S> <C> <C>
A. SCA Frequency Typically 67 kHz or 92 kHz
B. SCA Injection 9% +/- 0.5%
C. SCA Deviation +/- 6 kHz = 100% modulation
D. SCA Frequency Response 50-5000 Hz +1, -3 dB
(95% of low pass filter)
E. SCA Total Harmonic
Distortion Less than or equal to 1% (unweighted)
F. SCA Signal To Noise Ratio Greater than or equal to 50 dB
G. AM Noise (referenced to carrier) Greater than or equal to -50 dB
H. Incidental AM Greater than or equal to -45 dB
I. Crosstalk (Main to Sub Channel) Greater than or equal to -40 dB
</TABLE>
D - 1
<PAGE>
<TABLE>
<S> <C> <C>
J. Pre-emphasis Curve 150 micro seconds
K. Automatic Muting Defeatable if desired
</TABLE>
4. Local distribution may be made by UHF (950 MHz) transmitters as authorized
by the FCC. Maximum frequency range shall be used whenever possible if full
frequency range program material is available at the transmitter.
5. Local distribution may be made by MDS transmitters as authorized by the FCC.
Maximum frequency range shall be used whenever possible if full frequency
range program material is available at the transmitter.
6. Local distribution may be made by DBS. Receivers used, whether designed or
furnished by Muzak, shall be capable of receiving and demodulating program
material broadcast from Ku-band satellite transponder in accordance with
generally accepted trade specifications and practice. Equipment utilized
shall be UL approved and conform to the specifications listed below.
The earth station consists of an antenna assembly and a Ku-band addressable
satellite audio receiver with tuning and control instructions transmitted
via the Network and Control Data Channel.
The Muzak Ku-band addressable satellite audio receiver is designed utilizing
FM Squared subcarrier modulation and operates with a fully saturated video
transponder with tuning and control instructions transmitted via the Network
and Control Data Channel. The system design has a margin equal to or greater
than 3 dB to allow for signal degradation due to transponder variation,
precipitation, pointing error or LNB degradation.
Listed below are the DBS earth station technical specifications as of July
1, 1990:
RECEIVER SPECIFICATIONS
-----------------------
Subcarrier Tuning 0.15 to 8.20 MHz
Tuning and Control 9600 Asynchronous FSK
data Channel Occupying
20 kHz
RF Input Level -30 to -65 dBm
D - 2
<PAGE>
RF Input Frequency 950 MHz to 1450 MHz
RX Threshold (click) 78.5 +/- 1 dB/Hz
IF Bandwidth 16 MHz
IF Frequency 70 MHz
Peak Deviation 30 kHz Peak
Audio Noise Reduction Panda I Adaptive Pre-
emphasis Expander or
Equivalent
ANTENNA AND LNB SPECIFICATIONS
------------------------------
1.0 Meter Antenna 1.2 Meter Antenna
------------------ -----------------
Size: 1.0 Meter Offset Fed 1.2 Meter Offset Fed
Paraboloid Paraboloid
Gain: 40.7 dB at 12.0 GHz 42.3 dB at 12.5 GHz
VSWR: 1.3 Maximum 1.3 Maximum
LNB: 1.6 dB Minimum 1.6 dB Minimum
II. AUDIO DISTRIBUTION SYSTEM
-------------------------
In general, the 25 or 70 volt distribution system shall be used for low
level music and paging applications. Amplifiers shall be sized to maintain
less than 1% Total Harmonic Distortion throughout the system with a minimum
frequency response of 50-10,000 Hz +/- 3 dB. Loudspeakers shall have the
minimum power handling capacity of 10 watts. Matching transformers shall be
multi-tap with a minimum frequency response of 70-10,000 Hz. All amplifiers
shall be UL approved. All wiring and installations shall be made in
accordance with accepted standards of Broadcast Engineering Practice and
the National Electrical Code as well as local building codes that may
apply.
III. RECEPTION AND PLAYBACK EQUIPMENT
--------------------------------
All subscriber reception and playback equipment produced, either directly
or under subcontract by Muzak for sale to licensees, shall conform to the
standards and specifications of NAB, FCC and RIAA reflecting the state of
the art. All equipment shall be UL approved.
D - 3
<PAGE>
Detailed specifications of specific equipment currently in production as of
March 1990 will be furnished to licensee upon request. Disclosure of
proprietary information shall be limited to information for the proper
installation, operation and maintenance of the respective equipment
furnished.
IV. C-BAND SATELLITE RECEPTION EQUIPMENT
------------------------------------
If C-band satellite equipment is utilized for program reception, the
following general satellite system specification applies:
The satellite distribution system is designed to meet rigid performance
criteria. However, certain facets of the total system are beyond the
control of Muzak. These include, but are not limited to, weather conditions
at the transmit or receiver site, sun position relative to the satellite
position at the receiving location and proper maintenance of the receiver
site.
The single channel per carrier (SCPC) earth station consists of a minimum 5
meter antenna, a Low Noise Amplifier (LNA) and a C-band SCPC satellite
audio receiver.
AUDIO CHARACTERISTICS
---------------------
Audio Output Impedance 600 ohms, balanced
Audio Output Level Adjustable, 0 to +18 dBm
Audio Noise Reduction 2:1 companding
Audio Signal-to-Noise Ratio Greater than 50 dB CCITT 468
Weighted
Audio Bandwidth 7.5 kHz
Frequency Response 50-7.5 kHz +/- 1.0 dB
Total Harmonic Distortion Less than or equal to 1%
RECEIVER SPECIFICATIONS
-----------------------
RF Input Level -30 dBm maximum
RF Input Frequency 3.7 to 4.2 GHz
RF Output Impedance 75 ohms, unbalanced
IF Frequency Range 52-88 MHz
Frequency Selection Synthesized in 25 kHz
steps
Peak Deviation 30 kHz
Power Consumption 7 Watts ll0V/60 Hz
D - 4
<PAGE>
EXHIBIT E
---------
SALES OF ADJUNCT SERVICES
Capitalized terms used but not defined in this Exhibit E shall have the
meanings set forth in the body of the MUZAK(R) License Agreement to which this
Exhibit is attached (the "License Agreement").
1. Contract Form; Earth Station. All sales of the Adjunct Services to
----------------------------
Subscribers in the Territory shall be reflected in a fully executed MUZAK(R)
Adjunct Services Subscriber Contract substantially in the form of Schedule 1
----------
attached hereto. Any material modification to said Contract form shall require
the prior written consent of (i) Muzak and Licensee for Subscribers located
within the Territory that are not Multi-Territory Accounts (as defined in
Exhibit G to the License Agreement) or (ii) the Multi-Territory Sales Committee
(as defined in Exhibit G) for Subscribers which are Multi-Territory Accounts
pursuant to Exhibit G. No such modification shall conflict with the License
Agreement (including without limitation the provisions of this Exhibit E).
Licensee shall provide Muzak with the Adjunct Services Subscriber Contract,
executed by the Subscriber, at the time Licensee requests Muzak to commence
delivery of one or more Adjunct Services to the Subscriber, and Muzak shall
provide Licensee with a copy of the Contract executed by Muzak for itself (to
the extent stated in such Contract) and as Licensee's agent. Licensee shall
ensure that prior to commencement of delivery of the Adjunct Services to a
Subscriber, an Earth Station has been installed at each Subscriber Premises in
the Territory where such Adjunct Services are to be received. Without limiting
the foregoing, the delivery of the Adjunct Services shall be by such means as
meet the technical specifications set forth in Exhibit D to the License
Agreement.
2. Additional Equipment. Muzak shall provide to each Subscriber receiving
--------------------
the "Data" Adjunct Service, data receiving equipment designed to operate with
the MUZAK(R) satellite receiver (the "Data Receiving Equipment") and to each
Subscriber receiving the "Video" Adjunct Service video receiving equipment
designed to operate with MUZAK(R) satellite equipment (the "Video Receiving
Equipment"). It is the parties' intent that if a Subscriber requires an
encrypting card, machine or other instrumentality, such Subscriber shall bear
the expense thereof. The Data Receiving Equipment and/or the Video Receiving
Equipment, as the case may be, shall be installed and maintained by Licensee as
directed by Muzak. All service and maintenance by Licensee to any Data Receiving
Equipment or Video Receiving Equipment shall be limited to "swap out"
replacement of a defective unit, and Muzak agrees to maintain an adequate supply
of such replacements for 24-hour delivery to Licensee. Muzak shall retain all
rights
E-1
<PAGE>
of ownership in the Data Receiving Equipment and the Video Receiving Equipment
and, at the termination of the applicable Adjunct Services Subscriber Contract,
Licensee shall remove the Data Receiving Equipment and the Video Receiving
Equipment and deliver each such item as directed by Muzak. Licensee shall not,
and shall use its reasonable best efforts not to permit any other person or
entity to, alter or reproduce in any way the Adjunct Services, the Data
Receiving Equipment, the Video Receiving Equipment, or any other equipment or
materials provided by Muzak in connection with the Adjunct Services.
3. Effect of Termination or Expiration of License Agreement.
--------------------------------------------------------
3.1 Multi-Territory Accounts. In the event the License Agreement
------------------------
terminates or expires (without renewal) prior to the termination of a Multi-
Territory Contract (as defined in Exhibit G) for Adjunct Services being
delivered in the Territory, Licensee's rights with respect to such Contract
shall be governed by Article 4 of said Exhibit G.
3.2 Subscribers That Are Not Multi-Territory Accounts.
-------------------------------------------------
a. Subject to paragraph b. below, in the event the License Agreement
terminates or expires prior to the termination of an Adjunct Services Subscriber
Contract for Services being delivered in the Territory and such Contract is not
a Multi-Territory Contract, then Licensee shall sell to Muzak all of its rights
in such Adjunct Services Subscriber Contract, together with related equipment
(including the Earth Station if applicable), for a price determined in the
manner set forth in this Section 3.2. Upon such sale, Muzak shall assume all of
Licensee's obligations relative to performance of such Subscriber Contract and
with respect to such related equipment accruing after the date of transfer. In
the event such termination or expiration of the License Agreement is due to the
bona fide, arm's length purchase of Licensee's subscriber contracts for a price
based on a multiple of Recurring Adjunct Services Gross Billings (as hereinafter
defined), Muzak's purchase price hereunder shall be determined by multiplying
50% of such arm's length multiple times the Recurring Adjunct Services Gross
Billings attributable to the Adjunct Services Subscriber Contract being
purchased. In all other cases, Muzak's purchase price hereunder shall be the
result of multiplying 50% of the Prevailing Adjunct Services Multiple (as
hereinafter defined) times the Recurring Adjunct Services Gross Billings
attributable to such Contract. As used herein, (i) the term "Recurring Adjunct
Services Gross Billings" means the average recurring monthly billings to a
Subscriber for the Adjunct Services and related equipment, net of sales taxes,
and (ii) the term "Prevailing Adjunct Services Multiple" means the average of
the
E-2
<PAGE>
arm's length multiples used to determine the purchase prices of the three most
recently reported (to Muzak) sales of the businesses of MUZAK(R) licensees, to
the extent such prices were based on arm's length multiples of Recurring Adjunct
Services Gross Billings and such multiples can be independently verified as
such. Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of Licensee's rights under an Adjunct Services Subscriber
Contract, Licensee and/or Muzak have received formal notice that such Contract
will be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such termination of the Contract
is less than the Prevailing Adjunct Services Multiple, then the purchase price
of Licensee's rights in such Contract shall be determined by multiplying such
remaining number of months in the Contract term by 50% of the Recurring Adjunct
Services Gross Billings attributable to such Contract.
b. Licensee shall not be required to sell to Muzak its rights in any
Adjunct Services Subscriber Contract described in this Section 3.2 to the extent
such rights pertain to the Music-Related Adjunct Services. In addition, Licensee
shall not be required to sell to Muzak its rights in any Other Adjunct Services
Subscriber Contract that does not pertain to the provision of the Adjunct
Services to any Subscriber locations outside of Licensee's Territory. Section
2.2(b)(i) and (ii) of the License Agreement shall control with respect to the
rights retained by Licensee under this paragraph b.
3.3 Adjacent Territories. In the event of a termination of the
--------------------
MUZAK(R) License Agreement of a MUZAK(R) licensee operating in a territory that
adjoins Licensee's Territory, Licensee agrees to provide the Adjunct Services to
Subscribers in such adjoining territory upon the request of Muzak for such
period of time and upon such other terms as are then agreed to by Muzak and
Licensee.
4. Licensee's Inability to Provide Adjunct Services.
------------------------------------------------
4.1 Third-Party Contract. In the event that Licensee is offering in
--------------------
the Territory a communications service which is the same as or similar to any
Adjunct Service as a result of a third-party contract or agreement in effect at
the time Muzak first notifies Licensee that such Adjunct Service has been added
to Exhibit B to the License Agreement, Licensee shall have no obligation under
the License Agreement to market, offer, or sell such Adjunct Service until
Licensee ceases doing business with such third party.
4.2 Rights of Muzak and Adjacent Licensees. During such period as
--------------------------------------
Licensee is not marketing, offering or selling an
E-3
<PAGE>
Adjunct Service in the Territory for the reasons provided in Section 4.1 above,
either Muzak or, at the request of Muzak, a MUZAK(R) licensee operating from a
MUZAK(R) territory that adjoins the Territory shall have the right to market,
offer, and sell such Adjunct Service in the Territory. Licensee shall give Muzak
at least 30 days' prior written notice of the date on which Licensee will cease
doing business with the third party as referred to in Section 4.1 above. After
such date, (i) Licensee shall commence marketing, offering, and selling such
Adjunct Service in accordance with the License Agreement and (ii) Muzak and any
MUZAK(R) licensees operating in territories adjacent to the Territory shall no
longer have the right to market, offer, or sell such Adjunct Service in the
Territory except under the terms of a MUZAK(R) Adjunct Services Subscriber
Contract in effect on such date; provided, however, that Licensee shall have the
right to purchase from Muzak or such other MUZAK(R) licensee, as the case may
be, the licensee's rights under any such Adjunct Services Subscriber Contract,
as well as the related equipment, for a price determined in the manner set forth
in Section 3.2 above.
4.3 Adjacent Territories. In the event that a MUZAK(R) licensee
--------------------
operating in a territory that is adjacent to Licensee's Territory is unable to
market, offer, or sell an Adjunct Service for the reasons set forth in Section
4.1 above, Licensee agrees (i) to market, offer, and sell such Adjunct Service
in such adjacent territory upon the request of Muzak for such period of time and
upon such other terms as are then agreed to by Muzak and Licensee, and (ii) to
sell to such adjacent licensee its rights in any Adjunct Services Subscriber
Contract described in Section 4.2 above upon the terms described in said Section
4.2.
4.4 Use of Proprietary Marks. In the event that Muzak or an adjacent
------------------------
licensee (including Licensee in its capacity as such an adjacent licensee)
markets, offers, or sells an Adjunct Service under the conditions described in
Sections 4.1 through 4.3 above, none of the Proprietary Marks, other than those
associated specifically with such Adjunct Service (including the "MUZAK(R)"
Proprietary Mark if, and only to the extent that, it is specifically associated
with such Adjunct Service), shall be used for such marketing, offering and sales
purposes. Without limiting the generality of the foregoing, in such case neither
Muzak nor the adjacent licensee shall market such Adjunct Service in the
affected licensee's territory under the MUZAK(R) yellow-pages listing.
5. Multi-Territory Accounts. In the event Adjunct Services are provided to
------------------------
a Multi-Territory Account under the Multi-Territory Accounts Program described
in Article IX and Exhibit G of the License Agreement, the terms of such Program
shall control over the terms set forth herein.
E-4
<PAGE>
Schedule 1
----------
MUZAK(R) ADJUNCT SERVICES [MUZAK LOGO]
SUBSCRIBER AGREEMENT
1. This Adjunct Services Subscriber Agreement ("Agreement") is made this
--------
day of , 19 between MUZAK LIMITED PARTNERSHIP, acting as
--------------- --
agent for the Servicing Muzak Affiliates listed in Exhibit A and Exhibit B
hereto as now existing or subsequently amended by MUZAK, and for itself
(specifically with respect to paragraphs 7, 8, 10, 11, and 12) (collectively,
"MUZAK" and the "Subscriber").
2. This Agreement shall remain in effect for a term of months
-------------
from 19 and shall be automatically renewed for
---------------------------- --
subsequent -month terms unless terminated at the end of any term by
---------
either party by written notice given to the other party at least ninety (90)
days prior to the end of such term. This Agreement shall become binding when
signed by Subscriber and accepted and approved by MUZAK. Subject to the
terms and conditions of this Agreement, MUZAK shall provide to the
Subscriber at the commercial locations ("Premises") set forth in Exhibit B,
one or more of the following services (the "Services") as indicated below:
3. [ ] ADPARTING(SM) SERVICES are delivered by Direct Broadcast Satellite (DBS)
to a MUZAK-supplied DBS Audio Receiver. (5 Spot Minimum.)
A. Number of Premises: .
------------
B. Number of spots per scheduled hour: .
-------------
C. Message length: [ ] 20 seconds: [ ] 30 seconds.
D. Price per Premises per month: $ .
---------
E. If AdParting(SM) Services are to be provided for less than term described
above, specify months of provision:
---------------------------------------------------------------------------
F. Describe special needs relating to advertising (e.g., scheduling):
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4. [ ] BROADCAST DATA SERVICES are delivered by DBS to a MUZAK-supplied DBS
Audio Receiver equipped to receive MUZAK Data Services. Charges for
Broadcast Data Services are composed of a monthly charge per Premises
based on data transmissions totaling up to 500 kilobytes (for all
Premises) from the orginating location, plus a per-message charge for
additional kilobytes of transmission.
A. Number of Premises: .
------------
B. Basic Monthly Data Charge per Premises: $ .
---------------
C. Per-message charge for additional kilobytes of transmission: $ .
-------
D. Describe special needs and/or related charges for Broadcast Data
Services:
-------------------------------------------------------------
----------------------------------------------------------------------
5. [ ] BROADCAST VIDEO SERVICES are delivered by DBS to a MUZAK-supplied Video
Receiver providing access to one-way video reception in conjunction with
a MUZAK-supplied DBS Antenna and Audio Receiver.
A. Basic Monthly Charge for Basic Broadcast Video Service as described
above is $ per Premises.
-----
Note: Monthly charge does not include costs for transponder time, which
will be charged separately to Subscriber on a per-use basis. Subscriber
assumes the responsibility and cost of video production.
B. Describe special needs and/or related charges for transmission and
transponder services:
-----------------------------------------------
----------------------------------------------------------------------
6. Monthly charges indicated herein are billed monthly in advance and commence
on completion of installation of appropriate reception equipment as
designated above. Subscriber agrees to pay all charges for the Services as
indicated herein.
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
Subscriber: MUZAK LIMITED PARTNERSHIP
--------------------------
-------------------------------------
(Print Name of Business Entity)
By: By:
---------------------------------- --------------------------------
Title: Title:
------------------------------- -----------------------------
Address:
----------------------------- 400 North 34th Street, Suite 200
Seattle, WA 98103
-------------------------------------
INITIATING MUZAK AFFILIATE:
-------------------------------------
(Print Name of Business Entity)
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
<PAGE>
7. SUBSCRIBER MATERIALS. Subscriber shall provide to MUZAK at Subscriber's sole
expense and at such times and places and in such forms as are reasonably
requested by MUZAK, those data, video, advertising, and other materials (if
any) which are to be incorporated in the Services prior to transmission to
the Premises. Such materials are hereinafter collectively referred to as the
"Subscriber Materials". Subscriber shall be solely responsible for the
content of all Subscriber Materials, but MUZAK reserves the right to refuse
to transmit any Subscriber Materials the content, transmission, or broadcast
of which it believes could infringe upon the rights of others or otherwise
be unlawful or the form of which does not comply with MUZAK's requests as
provided above. Subscriber shall comply with all applicable governmental
laws, rules, and regulations pertaining to the Subscriber Materials and
their use in the Services. Subscriber shall indemnify and hold harmless
MUZAK and its officers, agents, partners, and employees from and against any
and all claims, liabilities, losses, damages, costs and expenses (including
reasonable attorney's fees), including without limitation claims for
infringement of proprietary rights, misrepresentation, and defamation,
arising out of or attributable in whole or in part to the Subscriber
Materials. This indemnity shall survive the expiration or earlier
termination of this Agreement.
8. EQUIPMENT.
a. With respect to any items of equipment that are provided hereunder to
Subscriber by MUZAK including but not limited to Earth Stations, MUZAK shall
maintain such items in good operating condition; provided, however, that
such maintenance shall be exclusively limited to that resulting from
ordinary and proper use of the equipment. All other maintenance, repair and
replacement of such equipment shall be paid by Subscriber in accordance with
MUZAK's customary charges therefor, MUZAK's OBLIGATIONS UNDER THIS PARAGRAPH
ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, RELATING TO THE
EQUIPMENT, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. Except for MUZAK's maintenance obligations resulting
from ordinary and proper use of the equipment as set forth above, Subscriber
shall indemnify MUZAK and hold it harmless from and against any and all
losses, claims, and expenses relating to the equipment provided hereunder to
Subscriber, including without limitation losses caused by accident, fire,
theft, or misuse of the equipment. Subscriber shall provide electrical
outlets and power as needed for the equipment.
b. Subscriber shall not, directly or indirectly, sell, mortgage, pledge, or
otherwise dispose of or encumber any MUZAK-owned equipment provided to
Subscriber, nor shall it change the location of, tamper with, or alter in
any manner such equipment. Subscriber shall execute such further documents
as are necessary or desirable to protect MUZAK's interests in such
equipment, shall adequately insure such equipment against damage or loss and
present evidence of such insurance to MUZAK upon request, and shall, upon
the expiration or earlier termination of this Agreement, promptly return to
MUZAK all of such equipment in good condition (or pay the full replacement
value thereof).
9. ADDITIONAL CHARGES.
a. In addition to the fees specified on the reverse side of this Agreement,
Subscriber shall pay to MUZAK any sales, use, excise, or other taxes or
governmental charges (except income taxes) arising under this Agreement.
Subscriber shall also pay to MUZAK any incremental increases in ASCAP, BMI
or other licensing fees resulting from the services supplied under this
Agreement.
b. Late payments of fees and charges due hereunder are subject to late-
payment and interest charges not to exceed the maximum rate permitted by
law.
c. MUZAK may increase any or all of the charges stated on the reverse side
of this Agreement on an annual basis by providing at least 15 days' prior
written notice to Subscriber; provided, however, that any such increase may
not exceed 10% of the then existing charge without the approval of
Subscriber. Should any such increase exceed 10% and not be approved by
Subscriber, MUZAK may elect to terminate the Agreement. Such termination
shall not release Subscriber from any obligations which accrued prior to the
time of such termination. Such termination shall not affect any other
agreement Subscriber may have with MUZAK.
10. ASSIGNMENT. Subscriber shall not assign its rights or delegate its duties
under this Agreement without the prior written consent of MUZAK which
consent shall not be unreasonably withheld. Any assignment of this Agreement
by Subscriber without MUZAK's written consent shall be void and shall at
MUZAK's option constitute a breach hereof by Subscriber. In the event
Subscriber ceases to do business at any Premises, Subscriber shall return to
MUZAK in the manner designated by MUZAK all MUZAK-owned equipment installed
at such Premises; such cessation shall not, however, reduce Subscriber's
payment obligations hereunder unless MUZAK otherwise agrees in writing. This
Agreement shall be fully assignable by MUZAK. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective successors, representatives, and assigns.
11. LIMITATION OF LIABILITY. In the event MUZAK fails to provide one or more of
the Services to any Premises for a period of twenty-four consecutive hours,
and Subscriber provides MUZAK with written notice thereof with 48 hours
after such failure, the following shall occur. Subscriber's account shall be
credited with an amount equal to one-thirtieth of the recurring monthly
charge for the affected Service for each such 24 hour reported period.
Notwithstanding the foregoing, in no event shall MUZAK be responsible or
liable (and no credit shall be given) for any failure of MUZAK to perform
its obligations hereunder due to Acts of God, stress, emergencies,
mechanical failures, regulatory or other governmental action, or inaction of
Subscriber, its employees, agents, or invitees, a breech of this Agreement
by Subscriber, or any other cause beyond MUZAK's reasonable control. In no
event shall MUZAK be liable for incidental, consequential or special damages
arising out of or relating to this Agreement. Without limiting the
foregoing, under no circumstances will MUZAK be responsible for the
reception of the services by the Subscriber at any Premises or for the
accuracy or completeness of the information or other material included in
the Services.
12. TERMINATION BY MUZAK. If Subscriber fails to perform any of its obligations
hereunder and does not cure such failure within thirty days after written
notice thereof from MUZAK, or if Subscriber becomes insolvent or bankrupt,
MUZAK, in addition to all other rights it may have under law or this
Agreement, shall have the rights (i) to declare all amounts to be paid by
Subscriber during the remaining term hereof immediately due and payable,
(ii) to cease providing the Services to Subscriber, and (iii) immediately to
enter the Premises and take possession of all MUZAK-owned equipment without
liability to Subscriber therefore and without relieving Subscriber of its
obligations under this Agreement. Subscriber shall reimburse MUZAK for all
costs and expenses, including reasonable attorneys' fees and court costs,
incurred in connection with MUZAK's exercise of its rights under this
Agreement. Muzak shall have the right to terminate this agreement in the
event that there is only one Servicing Muzak Affiliate providing services to
Subscriber hereunder and the Muzak(R) license rights of such servicing Muzak
Affiliate have expired or terminated without renewal.
13. SERVICING MUZAK AFFILIATES. Subscriber acknowledges and agrees that all
services to be provided by MUZAK hereunder shall be provided by the
Servicing Muzak Affiliate identified in Exhibit A as being responsible for a
particular Premises. Subscriber further acknowledges that MUZAK is entering
into and executing this Agreement on behalf of and as agent for each such
Servicing Muzak Affiliate with respect to each Premises served by each such
Servicing Muzak Affiliate and that the Xerographic copies of this Agreement
provided to each such Servicing Muzak Affiliate for each such Premises shall
be deemed for all purposes a counterpart original of this Agreement.
14. APPLICABLE LAW. In the event of a dispute affecting Premises located in one
State, this Agreement shall be governed by and in accordance with the laws
of that State applicable to contracts made and to be performed wholly within
such State and venue shall rest with the court of general jurisdiction
located in the county where the subject servicing Muzak Affiliate maintains
its principal place of business. In the event of a dispute affecting
Premises located in more than one State, this Agreement shall be governed by
and in accordance with the laws of the State of Washington applicable to
contracts made and to be performed wholly within such State, and Subscriber
consents to the personal jurisdiction of the State and federal courts of the
State of Washington for purposes of litigation affecting this Agreement. If
any provision of this Agreement is deemed unenforceable in whole or in part
by a Court of competent jurisdiction, the parties agree that such Court
shall amend or alter such provision so as to effectuate the intent of such
provision and of this Agreement to the maximum extent that is enforceable.
15. MISCELLANEOUS.
a. This Agreement constitutes the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior conversations,
representations, promises, and warranties, whether verbal or written, with
respect to such subject matter. No modification of this Agreement shall be
valid unless made in writing and signed by each party; provided, however,
that MUZAK shall have the right to modify or terminate this Agreement to the
extent necessitated by a modification or termination of any license or lease
agreement applicable to its provision of the Services.
b. The waiver of a breach of any provision of this Agreement shall not be
construed as a waiver of any subsequent breach of the same or of a different
provision of this Agreement.
c. Each party represents and warrants that it has the power and authority to
enter into this Agreement and discharge its obligations hereunder, and each
person executing this Agreement on behalf of a party represents and warrants
that he or she has the power and authority to sign this Agreement on behalf
of such party.
d. All notices required under this Agreement shall be in writing and
personally delivered or sent, postage prepaid, by certified or registered
mail, return receipt requested to the parties at their addresses set forth
on the reverse side (or such other address as is hereafter, provided by a
party to the other party).
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT A
SERVICING MUZAK AFFILIATES
- --------------------------------------------------------------------------------
ALABAMA
Electronic Engineers, Birmingham, AL
Electro-Systems, Dothan, AL
Service Associates, Huntsville, AL
Business Sound, Mobile, AL
Electronic Engineers, Montgomery, AL
ALASKA
Nothern Television, Anchorage, AK
Background Music, Fairbanks, AK
ARKANSAS
Fitzhugh Communications, Fayetteville, AR
Tempo Sound, Harrison, AR
Business Music, Inc. Little Rock, AR
ARIZONA
SunCom Group, Scottsdale, AZ (Phoenix)
Tucson Music, Tucson, AZ
CALIFORNIA
Muzak, Anaheim, CA
Serban Sound, Bakersfield, CA
Muzak, Burbank, CA (Los Angeles)
Attuned to Music, Chico, CA
American Music Network, Fresno, CA
American Music Network, Modesto, CA
Musi-Cal, Riverside, CA
Muzak, Roseville, CA (Sacramento)
American Music Network, Salinas, CA
Comcast, San Diego, CA
Muzak, San Francisco, CA
Muzicraft, Santa Barbara, CA
Muzicraft, Ventura, CA
COLORADO
Comcast, Colorado Springs, CO
Comcast, Denver, CO
CONNECTICUT
Comcast, Hartford, CT
Muzak, Milford, CT
DISTRICT OF COLUMBIA
Music Inc. Washington, DC
FLORIDA
Osborn Sound, Ft. Myers, FL
Florida Sound, Jacksonville, FL
Melody Inc., Miami, FL
Marion Music, Ocala, FL
Comcast, Orlando, FL
Electro-Systems, Panama City, FL
Electro-Systems, Tallahassee, FL
Tropical Music, Tampa, FL
Harmony Music & Sound, W. Palm Beach, FL (Palm Beach)
GEORGIA
Osborn Sound, Albany, GA
Osborn Sound, Atlanta, GA
Carolina-Georgia Sound, Augusta, GA
Background Music, Phenix City, AL (Columbus, GA)
Osborn Sound, Macon, GA
Georgia Music & Sound, Savannah, GA
HAWAII
Hawkins Audio Engineering, Honolulu, HI
IDAHO
Mountain West Audio, Boise, ID
Idaho Mountain West, Idaho Falls, ID
ILLNOIS
Muzak, Chicago, IL
Kickapoo Broadcasting, Danville, IL
WSOY, Decatur, IL
Comcast, Moline, IL
Comcast, Peoria, IL
Quincy Broadcasting, Quincy, IL
Springfield Advertising, Springfield, IL
INDIANA
Service Associates, Evansville, IN
Comcast, Fort Wayne, IN
Comcast, Indianapolis, IN
Music Engineering, South Bend, IN
IOWA
Music Services, Inc., Des Moines, IA
Brite & Rich, Le Mars, IA (Sioux City)
D.B. Acoustics, Marion, IA (Cedar Rapids)
KANSAS
McClelland Sound, Wichita, KS
KENTUCKY
P & M Electronics, Ashland, KY
Lexington Music & Sound, Lexington, KY
Planned Music of Kentucky, Louisville, KY
LOUISIANA
American Sound & Music, Baton Rouge, LA
Metro Communications, Lafayette, LA
Dixie Music, Lake Charles, LA
Business Sound, Metairie, LA (New Orleans)
Business Music, Shreveport, LA
MAINE
PBC Sound Systems, Bangor, ME
MARYLAND
Audio Communications Network, Baltimore, MD
MASSACHUSETTS
Muzak, Waltham, MA (Boston)
MICHIGAN
Muzi-Tronics, Cadillac, MI
Muzi-Tronics, Grand Rapids, MI
Muzi-Tronics, Kalamazoo, MI
Range Telecommunications, Marquette, MI
Blue Water Music, Port Huron, MI
McDonald Broadcasting, Saginaw, MI
Comcast, Warren, MI (Detroit)
MINNESOTA
Business Music, Inc., Cold Spring, MN (St. Cloud)
Business Music Service, Duluth, MN
Muzak, Minneapolis, MN
Custom Communications, Rochester/Winona, MN
Business Music, Inc. Willmar, MN
MISSISSIPPI
Melody Music Company, Columbus, MS
Mississippi Sound, Greenwood, MS
Metro Communications, Jackson, MS
MISSOURI
Towner Communications, Jefferson City, MO
Audio Acoustics, Joplin, MO
Audio Communications Network, Kansas City, MO
Audio Acoustics, Poplar Bluff, MO
Audio Communications Network, St. Louis, MO
Audio Acoustics, Springfield, MO
MONTANA
Shag Miller, Butte, MT
American Music, Great Falls, MT
Music Systems, Kalispell, MT
NEBRASKA
Parker Engineering, Kearney, NE
Business Music Inc., Lincoln, NE
Business Music Inc., Omaha, NE
NEVADA
Musaire, Inc., Las Vegas, NV
Dynamic Sound, Reno, NV
NEW HAMPSHIRE
Muzak, Exeter, NH
NEW JERSEY
World Music, Springfield, NJ
NEW MEXICO
Business Music, Inc., Albuquerque, NM
NEW YORK
Comcast, Buffalo, NY
Arranged Sound, Johnson City, NY (Binghamton)
Functional Communications, Latham, NY (Albany)
Muzak, Long Island City, NY (New York City)
NCC Systems, Potsdam, NY
Accent Communication Systems, Poughkeepsie, NY
Functional Communications, Rochester, NY
Functional Communications, Syracuse, NY
NCC Systems, Watertown, NY
NORTH CAROLINA
SunCom Group, Charlotte, NC
SunCom Group, Hillsborough, NC
Independence Communications, Kinston, NC
Warner Music & Communications, Rocky Mount, NC
Background Music, Wilmington, NC
NORTH DAKOTA
Music Systems, Inc., Bismarck ND
Music Systems, Inc., Fargo, ND
OHIO
Port Erie Communications, Ashtabula, OH
Ohio Musicue, Canton, OH
Muzak, Cincinnati, OH
Ohio Music Corporation, Cleveland, OH
Muzak, Columbus, OH
Audio Inc., Dayton, OH
Zaiser Communications, Toledo, OH
Hudix Music, Youngstown, OH
OKLAHOMA
Lawton Business Music, Lawton, OK
Business Music, Inc., Oklahoma, OK
Granite Sound, Tulsa, OK
OREGON
Musak, Eugene, OR
Musak, Medford, OR
Muzak, Portland, OR
PENNSYLVANIA
Independence Communications, Harrisburg, PA
Comcast, Hollidaysburg, PA
Independence Communications, Norristown, PA
(Philadelphia)
Independence Communications, Pittsburgh, PA
Comcast, Scranton, PA
SOUTH CAROLONIA
Carolina Sound Communications, Charleston, SC
Background Music, Columbia, SC
Carolina Sound Communications, Myrtle Beach, SC
SOUTH DAKOTA
Music of Rapid City, Rapid City, SD
Midco Communications, Sioux Falls, SD
TENNESSEE
Belew Sound & Visual, Bristol, TN
Service Associates, Chattanooga, TN
Service Associates, Knoxville, TN
Mid-South Music & Sound, Memphis, TN
Service Associates, Nashville, TN
TEXAS
Audioplan, Abilene, TX
Business Music, Inc., Amarillo, TX
AVCOM, Austin, TX
Beaumont Business Music, Beaumont, TX
ABC Music, Big Spring, TX
Brownwood Business Music, Brownwood, TX
Gulf Business Music, Corpus Christi, TX
Comcast, Dallas, TX
Muzicom, El Paso, TX
Comcast, Ft. Worth, TX
T F M Sound, Harlingen, TX
Taft Broadcasting, Houston, TX
Business Music, Inc., Lubbock, TX
Pioneer Music, Midland, TX
W. Texas Business Music, San Angelo, TX
Texas Wired Music, San Antonio, TX
Whitsound, Texarkana, TX
Comcast, Tyler, TX
Wichita Business Music, Wichita Falls, TX
UTAH
Mountain West Audio, Salt Lake City, UT
VERMONT
Music Services of Vermont, Essex Junction, VT
(Burlington)
VIRGINIA
Independence Communications, Charlottesville, VA
Independence Communications, Newport News, VA
Independence Communications, Richmond, VA
Business Communications, Roanoke, VA
WASHINGTON
Muzak, Seattle, WA
Muzak, Spokane, WA
Sousley Sound, Yakima, WA
WEST VIRGINIA
Joe L. Smith, Beckley, WV
Wheeling Services, Wheeling, WV (Parkersburg/Wheeling)
WISCONSIN
Northern Musicast, Appleton, WI
Central Communications, Eau Claire, WI
Pridham Electronics, Madison, WI
Wisconsin Music Network, Milwaukee, WI
Forward Electronics, Plover, WI
Forward Electronics, Wausau, WI
WYOMING
Background Music, Cheyenne, WY
- --------------------------------------------------------------------------------
MSA-EA
<PAGE>
EXHIBIT B
SERVICED PREMISES
List of all Serviced Premises (With Corresponding Reference to Muzak Affiliate
Responsible for each such Serviced Premises)
- -------------------------------------------------------------------------------
Serviced Premises Servicing Muzak Affiliates
- -------------------------------------------------------------------------------
MSA-EB
<PAGE>
EXHIBIT F
---------
ADJUNCT SERVICES REVENUE SHARING
BROADCAST DATA SERVICES ("Data")
- -------------------------------
Revenues from the sale of Data under the terms of an Adjunct Services Subscriber
Contract shall be shared between Muzak and Licensee on a 60/40 basis for a
three-year period starting August 1, 1989. Muzak will receive the 60% share for
the three-year period. Commencing August 1, 1992, revenue for Data will be
shared between Muzak and Licensee on a 50/50 basis.
ADPARTING SERVICES ("AdParting")
- -------------------------------
Revenues from the sale of Adparting under the terms of an Adjunct Services
Subscriber Contract shall be shared between Muzak and Licensee on a 60/40 basis,
with Muzak receiving the 60% share.
BROADCAST VIDEO SERVICES ("Video")
- ---------------------------------
Revenues from the sale of Video under the terms of an Adjunct Services
Subscriber Contract shall be shared between Muzak and Licensee on a 60/40 basis,
with Muzak receiving the 60% share.
DAYPARTING, WEEKPARTING, COMBINED, AND SWITCHING
- ------------------------------------------------
Services will be provided at flat fee as published from time to time by Muzak.
The fees charged by Muzak for Dayparting, Weekparting and Switching services
will not be increased from the date of the MUZAK(R) License Agreement to which
this Exhibit is attached through December 31, 1993 and thereafter none of such
fees shall increase by more than 10% per annum.
Notes:
- -----
1. Licensee will pay all sales commissions to local sales personnel if the
above-mentioned Adjunct Services are sold by the Licensee. Muzak will pay
sales commissions to Muzak National Sales personnel if the above-mentioned
Adjunct Services are sold by Muzak National Sales personnel.
2. The 3% Multi-Territory Accounts sales commissions will not apply to the
Adjunct Services.
3. Whichever of Muzak and Licensee receives revenues from the Subscriber under
the terms of the applicable Adjunct Services Subscriber Contract shall,
within 45 days after receipt of each payment of such revenues, provide the
other party with a report showing the date and amount of such payment and
pay to the other party such other party's share
F-1
<PAGE>
of the revenues, as provided herein. The party that is responsible for the
collection of revenues from a Subscriber under the terms of the applicable
Adjunct Services Subscriber Contract shall use its best efforts to ensure that
payments are made in a complete and timely manner by such Subscriber and shall
be responsible for paying any federal, state, or local taxes relating to the
provision of the Adjunct Services to the Subscriber to the appropriate taxing
authority. All payments of such revenues shall be promptly remitted to the other
party, without credit, offset or deduction of any kind or nature whatsoever
except that the party responsible for collection of revenues from a Subscriber
may deduct the other party's pro rata share of any sales or similar taxes
required to be collected in connection with the provision of the Adjunct
Services, as well as such other deductions as have been agreed to by the
parties.
F-2
<PAGE>
EXHIBIT G
---------
MUZAK(R) MULTI-TERRITORY ACCOUNTS PROGRAM
Muzak and various of its licensees, working through a "Multi-Territory
Sales Committee," have developed a Multi-Territory Accounts Program (the
"Program"), pursuant to which Muzak and its licensees will provide the Services
to certain Subscribers who own or operate Subscriber Premises located in the
MUZAK(R) territories of at least four MUZAK(R) licensees. The purpose of this
Exhibit G is to set forth the terms and conditions under which the Program will
operate. Capitalized terms used but not defined in this Exhibit G shall have the
meanings set forth in the body of the MUZAK(R) License Agreement to which this
Exhibit is attached.
1. Definitions. As used herein, the following terms shall have the
-----------
meanings set forth below:
1.1 Affiliate shall mean a person or entity (including Licensee) that
---------
has the right to offer and sell the Services under the terms of a license
agreement with Muzak, as well as an owned affiliate of Muzak.
1.2 Assigned Person shall have the meaning set forth in Section 1.7
---------------
below.
1.3 Commission shall mean 3% of the recurring gross billings to the
----------
Multi-Territory Account during the initial term of the Multi-Territory Contract
for Music Services (other than Music Services delivered either by Recorded Media
or in conjunction with in-store advertising provided by POP Radio Corporation)
provided to Subscriber Premises of the Multi-Territory Account located in
Licensee's Territory, plus 3% of the gross billings to the Multi-Territory
Account for certain equipment, as designated by the Committee, installed at such
Subscriber Premises; provided, however, that in calculating such gross billings
for purposes of determining the Commission, (i) a Multi-Territory Contract with
an initial term of more than 5 years shall be deemed to have a term of 5 years,
and (ii) there shall be taken into account only that portion (if any) of the
recurring gross billings for Music Services that exceeds the recurring gross
billings payable to Licensee under a contract that is superseded by the Multi-
Territory Contract.
1.4 Committee shall mean the "Multi-Territory Sales Committee"
---------
referred to above, as further described in Article 3 below.
G-1
<PAGE>
1.5 Licensee means the person or entity referred to as "Licensee" in
--------
the MUZAK(R) License Agreement to which this Exhibit is attached.
1.6 Multi-Territory Account shall mean a potential Subscriber that (a)
-----------------------
owns or operates 50 or more Subscriber Premises located in the MUZAK(R)
territories of at least four Affiliates, and (b) is set forth on the then-
current Multi-Territory Account List.
1.7 Multi-Territory Account List shall mean a document that is
----------------------------
periodically prepared by the Committee and disseminated to the Affiliates and
that specifies the Subscribers which meet the requirements of Section 1.6(a) and
the name of the respective person or entity who is assigned responsibility for
the multi-territory marketing of the Services to each such Multi-Territory
Account, which person or entity shall in each case be either Muzak or the
Affiliate licensed by Muzak to operate in the MUZAK(R) territory in which the
headquarters of the Multi-Territory Account are located. (Such person or entity
is referred to herein as the "Assigned Person"). Each such Multi-Territory
Account List shall remain in effect until a new Multi-Territory Account List is
prepared and disseminated. No Subscriber shall be added to the Multi-Territory
Account List without the prior written consent of the Affiliate in whose
MUZAK(R) territory the headquarters of such Subscriber are located. Licensee may
at any time and from time to time petition the Committee for removal of a
Subscriber from the Multi-Territory Account List if no multi-territory sale is
made to the Subscriber within 12 months of the inclusion of such Subscriber in
the Multi-Territory Account List.
1.8 Multi-Territory Contract shall have the meaning set forth in
------------------------
Section 2.2 below.
1.9 MUZAK(R) territory shall mean a geographical area in the United
------------------
States in which an Affiliate has certain exclusive rights to offer and sell the
Services.
2. Procedures for Subscriber Contracts with Multi-Territory Accounts. The
-----------------------------------------------------------------
following procedures will apply with respect to Subscriber Contracts for
Services and related equipment and services provided to Multi-Territory
Accounts:
2.1 Marketing. The Assigned Person will oversee the marketing
---------
approaches to each respective Multi-Territory Account. Unless Licensee is the
Assigned Person with respect to such Account, Licensee will not independently
approach a Multi-Territory Account location for marketing purposes without the
prior written consent of the Assigned Person. Licensee will provide such
marketing assistance to the Assigned Person, with respect to a Multi-Territory
Account that has its headquarters or one or more Subscriber Premises in
Licensee's Territory, as is
G-2
<PAGE>
reasonably requested by the Assigned Person. If Licensee is the Assigned Person,
Licensee shall market the Services to the Multi-Territory Account in a diligent
and proper manner. The Assigned Person shall not visit or otherwise contact the
headquarters of any Multi-Territory Account located in Licensee's Territory
without informing Licensee and soliciting Licensee's participation in such visit
or other contact.
2.2 Contract Form and Terms. Unless otherwise authorized in writing
-----------------------
by the Committee, all Subscriber Contracts with Multi-Territory Accounts for the
sale of the Music Services and related equipment and services shall be
substantially in the form of the MUZAK(R) Multi-Territory Music Service
Agreement that is attached as Schedule 1 to this Exhibit G and all Subscriber
----------
Contracts with Multi-Territory Accounts for the sale of Adjunct Services and
related equipment and services shall be substantially in the form of the
MUZAK(R) Adjunct Services Subscriber Contract described in Exhibit E of the
MUZAK(R) License Agreement to which this Exhibit is attached (either or both, as
the case may be, the "Multi-Territory Contract"). The specific terms (pricing,
length of contract period, etc.) set forth in the Multi-Territory Contract with
a specific Multi-Territory Account shall be as determined by the Committee,
subject to Section 3.2 below. Any material variations in the Multi-Territory
Contract shall require the prior consent of the Committee. Licensee understands
and agrees that, in performing its obligations and exercising its rights with
respect to a Multi-Territory Contract, Licensee shall be bound by the terms set
forth therein and shall have no right independently to amend or otherwise alter
any such terms.
2.3 Commissions.
-----------
(a) Licensee shall pay a Commission with respect to the Multi-
Territory Contract to the Assigned Person by no later than 60 days after
Licensee is provided with a copy of the fully executed Multi-Territory Contract.
(b) In the event that (1) Licensee is (A) invited by the Assigned
Person, (B) the licensee within whose territory the headquarters of such Account
are located, or (C) designated by the Committee to assist the Assigned Person in
the marketing of the Services to the Multi-Territory Account, and (2) the
Committee determines that Licensee (or an employee of Licensee) substantially
assisted the Assigned Person in such marketing (including for example by
maintaining contact with the Multi-Territory Account on behalf of the Assigned
Person and by delivery of the Multi-Territory Contract executed by the Multi-
Territory Account or the performance of other useful services), the Assigned
Person shall pay to Licensee (and not to any salesman or agent of Licensee in an
individual capacity) 1/3 of the Commission it receives. Such payment shall be
made in
G-3
<PAGE>
installments as the Subscriber Premises of the Multi-Territory Account commence
receiving the Services.
2.4 Insurance. To facilitate the marketing of the Services to Multi-
---------
Territory Accounts, each Affiliate, including Licensee, shall maintain in full
force and effect such workmen's compensation coverage and liability insurance
coverage as is reasonably required from time to time by the Committee, and shall
provide evidence of such coverage to the Committee from time to time as
requested.
3. The Committee.
-------------
3.1 Composition; Action.
-------------------
(a) The Committee shall at all times consist of six members, three of
whom shall be appointed annually by the International Planned Music Association
(or, in the event such Association is at any time not in existence, such
organization of the MUZAK(R) licensees as succeeds such Association) (the
"IPMA") and three of whom shall be appointed annually by Muzak. Of the three
members appointed by the IPMA, two shall be IPMA members and the third shall be
an Affiliate (or, in the case of a corporate or partnership Affiliate, an owner,
officer, or key employee of such Affiliate) who may be, but need not be, a
member of the IPMA. Of the three members appointed by Muzak, two shall be
officers or employees of Muzak and the third shall be an Affiliate (or, in the
case of a corporate or partnership Affiliate, an owner, officer, or key employee
of such Affiliate) who may be, but need not be, a member of the IPMA.
(b) The Committee shall meet as often as is necessary to maintain the
Program, but in no event less frequently than quarterly. All members of the
Committee shall be given reasonable prior written or telephone notice of any
Committee meeting. At any meeting of the Committee the presence of five or more
members (participating by phone or in person) shall constitute a quorum for the
transaction of business. All decisions of the Committee shall require the
affirmative vote of at least five members of the Committee during a Committee
meeting. Members may participate in a meeting of the Committee by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in the
meeting shall constitute presence of the person at such meeting.
(c) In the event a member retires from the Committee prior to the end
of his or her term of appointment, or is otherwise unable to serve until the end
of such term, the entity that appointed such member shall promptly appoint a
replacement member to serve until the end of such term.
G-4
<PAGE>
(d) Muzak shall bear the costs associated with the meetings of the
Committee and Muzak and the IPMA shall bear such other costs of the Committee as
they may from time to time agree.
3.2 Guidelines. The Committee shall adopt guidelines from time to
----------
time to govern its operations; provided, however, that such guidelines shall not
conflict with the provisions set forth in this Exhibit G. Such guidelines shall
include general pricing guidelines for Multi-Territory Contracts. After adoption
by the Committee, such guidelines (until revision by the Committee) shall be
binding on Muzak and all such Affiliates.
4. Cessation of Rights to Continue to Provide Services After Termination
---------------------------------------------------------------------
of License Agreement.
- --------------------
4.1 Cessation of Affiliate's Contract Rights. If the MUZAK(R) License
----------------------------------------
Agreement of an Affiliate (the "Terminating Affiliate") terminates or expires
(without a renewal) prior to the termination of a Multi-Territory Contract that
pertains to Subscriber Premises in the Terminating Affiliate's MUZAK(R)
territory, the Terminating Affiliate shall cease to have any right to provide
any music or other services to such Subscriber Premises during the remaining
term of such Multi-Territory Contract. Accordingly, in the event of a
termination of Licensee's MUZAK(R) License Agreement, Licensee shall sell to
Muzak all of its rights in all Multi-Territory Contracts, and all related
equipment, that pertain to Subscriber Premises in Licensee's Territory, with
such sale to be for the price(s) described in Section 4.2 below. Upon such sale,
Muzak shall assume all of Licensee's obligations relative to performance of such
Multi-Territory Contract and with respect to such related equipment accruing
after the date of transfer. In addition, in the event of a termination of the
MUZAK(R) License Agreement of an Affiliate in a MUZAK(R) territory that adjoins
Licensee's Territory, Licensee agrees to provide the Services to the Subscriber
Premises of the Multi-Territory Account in such adjoining territory upon the
request of Muzak for such period of time and upon such other terms as are then
agreed to by Muzak and Licensee.
4.2 Purchase of Contract Rights.
---------------------------
4.2.1 Music Services. In the event that Licensee is a Terminating
--------------
Affiliate, the price applicable to Muzak's purchase of the rights of Licensee in
a Multi-Territory Contract for the provision of Music Services (and the related
equipment, including the Earth Station) shall be determined as provided in this
subsection 4.2.1. In the event that the MUZAK(R) License Agreement of Licensee
has expired without renewal or is otherwise terminated due to the bona fide,
arm's length purchase of Licensee's subscriber contracts for a price based on a
multiple
G-5
<PAGE>
of Recurring Music Gross Billings (as hereinafter defined), Muzak's purchase
price hereunder shall be determined by multiplying such arm's length multiple
times the Recurring Music Gross Billings attributable to the Subscriber Premises
of the Multi-Territory Account located in the Territory. If, however, no such
arm's length multiple can be fairly or accurately determined under the
circumstances, Muzak's purchase price hereunder shall be the result of
multiplying the Prevailing Music Multiple (as hereinafter defined) times the
Recurring Music Gross Billings attributable to the Subscriber Premises of the
Multi-Territory Account located in the Territory. As used herein, (i) the term
"Recurring Music Gross Billings" means the average recurring monthly billings to
a Subscriber for the Music Services and related equipment, net of sales taxes
and (ii) the term "Prevailing Music Multiple" means the average of the arm's
length multiples used to determine the purchase prices of the three most
recently reported (to Muzak) sales of the businesses of MUZAK(R) licensees, to
the extent such prices were based on arm's length multiples of Recurring Music
Gross Billings and such multiples can be independently verified as such.
Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of Licensee's rights under a Multi-Territory Contract, Licensee
and/or Muzak have received formal notice that such Multi-Territory Contract will
expire or be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such expiration or termination of
the Contract is less than the above-described arm's length multiple or
Prevailing Music Multiple (as the case may be), then the purchase price of
Licensee's rights in such Multi-Territory Contract shall be determined by
multiplying such remaining number of months in the Contract term by the
Recurring Music Gross Billings attributable to such Contract. To facilitate the
determination of the Prevailing Music Multiple, if Licensee's MUZAK(R) business
is sold and the purchase price is determined wholly or in part by application of
a multiple to Licensee's Recurring Music Gross Billings, Licensee agrees to
inform Muzak of such multiple promptly after such sale occurs; if the purchase
price of such business is not determined by application of a multiple to
Licensee's Recurring Music Gross Billings, Licensee agrees to inform Muzak of
the amount of the purchase price, the amount of Licensee's Recurring Music Gross
Billings as of the date of closing and the method that was used to determine the
purchase price.
4.2.2 Adjunct Services. The price applicable to Muzak's purchase of
----------------
the rights of Licensee in a Multi-Territory Contract for the provision of the
Adjunct Services (and the related equipment, including the Earth Station) shall
be determined as provided in this subsection 4.2.2. In the event the termination
or expiration of the MUZAK(R) License Agreement of Licensee is due to the bona
fide, arm's length purchase of
G-6
<PAGE>
Licensee's subscriber contracts for a price based on a multiple of Recurring
Adjunct Services Gross Billings (as hereinafter defined), Muzak's purchase price
hereunder shall be determined by multiplying such arm's length multiple times
50% of the Recurring Adjunct Services Gross Billings attributable to the
Subscriber Premises of the Multi-Territory Account located in the Territory. In
all other cases, Muzak's purchase price hereunder shall be the result of
multiplying 50% of the Prevailing Adjunct Services Multiple (as hereinafter
defined) times the Recurring Adjunct Services Gross Billings attributable to the
Subscriber Premises of the Multi-Territory Account located in the Territory. As
used herein, (i) the term "Recurring Adjunct Services Gross Billings" means the
average recurring monthly billings to a Subscriber for the Adjunct Services and
related equipment, net of sales taxes and (ii) the term "Prevailing Adjunct
Services Multiple" means the average of the arm's length multiples used to
determine the purchase prices of the three most recently reported (to Muzak)
sales of the businesses of MUZAK(R) licensees, to the extent such prices were
based on arm's length multiples of Recurring Adjunct Services Gross Billings and
such multiples can be independently verified as such. Notwithstanding the
foregoing, in the event that (i) prior to the date of Muzak's purchase of
Licensee's rights under a Multi-Territory Contract pertaining to Adjunct
Services, Licensee and/or Muzak have received formal notice that such Contract
will be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such termination of the Contract
is less than the Prevailing Adjunct Services Multiple, then the purchase price
of Licensee's rights in such Multi-Territory Contract shall be determined by
multiplying such remaining number of months in the Contract term by 50% of the
Recurring Adjunct Services Gross Billings attributable to such Contract. To
facilitate the determination of the Prevailing Adjunct Services Multiple, if
Licensee's MUZAK(R) business is sold and the purchase price is determined wholly
or in part by application of a multiple to Licensee's Recurring Adjunct Services
Gross Billings, Licensee agrees to inform Muzak of such multiple promptly after
such sale occurs; if the purchase price of such business is not determined by
application of a multiple to Licensee's Recurring Adjunct Services Gross
Billings, Licensee agrees to inform Muzak of the amount of the purchase price,
the amount of Licensee's Recurring Adjunct Services Gross Billings as of the
date of closing and the method that was used to determine the purchase price.
4.3 Effect on License Agreement. To the extent there is an
---------------------------
inconsistency or conflict between the terms of this Article 4 and the provisions
set forth in the body of the MUZAK(R) License Agreement to which this Exhibit G
is attached, the provisions of this Article 4 shall control. Without limiting
the generality of the foregoing, this Exhibit G shall control over Section
2.2(b)(i) of said License Agreement.
G-7
<PAGE>
5. Affiliate's Failure to Perform.
------------------------------
5.1 No Discontinuance of Services. Under no circumstances shall an
-----------------------------
Affiliate discontinue the distribution of the Services or provision of related
goods and services to a Multi-Territory Account without providing the Committee
at least 96 hours' written notice of its intention to discontinue such
distribution.
5.2 Effect of Failure. In the event that an Affiliate (the "Failing
-----------------
Affiliate") fails to perform its obligations under the terms of a Multi-
Territory Contract and does not cure such failure within 30 days after notice of
such failure by the Committee (or, if such cure cannot be accomplished within 30
days, if the Failing Affiliate does not promptly commence such cure and
diligently pursue it toward completion during such 30-day period and then
accomplish such cure as soon as reasonably possible thereafter), an Affiliate
operating from a MUZAK(R) territory that is adjacent to the Failing Affiliate's
MUZAK(R) territory, as selected by the Committee, shall thereafter be authorized
to perform the obligations and exercise the rights (including rights to receive
payments) of the Failing Affiliate under such Contract until the termination
thereof. Notwithstanding the foregoing, if at any time a Failing Affiliate fails
to provide the Services to a Subscriber Premises in accordance with a Multi-
Territory Contract and does not cure such failure within 72 hours after receipt
of actual or written notice from the Committee, an Affiliate operating from a
MUZAK(R) territory that is adjacent to the Failing Affiliate's MUZAK(R)
territory, as selected by the Committee, shall have the right immediately to
provide the Services to such Subscriber Premises, and the Failing Affiliate
shall reimburse such Affiliate for the costs associated therewith.
6. Disputes. Subject to the last sentence of this Section 6, all disputes
--------
of any kind, nature or description arising in connection with the operation of
the Program that after a reasonable period of time have not been resolved by
less formal means shall be submitted for resolution to a three-person panel
composed of the then-current President of the IPMA, the then-current President
of Muzak, and a third person selected by the two aforementioned individuals. The
dispute shall be resolved according to such rules as are established by such
panel, and the decision of the panel with respect to such dispute shall be
binding on Muzak and the Affiliates. In the event that (i) either Muzak or
Licensee does not wish to use such panel to resolve such dispute, (ii) it
becomes impossible to convene such a panel, or (iii) the panel is unable after a
reasonable period of time to resolve a dispute, the dispute shall be submitted
to the offices of the American Arbitration Association in Seattle, Washington,
Chicago, Illinois, or New York, New York (as determined by the Committee) for
resolution.
G-8
<PAGE>
7. Amendment. This Exhibit G may be amended by the action of the
---------
Committee, acting in accordance with the requirements of paragraph (b) of
Section 3.1 (which such paragraph may not be amended without the prior written
approval of Licensee and Muzak); provided, however, that such amendment shall
not take effect until 30 days after the Committee provides written notice
thereof to Licensee and Muzak.
8. Distribution of Revenues. In the event that, under the terms of a
------------------------
Multi-Territory Contract, an Assigned Person collects recurring revenues from a
Multi-Territory Account that are then payable by the Assigned Person to one or
more of the Affiliates, the Assigned Person shall, within 30 days after receipt
of each payment of such revenues, provide such Affiliates with a report showing
the date and amount of such payment and pay to such Affiliates such Affiliates'
share of the revenues, without credit, offset or deduction of any kind or nature
whatsoever other than sales or similar taxes required to be collected in
connection with the provision of Services under the Multi-Territory Contract and
such other deductions as have been agreed to by such Affiliates.
9. Audit. In the event that, under the terms of a Multi-Territory
-----
Contract, the Assigned Person collects revenues from a Multi-Territory Account
that are then payable by the Assigned Person to one or more of the Affiliates,
the Committee shall have the right, upon 15 days' written notice, to audit those
books and records of the Assigned Person pertaining to the administration of
such Multi-Territory Contract for the sole purpose of verifying that such
payments were correctly calculated. During any such audit, the Committee may
make mechanical copies of only those books and records that are necessary for
the verification of such calculations and were physically examined as part of
the audit. The Committee shall take reasonable precautions to safeguard the
confidentiality of such copies and shall destroy any such copies on completion
of the audit and payment by the Assigned Person of any monies determined to be
owing as a result of the audit. Neither the Committee nor any Affiliate shall
assess the Assigned Person for amounts found, as a result of such audit, to be
owing if such amounts were first payable by the Assigned Person more than two
years prior to the date such audit commenced, provided that the Assigned Person
did not knowingly maintain false books and records regarding the Multi-Territory
Contract or knowingly make false payments to the Affiliates with respect to such
Multi-Territory Contract.
G-9
<PAGE>
Schedule 1
----------
MUZAK(R) MULTI TERRITORY
ACCOUNT SERVICE AGREEMENT [MUZAK LOGO]
This Agreement ("Agreement") is made as of the day , 199 by
------ -------------- -
and between MUZAK LIMITED PARTNERSHIP acting as agent for the Servicing Music
Suppliers listed on Exhibit "A" hereto as now existing or as subsequently
amended ("Supplier") and ______________________________________ ("Subscriber").
The parties agree as follows:
1. MUSIC SERVICES
Supplier provides MUZAK(R) subscription music programming (the "Music
Service") to commercial establishments. Subscriber owns, operates,
franchises or controls the commercial establishments listed in Exhibit "B"
("Serviced Premises"). The parties agree that, subject to paragraph 6 below,
Supplier shall provide the Music Service to each of the Serviced Premises.
Music service description:
------------------------------------------------
----------------------------------------------------------------------------
2. EQUIPMENT
For the consideration set forth in Section 3 below, Supplier shall provide
the following equipment to each Serviced Premises:
a. Purchased Equipment:
----------------------------------------------------
------------------------------------------------------------------------
b. Other Equipment:
--------------------------------------------------------
------------------------------------------------------------------------
(Subscriber may obtain additional equipment from Supplier on terms to be
negotiated on a location-by-location basis.)
3. FEES
In consideration of the services and equipment provided to Subscriber, and
in addition to the fees and charges referred to in Section 7 below,
Subscriber shall pay the following fees and charges to Supplier in the
manner set forth herein:
a. One-time charges:
Purchased Equipment (as specified above): $__________
Equipment Installation $__________
b. Recurring (monthly) charges:
Music Service and Equipment $__________
4. TERM
This Agreement shall remain in effect for sixty (60) months from
_________________ and shall be automatically renewed for subsequent sixty
(60) month period(s) unless terminated by either party by written notice
delivered to the other party at least ninety (90) days prior to the
expiration of the initial term or the applicable renewal term.
5. CONTINUATION OF AGREEMENT
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
IN WITNESS WHEREOF the parties have entered into this Agreement as of the day
and year first above written.
Subscriber: Muzak Limited Partnership
- ----------------------------------- As Agent for the Servicing Music Suppliers
By: By:
-------------------------------- --------------------------------------
Title: Title:
----------------------------- -----------------------------------
Address: 400 North 34th Street, Suite 200
--------------------------- Seattle, WA 98103
- -----------------------------------
MSA-1
<PAGE>
6. INSTALLATION AND MAINTENANCE OF EQUIPMENT
Subscriber hereby grants to Supplier (subject to any necessary governmental
or third party approvals) the right to install all necessary equipment for
receiving the Music Service, including but not limited to an exterior
antenna or a satellite receiver "dish." Supplier-owned equipment provided to
Subscriber hereunder shall be maintained by Supplier at no additional cost
to Subscriber; provided, however, that such maintenance shall be limited to
labor and repairs required by ordinary and proper use of such equipment.
Subscriber shall provide Supplier with reasonable access to the Serviced
Premises during normal business hours for purposes of performing required
maintenance. Supplier shall retain ownership of all equipment provided
hereunder that has not been purchased by Subscriber, and Subscriber shall
not transfer, encumber or in any way alienate such equipment. Subscriber
shall be responsible for any loss or damage to the Supplier-owned equipment
(reasonable wear and tear excepted) while installed at a Services Premises.
If the Music Service is no longer provided to a Serviced Premises,
Subscriber shall provide Suppler with reasonable access to such premises for
purposes of removing any Supplier-owned equipment. Upon the removal of any
Supplier-owned equipment, Supplier shall not be required to repair, replace
or otherwise reestablish the premises to their original condition.
7. PAYMENT TO SUPPLIER
With respect to each Serviced Premises, Subscriber shall pay the fees
specified herein. One-time charges shall be due and payable on a "Net 10
Days" basis. Recurring charges shall be payable monthly in advance and shall
be due on the first day of the calendar month to which the charges relate.
Additionally, Subscriber shall pay to Supplier the incremental cost of any
increase in copyright fees charged by ASCAP, BMI or other similar entities
beyond what is charged as of the date hereof and any sales, use, excuse, or
other taxes or governmental charges (except income taxes) arising from this
Agreement. Late payments shall be subject to an interest charge at the
maximum rate permitted by law. Annually during the term of this Agreement
Supplier may increase the recurring charges on 30 days' prior written notice
to Subscriber by a percentage increase equal to the percentage increase in
the Consumer Price Index, All Urban Consumers, during the preceding year.
8. USE OF MUSIC SERVICE
Subscriber agrees that without the prior written consent of Supplier the
Music Service shall not be (i) performed in conjunction with commercial
announcements for which Subscriber or any other person receives
consideration of any kind or (ii) copied, recorded, dubbed or supplemented.
Subscriber further agrees that the Music Service shall not be amplified,
transmitted or retransmitted so as to be audible outside any Serviced
Premises.
9. FAILURE OR INTERRUPTION OF SERVICE
Subscriber shall not be liable for any failure to perform its obligations
hereunder due to Acts of God, strikes, emergencies, mechanical failure,
regulatory or other governmental action, action or inaction by Subscriber,
its licensees, contractors, employees, agents or invitees, a breach of this
Agreement by Subscriber or any other cause beyond Supplier's control. For
any failure or interruption of the Music Service which is not excused under
the preceding sentences, which exceeds 24 consecutive hours in duration, and
of which Supplier receives written notice within 48 hours of such failure or
interruption. Supplier shall credit Subscriber's account with respect to the
affected Serviced Premises by an amount equal to one-thirtieth of the
recurring monthly charge for the Music Service for each 24-hour period
during which the failure or interruption continues. Said credit shall be the
sole and exclusive remedy of Subscriber with respect to any interruption or
failure of the Music Service. Supplier shall not be liable for any
incidental or consequential damages whatsoever.
10. ADDITIONS AND DELETIONS
In the event Subscriber wishes to add a Serviced Premises it shall give
Supplier 30 days' prior written notice of such addition. Within 10 days of
Supplier's receipt of such notice it shall advise Subscriber in writing if
it accepts the addition. If the addition is accepted Supplier shall promptly
install any equipment to be provided by Supplier and commence providing the
Music Service at the added premises. In the event Subscriber wishes to
delete a Serviced Premises, it shall give Supplier 30 days' prior written
notice of the deletion. Supplier shall promptly remove from the deleted
premises any Supplier-owned equipment. Subscriber's obligations with respect
to such deleted premises shall not cease unless Supplier is then providing
the Music Service to at least 95% of the Serviced Premises shown in Exhibit
B and (i) Subscriber has closed the deleted premises or (ii) Subscriber has
sold the deleted premises to an unrelated and unaffiliated third party.
11. SERVICING MUSIC SUPPLIER
Subscriber acknowledges and agrees that all services to be provided by
Supplier hereunder shall be provided by the Servicing Music Supplier
identified in Exhibit "B" as being responsible for a particular Serviced
Premises. Subscriber further acknowledges that Supplier is entering into and
executing this Agreement on behalf of and as agent for each such Servicing
Music Supplier; that it is the express interest of both parties hereto to
establish privity of contract between Subscriber and each such Servicing
Music Supplier with respect to each Serviced Premises served by each such
Servicing Music Supplier and that the Xerographic copies of this Agreement
provided in each such Servicing Music Supplier for each such Serviced
Premises shall be deemed for all purposes a counterpart original of this
Agreement.
12. APPLICABLE LAW
In the event of a dispute affecting Serviced Premises located in one state
this Agreement shall be governed by and in accordance with the laws of that
state applicable to contracts made and to be performed wholly within such
state and venue shall rest with the court of general jurisdiction located
in the county where the subject Servicing Music Supplier maintains its
principal place of business. In the event of a dispute affecting Serviced
Premises located in more than one state this Agreement shall be governed by
and in accordance with the laws of the state where the Supplier which has
executed this Agreement as agent for the Servicing Music Suppliers maintains
as principal place of business, applicable to contracts made and to be
performed wholly within such state and venue shall rest with the court of
general jurisdiction located in the county where said Supplier maintains
such principal place of business. If any provision of this Agreement is
deemed unenforceable (in whole or in part) by a Court of competent
jurisdiction the parties agree that such Court shall amend or delete such
provision so as to effectuate the intent of such provision and of this
Agreement to the maximum extent that is enforceable.
13. SUCCESSORS AND ASSIGNS
This Agreement is fully assignable by Supplier but may not be assigned by
Subscriber without the prior written consent of Supplier, which consent
shall not be unreasonably withheld.
14. DEFAULT AND REMEDIES
Default in payment or violation of any material term of this Agreement by
Subscriber shall cause, at Supplier's option, the entire contract balance to
become immediately due and payable as liquidated damages and Supplier shall
have the right to enter any Serviced Premises, discontinue service, and
remove the Supplier-owned equipment. Subscriber shall reimburse Supplier for
all costs and expenses, including reasonable attorneys' fees and costs,
incurred in connection with Supplier's exercise of its rights under this
Agreement.
15. PREEXISTING CONTRACT
In the event a Servicing Music Supplier has a preexisting contract for a
Serviced Premises, then at the option of such Servicing Music Supplier such
contract shall remain in full force and effect until it expires (without
giving effect to any automatic renewal clause), but upon such expiration
this Agreement shall immediately take effect.
16. NOTICES
All notices required to be sent by either party shall be in writing and
shall be sent certified mail postage prepaid to the respective addresses set
forth below their signatures on the reverse side.
17. WHOLE AGREEMENT
This Agreement constitutes the entire Agreement between the parties with
respect to the subject matter hereof and supercedes all prior agreements,
conversations, representations, promises of warranties (express or implied)
whether verbal or written. Except for a modification of the list of
Servicing Music Suppliers in Exhibits A and B, which may be made by Suppler,
no modification of this Agreement shall be valid unless made in writing and
signed by both parties.
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT A
SERVICING MUZAK SUPPLIERS
- --------------------------------------------------------------------------------
ALABAMA
Electronic Engineers, Birmingham, AL
Electro-Systems, Dothan, AL
Service Associates, Huntsville, AL
Business Sound, Mobile, AL
Electronic Engineers, Montgomery, AL
ALASKA
Nothern Television, Anchorage, AK
Background Music, Fairbanks, AK
ARKANSAS
Fitzhugh Communications, Fayetteville, AR
Tempo Sound, Harrison, AR
Business Music, Inc. Little Rock, AR
ARIZONA
SunCom Group, Scottsdale, AZ (Phoenix)
Tucson Music, Tucson, AZ
CALIFORNIA
Muzak, Anaheim, CA
Serban Sound, Bakersfield, CA
Muzak, Burbank, CA (Los Angeles)
Attuned to Music, Chico, CA
American Music Network, Fresno, CA
American Music Network, Modesto, CA
Musi-Cal, Riverside, CA
Muzak, Roseville, CA (Sacramento)
American Music Network, Salinas, CA
Comcast, San Diego, CA
Muzak, San Francisco, CA
Muzicraft, Santa Barbara, CA
Muzicraft, Ventura, CA
COLORADO
Comcast, Colorado Springs, CO
Comcast, Denver, CO
CONNECTICUT
Comcast, Hartford, CT
Muzak, Milford, CT
DISTRICT OF COLUMBIA
Music Inc. Washington, DC
FLORIDA
Osborn Sound, Ft. Myers, FL
Florida Sound, Jacksonville, FL
Melody Inc., Miami, FL
Marion Music, Ocala, FL
Comcast, Orlando, FL
Electro-Systems, Panama City, FL
Electro-Systems, Tallahassee, FL
Tropical Music, Tampa, FL
Harmony Music & Sound, W. Palm Beach, FL (Palm Beach)
GEORGIA
Osborn Sound, Albany, GA
Osborn Sound, Atlanta, GA
Carolina-Georgia Sound, Augusta, GA
Background Music, Phenix City, AL (Columbus, GA)
Osborn Sound, Macon, GA
Georgia Music & Sound, Savannah, GA
HAWAII
Hawkins Audio Engineering, Honolulu, HI
IDAHO
Mountain West Audio, Boise, ID
Idaho Mountain West, Idaho Falls, ID
ILLNOIS
Muzak, Chicago, IL
Kickapoo Broadcasting, Danville, IL
WSOY, Decatur, IL
Comcast, Moline, IL
Comcast, Peoria, IL
Quincy Broadcasting, Quincy, IL
Springfield Advertising, Springfield, IL
INDIANA
Service Associates, Evansville, IN
Comcast, Fort Wayne, IN
Comcast, Indianapolis, IN
Music Engineering, South Bend, IN
IOWA
Music Services, Inc., Des Moines, IA
Brite & Rich, Le Mars, IA (Sioux City)
D.B. Acoustics, Marion, IA (Cedar Rapids)
KANSAS
McClelland Sound, Wichita, KS
KENTUCKY
P & M Electronics, Ashland, KY
Lexington Music & Sound, Lexington, KY
Planned Music of Kentucky, Louisville, KY
LOUISIANA
American Sound & Music, Baton Rouge, LA
Metro Communications, Lafayette, LA
Dixie Music, Lake Charles, LA
Business Sound, Metairie, LA (New Orleans)
Business Music, Shreveport, LA
MAINE
PBC Sound Systems, Bangor, ME
MARYLAND
Audio Communications Network, Baltimore, MD
MASSACHUSETTS
Muzak, Waltham, MA (Boston)
MICHIGAN
Muzi-Tronics, Cadillac, MI
Muzi-Tronics, Grand Rapids, MI
Muzi-Tronics, Kalamazoo, MI
Range Telecommunications, Marquette, MI
Blue Water Music, Port Huron, MI
McDonald Broadcasting, Saginaw, MI
Comcast, Warren, MI (Detroit)
MINNESOTA
Business Music, Inc., Cold Spring, MN (St. Cloud)
Business Music Service, Duluth, MN
Muzak, Minneapolis, MN
Custom Communications, Rochester/Winona, MN
Business Music, Inc. Willmar, MN
MISSISSIPPI
Melody Music Company, Columbus, MS
Mississippi Sound, Greenwood, MS
Metro Communications, Jackson, MS
MISSOURI
Towner Communications, Jefferson City, MO
Audio Acoustics, Joplin, MO
Audio Communications Network, Kansas City, MO
Audio Acoustics, Poplar Bluff, MO
Audio Communications Network, St. Louis, MO
Audio Acoustics, Springfield, MO
MONTANA
Shag Miller, Butte, MT
American Music, Great Falls, MT
Music Systems, Kalispell, MT
NEBRASKA
Parker Engineering, Kearney, NE
Business Music Inc., Lincoln, NE
Business Music Inc., Omaha, NE
NEVADA
Musaire, Inc., Las Vegas, NV
Dynamic Sound, Reno, NV
NEW HAMPSHIRE
Muzak, Exeter, NH
NEW JERSEY
World Music, Springfield, NJ
NEW MEXICO
Business Music, Inc., Albuquerque, NM
NEW YORK
Comcast, Buffalo, NY
Arranged Sound, Johnson City, NY (Binghamton)
Functional Communications, Latham, NY (Albany)
Muzak, Long Island City, NY (New York City)
NCC Systems, Potsdam, NY
Accent Communication Systems, Poughkeepsie, NY
Functional Communications, Rochester, NY
Functional Communications, Syracuse, NY
NCC Systems, Watertown, NY
NORTH CAROLINA
SunCom Group, Charlotte, NC
SunCom Group, Hillsborough, NC
Independence Communications, Kinston, NC
Warner Music & Communications, Rocky Mount, NC
Background Music, Wilmington, NC
NORTH DAKOTA
Music Systems, Inc., Bismarck ND
Music Systems, Inc., Fargo, ND
OHIO
Port Erie Communications, Ashtabula, OH
Ohio Musicue, Canton, OH
Muzak, Cincinnati, OH
Ohio Music Corporation, Cleveland, OH
Muzak, Columbus, OH
Audio Inc., Dayton, OH
Zaiser Communications, Toledo, OH
Hudix Music, Youngstown, OH
OKLAHOMA
Lawton Business Music, Lawton, OK
Business Music, Inc., Oklahoma, OK
Granite Sound, Tulsa, OK
OREGON
Musak, Eugene, OR
Musak, Medford, OR
Muzak, Portland, OR
PENNSYLVANIA
Independence Communications, Harrisburg, PA
Comcast, Hollidaysburg, PA
Independence Communications, Norristown, PA
(Philadelphia)
Independence Communications, Pittsburgh, PA
Comcast, Scranton, PA
SOUTH CAROLONIA
Carolina Sound Communications, Charleston, SC
Background Music, Columbia, SC
Carolina Sound Communications, Myrtle Beach, SC
SOUTH DAKOTA
Music of Rapid City, Rapid City, SD
Midco Communications, Sioux Falls, SD
TENNESSEE
Belew Sound & Visual, Bristol, TN
Service Associates, Chattanooga, TN
Service Associates, Knoxville, TN
Mid-South Music & Sound, Memphis, TN
Service Associates, Nashville, TN
TEXAS
Audioplan, Abilene, TX
Business Music, Inc., Amarillo, TX
AVCOM, Austin, TX
Beaumont Business Music, Beaumont, TX
ABC Music, Big Spring, TX
Brownwood Business Music, Brownwood, TX
Gulf Business Music, Corpus Christi, TX
Comcast, Dallas, TX
Muzicom, El Paso, TX
Comcast, Ft. Worth, TX
T F M Sound, Harlingen, TX
Taft Broadcasting, Houston, TX
Business Music, Inc., Lubbock, TX
Pioneer Music, Midland, TX
W. Texas Business Music, San Angelo, TX
Texas Wired Music, San Antonio, TX
Whitsound, Texarkana, TX
Comcast, Tyler, TX
Wichita Business Music, Wichita Falls, TX
UTAH
Mountain West Audio, Salt Lake City, UT
VERMONT
Music Services of Vermont, Essex Junction, VT
(Burlington)
VIRGINIA
Independence Communications, Charlottesville, VA
Independence Communications, Newport News, VA
Independence Communications, Richmond, VA
Business Communications, Roanoke, VA
WASHINGTON
Muzak, Seattle, WA
Muzak, Spokane, WA
Sousley Sound, Yakima, WA
WEST VIRGINIA
Joe L. Smith, Beckley, WV
Wheeling Services, Wheeling, WV (Parkersburg/Wheeling)
WISCONSIN
Northern Musicast, Appleton, WI
Central Communications, Eau Claire, WI
Pridham Electronics, Madison, WI
Wisconsin Music Network, Milwaukee, WI
Forward Electronics, Plover, WI
Forward Electronics, Wausau, WI
WYOMING
Background Music, Cheyenne, WY
- --------------------------------------------------------------------------------
MSA-EA
<PAGE>
EXHIBIT B
SERVICED PREMISES
List of all Serviced Premises (With Corresponding Reference to Muzak Affiliate
Responsible for each such Serviced Premises)
- --------------------------------------------------------------------------------
Serviced Premises Servicing Music Suppliers
- -------------------------------------------------------------------------------
MSA-EB
<PAGE>
EXHIBIT H
---------
AGREEMENTS NOT SUPERSEDED
In-Store Advertising Agreement
<PAGE>
EXHIBIT 10.23
[Hillsborough, NC]
MUZAK(R)
LICENSE AGREEMENT
Dated February 01, 1996
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S> <C>
I. GRANT OF LICENSE.......................................... 3
1.1 As to Services.................................... 3
1.2 As to Proprietary Marks........................... 4
1.3 Rights Retained................................... 4
II. PROVISION OF SERVICES..................................... 5
2.1 Services.......................................... 5
2.2 Satellite-Delivered Services...................... 6
2.3 Delivery by Recorded Media........................ 9
2.4 Adjunct Services.................................. 10
2.5 Alternate Delivery Means.......................... 10
2.6 Service Delivery Equipment........................ 11
III. TERM...................................................... 12
3.1 Term.............................................. 12
3.2 Renewal of Rights................................. 12
3.3 Notice from Licensee.............................. 16
IV. EXCLUSIVITY............................................... 17
4.1 In the Territory.................................. 17
4.2 Future Services................................... 17
4.3 No Other Services................................. 18
4.4 Promotion of All Services......................... 20
V. STANDARDS OF SERVICE AND TRAINING......................... 21
5.1 Operations in General............................. 21
5.2 Sales............................................. 22
5.3 Protection of Services............................ 23
5.4 Training.......................................... 24
5.5 Confidentiality................................... 24
VI. FEES AND ROYALTIES........................................ 26
6.1 Initial Fee....................................... 26
6.2 Market Fee........................................ 27
6.3 Royalty Fee....................................... 28
6.4 DBS Surcharge..................................... 28
6.5 Recorded Media Charges............................ 29
6.6 Adjunct Services Charges.......................... 29
6.7 Payment Schedule.................................. 29
6.8 Gross Billings.................................... 30
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
VII. RECORDS, REPORTS, AND INSPECTIONS......................... 31
7.1 Records........................................... 31
7.2 Reports........................................... 32
7.3 Audit............................................. 32
VIII. MARKETING AND PROMOTION................................... 35
8.1 Advertisements.................................... 35
8.2 Yellow-Pages Advertising.......................... 36
8.3 Additional Assistance by Muzak.................... 36
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV.......... 36
X. DEFAULT AND TERMINATION OF THIS AGREEMENT................. 38
10.1 Default of Licensee............................... 38
10.2 Default of Muzak.................................. 41
10.3 Additional Remedies............................... 42
10.4 Force Majeure..................................... 43
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR
EXPIRATION OF THIS AGREEMENT.............................. 43
11.1 Action Required of Licensee....................... 43
11.2 Action Required of Muzak.......................... 44
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE............... 45
12.1 By Licensee and its Owners........................ 45
12.2 Consent of Muzak.................................. 45
12.3 Collateral........................................ 47
12.4 Transfer to Family Member......................... 48
12.5 By Muzak.......................................... 48
XIII. PROPRIETARY MARKS......................................... 48
13.1 Ownership......................................... 48
13.2 Infringement...................................... 49
13.3 Use............................................... 49
13.4 Substitution of Proprietary Marks................. 50
XIV. MISCELLANEOUS............................................. 51
14.1 Representations of Licensee....................... 51
14.2 Representations of Muzak.......................... 51
14.3 Independent Contractor............................ 52
14.4 Release........................................... 52
14.5 No Waiver......................................... 53
14.6 Notices........................................... 54
14.7 Entire Agreement.................................. 55
14.8 Severability...................................... 55
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
14.9 Captions.......................................... 55
14.10 Binding Effect.................................... 56
14.11 Counterparts...................................... 56
14.12 Attorney's Fees................................... 56
14.13 Applicable Law.................................... 56
14.14 All Remedies...................................... 56
14.15 Limitation........................................ 57
14.16 No Warranties..................................... 57
14.17 No Implied Rights................................. 58
14.18 Survival.......................................... 58
14.19 Conversion........................................ 59
14.20 Most Favorable Terms.............................. 59
XV. ACKNOWLEDGEMENTS.......................................... 60
15.1 Independent Investigations........................ 60
15.2 Disclosure........................................ 60
15.3 Opportunity to Review............................. 61
</TABLE>
EXHIBITS
- --------
Exhibit A - Music Services
Exhibit B - Adjunct Services (Music-Related and Other)
Exhibit C - Marks
Exhibit D - Technical Specifications
Exhibit E - Sales of Adjunct Services
Exhibit F - Adjunct Services Revenue Sharing
Exhibit G - MUZAK(R) Multi-Territory Accounts Program
Exhibit H - Agreements Not To Be Superseded
iii
<PAGE>
MUZAK(R)
LICENSE AGREEMENT
THIS MUZAK(R) LICENSE AGREEMENT ("Agreement") is made and entered into this
_______ day of ___________________________, 19 , by and between MUZAK LIMITED
PARTNERSHIP, a Delaware limited partnership ("Muzak"), and SUNCOM
COMMUNICATIONS, L.L.C., a _____________ limited liability company ("Licensee").
RECITALS:
--------
WHEREAS, Muzak has developed and owns a system (the "Muzak System") for
the production and delivery to licensees and subscribers of licensees of
subscription music services, adjunct communications services, and related
equipment, which system currently includes Muzak's unique software control
system for satellite distribution of multiple program services;
WHEREAS, the characteristics of the Muzak System also include, without
limitation, subscription music services, with certain unique and varied program
contents developed using distinctive and, in some cases, proprietary
program-scheduling techniques, which are set forth in Exhibit A attached hereto
and incorporated herein by reference (the "Music Services"); distinctive adjunct
services relating to the sequencing, changing, and switching of music-program
communications (the "Music-Related Adjunct Services") and to the delivery of
advertising, data and
1
<PAGE>
video communications (the "Other Adjunct Services"), (collectively the "Adjunct
Services"), which are set forth in Exhibit B attached hereto and incorporated
herein by reference; and delivery methods and procedures for both the Music
Services and the Adjunct Services (jointly, the "Services");
WHEREAS, Muzak identifies the Muzak System and the Services by means of
certain trade names, service marks, trademarks, logos, emblems, and indicia of
origin, including but not limited to the mark "MUZAK(R)" and such other trade
names, service marks, and trademarks as are set forth on Exhibit C attached
hereto and incorporated herein by reference (the "Proprietary Marks"), which
Proprietary Marks represent Muzak's high standards of quality and service; and
WHEREAS, Licensee desires to market and distribute the Services to
customers (the "Subscribers") who enter into agreements providing for receipt of
the Services at certain locations (the "Subscriber Premises"), and wishes to
obtain a license for that purpose from Muzak;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, hereby agree as
follows:
2
<PAGE>
I. GRANT OF LICENSE
----------------
1.1 As to Services.
--------------
(a) Subject to the terms and conditions herein contained, Muzak
hereby grants to Licensee an exclusive license, and Licensee hereby agrees, to
engage in the business of providing the Services to Subscribers at Subscriber
Premises located solely within the following areas (such areas being hereinafter
referred to as the "Territory"): the Counties of Alamance, Caswell, Chatham,
-------------------------------------------
Cumberland, Davidson, Davie, Durham, Forsyth, Granville, Guilford, Harnett,
- ---------------------------------------------------------------------------
Hoke, Lee, Moore, Orange, Person, Randolph, Rockingham, Stokes, Surry, Wake, and
- --------------------------------------------------------------------------------
Yadkin, all in the State of North Carolina. Except as specifically authorized by
- ------------------------------------------
the Multi-Territory Sales Committee in connection with the Multi-Territory
Accounts Program as described in Article IX below and Exhibit G attached hereto,
or by Muzak in connection with certain Adjunct Services sales as described in
Exhibit E attached hereto, Licensee shall not provide the Services to Subscriber
Premises located outside the Territory.
(b) Licensee and Muzak recognize that some outlying areas of
the Territory may at some future date be more efficiently served by a Muzak
licensee who operates in a territory adjoining the Territory. Licensee therefore
shall have the right at any time to present to Muzak a written request for
3
<PAGE>
reallocation of such outlying areas of the Territory to an adjoining licensee.
Any such reallocation shall be effective upon the written consent thereto of
both Muzak and the adjoining licensee. Muzak's consent shall not be unreasonably
withheld.
1.2 As to Proprietary Marks. Subject to the terms and conditions herein
-----------------------
contained, Muzak grants to Licensee, and Licensee accepts, a license to use the
Proprietary Marks solely in connection with Licensee's provision of the Services
as provided in this Agreement. Licensee shall at all times seek to market and
sell the Services through use of the Proprietary Marks.
1.3 Rights Retained. The grant of rights in Sections 1.1 and 1.2 above
---------------
does not include the grant of the following rights, which are retained by Muzak:
(a) The right to use, and to license others to use, the Muzak
System and the Proprietary Marks for the provision of the Services to Subscriber
Premises which are located outside the Territory.
(b) The right to provide the Services, and to use the Proprietary
Marks in connection therewith, to transportation common carriers (including,
without limitation, operators of automobiles, ships, airplanes, trains, or
buses) which sell or
4
<PAGE>
provide transportation common carrier services, in whole or in part, within the
Territory, it being understood that the reservation of such right shall not be
construed as limiting Licensee's right to provide the Services to transportation
common carriers located wholly within the Territory.
(c) The right to provide a foreground music service by Recorded Media
(as hereinafter defined) under the "YESCO(R)" name and trademark to existing
dealers of the "YESCO(R)" Foreground Music Service and their customers pursuant
to existing contractual obligations or agreements with such dealers; provided,
however, that Muzak shall not authorize such dealers to distribute any of the
Services or use the Proprietary Marks within the Territory.
II. PROVISION OF SERVICES
---------------------
2.1 Services. Muzak shall supply Licensee with the Services for and
--------
during the term hereof, for use by Licensee solely in accordance with the terms
of this Agreement. Muzak reserves the right to add a Service and, except with
respect to the "Environmental Music by MUZAK(R)" and the "Foreground Music
One(R)" Music Services, to substitute a different Service or discontinue the
distribution of a Service, if Muzak reasonably determines that such addition,
substitution, or discontinuation will be beneficial to its business and the
business of its
5
<PAGE>
licensees in general and gives Licensee at least six (6) months' prior notice of
such addition, substitution or discontinuation. Any such addition, substitution
or discontinuation will be reflected in an amendment of Exhibit A or Exhibit B,
as the case may be, and will not affect the validity of this Agreement, which
shall, in all respects, be deemed modified to provide for such addition,
substitution, or discontinuation.
2.2 Satellite-Delivered Services.
----------------------------
(a) Subject to Section 2.3, Licensee agrees to deliver the Music
Services to Subscribers by such means as meet the standards and technical
specifications set forth in Exhibit D attached hereto and incorporated herein by
reference and the other terms and conditions of this Agreement. Muzak may modify
the standards and specifications set forth in Exhibit D from time to time if
Muzak reasonably believes that such modifications are necessary to maintain or
improve the quality of delivery of the Services to Subscribers or to maintain or
improve the effectiveness or quality, or reduce the price, of the Service
Delivery Equipment (as hereinafter defined); provided, however, that no such
modifications shall have the effect of rendering the satellite receivers and
associated antennae (collectively, the "Earth Stations") then in use by Licensee
or Subscribers in the Territory incapable of receiving satellite transmissions,
or any other equipment then in use by Licensee or Subscribers in the
6
<PAGE>
Territory for the reception of the Services incapable of receiving the Services,
unless such modifications are necessitated by law or by the exercise of the
rights of third parties under the express terms of Muzak's satellite-space
contracts; and provided further, that Muzak shall provide Licensee with six (6)
months' prior notice of any changes to those standards and specifications in
Exhibit D that pertain to the Service Delivery Equipment and Licensee's
obligations under Section 2.6 below.
(b) In the event that the Services are delivered by "Direct-Broadcast
Satellite" ("DBS"), which permits the satellite transmission of Services by
Muzak directly to the premises of a Subscriber, the following shall apply:
(i) Muzak shall, promptly after receipt of written notice from
Licensee, commence DBS delivery of the Services to Subscribers who have
Earth Stations suitable for receipt of such delivery. Subject to the
provisions of Exhibits E and G hereto, if Muzak delivers Services by
DBS directly to the Subscriber Premises, Muzak shall not discontinue
such delivery until the earlier of the following: (A) the date which
Licensee designates, or (B) one hundred eighty (180) days after the
effective date of the termination or expiration (without renewal of
license rights) of this Agreement. In the event Muzak discontinues
7
<PAGE>
delivery of Services in violation of this subsection (b) (i), Muzak
agrees to the granting of a temporary injunction against it on the
condition that the duration of such injunction does not exceed ten (10)
days. Such injunction may be granted on an ex parte basis if Muzak
-- -----
fails to appear at the hearing following twelve (12) hours' notice by
telephone to the twenty-four (24) hour telephone number of the Muzak
DBS Division. During the ten (10) day temporary injunction period,
Licensee may seek to have such temporary relief converted to a
permanent injunction in a hearing on the merits following appropriate
notice to Muzak.
(ii) During the above-referenced 180-day (or shorter, if
Licensee so designates) period, Licensee shall remain obligated to
perform the duties and be subject to the restrictions applicable to it
under the terms of this Agreement with respect to such continuing DES
delivery of the Services, including without limitation those terms
which obligate Licensee to pay royalties, fees, charges, and surcharges
(but only with respect to Gross Billings [as hereinafter defined] and
fees and charges to Subscribers served by means of DES), but not
including terms which require Licensee to pay a market fee or which
restrict Licensee from offering or selling the services of others.
During such 180-day (or shorter) period, under no circumstances shall
Licensee use the Proprietary Marks
8
<PAGE>
except as necessary in association with the continuing provision of the
Services by DBS to Subscribers. In addition, during such period Muzak
shall not be precluded from appointing one or more distributors of the
Services in the Territory and from giving to such distributors any
rights previously accorded to Licensee under this Agreement or any
related agreement.
2.3 Delivery by Recorded Media. Certain Services, as reasonably
--------------------------
designated by Muzak, may be delivered by means of, among other things, magnetic
tape or compact disc, in analog or digital form (the "Recorded Media"). Muzak
shall at all times retain title to, and all ownership rights in, any Recorded
Media whether furnished to Licensee or to a Subscriber. Licensee shal not sell,
assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any
Recorded Media. Licensee shall (i) prohibit all Subscribers who receive Services
delivered by Recorded Media from selling, assigning, transferring, conveying,
giving away, pledging, mortgaging, or otherwise encumbering any of such Recorded
Media, (ii) promptly notify Muzak in the event it becomes aware that any
Subscriber has violated any such prohibition, (iii) cooperate with Muzak in the
immediate termination of the provision of Services to any Subscriber which has
violated any such prohibition, and (iv) take such further action as is requested
by Muzak (at Muzak's expense) to enforce such prohibition.
9
<PAGE>
2.4 Adjunct Services. All sales of the Adjunct Services shall be
----------------
conducted in the manner provided in Exhibit E attached hereto and incorporated
herein by reference.
2.5 Alternate Delivery Means. In the event of a failure of Muzak's
------------------------
satellite transmissions of the Services, Muzak shall use its reasonable best
efforts promptly to restore such transmissions. In addition, by no later than 30
days after the date of this Agreement, Muzak shall provide Licensee with tape
cassettes (or other form of Recorded Media) containing 72 hours of
"Environmental Music by MUZAK(R)" programming and 72 hours of "Foreground Music
One(R)" programming, at no cost to Licensee, which Licensee shall retain for
emergency use in the event of a failure of Muzak's satellite transmissions of
the Music Services. Should any such failure of satellite transmissions continue
for a period in excess of 48 hours, Muzak shall use its reasonable best efforts
promptly to provide Licensee with additional tape cassettes (or other form of
Recorded Media), at no cost to Licensee, to be used until such failure has been
corrected. All Recorded Media provided to Licensee or to Subscribers under the
terms of this Section 2.5 shall be subject to all other provisions of this
Agreement pertaining to Recorded Media, including, without limitation, Section
2.3.
10
<PAGE>
2.6 Service Delivery Equipment.
--------------------------
(a) Licensee, at its expense (except as provided in subsection (b) below),
shall obtain and maintain equipment (including, without limitation, Earth
Stations) to enable Licensee to receive and distribute the Services and shall
obtain and make available to the Subscribers equipment to enable the Subscribers
to receive the Services. (All equipment used to receive or distribute the
Services, including such equipment as is owned by Subscribers, is hereinafter
collectively referred to as the "Service Delivery Equipment.") The Service
Delivery Equipment, except Subscriber-owned equipment that is not sold to the
Subscriber by Licensee, shall conform to Muzak's standards and specifications in
effect on the date Licensee installs such Equipment at the Subscriber Premises.
The standards and specifications in effect as of the date hereof are attached
hereto in Exhibit D.
(b) Muzak shall, at no cost to Licensee, provide Licensee with two (2) Earth
Stations for Licensee's use (at such locations in the Territory as Licensee
determines) in receiving the Services during the term of this Agreement. Muzak
shall at all times retain title to, and all ownership rights in, the Earth
Stations that it provides to Licensee, and Licensee shall not under any
circumstances sell, assign, transfer, convey, give away, pledge, mortgage, or
otherwise encumber such Earth
11
<PAGE>
Stations. Licensee shall, at Muzak's expense (except with respect to the
obtaining of any required permits, which shall be at Licensee's expense up to
$500 per Earth Station), install the Earth Stations which Muzak provides to
Licensee, and shall, at its own expense, maintain such Earth Stations in good
working condition; provided, however, that in the event any Earth Station
provided to Licensee is, through no negligent or intentional act or failure to
act of Licensee, defective or in need of replacement parts or repair, Muzak,
after receipt of notice thereof, shall promptly provide or arrange for such
replacement parts and repair as are necessary to restore such Earth Station to
good working order.
III. TERM
----
3.1 Term. Except as otherwise provided herein, the term of this Agreement
----
shall begin as of the date set forth in the introductory paragraph of this
Agreement and shall continue in full force and effect for a period of ten (10)
years from such date.
3.2 Renewal of Rights.
-----------------
(a) If Muzak reasonably determines that the performance of Licensee during
the term stated in Section 3.1 is not sufficiently satisfactory to warrant
renewal of Licensee's
12
<PAGE>
license rights hereunder, then, at least two years prior to the date of
expiration described in Section 3.1 of this Agreement, Muzak shall notify
Licensee that it does not intend to renew Licensee's license rights and provide
the specific reasons for such decision. Such notification is intended to give
Licensee the opportunity to assign its rights under this Agreement, or to make
satisfactory its performance, it being understood that any such assignment is
subject to Muzak's prior approval as provided in Article XII hereof.
(i) In determining whether or not to renew Licensee's license
rights, Muzak shall consider Licensee's performance under this
Agreement. In evaluating Licensee's performance, Muzak shall consider
such factors as, among others, the following: Licensee's total
billings for all Services, the trend of Licensee's new billings and
cancellations (and the reasons therefor), local market conditions and
the degree of Licensee's market penetration in the Territory.
(ii) In the event Muzak notifies Licensee that Muzak does not
intend to renew Licensee's license rights because Muzak has reasonably
determined that Licensee's performance is not sufficiently
satisfactory to warrant renewal of Licensee's license rights
hereunder, Licensee shall have a period of six months from the date of
such
13
<PAGE>
notice to attempt to improve its performance. At the end of such
six-month period, Muzak shall reconsider the adequacy of Licensee's
performance and if such performance has sufficiently improved so that
it is no longer inadequate, Muzak shall rescind its notice of
intention not to renew Licensee's license rights. Conversely, if at
the end of such six-month period Muzak determines that Licensee's
performance remains inadequate, Muzak shall inform Licensee of the
reasons for such determination and send to Licensee a final notice of
nonrenewal.
(b) Muzak shall also have the right not to renew Licensee's license rights
if Licensee engages in conduct which Muzak reasonably deems inimical to the best
interests of the Muzak System (including the interests of the MUZAK(R) licensees
in such System). The exercise of Muzak's rights as stated in this subsection (b)
shall be subject to the following conditions:
(i) In the event such conduct constitutes a breach of this
Agreement, Muzak shall have the absolute right not to renew Licensee's
license rights, provided that Muzak has notified Licensee of such
breach, such breach occurred (or Muzak first became aware of such
breach) no more than six months before Muzak's nonrenewal notice to
Licensee, and Licensee has neither cured nor challenged such breach
within the period specified in Section 10.1(c)
14
<PAGE>
hereof, and provided further that Muzak's nonrenewal notice to
Licensee states that it constitutes a final notice of nonrenewal; and
(ii) In the event that such conduct does not constitute a breach
of this Agreement, Muzak shall notify Licensee within 90 days of its
discovery of the objectionable conduct that it considers such conduct
to be inimical to the best interests of the Muzak System (including
the interests of the MUZAK(R) licensees in such System). If, after two
such notices, Licensee again engages in conduct which Muzak reasonably
deems to be inimical to the best interests of the Muzak System
(including the interests of the MUZAK(R) licensees in such System),
then (whether or not such conduct is similar to the conduct referred
to in either of the earlier notices) Muzak may notify Licensee of that
fact and of the further fact that as a result of such conduct, it does
not intend to renew Licensee's license rights. This notice shall
constitute a final notice of nonrenewal.
(c) In the event that, in accordance with the provisions of this Section
3.2, Muzak notifies Licensee of its intention not to renew Licensee's license
rights, then Muzak shall have no obligation to offer to renew such license
rights; provided, however, that if, in the case of the final nonrenewal
15
<PAGE>
notice sent pursuant to subparagraph (a) or subparagraph (b)(ii) above,
Licensee challenges, by litigation commenced no later than 120 days after the
date of such final nonrenewal notice, the propriety of such notice, such notice
shall become effective only after such litigation is finally resolved in favor
of Muzak. It is understood and agreed that Licensee's right to challenge the
final nonrenewal notice sent under subparagraph (b)(i) of this Section 3.2
shall be exercised, if at all, by means of Licensee's challenge under Section
10.1 of this Agreement of the breach supporting such nonrenewal. For purposes
hereof, final resolution shall include Licensee's failure to make a timely
appeal of a court decision in favor of Muzak. If Muzak does not so notify
Licensee, then Muzak shall be required to offer to enter into a new license
agreement with Licensee upon expiration of this Agreement, which new license
agreement shall correspond to the form of license agreement which Muzak is then
bona fide offering to licensees (or prospective licensees) serving (or proposing
to serve) licensed territories of comparable size to that proposed to be
licensed to Licensee under such new agreement.
3.3 Notice from Licensee. Notwithstanding Section 3.2, Muzak shall have no
--------------------
obligation to offer to renew Licensee's license rights unless, after written
notice from Muzak sent to Licensee no less than eight (8) and no more than
twelve (12) months prior to the date of expiration described in Section 3.1
16
<PAGE>
of this Agreement advising Licensee of the effect of this Section 3.3, Licensee
shall have given Muzak written notice of its desire to renew its license rights
not less than six (6) months nor more than twelve (12) months prior to the date
of expiration described in Section 3.1 of this Agreement.
IV. EXCLUSIVITY
.1 In the Territory. Subject to the provisions of Sections 1.3 and 2.4
----------------
(including Exhibit E hereto) above, Article IX below (including Exhibit G
hereto), and the Licensee's In-Store Advertising Agreement described in Exhibit
H attached hereto, during the term of this Agreement, Muzak shall not authorize
anyone other than Licensee to (i) provide the Services in the Territory or (ii)
use the Proprietary Marks in the Territory.
.2 Future Services. Muzak shall conduct research and development to
---------------
maintain and improve the quality of the Services and the methods used to
distribute them. In the event that Muzak develops new subscription music
services, or new communications services in the nature of the Adjunct Services,
after the date hereof, Muzak shall amend Exhibit A or Exhibit B, as the case may
be, in the manner provided in Section 2.1 above (including the requirement of at
least six months' prior notice to Licensee of such amendment) to add such new
Services thereto, thereby giving
17
<PAGE>
Licensee the right and, subject to Exhibit E hereto, the obligation to
distribute such Services in the Territory under the terms of this Agreement.
.3 No Other Services. During the term of this Agreement, except as
-----------------
otherwise approved in writing by Muzak, neither Licensee nor any of the persons
or entities holding (either directly, indirectly, or beneficially) a controlling
ownership interest in Licensee shall, either directly or indirectly, for itself,
or through, on behalf of, or in conjunction with any person or entity:
(a) Participate or permit any of its employees, officers, or directors to
participate, either directly or indirectly in the distribution in the Territory
of any communications service substantially the same as or similar to the
Adjunct Services (except a communications service distributed by any such person
or entity pursuant to a contract or agreement in effect on the date the Adjunct
Service which is the same as or similar to such communications service is first
offered to Licensee by Muzak), or any subscription music service other than the
Music Services, including, without limitation, a radio program service which is
provided through special reception devices tuned only to that station's signal
and any music programming that is provided to commercial or residential
locations by means of cable television or cable radio; provided,
--------
18
<PAGE>
however, that the foregoing shall not become effective with respect to such
- -------
other subscription music services that are distributed by Recorded Media until
the later of (i) January 1, 1993, (ii) the first date Licensee may cancel or
otherwise terminate the agreement under which Licensee is the distributor of
such other music services without causing a breach of such agreement (provided
such agreement was in effect on March 1, 1990), or (iii) with reference to the
distribution of such music services to any particular customer, the first date
Licensee may either substitute the Music Services for such other music services
or cancel or terminate the agreement with such customer without causing a breach
of such agreement (provided such customer agreement was in effect on September
1, 1990); and provided further, that if, as a result of Licensee's acquisition
-------- -------
of another music business or the assets thereof during the term of this
Agreement, Licensee becomes the assignee of a customer agreement for such other
music or communications services or an agreement under which Licensee is the
distributor of such other music or communications services and Licensee cannot
substitute the Services for such other services without causing a breach of such
agreement, Licensee may provide such other services to the customers receiving
such services on the date of assignment through the remaining term (without
reference to renewal rights) of such agreement. Indirect participation shall
include participation as an officer, director, owner (which term shall not
include the holder of 5% or less of the common stock of a
19
<PAGE>
publicly-held entity), partner, employee, or consultant of an entity
distributing such other communications or subscription music service.
(b) Divert or permit any of its employees, officers, or directors to
divert any existing or prospective Subscriber to any competitor in the
Territory, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with Muzak, the Proprietary Marks, or the Services.
(c) Display in any location in the Territory any trade names, trademarks,
or service marks of any other business providing subscription music services or
providing communications services substantially similar to the Adjunct Services
except if permitted to sell or distribute such services in the Territory
pursuant to Paragraph (a) above.
.4 Promotion of All Services. Throughout the term of this Agreement,
-------------------------
Licensee shall use its reasonable best efforts actively to promote, market, and
distribute each of the Services (except as otherwise provided in Article 4 of
Exhibit E hereto).
20
<PAGE>
V. STANDARDS OF SERVICE AND TRAINING
5.1 Operations in General. In order to maintain the reputation and goodwill
---------------------
of Muzak, the Services, and the Proprietary Marks, Licensee shall:
(a) Comply with all federal, state, and local laws, rules and
regulations, and timely obtain all permits, certificates, and licenses,
necessary in the reasonable judgment of Licensee for the proper conduct of the
business licensed hereunder (the "Business").
(b) Maintain an office in the Territory and promptly notify Muzak in
the event Licensee moves the office to a new location within the Territory;
provided, however, that if Licensee is also the Muzak licensee in a territory
adjacent to the Territory and maintains an office in that territory that
adequately serves Subscribers in both such territories, Licensee need not
maintain an office in the Territory.
(c) Be responsible for paying for all performing rights licenses
necessary for the distribution of the Services; provided, however, that Muzak
shall be responsible for paying for the license with SESAC to the extent
required for Licensee's distribution of the Services.
21
<PAGE>
(d) Be responsible for paying all applicable local, state and federal
taxes of whatever nature, now or hereafter enacted, relating to Licensee's
provision of the Services, and all accounts and other indebtedness of every kind
incurred by Licensee in the conduct of the Business.
(e) Hold itself out to the public as an independent contractor,
operating under a license from Muzak. In the event Licensee elects to exhibit
the MUZAK(R) name on its stationery or vehicles, such exhibition shall be in a
conspicuous place and only in juxtaposition with Licensee's corporate name.
5.2 Sales. Licensee (or, if Licensee is a corporate or partnership entity,
-----
those individuals responsible for managing the Business) shall devote full-time
and reasonable best efforts to the sale, distribution, and support of all the
Services (it being understood that such obligation shall not be construed as
prohibiting Licensee from selling goods and services in addition to the
Services, provided such sale does not violate Section 4.3 above, or requiring
Licensee to sell certain Adjunct Services as described in Article 4 of Exhibit E
hereto). Without limiting the generality of the foregoing, prior to the
beginning of each consecutive twelve (12)-month period during the term of this
Agreement, with the first such period to begin on the first anniversary of the
date of this Agreement, Muzak and Licensee shall mutually set a Services sales
goal for Licensee. Such goal
22
<PAGE>
shall be based on the amount of Gross Billings, plus the amount of billings for
the sale of Recorded Media and Adjunct Services, which Muzak and Licensee
mutually believe can be attained by Licensee during such twelve (12)-month
period, taking into consideration such factors as the size and other distinctive
characteristics of the Territory, the size and trend of Licensee's past Gross
Billings and other billings, Licensee's prior sales of each Service, and
economic conditions affecting the Territory. Licensee shall use its best efforts
to meet such sales goals during each respective twelve (12)-month period.
5.3 Protection of Services. Licensee shall not alter in any way the
----------------------
Services or any products (including Service Delivery Equipment) owned by Muzak
and in the possession of Licensee. Without limiting the generality of the
foregoing, Licensee shall not substitute or add any musical selections or other
material in or to any Service (except in extraordinary circumstances, with the
prior written consent of Muzak, which in such circumstances shall not be
unreasonably withheld). Licensee shall not represent that any product or
equipment not produced by Muzak has been produced by Muzak; provided, however,
that the foregoing shall not preclude Licensee from displaying the MUZAK(R) name
on items not produced by Muzak, including promotional items, if Muzak has
authorized such display. Licensee shall report to Muzak any unauthorized
reception of the Services promptly after becoming aware of any such unauthorized
reception, and shall
23
<PAGE>
further cooperate with Muzak in protecting against and preventing the
unauthorized reception of the Services. Licensee shall not record, copy, or
reproduce all or any part of any Service and shall expressly prohibit, including
by written agreement if possible, Subscribers from recording, copying, or
reproducing all or any part of any Service.
5.4 Training. Muzak shall make available to Licensee and its employees
--------
training programs designed to maintain and improve Licensee's sales and delivery
of the Services; provided, however, that this obligation shall cease in the
event Muzak determines that such programs (or any sessions thereof) are not
cost-effective. For all such programs, Muzak shall provide instructors and
training materials, for which Muzak reserves the right to charge a reasonable
tuition fee. Licensee or its employees shall be responsible for any and all
other expenses incurred by them in connection with such training programs,
including without limitation the costs of transportation, lodging, meals, and
any wages.
5.5 Confidentiality. During the term of this Agreement and thereafter,
---------------
neither Muzak nor Licensee (including any persons or entities listed on the last
page of this Agreement) shall use for its own purposes or divulge to any third
party any trade secrets or confidential information of the other. As used herein
(i) the term "third party" shall not include any party otherwise lawfully
24
<PAGE>
in receipt of the trade secrets or confidential information to be divulged; or
any employee, attorney, accountant, or consulting engineer of Muzak or Licensee,
as the case may be, provided that such individual agrees not to further use or
disclose such trade secrets or confidential information; or any person or entity
providing credit or financing to Muzak or Licensee, as the case may be, provided
such person or entity (and any representative thereof) is similarly charged with
maintaining the confidence of such trade secrets and confidential information;
or any representative of a governmental authority or other person or entity to
whom disclosure is required by compulsion of law, provided notice of the demand
for such disclosure is given, within 48 hours of receipt of such demand, to the
party owning the confidential information or trade secrets required to be
disclosed; and (ii) the term "confidential information" means information
designated as such in writing by the party owning such information, as well as
customer lists and revenue data (without further designation), but does not
include information that has become part of the public domain through
publication or other similar communication. During the term of this Agreement
Muzak shall not require that Licensee disclose to Muzak the name and address of
any Subscriber other than (i) for the purpose of participation in the
Multi-Territory Accounts Program, (ii) to permit delivery of the Services under
the Licensee's In-Store Advertising Agreement, and (iii) to permit delivery of
the Services by such technological means as require such information
25
<PAGE>
for such delivery. Licensee understands and agrees that if Muzak is unable to
perform any of its obligations hereunder as a result of its inability to obtain
such Subscriber information, such nonperformance shall not be deemed a breach of
this Agreement.
VI. FEES AND ROYALTIES
6.1 Initial Fee. If this Agreement is entered into in connection with the
-----------
renewal or continuation (including amendments and adjustments of territories) of
rights granted under a prior agreement between Muzak (or its predecessor) and
Licensee (or its predecessor in the Territory), Licensee shall not be required
to pay any initial fee to Muzak. If this Agreement is not entered into in
connection with such renewal or continuation of rights granted under such a
prior agreement, Licensee shall pay to Muzak an initial fee of Five Thousand
Dollars, plus the amount, if any, paid by Muzak to purchase the rights of any
former licensee in the Territory in any Multi-Territory Contracts and certain
Adjunct Services Subscriber Agreements (as defined in Exhibits E and G hereto),
receipt of which initial fee is hereby acknowledged. The initial fee shall be
deemed fully earned and nonrefundable upon execution of this Agreement and
assignment of such subscriber contracts and agreements in consideration of the
administrative and other expenses incurred by Muzak in granting this license to
Licensee.
26
<PAGE>
6.2 Market Fee. Licensee shall pay to Muzak, in accordance with Section
----------
6.7 each calendar month, a market fee in the amount set forth below for
Licensee Category C and based upon information then available in the report
- -------------------
entitled County Business Patterns by State and a U.S. Summary, as published by
----------------------------------------------------
the Bureau of the Census, United States Department of Commerce or any successor
publication (the "U.S. Business Pattern Report") and, in the case of Category I
below, the population within the Territory.
<TABLE>
<CAPTION>
Licensee Number of Businesses and/or Monthly
Category Population Within Territory Market Fee
- -------- --------------------------- ----------
<C> <S> <C>
A 70,000 or more businesses $950
B 60,000 through 69,999 businesses 900
C 50,000 through 59,999 businesses 850
D 40,000 through 49,999 businesses 770
E 30,000 through 39,999 businesses 690
F 20,000 through 29,999 businesses 610
G 10,000 through 19,999 businesses 530
H 5,000 through 9,999 businesses 450
I ("Junior 4,999 or fewer businesses or population of 350
Franchise") 100,000 or less
</TABLE>
Upon a determination by Muzak, based upon the information then available in the
U.S. Business Pattern Report (or, in the case of Category I, the U.S. Census),
that the number of businesses or population within the Territory has changed so
as to require the recategorization of the Business, Muzak will so notify
Licensee. Any adjustment in the market fee resulting from such recategorization
shall become effective for the calendar month immediately following the month in
which such notice is given. Cumulative adjustments in the market fee during the
term of this
27
<PAGE>
Agreement shall not exceed two (2) categories from that shown above in this
Section 6.2.
6.3 Royalty Fee. Licensee shall pay to Muzak each month a royalty fee
-----------
in the amount of ten percent (10%) of Licensee's Gross Billings, as defined in
Section 6.8 below.
6.4 DBS Surcharge. In consideration of Muzak's development and
-------------
implementation of DBS, Licensee shall pay to Muzak a surcharge (the "DBS
Surcharge") throughout the term of this Agreement; provided, however, that
Licensee's obligation to pay the DES Surcharge shall no longer exist after
Licensee (and/or any predecessor of Licensee in the Territory) has paid to Muzak
the DBS surcharge with respect to the Territory for a cumulative total of
ninety-six (96) consecutive calendar months (including any months preceding the
date of this Agreement during which Licensee [or its predecessor in the
Territory] paid such DBS Surcharge with respect to the Territory). The DBS
Surcharge shall be equal to the following percentage of Licensee's Gross
Billings:
28
<PAGE>
<TABLE>
<CAPTION>
Calendar Months
(Including any applicable DBS Surcharge
months preceding the date (Percentage of
of this Agreement) Gross Billings)
------------------------- ---------------
<S> <C>
1 through 12 0.50%
13 through 24 1.25%
25 through 60 1.75%
61 through 96 1.00%
thereafter 0.00%
</TABLE>
6.5 Recorded Media Charges. Licensee shall pay Muzak's standard
----------------------
Recorded Media charges, as the same may be set forth by Muzak from time to time
in writing, for all Recorded Media distributed to Licensee or the Subscribers.
Muzak shall not increase such Recorded Media charges prior to January 1, 1993,
and increases thereafter shall not exceed ten percent (10%) per annum.
6.6 Adjunct Services Charges. Licensee shall pay Muzak's Adjunct
------------------------
Services charges in accordance with the terms set forth in Exhibit F attached
hereto and incorporated herein by reference.
6.7 Payment Schedule. All monthly payments required by Sections 6.3 and
----------------
6.4 shall be paid within forty-five days of the end of the month in which the
applicable Services are provided to the Subscribers, and shall be submitted
together with any reports or statements required under Section 7.2 hereof. All
Market Fee charges required by Section 6.2, all Recorded Media charges required
by Section 6.5, and all Adjunct Services charges
29
<PAGE>
required by Section 6.6 shall be paid within forty-five days after the date of
Muzak's billing to Licensee. Any payment of fees due to Muzak that is not
actually received by Muzak by the due date shall be deemed overdue. If any
payment is deemed overdue, simple interest may be assessed on such overdue
payment. Such interest shall accrue on a daily basis from the due date until the
date of payment, at the lesser of (i) the prime rate of The First National Bank
of Chicago per annum in effect at the beginning of the calendar quarter, or (ii)
the highest rate of interest permitted by law in Licensee's State. Entitlement
to such interest shall not limit any other remedies available under law or this
Agreement as a result of the overdue payment.
6.8 Gross Billings. "Gross Billings" means all amounts billed or
--------------
otherwise charged to a Subscriber by Licensee in connection with (1) the
provision of any Music Service, and (2) the lease or rental (but not the sale)
of Service Delivery Equipment and other equipment used to receive and distribute
such Music Service but not including (i.e., excluding) equipment that is not
used primarily in the provision or reception of a Music Service. Notwithstanding
the foregoing, "Gross Billings" shall not include any amount billed or otherwise
charged to a Subscriber by Licensee for (a) the provision of any Music Service
on Recorded Media, (b) Music-Related Adjunct Services, or (c) the lease or
rental of any Service Delivery Equipment used with Recorded Media. "Gross
Billings" also shall not include (i) any
30
<PAGE>
amounts billed to Subscribers as (and separately stated on the billings or
otherwise separately determinable as) sales or similar excise taxes; (ii)
one-time installation charges billed not later than ninety (90) days following
completion of such installation; (iii) charges for service of Subscriber-owned
equipment, provided that such charges are separately determinable; (iv) ad hoc
(i.e., extraordinary) charges for service actually performed on
----
Subscriber-leased or Subscriber-owned equipment; and (v) late-payment penalties
or interest charges imposed by Licensee, provided that such penalties and
charges do not exceed standard industry practice. Licensee may deduct from its
Gross Billings (i) amounts paid by Licensee as performing rights fees to ASCAP,
BMI, or similar performing rights organizations with respect to the Music
Services other than those distributed by Recorded Media, and (ii) the amount of
any billings that were previously reported to Muzak as part of Licensee's Gross
Billings but which, in the month of the deduction, were written off by Licensee
as uncollectible in accordance with federal income tax standards of
uncollectibility.
VII. RECORDS, REPORTS, AND INSPECTIONS
---------------------------------
7.1 Records. Licensee shall prepare, and retain at its principal place of
-------
business for at least two (2) years thereafter, complete and accurate books,
records, and accounts of the Business. Such books, records, and accounts shall
fairly
31
<PAGE>
represent the results of operations of such business, as determined on an
accrual basis, and shall be kept in sufficient detail to permit the transactions
included in such operations to be clearly identifiable and traceable to
underlying documentation. Licensee shall make available such records and books
of account to Muzak or its representatives if requested by Muzak for inspection
and audit as provided in Section 7.3.
7.2 Reports. Licensee shall submit to Muzak, together with the payments
-------
described in Section 6.7, royalty and fees reports, in such detail as Muzak may
from time to time reasonably request, accurately reflecting all Gross Billings
during the periods to which such payments pertain.
7.3 Audit.
-----
(a) Muzak or its representatives may, upon giving Licensee 30 days'
(or 10 days' in the case of an audit following a request for Muzak's consent to
a transfer under Article XII hereof) written notice, enter the premises of
Licensee (and of any person doing business [an "affiliated person"] controlling,
controlled by or under common control with Licensee) during normal business
hours for inspection and audit of the business and records of Licensee and of
such affiliated person, provided that such inspection and audit shall be no more
extensive than is required to verify that none of Licensee's or such affiliated
32
<PAGE>
person's revenues should have been reported as Gross Billings or as charges for
Recorded Media and Adjunct Services and that Licensee's payments to Muzak have
been properly computed in accordance with the provisions of Article VI of this
Agreement. Licensee shall cooperate with any such inspection and audit. Muzak
shall not assess Licensee for amounts found, as a result of such audit, to be
owing hereunder if such amounts derive from a reporting period that ended more
than two years prior to the date such audit commenced, provided that Licensee
has not knowingly maintained false books or records, or knowingly submitted
false reports to Muzak.
(b) During any audit hereunder, Muzak or its representatives (at
Muzak's cost and expense) may make mechanical copies of only those books and
records of Licensee that are necessary for the verification of Licensee's
statements and accountings to Muzak and were physically examined as part of the
audit. Muzak shall take reasonable precautions to safeguard the confidentiality
of such copies and shall destroy any such copies upon the mutually-confirmed
completion of the audit and payment in full of any royalties and other charges
determined to be owing to Muzak as a result of the audit. Nothing contained
herein shall be construed as in any way limiting Muzak's right manually to copy
or make abstracts of Licensee's or any affiliated person's books and records or
to make any notes or the like whatsoever; provided, however, that such manual
copies or
33
<PAGE>
abstracts (and any copies thereof) shall be destroyed upon the mutually-
confirmed completion of the audit.
(c) In the event that any audit conducted by or on behalf of Muzak
results in a determination that there has been either an underpayment or
overpayment of the amounts due Muzak hereunder, then within 30 days after such
determination, Licensee or Muzak, as the case may be, shall pay to the other the
amount of such underpayment or overpayment; provided, however, that in the event
that Licensee disputes the results of any such audit, the parties shall attempt
to resolve the matter by conducting a new audit under the joint supervision of
their respective independent certified public accountants. In the event that
such new audit resolves the dispute, the cost of each party's independent
certified public accountants shall be borne by the respective party. In the
event that such new audit fails to resolve the dispute, the matter shall be
resolved by arbitration under the rules of the American Arbitration Association,
and the losing party shall pay both parties' entire costs of the second audit.
(d) If it is determined as a result of an audit that there has been an
underpayment of seventeen percent (l7%) or more of the amounts due Muzak for any
given calendar year, Licensee shall pay to Muzak, within thirty (30) days after
such determination and in addition to all other amounts due under this
34
<PAGE>
Agreement, a penalty equal to fifteen percent (15%) of the underpayment for that
year. The foregoing remedies shall be in addition to any other remedies Muzak
may have for such underpayment.
(e) Muzak and Licensee shall confirm, at the conclusion of the audit
and following payment of any monies found owing as a result of the audit, that
such audit has been completed and that the periods audited shall not be audited
again absent a showing that Licensee knowingly maintained false books and
records for such period.
VIII. MARKETING AND PROMOTION
-----------------------
8.1 Advertisements. Licensee shall cooperate with any advertising or
--------------
promotional campaigns conducted by Muzak in accordance with sound business
practices. Licensee shall promptly discontinue any advertising or promotion
which Muzak informs Licensee is, in Muzak's judgment, inimical to Muzak's
reputation. Without limiting the generality of the foregoing, Licensee shall
submit to Muzak upon request samples of all advertising and promotional plans
and materials that Licensee proposes to use. Licensee shall amend any such plans
and materials as requested by Muzak upon receipt of notice from Muzak that such
plans or materials fail to comply with the requirements of this Section 8.1. In
the event that Muzak notifies Licensee
35
<PAGE>
to amend any advertising or promotional plans previously approved by Muzak's
predecessors-in-interest, Licensee shall have up to 180 days after the date of
such notice to make such amendments.
8.2 Yellow-Pages Advertising. Each year during the term of this Agreement,
------------------------
Licensee shall ensure that it is listed in at least one "trademark ad" under the
appropriate classification in the yellow pages of one major-market telephone
book in the Territory. Muzak will reimburse Licensee for the annual cost of one
such "trademark ad" within thirty (30) days after receipt from Licensee of the
invoice for the advertisement.
8.3 Additional Assistance by Muzak. Within the limits of its available
------------------------------
personnel, Muzak, when so requested by Licensee, shall make available technical
and marketing assistance to Licensee. The charges for such assistance shall be
mutually agreed upon by the parties.
IX. MULTI-TERRITORY ACCOUNTS PROGRAM; CABLE RADIO/TV
------------------------------------------------
9.1 Multi-Territory Accounts Program. Recognizing that potential
--------------------------------
Subscribers with substantial numbers of Subscriber Premises located throughout
the United States represent a significant potential market for Licensee and
other Muzak licensees marketing the Services, and that the effective marketing
of the Services to such accounts frequently requires a
36
<PAGE>
coordinated effort by Muzak and its licensees, Muzak, in conjunction with a
Multi-Territory Sales Committee, shall establish and maintain during the term of
this Agreement a Multi-Territory Accounts Program. The Multi-Territory Accounts
Program and the Multi-Territory Sales Committee are more fully described in
Exhibit G attached hereto and incorporated herein by reference. Licensee and
Muzak agree to participate in the Multi-Territory Accounts Program as set forth
in Exhibit G and otherwise to abide by the terms of Exhibit G. Without limiting
the generality of the foregoing, Licensee agrees to participate during the term
of this Agreement in all Multi-Territory Contracts (as defined in Exhibit G)
that pertain to Subscriber Premises in the Territory.
9.2 Cable Radio/TV. In the event that (i) a provider of cable television or
--------------
cable radio programming requests that Muzak provide music for such programming
that cannot otherwise be provided by Licensee utilizing the Music Services, and
(ii) such programming will be distributed to residences (but not to commercial
locations) in the Territory, then prior to Muzak's providing such music, Muzak
and Licensee shall jointly determine their respective interests in the revenues
deriving from the provision of such music to such provider.
37
<PAGE>
X. DEFAULT AND TERMINATION OF THIS AGREEMENT
-----------------------------------------
10.1 Default of Licensee.
-------------------
(a) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall, at the option of Muzak, immediately
terminate upon notice thereof to Licensee (without opportunity to cure), if at
any time:
(i) Licensee shall file in any court pursuant to any statute
either of the United States or of any State a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver
or trustee of all or a portion of Licensee's property, or if there is
commenced against Licensee any such petition which is not opposed by
Licensee or not dismissed within ninety days after such filing, or if
Licensee admits in writing its inability to pay its debts or makes a
general assignment for the benefit of creditors, or if Licensee makes
general application to Licensee's creditors to settle, compromise, or
extend the time of payment of all of Licensee's obligations; or
(ii) there occurs a voluntary or involuntary transfer or purported
transfer of an interest in Licensee or in this Agreement in violation
of Article XII.
38
<PAGE>
(b) Licensee shall be deemed to be in default under this Agreement,
and all rights granted herein shall terminate, if any of the following events
shall occur and not be cured, in the time and manner provided in subsection (c)
below, following notice thereof from Muzak:
(i) if Licensee fails to comply with any of its obligations
under this Agreement and Muzak has been or is reasonably likely to be
in any way damaged thereby, or if any representation made by Licensee
herein is found to be untrue when and as made and Muzak has been or is
reasonably likely to be in any way damaged thereby; or
(ii) if Licensee ceases to distribute the Music Services or
ceases to operate or otherwise abandons the Business; or
(iii) if Licensee loses the right to transact business in any
jurisdiction included in the Territory and Licensee refuses to surrender to
Muzak its license rights hereunder with respect to such jurisdiction; or
(iv) if Licensee knowingly maintains false books or records, or
submits false reports to Muzak.
39
<PAGE>
(c) Licensee shall have thirty (30) days after its receipt from Muzak
of a written notice of default within which to remedy any default as defined in
subsection (b) above (or, if the default cannot reasonably be cured within such
thirty (30) days, to initiate within that time substantial and continuing action
to cure the default) and to provide evidence thereof to Muzak. If any such
default is not cured within that time (or, if appropriate, substantial and
continuing action to cure the default is not initiated within that time), or
such longer period as applicable law may require, this Agreement shall terminate
following Licensee's receipt of a Notice of Termination reciting Licensee's
failure to cure or commence to cure and setting forth a definite termination
date, which shall be no sooner than 5 business days following Licensee's receipt
of such Notice or such longer period as applicable law may require; provided,
however, that in the event the existence of such default is disputed by
Licensee, and Licensee notifies Muzak of such dispute within 10 days after
receipt of Muzak's notice of default and thereafter promptly proceeds to take
all steps necessary to resolve such dispute, including (if necessary) the
commencement of litigation by no later than 30 days after receipt of Muzak's
notice of default, such termination shall not become finally effective until 10
days after the date such dispute is finally resolved in favor of Muzak. For
purposes hereof, final resolution shall include without limitation Licensee's
failure to make a timely appeal of a court decision in favor of Muzak.
Notwithstanding anything in
40
<PAGE>
this paragraph (c) to the contrary, in the event that the final resolution in
favor of Muzak of Licensee's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Licensee's legal challenge to the notice of default, Licensee had a
strong likelihood of success on the merits (without application by the court of
any balance-of-hardships tests), Licensee shall have 30 days from the date of
such final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.2 Default of Muzak. Muzak shall be deemed to be in default, and
Licensee shall have the right to terminate this Agreement, if Muzak fails to
comply with any of its obligations under this Agreement, and Licensee has been
or is reasonably likely to be in any way damaged thereby, and such failure is
not cured within thirty (30) days after Muzak's receipt of a written notice of
default from Licensee (or, if the default cannot reasonably be cured within such
thirty (30) days, if such cure has not been initiated and is not continuing
within that time); provided, however, that in the event the existence of such
default is disputed by Muzak, and Muzak notifies Licensee of such dispute within
10 days after receipt of Licensee's notice of default and thereafter promptly
proceeds to take all steps necessary to resolve such dispute, including (if
necessary) the
41
<PAGE>
commencement of litigation by no later than 30 days after receipt of Licensee's
notice of default, such termination shall not become effective until 10 days
after the date such dispute is finally resolved in favor of Licensee. For
purposes hereof, final resolution shall include Muzak's failure to make a timely
appeal of a court decision in favor of Licensee. Notwithstanding anything in
this Section 10.2 to the contrary, in the event that the final resolution in
favor of Licensee of Muzak's dispute of a notice of default is by means of a
court decision and such court also specifically decides that, at each successive
level of Muzak's legal challenge to the notice of default, Muzak had a strong
likelihood of success on the merits (without application by the court of any
balance-of-hardships tests), Muzak shall have 30 days from the date of such
final resolution to cure the default; in such event, if such cure is not
effectuated by the end of such 30-day period, the termination shall then become
immediately effective.
10.3 Additional Remedies. No termination of this Agreement shall
affect any obligation, including any obligation arising as a result of a default
of this Agreement, of any party accrued up to the date of termination or limit
any additional rights or remedies provided the nondefaulting party under this
Agreement or under law.
42
<PAGE>
10.4 Force Majeure. Neither Muzak nor Licensee shall have any
liability to the other or to any other person as a result of the failure of
either of such parties to perform its obligations hereunder, nor shall such
failure be considered a breach of this Agreement, if such failure is due to
fire, flood, other act of God, strike or other event or situation beyond the
control of such party acting in accordance with sound business practices.
XI. RELATIONSHIP OF THE PARTIES UPON TERMINATION OR EXPIRATION OF THIS
AGREEMENT
11.1 Action Required of Licensee. Upon termination or expiration
---------------------------
(without renewal of license rights) of this Agreement, Licensee shall, subject
to Section 2.2(b), Section 2.4 (including Exhibit E), and Article IX (including
Exhibit G), immediately
(a) Cease to distribute the Services to Subscribers and
shall not thereafter, directly or indirectly, represent itself to the public or
hold itself out as a licensee of Muzak;
(b) Cease to use, in any manner whatsoever, the Services and
the Proprietary Marks. Without limiting the generality of the foregoing,
Licensee shall immediately cancel any assumed name or equivalent registration
which contains the mark "MUZAK(R)" or any other service mark or trademark of
Muzak, or otherwise permit Muzak to effect such cancellation;
43
<PAGE>
(c) Sell to Muzak at Licensee's cost of acquisition, if any, all
manuals, instructions, sales literature, and other materials related to the
Services or the Proprietary Marks and retain no copy or record of any of the
foregoing except Licensee's copies of this Agreement and any other document
which Licensee reasonably needs for compliance with specific provisions of state
or federal law;
(d) Dismantle (if necessary) and dispose of as Muzak requests (at
Muzak's cost) all Earth Stations, Recorded Media, and other equipment provided
Licensee by Muzak; and
(e) Promptly pay all sums indisputably owing to Muzak.
11.2 Action Required of Muzak. Upon termination or expiration (without
------------------------
renewal of License rights) of this Agreement, Muzak shall promptly pay all sums
indisputably owing to Licensee. Muzak shall not provide or directly or
indirectly make available to any successor licensee in the Territory (including
any owned affiliates) any of Licensee's customer lists or customer contract
termination dates or terms; provided, however, that Muzak may transfer to such
successor licensee any contract rights purchased by Muzak from Licensee under
the terms of Exhibits E and G hereto.
44
<PAGE>
XII. TRANSFER OF BUSINESS OR CONTROL OF LICENSEE
-------------------------------------------
12.1 By Licensee and its Owners. Muzak has entered into this Agreement
--------------------------
in reliance on the business skills, financial capacity, and personal character
of Licensee and its owners. Accordingly, Licensee shall not permit the transfer
of any interest in or of Licensee that would have the effect, alone or together
with other previous, simultaneous, or proposed transfers, of directly or
indirectly transferring a controlling interest (whether in stock, partnership
interests or otherwise) in this Agreement, Licensee, or a major portion of the
assets used in the Business without the prior written consent of Muzak and
without otherwise complying with the requirements of this Article XII. Any such
purported assignment or transfer, by operation of law or otherwise, not having
the written consent of Muzak and not otherwise complying with the requirements
of this Article XII shall be null and void and shall constitute a material
breach of this Agreement.
12.2 Consent of Muzak. Muzak shall not unreasonably withhold its
----------------
consent to a transfer described in Section 12.1; provided, however, that Muzak
may require any or all of the following as conditions of its approval:
(a) All of Licensee's accrued monetary obligations to Muzak shall
have been satisfied (or otherwise provided for to
45
<PAGE>
Muzak's satisfaction, including without limitation the escrowing with counsel at
closing of the full amount of such obligations);
(b) The transferee and its owners shall enter into a written
assignment, in a form reasonably satisfactory to Muzak, assuming and agreeing to
discharge all of Licensee's obligations under this Agreement;
(c) The transferee shall demonstrate to Muzak's reasonable
satisfaction that (i) the transferee has the personal character and the
financial resources to conduct the Business, (ii) the transferee personally has
the general business experience to conduct the Business or will employ during
the term of this Agreement a general manager with such business experience to
conduct the Business, and (iii) the transferee is not in a position to use the
information obtained as a licensee of Muzak in a manner that will be harmful to
Muzak outside the Territory; and
(d) The transferee shall pay Muzak a transfer fee as follows:
(i) For any transfer to an existing licensee of Muzak (or any
entity owned or controlled by or having common ownership with an
existing licensee of Muzak), the sum of $1,000; or
46
<PAGE>
(ii) For any other transfer, (A) the sum of $2,500 for a
Business having Gross Billings (as defined herein) of $20,000 per
month or less, and (B) the sum of $5,000 for a Business having Gross
Billings (as defined herein) in excess of $20,000 per month.
In the event Muzak fails to respond to any request for approval of a
transfer to another MUZAK(R) licensee within 20 business days and to all others
within 30 business days of its receipt of a completed application for transfer,
then the request shall be deemed approved, subject only to Muzak's receipt of
notification of the transferee's assumption of Licensee's obligations, and of
the assignment to the transferee of Licensee's rights, under this Agreement.
12.3 Collateral. Muzak will not require approval of the assignment,
----------
transfer, pledge, or hypothecation of all or any part of the assets of the
Business, excluding this Agreement, and, if Licensee is a corporation, all or
any part of the stock of said corporation, to banks or other lending
institutions as collateral security for loans made directly to or for the
benefit of the Business. However, such approval will be required for any
proposed assignment of this Agreement.
12.4 Transfer to Family Member. An individual may transfer his or her
-------------------------
interest in Licensee or this Agreement to a member of
47
<PAGE>
his or her immediate family or to a corporation controlled by such individual,
provided that the requirements set forth in paragraphs (a), (b), and (c) of
Section 12.2 are met. No transfer fee shall be required for any such transfer.
12.5 By Muzak. Muzak shall have the right to transfer or assign all or
--------
any part of its rights or duties hereunder to any person or entity. Muzak shall
promptly notify Licensee of any such transfer.
XIII. PROPRIETARY MARKS
-----------------
13.1 Ownership. Muzak represents that it is the owner of all right,
---------
title, and interest in and to the Proprietary Marks. Muzak will take all steps,
including the taking of legal action, reasonably necessary to preserve and
protect the ownership and validity in and of the Proprietary Marks. Licensee
shall not directly or indirectly contest the validity or Muzak's ownership of
the Proprietary Marks. In the event that litigation involving the Proprietary
Marks is instituted or threatened against Licensee, Licensee shall promptly
notify Muzak and shall cooperate in the defense or settlement of such
litigation, which Muzak shall have the right to control at its expense. Licensee
expressly understands and acknowledges that Muzak is the owner of all right,
title, and interest in and to the Proprietary Marks and the goodwill associated
with and symbolized by them.
48
<PAGE>
Licensee's use of the Proprietary Marks pursuant to this Agreement does not give
Licensee any ownership interest or other interest in or to the Proprietary
Marks, except the license granted by this Agreement.
13.2 Infringement. Licensee shall promptly notify Muzak of any
------------
suspected infringement of the Proprietary Marks, and of any challenge to Muzak's
ownership of, or Licensee's right to use, the Proprietary Marks. Subject to
Section 13.1, Muzak shall have the sole right to decide whether an
administrative or judicial proceeding, or other action, should be undertaken in
response to any such suspected infringement or challenge, and, if any such
proceeding or action is to be undertaken, to initiate and control such
proceeding or action at its expense. In the event Muzak elects to undertake any
such proceeding or action, Licensee agrees to cooperate with Muzak in such
effort. Licensee shall have no right to institute any litigation against a third
party relating to the Proprietary Marks without Muzak's prior written consent.
13.3 Use. Licensee's right to use the Proprietary Marks is limited to
---
such uses as are authorized under this Agreement. Licensee shall not use the
Proprietary Marks as part of its corporate or other legal name. Licensee shall
comply with Muzak's instructions at Muzak's cost in filing and maintaining the
requisite trade name or fictitious name registrations, and
49
<PAGE>
shall execute any documents reasonably deemed necessary by Muzak or its counsel
to obtain protection for the Proprietary Marks or to maintain their continued
validity and enforceability. Unless otherwise authorized or required by Muzak,
Licensee shall use the Proprietary Marks without prefix or suffix and shall
comply with Muzak's instructions regarding the use of the federal registration
symbol and other trademark or service mark designations.
13.4 Substitution of Proprietary Marks. Muzak reserves the right to
---------------------------------
add Proprietary Marks and, except with respect to the MUZAK(R) trademark, to
substitute different Proprietary Marks, or discontinue the use of Proprietary
Marks, for use in identifying the Services if Muzak's currently owned
Proprietary Marks no longer can be used, or if Muzak determines that such
addition, substitution, or discontinuation will be beneficial to its business
and provides to Licensee at least six (6) months' prior notice of such addition,
substitution or discontinuation. All such additions, substitutions or
discontinuations will be reflected in an amendment of Exhibit C and shall not
affect the validity of this Agreement, which shall, in all respects, be deemed
modified to provide for such addition, substitution or discontinuation.
50
<PAGE>
XIV. MISCELLANEOUS
-------------
14.1 Representations of Licensee. Licensee represents and warrants to
---------------------------
Muzak that, on the date of this Agreement:
(a) If Licensee is a trust, corporation, or partnership, it is duly
organized, in good standing, and qualified to do business in all jurisdictions
included in the Territory; all controlling ownership interests in Licensee are
directly and indirectly held by those persons and entities listed on the
signature pages hereof, and no other persons or entities own any controlling
interests in Licensee; and it has all necessary power and authority to execute,
deliver, and perform this Agreement.
(b) There are no actions, suits, proceedings, or investigations in
any court or before any governmental agency or instrumentality which affect or
are reasonably likely to affect Licensee's ability to perform its obligations
under this Agreement.
14.2 Representations of Muzak. Muzak represents and warrants to Licensee
------------------------
that, on the date of this Agreement, it is duly organized and in good standing
as a limited partnership under the laws of the State of Delaware and has all
necessary power and authority to execute, deliver, and perform this Agreement.
51
<PAGE>
14.3 Independent Contractor. Muzak and Licensee are independent contractors
----------------------
vis-a-vis each other and neither party, nor their respective employees and
agents, are or are to be construed to be either legal or implied agents,
servants or employees of the other party or to have authority to act for or on
behalf of the other party. No acts taken or assistance given by one party to the
other pursuant to this Agreement will be construed to alter this relationship.
Without limiting the generality of the foregoing, but subject to the terms of
the Multi-Territory Accounts Program as described herein, Section 2.4 (including
Exhibit E), the In-Store Advertising Agreement between Muzak and Licensee, and
any other written contract between Muzak and Licensee, nothing in this Agreement
shall authorize one party to make any contract, agreement, warranty or
representation on behalf of the other party or to incur any debt or obligation
in the other party's name, and the other party shall in no event assume
liability for, or be deemed liable hereunder as result of, any such action.
Without limiting the rights of a party to enforce its rights hereunder, a party
shall not be liable to a third party by reason of any action or omission of the
other party in the conduct of its business.
14.4 Release. Muzak and Licensee hereby release and forever discharge each
-------
other, and their respective predecessors, successors, representatives, assigns,
agents, owners, employees, officers, and directors ("Designees"), of and from
any claims,
52
<PAGE>
debts, liabilities, demands, obligations, costs, expenses, actions, and causes
of action of every nature, character, and description, vested or contingent,
which such releasing party now owns or holds, or has at any time heretofore
owned or held, or may at any time own or hold, against the other party or its
Designees, arising prior to and including the date of this Agreement and
relating to any prior franchise or license agreement; provided, however, that
this release shall not apply to any royalties or other monies owed, whether or
not previously reported as owing, from Licensee to Muzak; and further provided
that this release shall not apply to any claims, debts, liabilities, demands,
obligations, costs, expenses, actions and causes of action of every nature,
character and description, vested or contingent which are (i) at any time raised
or asserted by any party against the other party as a defense, counterclaim, or
crossclaim in any arbitration or litigation; (ii) of which the other party is
advised within 120 days of the date hereof; or (iii) the existence of which
could not now be reasonably known to a party and of which the other party is
advised within 120 days of the claiming party's knowledge thereof.
14.5 No Waiver. No failure of a party to exercise any right or power
---------
reserved to it in this Agreement or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of such
53
<PAGE>
party's rights to demand exact compliance with any of the terms of this
Agreement. Waiver by a party of any particular default shall not affect or
impair such party's right with respect to any subsequent default of the same or
of a different nature, and, except as otherwise expressly provided herein, any
delay, forbearance, or omission of a party to exercise any power or right
arising hereunder shall not affect or impair such party's right thereafter to
exercise that or any other power or right.
14.6 Notices. Unless otherwise expressly provided herein, any and all
-------
notices required or permitted under this Agreement shall be in writing and shall
be personally delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other party:
Notices to Muzak: MUZAK
400 North 34th Street, Suite 200
Seattle, WA 98103
Attention: ____________________
Notices to Licensee: SUNCOM COMMUNICATIONS, L.L.C.
DAVID UNGER
220 E. 54 ST.
NYC, NY 10022
Notice by certified or registered mail shall be deemed to have been given at the
date and time of receipt.
54
<PAGE>
14.7 Entire Agreement. This Agreement, the documents referred to herein,
----------------
and the exhibits and attachments hereto, constitute the entire, full, and
complete agreement between the parties concerning the subject matter hereof, and
supersede all prior agreements except those set forth in Exhibit H (the terms of
which shall remain in effect to the extent not expressly contradicted by the
terms hereof). Except for those amendments referred to in Sections 2.1, 2.2 and
13.4 and Exhibits E, F, and G, no amendment of this Agreement shall be binding
on either party unless mutually agreed to by the parties and executed by their
authorized officers or agents in writing.
14.8 Severability. Each portion, part, and term of this Agreement shall be
------------
considered severable, and if, for any reason, any portion, part, or term herein
is determined by a court or agency with valid jurisdiction to be contrary to any
existing or future law or regulation and invalid, it shall not impair the
operation of, or have any other effect upon, the other portions, parts, or terms
of this Agreement that remain otherwise intelligible.
14.9 Captions. All captions in this Agreement are for convenience only and
--------
do not in any way limit or amplify the provisions hereof.
55
<PAGE>
14.10 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and, subject to Article XII, their
respective heirs, executors, representatives, successors, and assigns.
14.11 Counterparts. This Agreement may be executed in several
------------
counterparts, and all of such counterparts together shall constitute one
agreement binding on all parties thereto, notwithstanding that all parties are
not signatory to the original or same counterpart.
14.12 Attorney's Fees. If any action or proceeding is brought for the
---------------
enforcement of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in the action or proceeding, in addition to any other relief to which it or they
may be entitled.
14.13 Applicable Law. This Agreement shall be interpreted and construed
--------------
under the laws of the State of Colorado without reference to conflicts of law.
14.14 All Remedies. No right or remedy conferred upon or reserved to
------------
Muzak or Licensee by this Agreement is intended to be exclusive of any other
right or remedy herein or by law or equity provided, but each shall be
cumulative of every other right or
56
<PAGE>
remedy. Without limiting the generality of the foregoing, Licensee acknowledges
that its violation of the terms of Sections 4.3, 5.5, or 11.1 will result in
irreparable injury to Muzak for which no adequate remedy at law may be
available, and Licensee accordingly agrees that Muzak may seek to obtain the
issuance of an injunction prohibiting any conduct by Licensee in violation of
such terms.
14.15 Limitation. Licensee shall commence any action relating to Muzak's
----------
offer or sale of license rights hereunder to Licensee, or the execution of this
Agreement by Licensee, within one (1) year from the later of the date of
execution of this Agreement or the date Licensee reasonably should have
discovered the event or non-occurrence of the event first giving rise to the
action, and Licensee shall commence any other action arising hereunder within
two (2) years from the date Licensee reasonably should have discovered the event
or non-occurrence of the event first giving rise to such action. Licensee agrees
that any such claim not commenced within such time periods shall be barred, it
being understood that the assertion of any such claim as a defense, counterclaim
or cross-claim shall not be barred by this paragraph.
14.16 No Warranties. Muzak makes no warranties or guarantees upon which
-------------
Licensee may rely, and assumes no liability or obligation to Licensee, by
providing any waiver, approval,
57
<PAGE>
consent or suggestion to Licensee in connection with this Agreement, or by
reason of any neglect, delay, or denial of any request therefor.
14.17 No Implied Rights. Except as expressly provided to the contrary
-----------------
herein, nothing in this Agreement is intended, nor shall be deemed, to confer
upon any person or legal entity other than Licensee, Muzak, Muzak's officers,
partners, and employees, and such of Licensee's and Muzak's respective
successors and assigns as may be contemplated (and, as to Licensee, permitted)
by Article XII hereof, any rights or remedies under or by reason of this
Agreement.
14.18 Survival. All provisions of this Agreement that pertain to
--------
Licensee's rights and duties regarding Licensee's delivery of the Services to
certain Subscribers after the date of expiration or termination of this
Agreement shall survive such expiration or termination to the extent necessary
to give full effect to such rights and duties. All other covenants and
obligations of Muzak or Licensee that are to be performed or observed after the
expiration or termination of this Agreement, including, without limitation,
those set forth in Sections 5.5 and 14.3, Article XI, and Exhibits E and G,
shall also survive such expiration or termination.
58
<PAGE>
14.19 Conversion. Upon the expiration or earlier termination of this
----------
Agreement, in the event the addressability feature of Muzak's DBS facilities
permits Muzak to switch Licensee's music subscribers to another subscription
music supplier and Muzak has received written permission from such music
supplier and blanket indemnification from Licensee, then within a reasonable
time following Licensee's written direction to Muzak, Muzak shall perform one
such switch with respect to each such subscriber at the following cost to
Licensee: the greater of (i) Muzak's standard switching charge then in effect,
or (ii) Muzak's incremental out-of-pocket costs directly attributable to the
making of such switches.
14.20 Most Favorable Terms. In the event that after September 1, 1990 Muzak
--------------------
grants for the first time (and not pursuant to or in renewal of any agreement in
existence at September 1, 1990) to any other U.S. licensee of Muzak (i.e., a
distributor of the Services in a territory within the United States) financial
or other material terms (other than temporary or transient adjustments and
accommodations) that are more favorable than the terms set forth herein, Muzak
must offer such more favorable terms to Licensee; provided, however, that if,
and to the extent, Muzak is required by the laws and regulations of the State in
which another licensee resides or operates its business to offer such other
licensee more favorable terms than those set forth herein, Muzak shall not be
required to offer such
59
<PAGE>
more favorable terms to Licensee but shall notify the then-president of the IPMA
of the imposition of such legal or regulatory requirement.
XV. ACKNOWLEDGEMENTS
----------------
15.1 Independent Investigations. Licensee acknowledges that it has conducted
--------------------------
an independent investigation of the business licensed hereunder, and recognizes
that the business venture contemplated by this Agreement involves business risks
and that its success will be largely dependent upon the ability of Licensee as
an independent person or entity. Muzak expressly disclaims the making of, and
Licensee acknowledges that it has not received, any warranty or guarantee,
express or implied, as to the potential volume, profits, or success of the
business venture contemplated by this Agreement.
15.2 Disclosure. Licensee acknowledges that it received a copy of this
----------
Agreement and all exhibits and attachments thereto, and agreements relating
thereto, at least five (5) business days prior to the date on which this
Agreement was executed. Licensee further acknowledges that it received the
disclosure documents required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" at
60
<PAGE>
least ten (10) business days prior to the date on which this Agreement was
executed.
15.3 Opportunity to Review. Licensee acknowledges that it has read and
---------------------
understands this Agreement and the exhibits and attachments hereto, and
agreements relating hereto, and that Muzak has accorded Licensee ample time and
opportunity to consult with advisors of Licensee's own choosing about the
potential benefits and risks of entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.
MUZAK LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/ John R. Jester
---------------------------
Name: John R. Jester
Title: President
Licensee:
SUNCOM COMMUNICATIONS, L.L.C., a
Delaware limited liability company
By: /s/ David W. Unger
----------------------------
Name: David W. Unger
Title: Chairman
61
<PAGE>
Each of the undersigned (i) owns, directly, indirectly, or
beneficially, a controlling interest in Licensee; (ii) has read this Agreement;
and (iii) agrees to be bound by those provisions of this Agreement that impose
obligations on the owners of controlling interests in Licensee.
- ------------------------------------------
(Typed Name) _____________________________
Date: ____________________________________
Address:__________________________________
- ------------------------------------------
(Typed Name) _____________________________
Date: ____________________________________
Address:__________________________________
- ------------------------------------------
(Typed Name) _____________________________
Date: ____________________________________
Address:__________________________________
- ------------------------------------------
(Typed Name) _____________________________
Date: ____________________________________
Address:__________________________________
<PAGE>
EXHIBIT A
---------
MUSIC SERVICES
I. BROADCAST SERVICES
Services intended for Direct Broadcast Subscribers or for local re-broadcast to
- -------------------------------------------------------------------------------
Subscribers (by means of telephone lines, FM Radio Subcarriers ("SCA"), 950 MHz
- -----------
(UHF), cable and MDS, as more fully set forth in Exhibit D, and such other means
as are authorized in writing from time to time by Muzak.)
1. ENVIRONMENTAL MUSIC BY MUZAK(R) (to be distributed by means of
East and West coast feeds for as long as Stimulus
Progression(R) remains a valid concept)
2. FOREGROUND MUSIC ONE(R)
3. HITLINE(R)
4. LIGHT CLASSICAL
5. CONTEMPORARY JAZZ FLAVORS(SM)
6. EXPRESSIONS(SM)
7. COUNTRY CURRENTS(SM)
8. JUKEBOX GOLD(SM)
9. HOT FM(SM)
10. CONTEMPORARY INSTRUMENTALS
11. LATINO
12. SPECIALTY CHANNELS (various formats, as designated by Muzak
from time to time)
II. RECORDED MEDIA SERVICES
1. TONES(R) (various formats, as designated by Muzak from time to
time)
<PAGE>
EXHIBIT B
---------
ADJUNCT SERVICES
I. MUSIC-RELATED ADJUNCT SERVICES
------------------------------
1. DAYPARTING
DAYPARTING means that automatic program sequencing, utilizing
an in-place Muzak addressable receiver, of two or more program
formats on a regularly scheduled basis, with the same schedule
running without further change from the original format, each
day, for seven days per week.
2. WEEKPARTING
WEEKPARTING means that automatic program changing, utilizing
an in-place Muzak addressable receiver, of a single program
source with the option to change programs each day, seven days
per week.
3. COMBINED
COMBINED means a combination format of both dayparting and
weekparting.
4. SWITCHING
SWITCHING means the controlled switching of a single program
Subscriber to another single program from the Muzak DBS
computer controlled headend utilizing the in-place Muzak
addressable receiver.
II. OTHER ADJUNCT SERVICES
----------------------
1. ADPARTING (various number of message inserts as designated by
Muzak from time to time)
ADPARTING means that audio promotion and messaging service
provided directly to the end user via an in-place Muzak
addressable DBS system. This service is designed for "spot"
message inserts originating from the Muzak DBS Operational
Control Facility utilizing a computer control head-end system.
2. BROADCAST DATA
BROADCAST DATA means that enhanced service which operates
through the in-place Muzak addressable DBS
B - 1
<PAGE>
receiver and provides a one-way data communication channel for
point-to-multipoint distribution. This service is designed for
a distribution of data files and/or text messaging originating
through the Muzak DBS Operational Control Facility utilizing a
computer control head-end system.
3. BROADCAST VIDEO
BROADCAST VIDEO means that occasional use non-dedicated one-
way point-to-multipoint direct broadcast service utilizing an
in-place Muzak addressable DBS system and adjunct video
receiver. This service is designed as a video broadcast
distribution system for an end user's private network and is
managed and controlled through the Muzak DBS Operational
Control Facility.
B - 2
<PAGE>
EXHIBIT C
---------
MARKS
MUZAK(R) AUDIO MARKETING SERVICES(SM)
ADCASTER(R) DAYPARTING(SM)
ADPARTING(R) ENVIRONMENTAL MUSIC(SM)
FOREGROUND MUSIC ONE(R) FM ONE(SM)
FM-1(R) IN-STORE ADCASTING(SM)
HITLINE(R) UNICART(TM)
MARKETING ON HOLD(R)
MUSIC PLUS(R)
SOUND BUSINESS SOLUTIONS(R)
STIMULUS PROGRESSION(R)
TONES(R)
<PAGE>
EXHIBIT D
---------
TECHNICAL SPECIFICATIONS
I. LOCAL DISTRIBUTION SYSTEMS
--------------------------
Licensor and licensee acknowledge that the Muzak Program Services
should be delivered to the end subscriber at the highest fidelity
possible consistent with local conditions and reasonable business
judgment, therefore:
1. Telephone lines from central studio to Telco central office and to
broadcasting facilities should be equalized for a minimum frequency
response of 50-8000 Hz.
2. Telephone lines to individual subscribers from central offices need
not be equalized. If only low quality facilities are available,
consideration should be given to local equalization at subscriber
premises or replacement of Telco lines with SCA or DBS delivery.
3. SCA contracts shall include the following minimum equipment and
performance standards particularly if the SCA generator is not
furnished by the licensee.
A. SCA Frequency Typically 67 kHz or 92
kHz
B. SCA Injection 9% +/- 0.5%
C. SCA Deviation +/- 6 kHz = 100% modulation
50-5000 Hz +1, -3 dB
D. SCA Frequency Response (95% of low pass
filter)
E. SCA Total Harmonic
Distortion Less than/equal to 1%
(unweighted)
F. SCA Signal To Noise Ratio Greater than/equal to 50 dB
G. AM Noise (referenced to carrier) Greater than/equal to -50 dB
H. Incidental AM Greater than/equal to -45 dB
I. Crosstalk (Main to Sub Channel) Greater than/equal to -40 dB
D - 1
<PAGE>
J. Pre-emphasis Curve 150 micro seconds
K. Automatic Muting Defeatable if desired
4. Local distribution may be made by UHF (950 MHz) transmitters as
authorized by the FCC. Maximum frequency range shall be used whenever
possible if full frequency range program material is available at the
transmitter.
5. Local distribution may be made by MDS transmitters as authorized by the
FCC. Maximum frequency range shall be used whenever possible if full
frequency range program material is available at the transmitter.
6. Local distribution may be made by DBS. Receivers used, whether designed
or furnished by Muzak, shall be capable of receiving and demodulating
program material broadcast from Ku-band satellite transponder in
accordance with generally accepted trade specifications and practice.
Equipment utilized shall be UL approved and conform to the
specifications listed below.
The earth station consists of an antenna assembly and a Ku-band
addressable satellite audio receiver with tuning and control
instructions transmitted via the Network and Control Data Channel.
The Muzak Ku-band addressable satellite audio receiver is designed
utilizing FM Squared subcarrier modulation and operates with a fully
saturated video transponder with tuning and control instructions
transmitted via the Network and Control Data Channel. The system design
has a margin equal to or greater than 3 dB to allow for signal
degradation due to transponder variation, precipitation, pointing error
or LNB degradation.
Listed below are the DBS earth station technical specifications as of
July 1, 1990:
RECEIVER SPECIFICATIONS
-----------------------
Subcarrier Tuning 0.15 to 8.20 MHz
Tuning and Control 9600 Asynchronous FSK
data Channel Occupying
20 kHz
RF Input Level -30 to -65 dBm
D-2
<PAGE>
RF Input Frequency 950 MHz to 1450 MHz
RX Threshold (click) 78.5 +/1- 1 dB/Hz
IF Bandwidth 16 MHz
IF Frequency 70 MHz
Peak Deviation 30 kHz Peak
Audio Noise Reduction Panda I Adaptive Preemphasis
Expander or Equivalent
ANTENNA AND LNB SPECIFICATIONS
------------------------------
1.0 Meter Antenna 1.2 Meter Antenna
Size: 1.0 Meter Offset Fed 1.2 Meter Offset Fed
Paraboloid Paraboloid
Gain: 40.7 dB at 12.0 GHz 42.3 dB at 12.5 GHz
VSWR: 1.3 Maximum 1.3 Maximum
LNB: 1.6 dB Minimum 1.6 dB Minimum
II. AUDIO DISTRIBUTION SYSTEM
-------------------------
In general, the 25 or 70 volt distribution system shall be used for low
level music and paging applications. Amplifiers shall be sized to maintain
less than 1% Total Harmonic Distortion throughout the system with a
minimum frequency response of 50-10,000 Hz +1- 3 dB. Loudspeakers shall
have the minimum power handling capacity of 10 watts. Matching
transformers shall be multi-tap with a minimum frequency response of 70-
10,000 Hz. All amplifiers shall be UL approved. All wiring and
installations shall be made in accordance with accepted standards of
Broadcast Engineering Practice and the National Electrical Code as well as
local building codes that may apply.
III. RECEPTION AND PLAYBACK EQUIPMENT
--------------------------------
All subscriber reception and playback equipment produced, either directly
or under subcontract by Muzak for sale to licensees, shall conform to the
standards and specifications of NAB, FCC and RIAA reflecting the state of
the art. All equipment shall be UL approved.
D-3
<PAGE>
Detailed specifications of specific equipment currently in production as
of March 1990 will be furnished to licensee upon request. Disclosure of
proprietary information shall be limited to information for the proper
installation, operation and maintenance of the respective equipment
furnished.
IV. C-BAND SATELLITE RECEPTION EQUIPMENT
------------------------------------
If C-band satellite equipment is utilized for program reception, the
following general satellite system specification applies:
The satellite distribution system is designed to meet rigid performance
criteria. However, certain facets of the total system are beyond the
control of Muzak. These include, but are not limited to, weather
conditions at the transmit or receiver site, sun position relative to the
satellite position at the receiving location and proper maintenance of the
receiver site.
The single channel per carrier (SCPC) earth station consists of a minimum
5 meter antenna, a Low Noise Amplifier (LNA) and a C-band SCPC satellite
audio receiver.
AUDIO CHARACTERISTICS
---------------------
Audio Output Impedance 600 ohms, balanced
Audio Output Level Adjustable, 0 to +18
dBm
Audio Noise Reduction 2:1 companding
Audio Signal-to-Noise Ratio Greater than 50 dB CCITT 468
Weighted
Audio Bandwidth 7.5 kHz
Frequency Response 50-7.5 kHz +/- 1.0 dB
Total Harmonic Distortion Less than or equal to 1%
RECEIVER SPECIFICATIONS
- -----------------------
RF Input Level -30 dBm maximum
RF Input Frequency 3.7 to 4.2 GHz
RF Output Impedance 75 ohms, unbalanced
IF Frequency Range 52-88 MHz
Frequency Selection Synthesized in 25 kHz
steps
Peak Deviation 30 kHz
Power Consumption 7 Watts 110V/60 Hz
D-4
<PAGE>
EXHIBIT E
SALES OF ADJUNCT SERVICES
Capitalized terms used but not defined in this Exhibit E shall have
the meanings set forth in the body of the MUZAK(R) License Agreement to which
this Exhibit is attached (the "License Agreement").
1. Contract Form; Earth Station. All sales of the Adjunct Services to
----------------------------
Subscribers in the Territory shall be reflected in a fully executed MUZAK(R)
Adjunct Services Subscriber Contract substantially in the form of Schedule 1
----------
attached hereto. Any material modification to said Contract form shall require
the prior written consent of (i) Muzak and Licensee for Subscribers located
within the Territory that are not Multi-Territory Accounts (as defined in
Exhibit G to the License Agreement) or (ii) the Multi-Territory Sales Committee
(as defined in Exhibit G) for Subscribers which are Multi-Territory Accounts
pursuant to Exhibit G. No such modification shall conflict with the License
Agreement (including without limitation the provisions of this Exhibit E).
Licensee shall provide Muzak with the Adjunct Services Subscriber Contract,
executed by the Subscriber, at the time Licensee requests Muzak to commence
delivery of one or more Adjunct Services to the Subscriber, and Muzak shall
provide Licensee with a copy of the Contract executed by Muzak for itself (to
the extent stated in such Contract) and as Licensee's agent. Licensee shall
ensure that prior to commencement of delivery of the Adjunct Services to a
Subscriber, an Earth Station has been installed at each Subscriber Premises in
the Territory where such Adjunct Services are to be received. Without limiting
the foregoing, the delivery of the Adjunct Services shall be by such means as
meet the technical specifications set forth in Exhibit D to the License
Agreement.
2. Additional Equipment. Muzak shall provide to each Subscriber
--------------------
receiving the "Data" Adjunct Service, data receiving equipment designed to
operate with the MUZAK(R) satellite receiver (the "Data Receiving Equipment")
and to each Subscriber receiving the "Video" Adjunct Service video receiving
equipment designed to operate with MUZAK(R) satellite equipment (the "Video
Receiving Equipment"). It is the parties' intent that if a Subscriber requires
an encrypting card, machine or other instrumentality, such Subscriber shall bear
the expense thereof. The Data Receiving Equipment and/or the Video Receiving
Equipment, as the case may be, shall be installed and maintained by Licensee as
directed by Muzak. All service and maintenance by Licensee to any Data Receiving
Equipment or Video Receiving Equipment shall be limited to "swap out"
replacement of a defective unit, and Muzak agrees to maintain an adequate supply
of such replacements for 24-hour delivery to Licensee. Muzak shall retain all
rights
E-1
<PAGE>
of ownership in the Data Receiving Equipment and the Video Receiving Equipment
and, at the termination of the applicable Adjunct Services Subscriber Contract,
Licensee shall remove the Data Receiving Equipment and the Video Receiving
Equipment and deliver each such item as directed by Muzak. Licensee shall not,
and shall use its reasonable best efforts not to permit any other person or
entity to, alter or reproduce in any way the Adjunct Services, the Data
Receiving Equipment, the Video Receiving Equipment, or any other equipment or
materials provided by Muzak in connection with the Adjunct Services.
3. Effect of Termination or Expiration of License Agreement.
--------------------------------------------------------
3.1 Multi-Territory Accounts. In the event the License Agreement
------------------------
terminates or expires (without renewal) prior to the termination of a Multi-
Territory Contract (as defined in Exhibit G) for Adjunct Services being
delivered in the Territory, Licensee's rights with respect to such Contract
shall be governed by Article 4 of said Exhibit G.
3.2 Subscribers That Are Not Multi-Territory Accounts.
-------------------------------------------------
a. Subject to paragraph b. below, in the event the License Agreement
terminates or expires prior to the termination of an Adjunct Services Subscriber
Contract for Services being delivered in the Territory and such Contract is not
a Multi-Territory Contract, then Licensee shall sell to Muzak all of its rights
in such Adjunct Services Subscriber Contract, together with related equipment
(including the Earth Station if applicable), for a price determined in the
manner set forth in this Section 3.2. Upon such sale, Muzak shall assume all of
Licensee's obligations relative to performance of such Subscriber Contract and
with respect to such related equipment accruing after the date of transfer. In
the event such termination or expiration of the License Agreement is due to the
bona fide, arm's length purchase of Licensee's subscriber contracts for a price
based on a multiple of Recurring Adjunct Services Gross Billings (as hereinafter
defined), Muzak's purchase price hereunder shall be determined by multiplying
50% of such arm's length multiple times the Recurring Adjunct Services Gross
Billings attributable to the Adjunct Services Subscriber Contract being
purchased. In all other cases, Muzak's purchase price hereunder shall be the
result of multiplying 50% of the Prevailing Adjunct Services Multiple (as
hereinafter defined) times the Recurring Adjunct Services Gross Billings
attributable to such Contract. As used herein, (i) the term "Recurring Adjunct
Services Gross Billings" means the average recurring monthly billings to a
Subscriber for the Adjunct Services and related equipment, net of sales taxes,
and (ii) the term "Prevailing Adjunct Services Multiple" means the average of
the
E-2
<PAGE>
arm's length multiples used to determine the purchase prices of the three most
recently reported (to Muzak) sales of the businesses of MUZAK(R) licensees, to
the extent such prices were based on arm's length multiples of Recurring Adjunct
Services Gross Billings and such multiples can be independently verified as
such. Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of Licensee's rights under an Adjunct Services Subscriber
Contract, Licensee and/or Muzak have received formal notice that such Contract
will be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such termination of the Contract
is less than the Prevailing Adjunct Services Multiple, then the purchase price
of Licensee's rights in such Contract shall be determined by multiplying such
remaining number of months in the Contract term by 50% of the Recurring Adjunct
Services Gross Billings attributable to such Contract.
b. Licensee shall not be required to sell to Muzak its rights in any
Adjunct Services Subscriber Contract described in this Section 3.2 to the extent
such rights pertain to the Music-Related Adjunct Services. In addition, Licensee
shall not be required to sell to Muzak its rights in any Other Adjunct Services
Subscriber Contract that does not pertain to the provision of the Adjunct
Services to any Subscriber locations outside of Licensee's Territory. Section
2.2(b) (i) and (ii) of the License Agreement shall control with respect to the
rights retained by Licensee under this paragraph b.
3.3 Adjacent Territories. In the event of a termination of the MUZAK(R)
--------------------
License Agreement of a MUZAK(R) licensee operating in a territory that adjoins
Licensee's Territory, Licensee agrees to provide the Adjunct Services to
Subscribers in such adjoining territory upon the request of Muzak for such
period of time and upon such other terms as are then agreed to by Muzak and
Licensee.
4. Licensee's Inability to Provide Adjunct Services.
------------------------------------------------
4.1 Third-Party Contract. In the event that Licensee is offering in the
--------------------
Territory a communications service which is the same as or similar to any
Adjunct Service as a result of a third-party contract or agreement in effect at
the time Muzak first notifies Licensee that such Adjunct Service has been added
to Exhibit B to the License Agreement, Licensee shall have no obligation under
the License Agreement to market, offer, or sell such Adjunct Service until
Licensee ceases doing business with such third party.
4.2 Rights of Muzak and Adjacent Licensees. During such period as
--------------------------------------
Licensee is not marketing, offering or selling an
E-3
<PAGE>
Adjunct Service in the Territory for the reasons provided in Section 4.1 above,
either Muzak or, at the request of Muzak, a MUZAK(R) licensee operating from a
MUZAK(R) territory that adjoins the Territory shall have the right to market,
offer, and sell such Adjunct Service in the Territory. Licensee shall give Muzak
at least 30 days' prior written notice of the date on which Licensee will cease
doing business with the third party as referred to in Section 4.1 above. After
such date, (i) Licensee shall commence marketing, offering, and selling such
Adjunct Service in accordance with the License Agreement and (ii) Muzak and any
MUZAK(R) licensees operating in territories adjacent to the Territory shall no
longer have the right to market, offer, or sell such Adjunct Service in the
Territory except under the terms of a MUZAK(R) Adjunct Services Subscriber
Contract in effect on such date; provided, however, that Licensee shall have the
right to purchase from Muzak or such other MUZAK(R) licensee, as the case may
be, the licensee's rights under any such Adjunct Services Subscriber Contract,
as well as the related equipment, for a price determined in the manner set forth
in Section 3.2 above.
4.3 Adjacent Territories. In the event that a MUZAK(R) licensee
--------------------
operating in a territory that is adjacent to Licensee's Territory is unable to
market, offer, or sell an Adjunct Service for the reasons set forth in Section
4.1 above, Licensee agrees (i) to market, offer, and sell such Adjunct Service
in such adjacent territory upon the request of Muzak for such period of time and
upon such other terms as are then agreed to by Muzak and Licensee, and (ii) to
sell to such adjacent licensee its rights in any Adjunct Services Subscriber
Contract described in Section 4.2 above upon the terms described in said Section
4.2.
4.4 Use of Proprietary Marks. In the event that Muzak or an adjacent
------------------------
licensee (including Licensee in its capacity as such an adjacent licensee)
markets, offers, or sells an Adjunct Service under the conditions described in
Sections 4.1 through 4.3 above, none of the Proprietary Marks, other than those
associated specifically with such Adjunct Service (including the "MUZAK(R)"
Proprietary Mark if, and only to the extent that, it is specifically associated
with such Adjunct Service), shall be used for such marketing, offering and sales
purposes. Without limiting the generality of the foregoing, in such case neither
Muzak nor the adjacent licensee shall market such Adjunct Service in the
affected licensee's territory under the MUZAK(R) yellow-pages listing.
5. Multi-Territory Accounts. In the event Adjunct Services are provided to
------------------------
a Multi-Territory Account under the Multi-Territory Accounts Program described
in Article IX and Exhibit G of the License Agreement, the terms of such Program
shall control over the terms set forth herein.
E-4
<PAGE>
Schedule 1
----------
MUZAK(R) ADJUNCT SERVICES [LOGO OF
SUBSCRIBER AGREEMENT MUZAK]
1. This Adjunct Services Subscriber Agreement ("Agreement") is made this_______
day of _____________ 19__ between MUZAK LIMITED PARTNERSHIP, acting as agent
for the Servicing Muzak Affiliates listed in Exhibit A and Exhibit B hereto
as now existing or subsequently amended by MUZAK, and for itself
(specifically with respect to paragraphs 7, 8, 10, 11, and 12)
(collectively, "MUZAK" and ____________________________________________ (the
"Subscriber").
2. This Agreement shall remain in effect for a term of___________ months from
_____________________, 19___ and shall be automatically renewed for
subsequent________-month terms unless terminated at the end of any term by
either party by written notice given to the other party at least ninety (90)
days prior to the end of such term. This Agreement shall become binding when
signed by Subscriber and accepted and approved by MUZAK. Subject to the
terms and conditions of this Agreement, MUZAK shall provide to the
Subscriber at the commercial locations ("Premises") set forth in Exhibit B,
one or more of the following services (the "Services") as indicated below:
______________________________________________________________________________
3. [_] ADPARTING(SM) SERVICES are delivered by Direct Broadcast Satellite (DBS)
to a MUZAK-supplied DBS Audio Receiver. (5 Spot Minimum.)
A. Number of Premises:___________.
B. Number of spots per scheduled hour:_____________.
C. Message length: [_] 20 seconds; [_] 30 seconds.
D. Price per Premises per month: $________.
E. If AdParting(SM) Services are to be provided for less than term
described above, specify months of provision:
____________________________________________________________________
____________________________________________________________________
F. Describe special needs relating to advertising (e.g., scheduling):
____________________________________________________________________
____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
4. [_] BROADCAST DATA SERVICES are delivered by DBS to a MUZAK-supplied DBS
Audio Receiver equipped to receive MUZAK Data Services. Charges for
Broadcast Data Services are composed of a monthly charge per Premises
based on data transmissions totaling up to 500 kilobytes (for all
Premises) from the originating location, plus a per-message charge for
additional kilobytes of transmission.
A. Number of Premises:___________.
B. Basic Monthly Data Charge per Premises: $_______.
C. Per-message charge for additional kilobytes of transmission: $_____.
D. Describe special needs and/or related charges for Broadcast Data
Services:________________________________________________________
____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
5. [_] BROADCAST VIDEO SERVICES are delivered by DBS to a MUZAK-supplied Video
Receiver providing access to one-way video reception In conjunction with
a MUZAK-supplied DBS Antenna and Audio Receiver.
A. Basic Monthly Charge for Basic Broadcast Video Service as described
above is $________per Premises.
Note: Monthly charge does not Include costs for transponder time, which
will be charged separately to Subscriber on a per-use basis. Subscriber
assumes the responsibility and cost of video production.
B. Describe special needs and/or related charges for transmission and
transponder services:_________________________________________________
______________________________________________________________________
______________________________________________________________________________
6. Monthly charges indicated herein are billed monthly In advance and
commence on completion of installation of appropriate reception
equipment as designated above. Subscriber agrees to pay all charges for
the Services as indicated herein.
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
Subscriber:________________________ MUZAK LIMITED PARTNERSHIP
___________________________________
(Print Name of Business Entity) By:________________________________
By:________________________________ Title:_____________________________
Title:_____________________________
Address:___________________________ 400 North 34th Street, Suite 200
___________________________________ Seattle, WA 98103
INITIATING MUZAK AFFILIATE:
___________________________________
(Print Name of Business Entity)
By:________________________________
Title:_____________________________
Address:___________________________
<PAGE>
7. SUBSCRIBER MATERIALS. Subscriber shall provide to MUZAK at Subscriber's
sole expense and at such times and places and in such forms as are
reasonably requested by MUZAK, those data, video, advertising, and other
materials (if any) which are to be incorporated in the Services prior to
transmission to the Premises. Such materials are hereinafter collectively
referred to as the "Subscriber Materials". Subscriber shall be solely
responsible for the content of all Subscriber Materials, but Muzak
reserves the right to refuse to transmit any Subscriber Materials the
content, transmission, or broadcast of which it believes could infringe
upon the rights of others or otherwise be unlawful or the form of which
does not comply with MUZAK's requests as provided above. Subscriber shall
comply with all applicable governmental laws, rules, and regulations
pertaining to the Subscriber Materials and their use in the Services.
Subscriber shall indemnify and hold harmless MUZAK and its officers,
agents, partners, and employees from and against any and all claims,
liabilities, losses, damages, costs and expenses (including reasonable
attorney's fees), including without limitation claims for infringement of
proprietary rights, misrepresentation, and defamation, arising out of or
attributable in whole or in part to the Subscriber Materials. This
indemnity shall survive the expiration or earlier termination of this
Agreement.
8. EQUIPMENT.
a. With respect to any items of equipment that are provided hereunder to
Subscriber by MUZAK including but not limited to Earth Stations, MUZAK
shall maintain such items in good operating condition: provided, however,
that such maintenance shall be exclusively limited to that resulting from
ordinary and proper use of the equipment. All other maintenance, repair
and replacement of such equipment shall be paid by Subscriber in
accordance with MUZAK's customary charges therefor. MUZAK'S OBLIGATIONS
UNDER THIS PARAGRAPH ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR
IMPLIED, RELATING TO THE EQUIPMENT, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Except for MUZAK's
maintenance obligations resulting from ordinary and proper use of the
equipment as set forth above, Subscriber shall indemnify MUZAK and hold
it harmless from and against any and all losses, claims, and expenses
relating to the equipment provided hereunder to Subscriber, including
without limitation losses caused by accident, fire, theft, or misuse of
the equipment. Subscriber shall provide electrical outlets and power as
needed for the equipment.
b. Subscriber shall not, directly or indirectly, sell, mortgage, pledge,
or otherwise dispose of or encumber any MUZAK-owned equipment provided to
Subscriber, nor shall it change the location of, tamper with, or alter in
any manner such equipment. Subscriber shall execute such further
documents as are necessary or desirable to protect MUZAK's interests in
such equipment shall, adequately insure such equipment against damage or
loss and present evidence of such insurance to MUZAK upon request, and
shall, upon the expiration of earlier termination of this Agreement,
promptly return to MUZAK all of such equipment in good condition (or pay
the full replacement value thereof).
9. ADDITIONAL CHARGES.
a. In addition to the fees specified on the reverse side of this
Agreement, Subscriber shall pay to MUZAK any sales, use, excise, or other
taxes or governmental charges (except income taxes) arising under this
Agreement. Subscriber shall also pay to MUZAK any incremental increases
in ASCAP, BMI, or other licensing fees resulting from the services
supplied under this Agreement.
b. Late payments of fees and charges due hereunder are subject to late-
payment and interest charges not to exceed the maximum rate permitted by
law.
c. MUZAK may increase any or all of the charges stated on the reverse
side of this Agreement on an annual basis by providing at least 15 days'
prior written notice to Subscriber; provided, however, that any such
increase may not exceed 10% of the then existing charge without the
approval of Subscriber. Should any such increase exceed 10% and not be
approved by Subscriber. MUZAK may elect to terminate the Agreement. Such
termination shall not release Subscriber from any obligations which
accrued prior to the time of such termination. Such termination shall not
affect any other agreement Subscriber may have with MUZAK.
10. ASSIGNMENT. Subscriber shall not assign its rights or delegate its duties
under this Agreement without the prior written consent of MUZAK which
consent shall not be unreasonably withheld. Any assignment of this
Agreement by Subscriber without MUZAK'S written consent shall be void and
shall at MUZAK'S option constitute a breach hereof by Subscriber. In the
event Subscriber ceases to do business at any Premises, Subscriber shall
return to MUZAK in the manner designated by MUZAK all MUZAK-owned
equipment installed at such Premises; such cessation shall not, however,
reduce Subscriber's payment obligations hereunder unless MUZAK otherwise
agrees in writing. This Agreement shall be fully assignable by MUZAK.
Subject to the foregoing, this Agreements shall be binding upon and shall
inure to the benefit of the partners and their respective successors,
representatives, and assigns.
11. LIMITATION OF LIABILITY. In the event MUZAK fails to provide one or more
of the Services to any Premises for a period of twenty-four consecutive
hours, and Subscriber provides MUZAK with written notice thereof within
48 hours after such failure, the following shall occur. Subscriber's
account shall be credited with an amount equal to one-thirtieth of the
recurring monthly charge for the affected Service for each such 24 hour
reported period. Notwithstanding the foregoing, in no event shall MUZAK
be responsible or liable (and no credit shall be given) for any failure
of MUZAK to perform its obligations hereunder due to Acts of God,
strikes, emergencies, mechanical failures, regulatory or other
governmental action, or inaction of Subscriber, its employees, agents,
or invitees, a breach of the Agreement by Subscriber, or any other cause
beyond MUZAK's reasonable control. In no event shall MUZAK be liable for
incidental, consequential or special damages arising out of or relating
to this Agreement. Without limiting the foregoing, under no
circumstances will MUZAK be responsible for the reception of the
services by the Subscriber at any Premises or for the accuracy or
completeness of the information or other material included in the
Services.
12. TERMINATION BY MUZAK. If Subscriber fails to perform any of its
obligations hereunder and does not cure such failure within thirty days
after written notice thereof from MUZAK, or if Subscriber becomes
insolvent or bankrupt, MUZAK, in addition to all other rights it may
have under law or this Agreement, shall have the rights (i) to declare
all amounts to be paid by Subscriber during the remaining term hereof
immediately due and payable, (ii) to cease providing the Services to
Subscriber, and (iii) immediately to enter the Premises and take
possession of all MUZAK-owned equipment without liability to Subscriber
therefore and without relieving Subscriber of its obligations under the
Agreement. Subscriber shall reimburse MUZAK for all costs and expenses,
including reasonable attorneys' fees and court costs, incurred in
connection with MUZAK's exercise of its rights under this Agreement.
MUZAK shall have the right to terminate this agreement in the event
that there is only one Servicing Muzak Affiliate providing services to
Subscriber hereunder and the Muzak(R) license rights of such servicing
Muzak Affiliate have expired or terminated without renewal.
13. SERVICING MUZAK AFFILIATES. Subscriber acknowledges and agrees that all
services to be provided by MUZAK hereunder shall be provided by the
Servicing Muzak Affiliate identified in Exhibit A as being responsible
for a particular Premises. Subscriber further acknowledges that MUZAK is
entering into and executing this Agreement on behalf of and as agent for
each such Servicing Muzak Affiliate with respect to each Premises served
by each such Servicing Muzak Affiliate and that the Xerographic copies of
this Agreement provided to each such Servicing Muzak Affiliate for each
such Premises shall be deemed for all purposes a counterpart original of
the Agreement.
14. APPLICABLE LAW. In the event of a dispute affecting Premises located in
one State, this Agreement shall be governed by and in accordance with
the laws of that State applicable to contracts made and to be performed
wholly within such State and venue shall rest with the court of general
jurisdiction located in the county where the subject servicing Muzak
Affiliate maintains its principal place of business. In the event of a
dispute affecting Premises located in more than one State, this Agreement
shall be governed by and in accordance with the laws of the State of
Washington applicable to contracts made and to be performed wholly with
such State, and Subscriber consents to the personal jurisdiction of the
State and federal courts of the State of Washington for purposes of
litigation affecting this Agreement. If any provision of this Agreement
is deemed unenforceable in whole or in part by a Court of competent
jurisdiction, the parties agree that such Court shall amend or alter such
provision so as to effectuate the intent of such provision and of this
Agreement to the maximum extent that is enforceable.
15. MISCELLANEOUS.
a. This Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior
conversations, representations, promises, and warranties, whether verbal
or written, with respect to such subject matter. No modification of this
Agreement shall be valid unless made in writing and signed by each party;
provided however, that MUZAK shall have the right to modify or terminate
this Agreement to the extent necessitated by a modification or
termination of any license or lease agreement applicable to its provision
of the Services.
b. The waiver of a breach of any provision of this Agreement shall not be
construed as a waiver of any subsequent breach of the same or of a
different provision of this Agreement.
c. Each party represents and warrants that it has the power and authority
to enter into this Agreement and discharge its obligations hereunder, and
each person executing this Agreement on behalf of a party represents and
warrants that he or she has the power and authority to sign this
Agreement on behalf of such party.
d. All notices required under this Agreement shall be in writing and
personally delivered or sent, postage prepaid, by certified or registered
mail, return receipt requested to the parties at their addresses set
forth on the reverse side (or such other address as is hereafter,
provided by a party to the other party).
<PAGE>
EXHIBIT A
SERVICING MUZAK AFFILIATES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ALABAMA MONTANA
Electronic Engineers, Birmingham, AL Shag Miller, Butte, MT
Electro-Systems, Dothan, AL American Music, Great Falls, MT
Service Associates, Huntsville, AL Music Systems, Kalimpell, MT
Business Sound, Mobile, AL
Electronic Engineers, Montgomery, AL NEBRASKA
Parker Engineering, Kearney, NE
ALASKA Business Music Inc., Lincoln, NE
Northern Television, Anchorage, AK Business Music Inc., Omaha, NE
Background Music, Fairbanks, AK
NEVADA
ARKANSAS Musaire, Inc., Las Vegas, NV
Fitzhugh Communications, Fayetteville, AR Dynamic Sound, Reno, NV
Tempo Sound, Harrison, AR
Business Music, Inc., Little Rock, AR NEW HAMPSHIRE
Muzak, Exeter, NH
ARIZONA
SunCom Group, Scottsdale, AZ (Phoenix) NEW JERSEY
Tucson Music, Tucson, AZ World Music, Springfield, NJ
CALIFORNIA NEW MEXICO
Muzak, Anaheim, CA Business Music, Inc. Albuquerque, NM
Serban Sound, Bakersfield, CA
Muzak, Burbank, CA (Los Angeles) NEW YORK
Attuned to Music, Chico, CA Comcast, Buffalo, NY
American Music Network, Fresno, CA Arranged Sound, Johnson City, NY (Binghamton)
American Music Network, Modesto, CA Functional Communications, Latham, NY (Albany)
Musi-Cal, Riverside, CA Muzak, Long Island City, NY (New York City)
Muzak, Roseville, CA (Sacramento) NCC Systems, Potsdam, NY
American Music Network, Salinas, CA Accent Communications Systems, Poughkeepsie, NY
Comcast, San Diego, CA Functional Communications, Rochester, NY
Muzak, San Francisco, CA Functional Communications, Syracuse, NY
Muzicraft, Santa Barbara, CA NCC Systems, Watertown, NY
Muzicraft, Ventura, CA
NORTH CAROLINA
COLORADO SunCom Group, Charlotte, NC
Comcast, Colorado Springs, CO SunCom Group, Hillsborough, NC
Comcast, Denver, CO Independence Communications, Kinston, NC
Warner Music & Communications, Rocky Mount, NC
CONNECTICUT Background Music, Wilmington, NC
Comcast, Hartford, CT
Muzak, Milford, CT NORTH DAKOTA
Music Systems, Inc., Bismark, ND
DISTRICT OF COLUMBIA Music Systems, Inc., Fargo, ND
Music Inc., Washington, DC
OHIO
FLORIDA Port Erie Communications, Ashtabula, OH
Osborn Sound, Ft. Myers, FL Ohio Musicue, Canton, OH
Florida Sound, Jacksonville, FL Muzak, Cincinnati, OH
Melody Inc., Miami, FL Ohio Music Corporation, Cleveland, OH
Marion Music, Ocala, FL Muzak, Columbus, OH
Comcast, Orlando, FL Audio Inc., Dayton, OH
Electro-Systems, Panama City, FL Zaiser Communications, Toledo, OH
Electro-Systems, Tallahassee, FL Hudix Music, Youngstown, OH
Tropical Music, Tampa, FL
Harmony Music & Sound, W. Palm Beach, FL (Palm Beach) OKLAHOMA
Lawton Business Music, Lawton, OK
GEORGIA Business Music, Inc., Oklahoma, OK
Osborn Sound, Albany, GA Granite Sound, Tulsa, OK
Osborn Sound, Atanta, GA
Carolina-Georgia Sound, Augusta, GA OREGON
Background Music, Phonix City, AL (Columbus, GA) Muzak, Eugene, OR
Osborn Sound, Macon, GA Muzak, Medford, OR
Georgia Music & Sound, Savannah, GA Muzak, Portland, OR
HAWAII PENNSYLVANIA
Hawkins Audio Engineering, Honolulu, HI Independence Communications, Harrisburg, PA
Comcast, Hollidaysburg, PA
IDAHO Independence Communications, Norristown, PA (Philadelphia)
Mountain West Audio, Boise, ID Independence Communications, Pittsburgh, PA
Idaho Mountain West, Idaho Falls, ID Comcast, Scranton, PA
ILLINOIS SOUTH CAROLINA
Muzak, Chicago, IL Carolina Sound Communications, Charleston, SC
Kickapoo Broadcasting, Danville, IL Background Music, Columbia, SC
WSOY, Decantur, IL Carolina Sound Communications, Myrtle Beach, SC
Comcast, Moline, IL
Comcast, Peoria, IL SOUTH DAKOTA
Ouincy Broadcasting, Quincy, IL Music of Rapid City, Rapid City, SD
Springfield Advertising, Springfield, IL Midco Communications, Sioux Falls, SD
INDIANA TENNESSEE
Service Associates, Evansville, IN Belew Sound & Visual, Bristol, TN
Comcast, Fort Wayne, IN Service Associates, Chattanooga, TN
Comcast, Indianapolis, IN Service Associates, Knoxville, TN
Music Engineering, South Bend, IN Mid-South Music & Sound, Memphis, TN
Service Associates, Nashville, TN
IOWA
Music Services, Inc., Des Moines, IA TEXAS
Brite & Rich, Le Mars, IA (Sioux City) Audioplan, Abilene, TX
D.B. Acoustics, Marion, IA (Cedar Rapids) Business Music, Inc., Amarillo, TX
AVCOM, Austin, TX
KANSAS Beaumont Business Music, Beaumont, TX
McClelland Sound, Wichita, KS ABC Music, Big Spring, TX
Brownwood Business Music, Brownwood, TX
KENTUCKY Gulf Business Music, Corpus Christi, TX
P & M Electronics, Ashland, KY Comcast, Dallas, TX
Lexington Music & Sound, Lexington, KY Muzicom, El Paso, TX
Planned Music of Kentucky, Louisville, KY Comcast, Ft. Worth, TX
T F M Sound, Harlingen, TX
LOUISIANA Taft Broadcasting, Houston, TX
American Sound & Music, Baton Rouge, LA Business Music, Inc., Lubbock, TX
Metro Communications, Lafayette, LA Pioneer Music, Midland, TX
Dixie Music, Lake Charles, LA W. Texas Business Music, San Angelo, TX
Business Sound, Metairie, LA (New Orleans) Texas Wired Music, San Antonio, TX
Business Music, Shreveport, LA Whitsound, Taxarkana, TX
Comcast, Tyler, Tx
MAINE Wichita Business Music, Wichita Falls, TX
PBC Sound Systems, Bangor, ME
UTAH
MARYLAND Mountain West Audio, Salt Lake City, UT
Audio Communications Network, Baltimore, MD
VERMONT
MASSACHUSETTS Music Services of Vermont, Essex Junction, VT (Burlington)
Muzak, Waltham, MA (Boston)
VIRGINIA
MICHIGAN Independence Communications, Charlottesville, VA
Muzi-Tronics, Cadillac, MI Independence Communications, Newport News, VA
Muzi-Tronics, Grand Rapids, MI Independence Communications, Richmond, VA
Muzi-Tronics, Kalamazoo, MI Business Communications, Roanoke, VA
Range Telecommunications, Marquette, MI
Blue Water Music, Port Huron, MI WASHINGTON
MacDonald Broadcasting, Saginaw, MI Muzak, Seattle, WA
Comcast, Warren, MI (Detroit) Muzak, Spokane, WA
Sousley Sound, Yakima, WA
MINNESOTA
Business Music, Inc., Cold Springs, MN (St. Cloud) WEST VIRGINIA
Business Music Service, Duluth, MN Joe L. Smith, Beckley, WV
Muzak, Minneapolis, MI Wheeling Services, Wheeling, WV (Parkersbury/Wheeling)
Custom Communications, Rochester/Winona, MN
Business Music, Inc., Wilmar, MN WISCONSIN
Northern Musicast, Appleton, WI
MISSISSIPPI Central Communications, Eau Claire, WI
Melody Music Company, Columbus, MS Pridham Electronics, Madison, WI
Mississippi Sound, Greenwood, MS Wisconsin Music Network, Milwaukee, WI
Metro Communications, Jackson, MS Forward Electronics, Plover, WI
Forward Electronics, Wausau, WI
MISSOURI
Towner Communications, Jefferson City, MO WYOMING
Audio Acoustics, Joplin, MO Background Music, Cheyenne, WY
Audio Communications, Network, Kansas City, MO
Audio Acoustics, Poplar Bluff, MO
Audio Communications, Network, St. Louis, MO
Audio Acoustics, Springfield, MO
</TABLE>
<PAGE>
EXHIBIT B
SERVICED PREMISES
List of all Serviced Premises (With Corresponding Reference to Muzak Affiliate
Responsible for each such Serviced Premises)
- --------------------------------------------------------------------------------
Serviced Premises Servicing Muzak Affiliates
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MSA-EB
<PAGE>
EXHIBIT F
---------
ADJUNCT SERVICES REVENUE SHARING
BROADCAST DATA SERVICES ("Data")
- --------------------------------
Revenues from the sale of Data under the terms of an Adjunct Services Subscriber
Contract shall be shared between Muzak and Licensee on a 60/40 basis for a
three-year period starting August 1, 1989. Muzak will receive the 60% share for
the three-year period. Commencing August 1, 1992, revenue for Data will be
shared between Muzak and Licensee on a 50/50 basis.
ADPARTING SERVICES ("AdParting")
- --------------------------------
Revenues from the sale of Adparting under the terms of an Adjunct Services
Subscriber Contract shall be shared between Muzak and Licensee on a 60/40 basis,
with Muzak receiving the 60% share.
BROADCAST VIDEO SERVICES ("Video")
- ----------------------------------
Revenues from the sale of Video under the terms of an Adjunct Services
Subscriber Contract shall be shared between Muzak and Licensee on a 60/40 basis,
with Muzak receiving the 60% share.
DAYPARTING, WEEKPARTING, COMBINED, AND SWITCHING
- ------------------------------------------------
Services will be provided at flat fee as published from time to time by Muzak.
The fees charged by Muzak for Dayparting, Weekparting and Switching services
will not be increased from the date of the MUZAK(R) License Agreement to which
this Exhibit is attached through December 31, 1993 and thereafter none of such
fees shall increase by more than 10% per annum.
Notes:
- -----
1. Licensee will pay all sales commissions to local sales personnel if the
above-mentioned Adjunct Services are sold by the Licensee. Muzak will pay
sales commissions to Muzak National Sales personnel if the above-mentioned
Adjunct Services are sold by Muzak National Sales personnel.
2. The 3% Multi-Territory Accounts sales commissions will not apply to the
Adjunct Services.
3. Whichever of Muzak and Licensee receives revenues from the Subscriber under
the terms of the applicable Adjunct Services Subscriber Contract shall,
within 45 days after receipt of each payment of such revenues, provide the
other party with a report showing the date and amount of such payment and
pay to the other party such other party's share
F-1
<PAGE>
of the revenues, as provided herein: The party that is responsible for the
collection of revenues from a Subscriber under the terms of the applicable
Adjunct Services Subscriber Contract shall use its best efforts to ensure
that payments are made in a complete and timely manner by such Subscriber
and shall be responsible for paying any federal, state, or local taxes
relating to the provision of the Adjunct Services to the Subscriber to the
appropriate taxing authority. All payments of such revenues shall be
promptly remitted to the other party, without credit, offset or deduction of
any kind or nature whatsoever except that the party responsible for
collection of revenues from a Subscriber may deduct the other party's pro
rata share of any sales or similar taxes required to be collected in
connection with the provision of the Adjunct Services, as well as such other
deductions as have been agreed to by the parties.
F-2
<PAGE>
EXHIBIT G
---------
MUZAK(R) MULTI-TERRITORY ACCOUNTS PROGRAM
Muzak and various of its licensees, working through a "Multi-Territory
Sales Committee," have developed a Multi-Territory Accounts Program (the
"Program"), pursuant to which Muzak and its licensees will provide the Services
to certain Subscribers who own or operate Subscriber Premises located in the
MUZAK(R) territories of at least four MUZAK(R) licensees. The purpose of this
Exhibit G is to set forth the terms and conditions under which the Program will
operate. Capitalized terms used but not defined in this Exhibit G shall have the
meanings set forth in the body of the MUZAK(R) License Agreement to which this
Exhibit is attached.
1. Definitions. As used herein, the following terms shall have the
-----------
meanings set forth below:
1.1 Affiliate shall mean a person or entity (including Licensee)
---------
that has the right to offer and sell the Services under the terms of a license
agreement with Muzak, as well as an owned affiliate of Muzak.
1.2 Assigned Person shall have the meaning set forth in Section 1.7
---------------
below.
1.3 Commission shall mean 3% of the recurring gross billings to the
----------
Multi-Territory Account during the initial term of the Multi-Territory Contract
for Music Services (other than Music Services delivered either by Recorded Media
or in conjunction with in-store advertising provided by POP Radio Corporation)
provided to Subscriber Premises of the Multi-Territory Account located in
Licensee's Territory, plus 3% of the gross billings to the Multi-Territory
Account for certain equipment, as designated by the Committee, installed at such
Subscriber Premises; provided, however, that in calculating such gross billings
for purposes of determining the Commission, (i) a Multi-Territory Contract with
an initial term of more than 5 years shall be deemed to have a term of 5 years,
and (ii) there shall be taken into account only that portion (if any) of the
recurring gross billings for Music Services that exceeds the recurring gross
billings payable to Licensee under a contract that is superseded by the Multi-
Territory Contract.
1.4 Committee shall mean the "Multi-Territory Sales Committee"
---------
referred to above, as further described in Article 3 below.
G-1
<PAGE>
1.5 Licensee means the person or entity referred to as "Licensee" in
--------
the MUZAK(R)License Agreement to which this Exhibit is attached.
1.6 Multi-Territory Account shall mean a potential Subscriber that
-----------------------
(a) owns or operates 50 or more Subscriber Premises located in the MUZAK(R)
territories of at least four Affiliates, and (b) is set forth on the then-
current Multi- Territory Account List.
1.7 Multi-Territory Account List shall mean a document that is
----------------------------
periodically prepared by the Committee and disseminated to the Affiliates and
that specifies the Subscribers which meet the requirements of Section 1.6(a) and
the name of the respective person or entity who is assigned responsibility for
the multi-territory marketing of the Services to each such Multi-Territory
Account, which person or entity shall in each case be either Muzak or the
Affiliate licensed by Muzak to operate in the MUZAK(R) territory in which the
headquarters of the Multi-Territory Account are located. (Such person or entity
is referred to herein as the "Assigned Person"). Each such Multi-Territory
Account List shall remain in effect until a new Multi-Territory Account List is
prepared and disseminated. No Subscriber shall be added to the Multi-Territory
Account List without the prior written consent of the Affiliate in whose
MUZAK(R) territory the headquarters of such Subscriber are located. Licensee may
at any time and from time to time petition the Committee for removal of a
Subscriber from the Multi-Territory Account List if no multi-territory sale is
made to the Subscriber within 12 months of the inclusion of such Subscriber in
the Multi-Territory Account List.
1.8 Multi-Territory Contract shall have the meaning set forth in
------------------------
Section 2.2 below.
1.9 MUZAK(R) territory shall mean a geographical area in the United
------------------
States in which an Affiliate has certain exclusive rights to offer and sell the
Services.
2. Procedures for Subscriber Contracts with Multi-Territory Accounts. The
-----------------------------------------------------------------
following procedures will apply with respect to Subscriber Contracts for
Services and related equipment and services provided to Multi-Territory
Accounts:
2.1 Marketing. The Assigned Person will oversee the marketing
---------
approaches to each respective Multi-Territory Account. Unless Licensee is the
Assigned Person with respect to such Account, Licensee will not independently
approach a Multi-Territory Account location for marketing purposes without the
prior written consent of the Assigned Person. Licensee will provide such
marketing assistance to the Assigned Person, with respect to a Multi-Territory
Account that has its headquarters or one or more Subscriber Premises in
Licensee's Territory, as is
G-2
<PAGE>
reasonably requested by the Assigned Person. If Licensee is the Assigned Person,
Licensee shall market the Services to the Multi-Territory Account in a diligent
and proper manner. The Assigned Person shall not visit or otherwise contact the
headquarters of any Multi-Territory Account located in Licensee's Territory
without informing Licensee and soliciting Licensee's participation in such visit
or other contact.
2.2 Contract Form and Terms. Unless otherwise authorized in writing
-----------------------
by the Committee, all Subscriber Contracts with Multi-Territory Accounts for the
sale of the Music Services and related equipment and services shall be
substantially in the form of the MUZAK(R) Multi-Territory Music Service
Agreement that is attached as Schedule 1 to this Exhibit G and all Subscriber
----------
Contracts with Multi-Territory Accounts for the sale of Adjunct Services and
related equipment and services shall be substantially in the form of the
MUZAK(R) Adjunct Services Subscriber Contract described in Exhibit E of the
MUZAK(R) License Agreement to which this Exhibit is attached (either or both, as
the case may be, the "Multi-Territory Contract"). The specific terms (pricing,
length of contract period, etc.) set forth in the Multi-Territory Contract with
a specific Multi-Territory Account shall be as determined by the Committee,
subject to Section 3.2 below. Any material variations in the Multi-Territory
Contract shall require the prior consent of the Committee. Licensee understands
and agrees that, in performing its obligations and exercising its rights with
respect to a Multi-Territory Contract, Licensee shall be bound by the terms set
forth therein and shall have no right independently to amend or otherwise alter
any such terms.
2.3 Commissions.
-----------
(a) Licensee shall pay a Commission with respect to the Multi-Territory
Contract to the Assigned Person by no later than 60 days after Licensee is
provided with a copy of the fully executed Multi-Territory Contract.
(b) In the event that (1) Licensee is (A) invited by the Assigned
Person, (B) the licensee within whose territory the headquarters of such Account
are located, or (C) designated by the Committee to assist the Assigned Person in
the marketing of the Services to the Multi-Territory Account, and (2) the
Committee determines that Licensee (or an employee of Licensee) substantially
assisted the Assigned Person in such marketing (including for example by
maintaining contact with the Multi-Territory Account on behalf of the Assigned
Person and by delivery of the Multi-Territory Contract executed by the Multi-
Territory Account or the performance of other useful services), the Assigned
Person shall pay to Licensee (and not to any salesman or agent of Licensee in an
individual capacity) 1/3 of the Commission it receives. Such payment shall be
made in
G-3
<PAGE>
installments as the Subscriber Premises of the Multi-Territory Account commence
receiving the Services.
2.4 Insurance. To facilitate the marketing of the Services to
---------
Multi-Territory Accounts, each Affiliate, including Licensee, shall maintain in
full force and effect such workmen's compensation coverage and liability
insurance coverage as is reasonably required from time to time by the Committee,
and shall provide evidence of such coverage to the Committee from time to time
as requested.
3. The Committee.
-------------
3.1 Composition; Action.
-------------------
(a) The Committee shall at all times consist of six members, three
of whom shall be appointed annually by the International Planned Music
Association (or, in the event such Association is at any time not in existence,
such organization of the MUZAK(R) licensees as succeeds such Association) (the
"IPMA") and three of whom shall be appointed annually by Muzak. Of the three
members appointed by the IPMA, two shall be IPMA members and the third shall be
an Affiliate (or, in the case of a corporate or partnership Affiliate, an owner,
officer, or key employee of such Affiliate) who may be, but need not be, a
member of the IPMA. Of the three members appointed by Muzak, two shall be
officers or employees of Muzak and the third shall be an Affiliate (or, in the
case of a corporate or partnership Affiliate, an owner, officer, or key employee
of such Affiliate) who may be, but need not be, a member of the IPMA.
(b) The Committee shall meet as often as is necessary to maintain
the Program, but in no event less frequently than quarterly: All members of the
Committee shall be given reasonable prior written or telephone notice of any
Committee meeting. At any meeting of the Committee the presence of five or more
members (participating by phone or in person) shall constitute a quorum for the
transaction of business. All decisions of the Committee shall require the
affirmative vote of at least five members of the Committee during a Committee
meeting. Members may participate in a meeting of the Committee by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in the
meeting shall constitute presence of the person at such meeting.
(c) In the event a member retires from the Committee prior to the
end of his or her term of appointment, or is otherwise unable to serve until the
end of such term, the entity that appointed such member shall promptly appoint a
replacement member to serve until the end of such term.
G-4
<PAGE>
(d) Muzak shall bear the costs associated with the meetings of the
Committee and Muzak and the IPMA shall bear such other costs of the Committee as
they may from time to time agree.
3.2 Guidelines. The Committee shall adopt guidelines from time to time
----------
to govern its operations; provided, however, that such guidelines shall not
conflict with the provisions set forth in this Exhibit G. Such guidelines shall
include general pricing guidelines for Multi-Territory Contracts. After adoption
by the Committee, such guidelines (until revision by the Committee) shall be
binding on Muzak and all such Affiliates.
4. Cessation of Rights to Continue to Provide Services After Termination of
------------------------------------------------------------------------
License Agreement.
- -----------------
4.1 Cessation of Affiliate's Contract Rights. If the MUZAK(R) License
----------------------------------------
Agreement of an Affiliate (the "Terminating Affiliate") terminates or expires
(without a renewal) prior to the termination of a Multi-Territory Contract that
pertains to Subscriber Premises in the Terminating Affiliate's MUZAK(R)
territory, the Terminating Affiliate shall cease to have any right to provide
any music or other services to such Subscriber Premises during the remaining
term of such Multi-Territory Contract. Accordingly, in the event of a
termination of Licensee's MUZAK(R) License Agreement, Licensee shall sell to
Muzak all of its rights in all Multi-Territory Contracts, and all related
equipment, that pertain to Subscriber Premises in Licensee's Territory, with
such sale to be for the price(s) described in Section 4.2 below. Upon such sale,
Muzak shall assume all of Licensee's obligations relative to performance of such
Multi-Territory Contract and with respect to such related equipment accruing
after the date of transfer. In addition, in the event of a termination of the
MUZAK(R) License Agreement of an Affiliate in a MUZAK(R) territory that adjoins
Licensee's Territory, Licensee agrees to provide the Services to the Subscriber
Premises of the Multi-Territory Account in such adjoining territory upon the
request of Muzak for such period of time and upon such other terms as are then
agreed to by Muzak and Licensee.
4.2 Purchase of Contract Rights.
---------------------------
4.2.1 Music Services. In the event that Licensee is a Terminating
--------------
Affiliate, the price applicable to Muzak's purchase of the rights of Licensee in
a Multi-Territory Contract for the provision of Music Services (and the related
equipment, including the Earth Station) shall be determined as provided in this
subsection 4.2.1. In the event that the MUZAK(R) License Agreement of Licensee
has expired without renewal or is otherwise terminated due to the bona fide,
arm's length purchase of Licensee's subscriber contracts for a price based on a
multiple
G-5
<PAGE>
of Recurring Music Gross Billings (as hereinafter defined), Muzak's purchase
price hereunder shall be determined by multiplying such arm's length multiple
times the Recurring Music Gross Billings attributable to the Subscriber Premises
of the Multi-Territory Account located in the Territory. If, however, no such
arm's length multiple can be fairly or accurately determined under the
circumstances, Muzak's purchase price hereunder shall be the result of
multiplying the Prevailing Music Multiple (as hereinafter defined) times the
Recurring Music Gross Billings attributable to the Subscriber Premises of the
Multi-Territory Account located in the Territory. As used herein, (i) the term
"Recurring Music Gross Billings" means the average recurring monthly billings to
a Subscriber for the Music Services and related equipment, net of sales taxes
and (ii) the term "Prevailing Music Multiple" means the average of the arm's
length multiples used to determine the purchase prices of the three most
recently reported (to Muzak) sales of the businesses of MUZAK(R) licensees, to
the extent such prices were based on arm's length multiples of Recurring Music
Gross Billings and such multiples can be independently verified as such.
Notwithstanding the foregoing, in the event that (i) prior to the date of
Muzak's purchase of Licensee's rights under a Multi-Territory Contract, Licensee
and/or Muzak have received formal notice that such Multi-Territory Contract will
expire or be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such expiration or termination of
the Contract is less than the above-described arm's length multiple or
Prevailing Music Multiple (as the case may be), then the purchase price of
Licensee's rights in such Multi-Territory Contract shall be determined by
multiplying such remaining number of months in the Contract term by the
Recurring Music Gross Billings attributable to such Contract. To facilitate the
determination of the Prevailing Music Multiple, if Licensee's MUZAK(R) business
is sold and the purchase price is determined wholly or in part by application of
a multiple to Licensee's Recurring Music Gross Billings, Licensee agrees to
inform Muzak of such multiple promptly after such sale occurs; if the purchase
price of such business is not determined by application of a multiple to
Licensee's Recurring Music Gross Billings, Licensee agrees to inform Muzak of
the amount of the purchase price, the amount of Licensee's Recurring Music Gross
Billings as of the date of closing and the method that was used to determine the
purchase price.
4.2.2 Adjunct Services. The price applicable to Muzak's purchase of
----------------
the rights of Licensee in a Multi-Territory Contract for the provision of the
Adjunct Services (and the related equipment, including the Earth Station) shall
be determined as provided in this subsection 4.2.2. In the event the termination
or expiration of the MUZAK(R) License Agreement of Licensee is due to the bona
fide, arm's length purchase of
G-6
<PAGE>
Licensee's subscriber contracts for a price based on a multiple of Recurring
Adjunct Services Gross Billings (as hereinafter defined), Muzak's purchase price
hereunder shall be determined by multiplying such arm's length multiple times
50% of the Recurring Adjunct Services Gross Billings attributable to the
Subscriber Premises of the Multi-Territory Account located in the Territory. In
all other cases, Muzak's purchase price hereunder shall be the result of
multiplying 50% of the Prevailing Adjunct Services Multiple (as hereinafter
defined) times the Recurring Adjunct Services Gross Billings attributable to the
Subscriber Premises of the Multi-Territory Account located in the Territory. As
used herein, (i) the term "Recurring Adjunct Services Gross Billings" means the
average recurring monthly billings to a Subscriber for the Adjunct Services and
related equipment, net of sales taxes and (ii) the term "Prevailing Adjunct
Services Multiple" means the average of the arm's length multiples used to
determine the purchase prices of the three most recently reported (to Muzak)
sales of the businesses of MUZAK(R) licensees, to the extent such prices were
based on arm's length multiples of Recurring Adjunct Services Gross Billings and
such multiples can be independently verified as such. Notwithstanding the
foregoing, in the event that (i) prior to the date of Muzak's purchase of
Licensee's rights under a Multi-Territory Contract pertaining to Adjunct
Services, Licensee and/or Muzak have received formal notice that such Contract
will be terminated (without renewal) for reasons unrelated to the transfer
thereof to Muzak, and (ii) the number of calendar months remaining between the
date of such purchase by Muzak and the date of such termination of the Contract
is less than the Prevailing Adjunct Services Multiple, then the purchase price
of Licensee's rights in such Multi-Territory Contract shall be determined by
multiplying such remaining number of months in the Contract term by 50% of the
Recurring Adjunct Services Gross Billings attributable to such Contract. To
facilitate the determination of the Prevailing Adjunct Services Multiple, if
Licensee's MUZAK(R) business is sold and the purchase price is determined wholly
or in part by application of a multiple to Licensee's Recurring Adjunct Services
Gross Billings, Licensee agrees to inform Muzak of such multiple promptly after
such sale occurs; if the purchase price of such business is not determined by
application of a multiple to Licensee's Recurring Adjunct Services Gross
Billings, Licensee agrees to inform Muzak of the amount of the purchase price,
the amount of Licensee's Recurring Adjunct Services Gross Billings as of the
date of closing and the method that was used to determine the purchase price.
4.3 Effect on License Agreement. To the extent there is an inconsistency
---------------------------
or conflict between the terms of this Article 4 and the provisions set forth in
the body of the MUZAK(R) License Agreement to which this Exhibit G is attached,
the provisions of this Article 4 shall control. Without limiting the generality
of the foregoing, this Exhibit G shall control over Section 2.2(b) (i) of said
License Agreement.
G-7
<PAGE>
5. Affiliate's Failure to Perform.
------------------------------
5.1 No Discontinuance of Services. Under no circumstances shall an
-----------------------------
Affiliate discontinue the distribution of the Services or provision of related
goods and services to a Multi-Territory Account without providing the Committee
at least 96 hours' written notice of its intention to discontinue such
distribution.
5.2 Effect of Failure. In the event that an Affiliate (the "Failing
-----------------
Affiliate") fails to perform its obligations under the terms of a Multi-
Territory Contract and does not cure such failure within 30 days after notice of
such failure by the Committee (or, if such cure cannot be accomplished within 30
days. if the Failing Affiliate does not promptly commence such cure and
diligently pursue it toward completion during such 30-day period and then
accomplish such cure as soon as reasonably possible thereafter), an Affiliate
operating from a MUZAK(R) territory that is adjacent to the Failing Affiliate's
MUZAK(R) territory, as selected by the Committee, shall thereafter be authorized
to perform the obligations and exercise the rights (including rights to receive
payments) of the Failing Affiliate under such Contract until the termination
thereof. Notwithstanding the foregoing, if at any time a Failing Affiliate fails
to provide the Services to a Subscriber Premises in accordance with a Multi-
Territory Contract and does not cure such failure within 72 hours after receipt
of actual or written notice from the Committee, an Affiliate operating from a
MUZAK(R) territory that is adjacent to the Failing Affiliate's MUZAK(R)
territory, as selected by the Committee, shall have the right immediately to
provide the Services to such Subscriber Premises, and the Failing Affiliate
shall reimburse such Affiliate for the costs associated therewith.
6. Disputes. Subject to the last sentence of this Section 6, all disputes
--------
of any kind, nature or description arising in connection with the operation of
the Program that after a reasonable period of time have not been resolved by
less formal means shall be submitted for resolution to a three-person panel
composed of the then-current President of the IPMA, the then-current President
of Muzak, and a third person selected by the two aforementioned individuals. The
dispute shall be resolved according to such rules as are established by such
panel, and the decision of the panel with respect to such dispute shall be
binding on Muzak and the Affiliates. In the event that (i) either Muzak or
Licensee does not wish to use such panel to resolve such dispute, (ii) it
becomes impossible to convene such a panel, or (iii) the panel is unable after a
reasonable period of time to resolve a dispute, the dispute shall be submitted
to the offices of the American Arbitration Association in Seattle, Washington,
Chicago, Illinois, or New York, New York (as determined by the Committee) for
resolution.
G-8
<PAGE>
7. Amendment. This Exhibit G may be amended by the action of the Committee,
---------
acting in accordance with the requirements of paragraph (b) of Section 3.1
(which such paragraph may not be amended without the prior written approval of
Licensee and Muzak); provided, however, that such amendment shall not take
effect until 30 days after the Committee provides written notice thereof to
Licensee and Muzak.
8. Distribution of Revenues. In the event that, under the terms of a
------------------------
Multi-Territory Contract, an Assigned Person collects recurring revenues from a
Multi-Territory Account that are then payable by the Assigned Person to one or
more of the Affiliates, the Assigned Person shall, within 30 days after receipt
of each payment of such revenues, provide such Affiliates with a report showing
the date and amount of such payment and pay to such Affiliates such Affiliates'
share of the revenues, without credit, offset or deduction of any kind or nature
whatsoever other than sales or similar taxes required to be collected in
connection with the provision of Services under the Multi-Territory Contract and
such other deductions as have been agreed to by such Affiliates.
9. Audit. In the event that, under the terms of a Multi-Territory
-----
Contract, the Assigned Person collects revenues from a Multi-Territory Account
that are then payable by the Assigned Person to one or more of the Affiliates,
the Committee shall have the right, upon 15 days' written notice, to audit those
books and records of the Assigned Person pertaining to the administration of
such Multi-Territory Contract for the sole purpose of verifying that such
payments were correctly calculated. During any such audit, the Committee may
make mechanical copies of only those books and records that are necessary for
the verification of such calculations and were physically examined as part of
the audit. The Committee shall take reasonable precautions to safeguard the
confidentiality of such copies and shall destroy any such copies on completion
of the audit and payment by the Assigned Person of any monies determined to be
owing as a result of the audit. Neither the Committee nor any Affiliate shall
assess the Assigned Person for amounts found, as a result of such audit, to be
owing if such amounts were first payable by the Assigned Person more than two
years prior to the date such audit commenced, provided that the Assigned Person
did not knowingly maintain false books and records regarding the Multi-Territory
Contract or knowingly make false payments to the Affiliates with respect to such
Multi-Territory Contract.
G-9
<PAGE>
Schedule 1
----------
MUZAK(R) MULTI TERRITORY ACCOUNT [LOGO OF MUZAK]
SERVICE AGREEMENT
This Agreement ("Agreement") is made as of the _____ day __________, 1999__ by
and between MUZAK LIMITED PARTNERSHIP acting as agent for the Servicing Music
Suppliers listed on Exhibit "A" hereto as now existing or as subsequently
amended ("Supplier") and __________________________________ ("Subscriber")
The parties agree as follows:
1. MUSIC SERVICES
Suppliers provide MUZAK(R) subscription music programming (the "Music
Service") to commercial establishments. Subscriber owns, operates,
franchises or controls the commercial establishments listed in Exhibit "B"
("Services Premises"). The parties agree that, subject to paragraph 6
below, Supplier shall provide the Music Service to each of the Serviced
Premises. Music service description:______________________________________
__________________________________________________________________________
2. EQUIPMENT
For the consideration set forth in Section 3 below, Supplier shall provide
the following equipment to each Serviced Premises:
a. Purchased Equipment:___________________________________________________
__________________________________________________________________________
b. Other Equipment:_______________________________________________________
__________________________________________________________________________
(Subscriber may obtain additional equipment from Supplier on terms to be
negotiated on a location-by-location basis.)
3. FEES
In consideration of the services and equipment provided to Subscriber, and
in addition to the fees and charges referred to in Section 7 below,
Subscriber shall pay the following fees and charges to Supplier in the
manner set forth herein :
a. One-time charges:
Purchased Equipment (as specified above): $__________
Equipment Installation $__________
b. Recurring (monthly) charges:
Music Service and Equipment $__________
4. TERM
This Agreement shall remain in effect for sixty (60) months from _________
and shall be automatically renewed for subsequent sixty (60) month
period(s) unless terminated by either party by written notice delivered to
the other party at least ninety (90) days prior to the expiration of the
initial term or the applicable renewal term.
5. CONTINUATION OF AGREEMENT
THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE ARE PART OF THIS
AGREEMENT.
________________________________________________________________________________
IN WITNESS WHEREOF the parties have entered into this Agreement as of the day
and year first above written.
Subscriber: Muzak Limited Partnership
________________________________ As Agent for the Servicing Music Suppliers
By:_____________________________ By:_______________________________________
Title:__________________________ Title:____________________________________
Address:________________________ 400 North 34th Street, Suite 200
Seattle, WA 98103
________________________________
________________________________________________________________________________
<PAGE>
6. INSTALLATION AND MAINTENANCE OF EQUIPMENT
Subscriber hereby grants to Supplier (subject to any necessary governmental
or third party approvals) the right to install all necessary equipment for
receiving the Music Service, including but not limited to and exterior
antenna or a satellite receiver "^^^." Supplier-owned equipment provided to
Subscriber hereunder shall be maintained by Supplier at no additional cost
to Subscriber: provided, however, that such maintenance shall be limited to
labor and repairs required by ordinary and proper use of such equipment.
Subscriber shall provide Supplier with reasonable access to the Serviced
Premises during normal business hours for purposes of performing required
maintenance. Supplier shall retain ownership of all equipment provided
hereunder that has not been purchased by Subscriber, and Subscriber shall
not transfer, encumber or in any way alienate such equipment. Subscriber
shall be responsible for any loss or damage to the Supplier-owned equipment
(reasonable wear and tear excepted) while installed at a Serviced Premises.
If the Music Service is no longer provided to a Serviced Premises,
Subscriber shall provide Supplier with reasonable access to such premises
for purposes of removing any Supplier-owned equipment. Upon the removal of
any Supplier-owned equipment, Supplier shall not be required to repair,
replace or otherwise reestablish the premises to their original condition.
7. PAYMENT TO SUPPLIER
With respect to each Serviced Premises. Subscriber shall pay the fees
specified herein. One-time charges shall be due and payable on a "Net 10
Days" basis. Recurring charges shall be payable monthly in advance and
shall be due on the first day of the calender month to which the charges
relate. Additionally, Subscriber shall pay to Supplier the incremental cost
of any increase in copyright fees charged by ASCAP, BMI or other similar
entities beyond what is charged as of the date hereof and any sales, use,
excise, or other taxes or governmental charges (except income taxes)
arising from this Agreement. Late payments shall be subject to an interest
charge at the maximum rate permitted by law. Annually during the term of
this Agreement Supplier may increase the recurring charges on 30 days'
prior written notice to Subscriber by a percentage increase equal to the
percentage increase in the Consumer Price Index. All Urban Consumers,
during the preceding year.
8. USE OF MUSIC SERVICE
Subscriber agrees that without the prior written consent of Supplier the
Music Service shall not be (i) performed in conjunction with commercial
announcements for which Subscriber or any other person receives
consideration of any kind or (ii) copied, recorded, dubbed or supplemented.
Subscriber further agrees that the Music service shall not be modified,
transmitted or retransmitted so as to be audible outside any Serviced
Premises.
9. FAILURE OR INTERRUPTION OF SERVICE
Supplier shall not be liable for any failure to perform its obligations
hereunder due to Acts of God, strikes, emergencies, mechanical failure,
regulatory or other governmental action, action or inaction by Subscriber,
its licensees, contractors, employees, agents or invitees, a breach of this
Agreement by Subscriber or any other cause beyond Supplier's control. For
any failure or interruption of the Music Service which is not excused under
the preceding sentence, which exceeds 24 consecutive hours in duration, and
of which Supplier receives written notice within 48 hours of such failure
or interruption, Supplier shall credit Subscriber's account with respect to
the affected Service Premises of an amount equal to one-thirtieth of the
recurring monthly charge for the Music Service for each 24-hour period
during which the failure or interruption continues. Said credit shall be
the sole and exclusive remedy of Subscriber with respect to any
interruption or failure of the Music Service. Supplier shall not be liable
for any incidental or consequential damages whatsoever.
10. ADDITIONS AND DELETIONS
In the event Subscriber wishes to add a Serviced Premises it shall give
Supplier 30 days' written notice of such addition. Within 10 days of
Supplier's receipt of such notice it shall advise Subscriber in writing if
it accepts the addition. If the addition is accepted Supplier shall
promptly install any equipment to be provided by Supplier and commence
providing the Music Service at the added premises. In the event Subscriber
wishes to delete a Serviced Premises, it shall give Supplier 30 days' prior
written notice of the deletion. Supplier shall promptly remove from the
deleted premises any Supplier-owned equipment. Subscriber's obligation with
respect to such deleted premises shall not cease unless Supplier is then
providing the Music Service to at least 95% of the Serviced Premises shown
in Exhibit B and (i) Subscriber has closed the deleted premises or (ii)
Subscriber has sold the deleted premises to an unrelated and unaffiliated
third party.
11. SERVICING MUSIC SUPPLIER
Subscriber acknowledges and agrees that all services to be provided by
Supplier hereunder shall be provided by the Servicing Music Supplier
identified in Exhibit "B" as being responsible for a particular Serviced
Premises. Subscriber further acknowledges that Supplier is entering into
and executing this Agreement on behalf of and as agent for each such
Servicing Music Supplier; that it is the express intent of both parties
hereto to establish privity of contract between Subscriber and each such
Servicing Music Supplier with respect to each Serviced Premises served by
each such Servicing Music Supplier and that the Xerographic copies of this
Agreement provided to each such Servicing Music Supplier for each such
Serviced Premises shall be deemed for all purposes a counterpart original
of this Agreement.
12. APPLICABLE LAW
In the event of a dispute affecting Serviced Premises located in one state
this Agreement shall be governed by and in accordance with the laws of that
state applicable to contracts made and to be performed wholly within such
state and venue shall rest with the court of general jurisdiction located
in the county where the subject Servicing Music Supplier maintains its
principal place of business. in the event of a dispute affecting Serviced
Premises located in more than one state this Agreement shall be governed by
and in accordance with the laws of the state where the Supplier which has
executed this Agreement as agent for the Servicing Music Suppliers
maintains its principal place of business, applicable to contracts made
and to be performed wholly within such state and venue shall rest with the
court of general jurisdiction located in the country where said Supplier
maintains such principal place of business. If any provision of this
Agreement is deemed unenforceable (in whole or in part by a Court of
competent jurisdiction the parties agree that such Court shall amend or
delete such provision so as to effectuate the intent of such provision and
of this Agreement to the maximum extent that is enforceable.
13. SUCCESSORS AND ASSIGNS
This Agreement is fully assignable by Supplier but may not be assigned by
Subscriber without the prior written consent of Supplier, which consent
shall not be unreasonably withheld.
14. DEFAULT AND REMEDIES
Default in payment or violation of any material term of this Agreement by
Subscriber shall cause, at Supplier's option, the entire contract balance
to become immediately due and payable as liquidated damages and Supplier
shall have the right to enter any Serviced Premises, discontinue service,
and remove the Supplier-owned equipment. Subscriber shall reimburse
Supplier for all costs and expenses including reasonable attorneys' fees
and costs, incurred in connection with Supplier's exercise of its rights
under this Agreement.
15. PREEXISTING CONTRACT
In the event a Servicing Music Supplier has a preexisting contract for a
Serviced Premises, then at the option of such Servicing Music Supplier such
contract shall remain in full force and effect until it expires (without
giving effect to any automatic renewal clause), but upon such expiration
this Agreement shall immediately take effect.
16. NOTICES
All notices required to be sent by either party shall be in writing and
shall be sent certified mail postage prepaid to the respective addresses
set forth below their signatures on the reverse side.
17. WHOLE AGREEMENT
This Agreement constitutes the entire Agreement between the parties with
respect to the subject matter hereof and supercedes all prior agreements,
conversations, representations, promises of warranties (express or implied)
whether verbal or written. Except for a modification of the list of
Servicing Music Suppliers in Exhibits A and B, which may be made by
Supplier, no modification of this Agreement shall be valid unless made in
writing and signed by both parties.
<PAGE>
EXHIBIT A
SERVICING MUSIC SUPPLIERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ALABAMA MONTANA
Electronic Engineers, Birmingham, AL Shag Miller, Butte, MT
Electro-Systems, Dothan, AL American Music, Great Falls, MT
Service Associates, Huntsville, AL Music Systems, Kalispell, MT
Business Sound, Mobile, AL
Electronic Engineers, Montgomery, AL NEBRASKA
Parker Engineering, Kearney, NE
ALASKA Business Music Inc., Lincoln, NE
Northern Television, Anchorage, AK Business Music Inc., Omaha, NE
Background Music, Fairbanks, AK
NEVADA
ARKANSAS Musaire, Inc., Las Vegas, NV
Fitzhugh Communications, Fayetteville, AR Dynamic Sound, Reno, NV
Tempo Sound, Harrison, AR
Business Music, Inc., Little Rock, AR NEW HAMPSHIRE
Muzak, Exeter, NH
ARIZONA
SunCom Group, Scottsdale, AZ (Phoenix) NEW JERSEY
Tucson Music, Tucson AZ World Music, Springfield, NJ
CALIFORNIA NEW MEXICO
Muzak, Anaheim, CA Business Music, Inc., Albuquerque, NM
Serban Sound, Bakersfield, CA
Muzak, Burbank, CA (Los Angeles) NEW YORK
Attuned to Music, Chico, CA Comcast, Buffalo, NY
American Music Network, Fresno, CA Arranged Sound, Johnson City, NY (Binghamton)
American Music Network, Modesto, CA Functional Communications, Latham, NY (Albany)
Musi-Cal, Riverside, CA Muzak, Long Island City, NY (New York City)
Muzak, Roseville, CA (Sacramento) NCC Systems, Potsdam, NY
American Music Network, Salinas, CA Accent Communications, Poughkeepsie, NY
Comcast, San Diego, CA Functional Communication, Rochester, NY
Muzak, San Francisco, CA Functional Communication, Syracuse, NY
Muzicraft, Santa Barbara, CA NCC Systems, Watertown, NY
Muzicraft, Ventura, CA
NORTH CAROLINA
COLORADO SunCom Group, Charlotte, NC
Comcast, Colorado Springs, CO SunCom Group, Hillsborough, NC
Comcast, Denver, CO Independence Communications, Kinston, NC
Warner Music & Communications, Rocky Mount, NC
CONNECTICUT Background Music, Wilmington, NC
Comcast, Hartford, CT
Muzak, Milford, CT NORTH DAKOTA
Music Systems, Inc., Bismarck, ND
District of Columbia Music Systems, Inc., Fargo, ND
Music Inc., Washington, DC
FLORIDA OHIO
Osborn Sound, Ft. Myers, FL Port Erie Communications, Ashtabula, OH
Florida Sound, Jacksonville, FL Ohio Musicue, Canton, OH
Melody Inc., Miami, FL Muzak, Cincinnati, OH
Marion Music, Ocala, FL Ohio Music Corporation, Cleveland, OH
Comcast, Orlando, FL Muzak, Columbus, OH
Electro-Systems, Panama City, FL Audio Inc., Dayton, OH
Electro-Systems, Tallahassee, FL Zaiser Communications, Toledo, OH
Tropical Music, Tampa, FL Hudix Music, Youngstown, OH
Harmony Music & Sound, W. Palm Beach, FL (Palm Beach)
OKLAHOMA
GEORGIA Lawton Business Music, Lawton, OK
Osborn Sound, Albany, GA Business Music, Inc., Oklahoma, OK
Osborn Sound, Atlanta, GA Granite Sound, Tulsa, OK
Carolina-Georgia Sound, Augusta, GA
Background Music, Phenix City, AL (Columbus, GA) OREGON
Osborn Sound, Macon, GA Muzak, Eugene, OR
Georgia Music & Sound, Savannah, GA Muzak, Medford, OR
Muzak, Portland, OR
HAWAII
Hawkins Audio Engineering, Honolulu, HI PENNSYLVANIA
Independence Communications, Harrisburg, PA
IDAHO Comcast, Hollidaysburg, PA
Mountain West Audio, Boise, ID Independence Communications, Norristown, PA (Philadelphia)
Idaho Mountain West, Idaho Falls, ID Independence Communications, Pittsburgh, PA
Comcast, Scranton, PA
ILLINOIS
Muzak, Chicago, IL SOUTH CAROLINA
Kickapoo Broadcasting, Danville, IL Carolina Sound Communications, Charleston, SC
WSOY, Decatur, IL Background Music, Columbia, SC
Comcast, Moline, IL Carolina Sound Communications, Myrtle Beach, SC
Comcast, Peoria, IL
Ouincy Broadcasting, Quincy, IL SOUTH DAKOTA
Springfield Advertising, Springfield, IL Music of Rapid City, Rapid City, SD
Midco Communications, Sioux Falls, SD
INDIANA
Service Associates, Evansville, IN TENNESSEE
Comcast, Fort Wayne, IN Belew Sound & Visual, Bristol, TN
Comcast, Indianapolis, IN Service Associates, Chattanooga, TN
Music Engineering, South Bend, IN Service Associates, Knoxville, TN
Mid-South Music & Sound, Memphis, TN
IOWA Service Associates, Nashville, TN
Music Services, Inc., Des Moines, IA
Brite & Rich, Le Mars, IA (Sioux City) TEXAS
D.B. Acoustics, Marion, IA (Cedar Rapids) Audioplan, Abilene, TX
Business Music, Inc., Amarillo, TX
KANSAS AVCOM, Austin, TX
McClelland Sound, Wichita, KS Beaumont Business Music, Beaumont, TX
ABC Music, Big Spring, TX
KENTUCKY Brownwood Business Music, Brownwood, TX
P & M Electronics, Ashland, KY Gulf Business Music, Corpus Christi, TX
Lexington Music & Sound, Lexington, KY Comcast, Dallas, TX
Planned Music of Kentucky, Louisville, KY Muzicom, El Paso, TX
Comcast, Ft. Worth, TX
LOUISIANA T F M Sound, Harlingen, TX
American Sound & Music, Baton Rouge, LA Talt Broadcasting, Houston, TX
Metro Communications, Lafayette, LA Business Music, Inc., Lubbock, TX
Dixie Music, Lake Charles, LA Pioneer Music, Midland, TX
Business Sound, Metairie, LA (New Orleans) W. Texas Business Music, San Angelo, TX
Business Music, Shreveport, LA Texas Wired Music, San Antonio, TX
Whitsound, Texarkana, TX
MAINE Comcast, Tyler, TX
PBC Sound Systems, Bangor, ME Wichita Business Music, Wichita Falls, TX
MARYLAND UTAH
Audio Communications Network, Baltimore, MD Mountain West Audio, Salt Lake City, UT
MASSACHUSETTS VERMONT
Muzak, Waltham, MA (Boston) Music Services of Vermont, Essex Junction, VT (Burlington)
MICHIGAN VIRGINIA
Muzi-Tronics, Cadillac, MI Independence Communications, Charlottesville, VA
Muzi-Tronics, Grand Rapids, MI Independence Communications, Newport News, VA
Muzi-Tronics, Kalamazoo, MI Independence Communications, Richmond, VA
Range Telecommunications, Marquette, MI Business Communications, Roanoke, VA
Blue Water Music, Port Huron, MI
MacDonald Broadcasting , Saginaw, MI WASHINGTON
Comcast, Warren, MI (Detroit) Muzak, Seattle, WA
Muzak, Spokane, WA
MINNESOTA Sousley Sound, Yakima, WA
Business Music, Inc., Cold Springs, MN (St. Cloud)
Business Music Service, Duluth, MN WEST VIRGINIA
Muzak, Minneapolis, MN Joe L. Smith, Beckley, WV
Custom Communications, Rochester/Winona, MN Wheeling Services, Wheeling, WV (Parkersburg/Wheeling)
Business Music, Inc., Wilmar, MN
WISCONSIN
MISSISSIPPI Northern Musicast, Appleton, WI
Melody Music Company, Columbus, MS Central Communications, Eau Claire, WI
Mississippi Sound, Greenwood, MS Pridham Electronics, Madison, WI
Metro Communications, Jackson, MS Wisconsin Music Network, Milwaukee, WI
Forward Electronics, Plover, WI
MISSOURI Forward Electronics, Wausau, WI
Towner Communications, Jefferson City, MO
Audio Acoustics, Joplin, MO WYOMING
Audio Communications, Network, Kansas City, MO Background Music, Cheyenne, WY
Audio Acoustics, Poplar Bluff, MO
Audio Communications, Network, St. Louis, MO
Audio Acoustics, Springfield, MO
</TABLE>
<PAGE>
EXHIBIT B
SERVICED PREMISES
List of all Serviced Premises (With Corresponding Reference to Muzak Affiliate
Responsible for each such Serviced Premises)
- --------------------------------------------------------------------------------
Serviced Premises Servicing Music Suppliers
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MSA-EB
<PAGE>
EXHIBIT H
---------
AGREEMENTS NOT SUPERSEDED
In-Store Advertising Agreement
<PAGE>
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
American Music Network, Inc. d/b/a Audio Communications Network (California
corporation)
Florida Sound Engineering Company (Florida corporation)
Audio Communications Network, Inc. (Missouri corporation)
Audio Communications Network, Inc. (Maryland corporation)
Suncom, Inc. (Delaware corporation)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 680,195 132,565
<SECURITIES> 0 0
<RECEIVABLES> 2,643,390 945,239
<ALLOWANCES> (484,227) (105,795)
<INVENTORY> 1,150,133 443,969
<CURRENT-ASSETS> 4,186,382 1,540,348
<PP&E> 15,400,695 6,829,271
<DEPRECIATION> (2,271,197) (920,839)
<TOTAL-ASSETS> 45,305,640 23,104,094
<CURRENT-LIABILITIES> 4,732,484 3,358,049
<BONDS> 32,395,375 17,197,865
0 0
0 0
<COMMON> 1,125,534 0
<OTHER-SE> 7,052,247 2,548,180
<TOTAL-LIABILITY-AND-EQUITY> 45,305,640 23,104,094
<SALES> 17,552,024 10,122,175
<TOTAL-REVENUES> 17,552,024 10,122,175
<CGS> 7,168,978 3,412,161
<TOTAL-COSTS> 16,339,433 8,752,760
<OTHER-EXPENSES> (79,782) (10,794)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,669,160 1,925,552
<INCOME-PRETAX> (1,376,787) (545,343)
<INCOME-TAX> 26,350 0
<INCOME-CONTINUING> (1,403,137) (545,343)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,403,137) (545,343)
<EPS-PRIMARY> (0.32) (0.13)
<EPS-DILUTED> 0<F1> 0<F1>
<FN>
<F1>Diluted loss per common share has been excluded since the results would be
antidilutive.
</FN>
</TABLE>
