EXHIBIT 3.19
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
MUZAK HOLDINGS LLC,
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF MARCH 18, 1999
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS............................................................ -2-
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1.1 Definitions....................................................... -2-
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1.2 Other Definitional Provisions..................................... -8-
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ARTICLE II
ORGANIZATION OF THE COMPANY............................................ -8-
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2.1 Formation......................................................... -8-
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2.2 Name.............................................................. -9-
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2.3 Principal Place of Business....................................... -9-
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2.4 Registered Office and Registered Agent............................ -9-
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2.5 Term.............................................................. -9-
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2.6 Purposes and Powers............................................... -9-
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ARTICLE III
MANAGEMENT OF THE COMPANY.............................................. -10-
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3.1 Board of Directors................................................ -10-
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3.2 Committees of the Board........................................... -12-
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3.3 Officers.......................................................... -13-
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3.4 Fiduciary Duties.................................................. -14-
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3.5 Performance of Duties; Liability of Directors and Officers........ -14-
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3.6 Indemnification................................................... -15-
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ARTICLE IV
MEMBERS; VOTING RIGHTS................................................. -15-
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4.1 Meetings of Members............................................... -15-
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4.2 Voting Rights..................................................... -16-
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4.3 Registered Members................................................ -16-
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4.4 Limitation of Liability........................................... -17-
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4.5 Withdrawal; Resignation........................................... -17-
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4.6 Death of a Member................................................. -17-
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4.7 Authority......................................................... -17-
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4.8 Outside Activities................................................ -17-
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ARTICLE V
UNITS; MEMBERSHIP........................................................... -17-
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5.1 Units Generally; Membership Interests.................................. -17-
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5.2 Authorization and Issuance of Units.................................... -18-
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5.3 Unit Certificates...................................................... -19-
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5.4 Issuance of Units...................................................... -19-
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5.5 New Members from the Issuance of Units................................. -19-
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5.6 Class B-4 Units........................................................ -20-
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ARTICLE VI
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS.................................. -21-
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6.1 Capital Contributions.................................................. -21-
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6.2 Capital Accounts....................................................... -21-
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6.3 Method of Determining Profit and Loss.................................. -21-
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6.4 Negative Capital Accounts.............................................. -22-
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6.5 No Withdrawal.......................................................... -22-
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6.6 Loans From Members..................................................... -22-
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6.7 Status of Capital Contributions........................................ -22-
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ARTICLE VII
DISTRIBUTIONS............................................................... -23-
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7.1 Order of Priority Generally............................................ -23-
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7.2 No Right to Receive Certain Distributions.............................. -24-
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7.3 Tax Distributions...................................................... -24-
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7.4 Indemnification and Reimbursement for Payments on Behalf of a Member... -24-
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7.5 Set-off against Distributions to Holders of Class B-4 Units............ -25-
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7.6 Limitations on Distributions........................................... -25-
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ARTICLE VIII
ALLOCATIONS................................................................. -26-
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8.1 Regular Allocations.................................................... -26-
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8.2 Special Allocations.................................................... -28-
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8.3 Tax Allocations........................................................ -29-
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8.4 Curative Allocations................................................... -29-
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ARTICLE IX
ELECTIONS AND REPORTS....................................................... -30-
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9.1 Generally.............................................................. -30-
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9.2 Tax Status............................................................. -30-
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9.3 Reports................................................................ -30-
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9.4 Tax Elections........................................................ -30-
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9.5 Tax Controversies.................................................... -30-
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ARTICLE X
DISSOLUTION AND LIQUIDATION................................................ -31-
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10.1 Dissolution.......................................................... -31-
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10.2 Liquidation.......................................................... -31-
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10.3 Voluntary Dissolution................................................ -33-
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ARTICLE XI
TRANSFER OF UNITS.......................................................... -33-
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11.1 Restrictions......................................................... -33-
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11.2 General Restrictions on Transfer..................................... -33-
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11.3 Procedures for Transfer.............................................. -34-
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11.4 Legend............................................................... -34-
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11.5 Limitations.......................................................... -35-
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11.6 Tax Matters.......................................................... -35-
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ARTICLE XII
MISCELLANEOUS PROVISIONS................................................... -36-
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12.1 Notices.............................................................. -36-
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12.2 Governing Law........................................................ -36-
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12.3 No Action for Partition.............................................. -36-
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12.4 Headings and Sections................................................ -36-
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12.5 Amendments........................................................... -36-
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12.6 Number and Gender.................................................... -37-
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12.7 Binding Effect....................................................... -37-
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12.8 Counterparts......................................................... -37-
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12.9 Severability......................................................... -37-
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12.10 Remedies............................................................. -37-
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12.11 Business Days........................................................ -37-
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12.12 Waiver of Jury Trial................................................. -37-
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12.13 No Strict Construction............................................... -38-
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12.14 Entire Agreement..................................................... -38-
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12.15 Parties in Interest.................................................. -38-
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12.16 Inconsistent Provisions of the Members Agreement..................... -38-
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EXHIBITS:
Exhibit A Board Resolutions with respect to Class B-5 Units
Exhibit B Certificates of Designation
Exhibit C Form of Joinder to Limited Liability Company Agreement
SCHEDULES:
Schedule A Officers of the Company as of March 18, 1999
Schedule B Members Schedule as of March 18, 1999
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
MUZAK HOLDINGS LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement")
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dated as of March 18, 1999 of Muzak Holdings LLC (f/k/a ACN Holdings, LLC), a
Delaware limited liability company (the "Company"), among the Persons executing
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this Agreement and listed on the Members Schedule (as herein defined).
WHEREAS, ABRY Broadcast Partners III, L.P. ("ABRY"), ▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇")
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and ▇▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇") entered into that certain Limited Liability Company
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Agreement of the Company, dated as of October 6, 1998 (the "Original
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Agreement");
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WHEREAS, on November 30, 1998, ABRY transferred all of its Common Units as
well as, among other things, all of its rights and obligations under the
Original Agreement to MEM Holdings, LLC, a Delaware limited liability company
("MEM Holdings");
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WHEREAS, as of the date hereof, the Company issued a certain number of
Class A Units and Class B-4 Units to ▇▇▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇") pursuant to the terms
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of the ▇▇▇▇ Contribution Agreement;
WHEREAS, as of the date hereof, the Company has issued a certain number of
Class B-4 Units to Music Holdings Corp. ("MHC") pursuant to the terms of the
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Muzak Merger Agreement;
WHEREAS, as of the date hereof, the Company has issued a certain number of
Class A Units to Capstar Broadcasting Corporation ("Capstar") pursuant to the
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terms of the Capstar Contribution Agreement;
WHEREAS, (i) MEM Holdings, ▇▇▇▇▇, Koff, Boyd, MHC and Capstar hereby
acknowledge and agree that, as of the date hereof, MHC and Capstar have become
Members of the Company, and (ii) MEM Holdings, ▇▇▇▇▇, Koff, Boyd, MHC and
Capstar, being all of the Members of the Company as of the date hereof, desire
to amend and restate the Original Agreement in its entirety as set forth below;
and
WHEREAS, as of the date hereof, (i) each of the five Managers (as such term
is defined in the Original Agreement) of the Company as of immediately prior to
the effectiveness of this Agreement (such five Managers being ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇) shall immediately cease to be
Managers and shall immediately be deemed to be five of the eight members of the
Board (as herein defined) (with each of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇ designated as Class A Directors (as herein defined) and ▇▇▇▇ and ▇▇▇▇▇
designated as Class B Directors (as herein defined)) until their successors have
been elected and qualified, or until their earlier death, resignation or removal
in accordance with the terms and conditions of this Agreement and (ii) ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ are hereby elected as the other three
members of the Board (with each of ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
designated as Class B Directors and with ▇▇▇▇▇▇ ▇▇▇▇▇ designated as the Chairman
(as herein defined)) until their
successors have been elected and qualified, or until their earlier death,
resignation or removal in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein made and other good and valuable consideration, the Members hereby agree
as follows:
ARTICLE I
DEFINITIONS
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1.1 DEFINITIONS. The following terms used in this Agreement shall have
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the following meanings (unless otherwise expressly provided in this Agreement):
"Adjusted Capital Account Deficit" means, with respect to any Capital
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Account as of the end of any Fiscal Year or other period, the amount (if any) by
which the balance in such Capital Account is less than zero. For this purpose,
such person's Capital Account balance will be (a) reduced for any items
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6),
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and (b) increased for any amount such person is obligated to contribute to the
Company or is treated as being so obligated pursuant to Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership)
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or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain).
"Affiliate" means with respect to any Person, any other Person
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controlling, controlled by, or under common control with such first Person.
"Bankruptcy" means, with respect to a Member, (i) that such Member has
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(A) made an assignment for the benefit of creditors; (B) filed a voluntary
petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or had entered
against such Member an order of relief in any bankruptcy or insolvency
proceeding; (D) filed a petition or an answer seeking for such Member any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation or filed an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against such Member in any proceeding of such nature; or (E)
sought, consented to, or acquiesced in the appointment of a trustee, receiver or
liquidator of such Member or of all or any substantial part of such Member's
properties; (ii) 120 days have elapsed after the commencement of any proceeding
against such Member seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation and such proceeding has not been dismissed; or (iii) 90 days have
elapsed since the appointment without such Member's consent or acquiescence of a
trustee, receiver or liquidator of such Member or of all or any substantial part
of such Member's properties and such appointment has not been vacated or stayed
or the appointment is not vacated within 90 days after the expiration of such
stay.
"Book Value" means, with respect to any Company property, the
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Company's adjusted basis for federal income tax purposes, adjusted from time to
time to reflect the adjustments required or permitted by Treasury Regulation
Section 1.704-1(b)(2)(iv)(d)-(g); provided that the Book Value of any property
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contributed to the Company shall be its Fair Market Value on the date of
contribution.
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"▇▇▇▇ Contribution Agreement" means the Contribution Agreement dated
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as of the date hereof, among ▇▇▇▇, Audio Communications Network, LLC and the
Company.
"Capital Account" means, with respect to any Member, the account
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maintained for such Member as provided in Article VI and in a manner which the
Board determines is in accordance with Treasury Regulations Section 1.704-
1(b)(2)(iv), and this Agreement.
"Capital Contribution" means any contribution to the capital of the
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Company in cash or property by a Member, whenever made.
"Capstar Contribution Agreement" means the Contribution Agreement
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dated as of February 19, 1999, as amended, between Capstar and the Company.
"Capstar Credit and Pledge Agreement" means the Credit Agreement dated
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as of May 29, 1998, as amended, among Capstar Radio Broadcasting Partners, Inc.
as the borrower, Capstar, Capstar Broadcasting Partners, Inc. and the financial
institutions party thereto, as well as any pledge agreement executed in
connection therewith.
"Capital Value" for each Class A Unit means $1,000.
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"Catch-Up Amount" at any time means the largest aggregate amount of
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Distributions which has theretofore been paid in respect of any single Common
Unit.
"Certificate" means the Certificate of Formation, as such Certificate
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of Formation may be amended, supplemented or restated from time to time.
"Class A Unit" means a Unit having the rights and obligations
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specified with respect to "Class A Units" in this Agreement.
"Class B Units" means the Class B-1 Units, the Class B-2 Units, the
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Class B-3 Units, the Class B-4 Units and the Class B-5 Units.
"Class B-1 Unit" means a Unit having the rights and obligations
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specified with respect to "Class B-1 Units" in this Agreement.
"Class B-2 Unit" means a Unit having the rights and obligations
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specified with respect to "Class B-2 Units" in this Agreement.
"Class B-3 Unit" means a Unit having the rights and obligations
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specified with respect to "Class B-3 Units" in this Agreement.
"Class B-4 Unit" means a Unit having the rights and obligations
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specified with respect to "Class B-4 Units" in this Agreement.
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"Class B-5 Unit" means a Unit having the rights and obligations
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specified with respect to "Class B-5 Units" in this Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
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amended and effective as of the date of this Agreement. Such term will be deemed
to include any future amendments to such statutes and any corresponding
provisions of succeeding statutes which are mandatory. Such term will also be
deemed to include any future amendments or succeeding statutes which call for an
election by the Company as to the application of the amendment or succeeding
statutes to the Company if the Tax Matters Partner so elects, to the extent that
the Tax Matters Partner determines that any such amendments and succeeding
statutes do not materially and adversely affect the economic interests of the
Members.
"Common Member" means any Member who is a holder of Common Units, but
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solely in such Member's capacity as a holder of Common Units.
"Common Units" means the Class A Units and the Class B Units.
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"Delaware Act" means the Delaware Limited Liability Company Act, as
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the same may be amended from time to time.
"Distribution" means each distribution made by the Company to a
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Member, whether in cash, securities of the Company or other property and whether
by liquidating distribution, redemption, repurchase or otherwise; provided that
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none of the following will be a Distribution: (a) any redemption or repurchase
by the Company of any Unit from any employee or former employee of the Company
or any Subsidiary of the Company (including pursuant to a Management Securities
Repurchase Agreement) which is approved by the Board, (b) any recapitalization
or exchange of securities of the Company, and (c) any subdivision (by Unit split
or otherwise) or any combination (by reverse Unit split or otherwise) of any
outstanding Units.
"Fair Market Value" of any asset as of any date means the purchase
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price which a willing buyer having all relevant knowledge would pay a willing
seller for such asset in an arm's-length transaction.
"Fiscal Year" means the Company's fiscal year, which shall be the
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calendar year unless the Board determines otherwise.
"Investor Securities Purchase Agreement" means the Investor Securities
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Purchase Agreement dated as of October 6, 1998 among the Company and the
investors named therein, as in effect from time to time.
"Losses" means items of loss and deduction of the Company determined
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according to Section 6.3.
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"Majority of the Board" means, at any time, a combination of any of
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the then Directors constituting a majority of the votes of all of the Directors
who are then elected and qualified.
"Majority in Voting Interest" means, at any time, a Member or Members
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which own a majority of the Voting Units outstanding at such time.
"Management Securities Repurchase Agreements" means the Management
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Securities Repurchase Agreements dated as of October 6, 1998, one by and among
the Company, ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇, one by and among the Company, ▇▇▇▇▇ ▇▇▇▇▇ and
ABRY, and all other agreements into which the Company may enter with any
employee of or consultant to the Company or any of its Subsidiaries concerning
the acquisition by such employee or consultant of any Unit and/or the
reacquisition of any Unit by the Company, each as in effect from time to time.
"MEM Holdings" means MEM Holdings, LLC, a Delaware limited liability
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company.
"Member" means each Person identified on the Members Schedule as of
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the date hereof who has executed this Agreement or a counterpart hereof and each
Person who may hereafter be admitted as a Member in accordance with the terms of
this Agreement. The Members shall constitute the "members" (as that term is
defined in the Delaware Act) of the Company.
"Members Agreement" means that certain Amended and Restated Members
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Agreement dated as of the date hereof by and among the Company and the Members
of the Company named therein, as in effect from time to time.
"Membership Interest" means the interest acquired by a Member in the
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Company, including such Member's right (based on the type and class and/or
series of Unit or Units held by such Member), as applicable, (a) to a
distributive share of Profits, Losses, and other items of income, gain, loss,
deduction and credits of the Company, (b) to a distributive share of the assets
of the Company, (c) to vote on, consent to or otherwise participate in any
decision of the Members, and (d) to any and all other benefits to which such
Member may be entitled as provided in this Agreement or the Delaware Act.
"Minimum Gain" means Company minimum gain determined pursuant to
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Treasury Regulation Section 1.704-2(d).
"Muzak Merger Agreement" means the Agreement and Plan of Merger, dated
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as of January 29, 1999 among the Company; Audio Communications Network, LLC;
Muzak Limited Partnership; MLP Acquisition, L.P.; and MHC, as in effect from
time to time.
"Net Loss" means the excess, if any, of the Company's items of Loss
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over the Company's items of Profit for the Fiscal Year or for any other
accounting period for which a calculation of Net Loss is necessary.
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"Net Profit" means the excess, if any, of the Company's items of
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Profit over the Company's items of Loss for the Fiscal Year or for any other
accounting period for which a calculation of Net Profit is necessary.
"Non-Distribution Amount" for any Class B Unit at any time means (i)
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$1,000, if such Class B Unit is a Class B-1 Unit, (ii) $2,000, if such Class B
Unit is a Class B-2 Unit, (iii) $3,000, if such Class B Unit is a Class B-3
Unit, (iv) zero, if such Class B Unit is a Class B-4 Unit, or (v) such amount as
determined by written resolution of the Board at the time of the issuance of
such Class B Unit (which resolution shall thereafter be attached as Exhibit A
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hereto), if such Class B Unit is a Class B-5 Unit.
"Nonvoting Units" means any Preferred Units and the Class B Units.
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"Person" means any individual, corporation, partnership, limited
------
liability company, trust, joint venture, governmental entity or other
unincorporated entity, association or group.
"Preferred Units" means a Unit having the rights and obligations
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specified with respect to "Preferred Units" in this Agreement and any applicable
Certificate of Designation.
"Profits" means items of income and gain of the Company determined
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according to Section 6.3.
"Public Offering" means an underwritten public offering and sale of
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Common Units or any securities issued with respect to, or in exchange for Common
Units pursuant to an effective registration statement under the Securities Act;
provided that a Public Offering shall not include an offering made in connection
with a business acquisition or combination pursuant to a registration statement
on Form S-4 or any similar form, or an employee benefit plan pursuant to a
registration statement on Form S-8 or any similar form.
"Public Sale" means any sale of Restricted Securities to the public
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pursuant to an offering registered under the Securities Act or, after the
consummation of an initial Public Offering, to the public pursuant to the
provisions of Rule 144 (or any similar rule or rules then in effect) under the
Securities Act.
"Registration Rights Agreement" means that certain Amended and
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Restated Registration Agreement dated as of the date hereof by and among the
Company and the Members of the Company named therein, as in effect from time to
time.
"Related Agreements" means the Investor Securities Purchase Agreement,
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the Management Securities Repurchase Agreements, the Members Agreement, the
Registration Rights Agreement, the Securityholders Agreement, the Capstar
Contribution Agreement and the ▇▇▇▇ Contribution Agreement.
"Restricted Securities" means (a) all Units issued by the Company and
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(b) any securities issued with respect to, or in exchange for, the Units
referred to in clause (a) above in
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connection with a conversion, combination of units or shares, recapitalization,
merger, consolidation or other reorganization, including in connection with the
consummation of any reorganization plan. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have been Transferred pursuant to a Public Sale.
"Securityholders Agreement" means that certain Securityholders
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Agreement dated as of the date hereof by and among the Company and the Members
of the Company named therein, as in effect from time to time.
"Subsidiary" means, with respect to any person, any corporation,
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limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such person or one or more of the other
Subsidiaries of such person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any person or one or more
Subsidiaries of such person or entity or a combination thereof. For purposes of
this Agreement, a person or persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such person or persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, managing member,
or general partner of such limited liability company, partnership, association
or other business entity.
"Tax Matters Partner" has the meaning set forth in Code Section 6231.
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"Transfer" means any direct or indirect sale, transfer, conveyance,
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assignment, pledge, hypothecation, gift, delivery or other disposition; provided
that, notwithstanding anything contained herein to the contrary, the pledge by
Capstar of Class A Units owned by Capstar pursuant to the terms of the Capstar
Credit and Pledge Agreement shall not be a "Transfer" for purposes of this
Agreement, but any actual transfer of title pursuant to such pledge shall be a
"Transfer" for purposes of this Agreement.
"Treasury Regulations" means the income tax regulations promulgated
--------------------
under the Code and effective as of the date of this Agreement. Such term will be
deemed to include any future amendments to such regulations and any
corresponding provisions of succeeding regulations which are mandatory. Such
term will also be deemed to include any future amendments or succeeding
regulations which call for an election by the Company as to the application of
the amendment or succeeding regulation to the Company if the Board so elect, to
the extent that the Board determines that any such amendments and succeeding
regulations do not materially and adversely affect the economic interests of the
Members.
"Unit" means a unit representing a fractional part of the Membership
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Interests of all of the Unitholders and shall include all types and classes
and/or series of Units; provided that any type or class or series of Unit shall
have the designations, preferences and/or special rights set forth
-7-
in this Agreement and any applicable Certificate of Designation and the
Membership Interests represented by such type or class or series of Unit shall
be determined in accordance with such designations, preferences and/or special
rights.
"Unitholder" means with respect to any Unit, the record holder thereof
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as evidenced on the Members Schedule.
"Unpaid Yield" on any Class A Unit means, as of any date, an amount
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equal to the excess, if any, of (a) the aggregate Yield accrued on such Class A
Unit prior to such date, over (b) the aggregate amount of prior Distributions
made on such Class A Unit by the Company pursuant to Section 7.1(a).
"Unreturned Capital Value" means, for any Class A Unit, the amount of
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the Capital Value for such Class A Unit, reduced by all Distributions made by
the Company in respect of such Class A Unit pursuant to Section 7.1(b).
"Voting Units" means the Class A Units.
------------
"Yield" on any Class A Unit means the amount accruing in respect of
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such Class A Unit (commencing with respect to such Class A Unit on the later of
(x) the date the Company issues or issued such Class A Unit and (y) the date
hereof) on an annual basis, at 15% per annum, on (a) the Unreturned Capital
Value for such Class A Unit plus (b) the Unpaid Yield on such Class A Unit for
all prior annual periods (or portions thereof) ending on any December 31. In
calculating the amount of any Distribution to be made during an annual period,
the portion of the Yield on any Class A Unit for such portion of such annual
period elapsing before such Distribution is made will be taken into account.
1.2 OTHER DEFINITIONAL PROVISIONS. Capitalized terms used in this
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Agreement which are not defined in this Article I have the meanings contained
elsewhere in this Agreement. Defined terms used in this Agreement in the
singular shall import the plural and vice versa.
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ARTICLE II
ORGANIZATION OF THE COMPANY
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2.1 FORMATION.
---------
(a) The Company was formed upon the filing of the Certificate of
Formation of the Company (the "Certificate of Formation") with the Secretary of
------------------------
State of the State of Delaware on August 28, 1998, pursuant to the Delaware Act.
This Agreement shall constitute the "limited liability company agreement" (as
that term is used in the Delaware Act) of the Company. The rights, powers,
duties, obligations and liabilities of the Members shall be determined pursuant
to the Delaware Act and this Agreement. To the extent that the rights, powers,
duties, obligations and liabilities of any Member are different by reason of any
provision of this Agreement than they would
-8-
be in the absence of such provision, this Agreement shall, to the extent
permitted by the Delaware Act, control.
(b) Any officer of the Company as an "authorized person" within the
meaning of the Delaware Act, is hereby authorized, at any time that the
applicable Member(s) have approved an amendment to the Certificate in accordance
with the terms hereof, to promptly execute, deliver and file such amendment in
accordance with the Delaware Act.
(c) The Company shall, to the extent permissible, elect to be treated
as a partnership for federal, foreign, state and local income tax purposes, and
each Member and the Company shall file all tax returns and shall otherwise take
all tax and financial reporting positions in a manner consistent with such
treatment and no Member shall take any action inconsistent with such treatment.
The Company shall not be deemed a partnership or joint venture for any other
purpose.
2.2 NAME. The name of the Company is "Muzak Holdings LLC" or such other
----
name or names as the Board may from time to time designate; provided, that the
name shall always contain the words "Limited Liability Company", "LLC" or
"L.L.C."
2.3 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
---------------------------
Company shall be ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The
Company may locate its place or places of business (including its principal
place of business) and registered office at any other place or places as the
Board may from time to time deem necessary or advisable.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's registered
--------------------------------------
office shall be at Corporation Service Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇, and the name of its initial registered agent at such address
shall be Corporation Service Company.
2.5 TERM. The term of existence of the Company shall be perpetual from
----
the date the Certificate of Formation was filed with the Secretary of State of
Delaware, unless the Company is dissolved in accordance with the provisions of
this Agreement.
2.6 PURPOSES AND POWERS. The purposes and character of the business of
-------------------
the Company shall be to transact any or all lawful business for which limited
liability companies may be organized under the Delaware Act. The Company shall
have any and all powers which are necessary or desirable to carry out the
purposes and business of the Company, including the ability to incur and
guaranty indebtedness, to the extent the same may be legally exercised by
limited liability companies under the Delaware Act. The Company shall carry out
the foregoing activities pursuant to the arrangements set forth in this
Agreement. Notwithstanding anything herein to the contrary, nothing set forth
herein shall be construed as authorizing the Company to possess any purpose or
power, or to do any act or thing, forbidden by law to a limited liability
company organized under the laws of the State of Delaware.
-9-
ARTICLE III
MANAGEMENT OF THE COMPANY
-------------------------
3.1 BOARD OF DIRECTORS.
------------------
(a) Establishment. There is hereby established a committee (the
-------------
"Board") comprised of natural persons (the "Directors") having the authority and
----- ---------
duties set forth in this Agreement. Each Director shall be designated as either
a "Class A Director" or a "Class B Director". Each Class A Director shall be
---------------- ----------------
entitled to three votes and each Class B Director shall be entitled to one vote.
Any decisions to be made by the Board shall require the approval of a Majority
of the Board. Except as provided in the immediately preceding sentence, no
Director acting alone, or with any other Director or Directors, shall have the
power to act for or on behalf of, or to bind the Company. Each Director shall
be a "manager" (as that term is defined in the Delaware Act) of the Company,
but, notwithstanding the foregoing, no Director shall have any rights or powers
beyond the rights and powers granted to such Director in this Agreement.
Directors need not be residents of the State of Delaware.
(b) Powers. The business and affairs of the Company shall be managed
------
by or under the direction of the Board.
(c) Number of Directors; Term of Office. The authorized number of
-----------------------------------
each class of Directors shall, as of the date hereof, be three Class A Directors
and five Class B Directors and, hereafter, the authorized number of each class
of Directors may be increased or decreased by the Board. The Directors shall,
except as hereinafter otherwise provided for filling vacancies, be elected by
vote of the Members and shall hold office until their respective successors are
elected and qualified or until their earlier death, resignation or removal. As
provided in the preamble, the three initial Class A Directors shall be ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ and the five initial Class B Directors
shall be ▇▇▇▇, Unger, Boyd, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and each such
person shall hold office as a Director until his or her respective successor is
elected and qualified or until his or her earlier death, resignation or removal.
(i) Subject to the terms and provisions of the Securityholders
Agreement, holders of a majority of the outstanding Voting Units may
remove, with or without cause, any Director and fill the vacancy;
provided that whenever any Director shall have been elected by a
particular Member or Members pursuant to the Securityholders
Agreement, such Director may be removed and the vacancy filled only by
the Member or Members entitled to designate such Director as set forth
in the Securityholders Agreement. Vacancies caused by any such removal
by the Members and not filled by the Members at the meeting at which
such removal shall have been made or pursuant to the applicable
written consent of the Members, may be filled by a majority of the
votes of the Directors then in office, although less than a quorum,
and any Director so elected to fill any such vacancy shall hold office
until his successor is elected and qualified or until his earlier
death, resignation or removal; provided, that such Director can be
removed with or without cause and
-10-
replaced by the Member or Members, if any, which have the right to
designate such Director pursuant to the Securityholders Agreement.
(ii) A Director may resign at any time by giving written notice
to that effect to the Board. Any such resignation shall take effect at the
time of the receipt of that notice or any later effective time specified in
that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any
vacancy caused by any such resignation or by the death of any Director or
any vacancy for any other reason (including due to the authorization by the
Board of a newly created directorship) and not filled by the Members
(either by Members with the right to designate such Director pursuant to
the Securityholders Agreement or otherwise) may be filled by a majority of
the votes of the Directors then in office, although less than a quorum, and
any Director so elected to fill any such vacancy shall hold office until
his successor is elected and qualified or until his earlier death,
resignation or removal; provided, that such Director can be removed with or
without cause and replaced by the Member or Members, if any, which have the
right to designate such Director pursuant to the Securityholders Agreement.
(d) Meetings of the Board. The Board shall meet at such time and at
---------------------
such place (either within or without the State of Delaware) as the Board may
designate; provided, that the Board shall meet not less than two (2) times in
--------
any twelve (12) month period. Special meetings of the Board shall be held on
the call of any two (2) Directors upon at least four (4) days (if the meeting is
to be held in person) or two (2) days (if the meeting is to be held by telephone
communications) oral or written notice to the Directors, or upon such shorter
notice as may be approved by all of the Directors. Any Director may waive such
notice as to himself. A record shall be maintained by the Secretary of the
Company of each meeting of the Board.
(i) Conduct of Meetings. Any meeting of the Directors may be
-------------------
held in person or telephonically.
(ii) Quorum. A Majority of the Board shall constitute a quorum
------
of the Board for purposes of conducting business. At all times when the
Board is conducting business at a meeting of the Board, a quorum of the
Board must be present at such meeting. If a quorum shall not be present at
any meeting of the Board, then the Directors present at the meeting may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. A Director
may vote or be present at a meeting either in person or by proxy.
(iii) Attendance and Waiver of Notice. Attendance of a Director
-------------------------------
at any meeting shall constitute a waiver of notice of such meeting, except
where a Director attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that 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 Board need be
specified in the notice or waiver of notice of such meeting.
-11-
(iv) Actions Without a Meeting. Notwithstanding any provision
-------------------------
contained in this Agreement, any action of the Board may be taken by
written consent without a meeting. Any such action taken by the Board
without a meeting shall be effective only if the written consent or
consents are in writing, set forth the action so taken, and are signed by a
Majority of the Board, or such greater number of the Directors that would
be necessary to take such action at a validly constituted meeting of the
Board.
(e) Compensation of the Directors. Directors, as such, shall not
-----------------------------
receive any stated salary for their services, but shall receive such
compensation for their services as may be from time to time agreed upon by a
Majority in Voting Interest. In addition, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board, provided that nothing contained in this Agreement shall be
construed to preclude any Director from serving the Company or any of its
Subsidiaries in any other capacity and receiving compensation for such service.
(f) Chairman of the Board. A Majority of the Board may elect any one
---------------------
of the Directors to be the Chairman of the Board (the "Chairman"); provided that
--------
the initial Chairman shall be ▇▇▇▇▇▇ ▇▇▇▇▇ as provided in the preamble of this
Agreement. At any time, the Chairman, if any, can be removed from his or her
position as Chairman by a Majority of the Board. The Chairman, in his or her
capacity as the Chairman of the Board, shall not have any of the rights or
powers of an officer of the Company.
3.2 COMMITTEES OF THE BOARD.
-----------------------
(a) Creation. The Board may, by resolution, designate from among the
--------
Directors one or more committees (including, but not limited to, an Audit
Committee, a Nominating Committee, and a Compensation Committee), each of which
shall be comprised of one or more Directors, and may designate one or more of
the Directors as alternate members of any committee, who may, subject to any
limitations imposed by the Board, replace absent or disqualified Directors at
any meeting of that committee. Any such committee, to the extent provided in
such resolution, shall have and may exercise all of the authority of the Board,
subject to the limitations set forth in the Delaware Act or in the establishment
of the committee. Any members thereof may be removed by a Majority of the
Board. Unless the resolution designating a particular committee or this
Agreement expressly so provides, a committee of the Board shall not have the
authority to authorize or make a Distribution to the Members or to authorize the
issuance of Units.
(b) Limitation of Authority. No committee of the Board shall have the
-----------------------
authority of the Board in reference to:
(i) amending this Agreement, except that a committee may, to the
extent provided in the resolution designating that committee or in
this Agreement, exercise the authority of the Board provided in this
Agreement to establish the relative rights, obligations, preferences
and limitations of any type, class or series of Units;
-12-
(ii) approving a plan of merger of the Company;
(iii) recommending to the Members a voluntary dissolution of
the Company or a revocation thereof;
(iv) filling vacancies in the Board;
(v) fixing the compensation of any member or alternate
members of such committee; or
(vi) altering or repealing any resolution of the Board that
by its terms provides that it shall not be so amendable or repealable.
3.3 OFFICERS.
--------
(a) Appointment of Officers. The Board shall appoint individuals as
-----------------------
officers ("officers") of the Company, which shall include (i) a Chief Executive
--------
Officer, (ii) a Treasurer, (iii) a Secretary and (iv) such other officers (such
as a President or any number of Vice Presidents) as the Board deems advisable.
No officer need be a Member or a Director. An individual can be appointed to
more than one office. Each officer of the Company shall be a "manager" (as that
term is used in the Delaware Act) of the Company, but, notwithstanding the
foregoing, no officer of the Company shall have any rights or powers beyond the
rights and powers granted to such officer in this Agreement. The officers of
the Company as of the date hereof are listed on the attached Schedule A.
----------
(b) Duties of Officers Generally. Under the direction of and, at all
----------------------------
times, subject to the authority of the Board, the officers shall have full and
complete discretion to manage and control the day-to-day business, operations
and affairs of the Company in the ordinary course of its business, to make all
decisions affecting the day-to-day business, operations and affairs of the
Company in the ordinary course of its business and to take all such actions as
he or she deems necessary or appropriate to accomplish the foregoing. In
addition, the officers shall have such other powers and duties as may be
prescribed by the Board or this Agreement. The Chief Executive Officer shall
have the power and authority to delegate to any agents or employees of the
Company rights and powers of officers of the Company to manage and control the
day-to-day business, operations and affairs of the Company in the ordinary
course of its business, as the Chief Executive Officer may deem appropriate from
time to time.
(c) Authority of Officers. Subject to Section 3.3(b), any officer of
---------------------
the Company shall have the right, power and authority to transact business in
the name of the Company or to act for or on behalf of or to bind the Company.
With respect to all matters within the ordinary course of business of the
Company, third parties dealing with the Company may rely conclusively upon any
certificate of any officer to the effect that such officer is acting on behalf
of the Company.
(d) Removal, Resignation and Filling of Vacancy of Officers. The
-------------------------------------------------------
Board may remove any officer, for any reason or for no reason, at any time. Any
officer may resign at any time
-13-
by giving written notice to the Board, and such resignation shall take effect at
the date of the receipt of that notice or any later time specified in that
notice; provided, that unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any such
resignation shall be without prejudice to the rights, if any, of the Company or
such officer under this Agreement. A vacancy in any office because of death,
resignation, removal or otherwise shall be filled in the manner prescribed in
this Agreement for regular appointments to that office.
(e) Compensation of Officers. The officers shall be entitled to
------------------------
receive compensation from the Company as determined by the Board.
(f) Chief Executive Officer. Under the direction of and, at all
-----------------------
times, subject to the authority of the Board, the Chief Executive Officer shall
have general supervision over the day-to-day business, operations and affairs of
the Company. The Chief Executive Officer shall have such other powers and
perform such other duties as may from time to time be prescribed by the Board.
(g) Treasurer. The Treasurer shall keep and maintain, or cause to be
---------
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Company, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, capital and Units.
The Treasurer shall have the custody of the funds and securities of the Company,
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Company. The Treasurer shall have such other powers and
perform such other duties as may from time to time be prescribed by the Board.
(h) Secretary. The Secretary shall (i) keep the minutes of the
---------
meetings of the Members and the Board in one or more books provided for that
purpose; (ii) see that all notices are duly given in accordance with the
provisions of this Agreement and as required by law; (iii) be custodian of the
company records; (iv) keep a register of the addresses of each Member which
shall be furnished to the Secretary by such Member; (v) have general charge of
the Members Schedule; and (vi) in general perform all duties incident to the
office of a secretary of a company. The Secretary shall have such other powers
and perform such other duties as may from time to time be prescribed by the
Board.
3.4 FIDUCIARY DUTIES. The Directors, in the performance of their duties
----------------
as such, shall owe to the Members duties of loyalty and due care of the type
owed by the directors of a corporation to the stockholders of such corporation
under the laws of the State of Delaware. The officers, in the performance of
their duties as such, shall owe to the Members duties of loyalty and due care of
the type owed by the officers of a corporation to the stockholders of such
corporation under the laws of the State of Delaware.
3.5 PERFORMANCE OF DUTIES; LIABILITY OF DIRECTORS AND OFFICERS. In
----------------------------------------------------------
performing his or her duties, each of the Directors and the officers shall be
entitled to rely in good faith on the provisions of this Agreement and on
information, opinions, reports, or statements (including financial statements
and information, opinions, reports or statements as to the value or amount of
the assets, liabilities, Profits or Losses of the Company or any facts pertinent
to the existence and amount of assets from which Distributions to Members might
properly be paid), of the following
-14-
other Persons or groups: (a) one or more officers or employees of the Company;
(b) any attorney, independent accountant, or other Person employed or engaged by
the Company; or (c) any other Person who has been selected with reasonable care
by or on behalf of the Company, in each case as to matters which such relying
Person reasonably believes to be within such other Person's professional or
expert competence. The preceding sentence shall in no way limit any Person's
right to rely on information to the extent provided in Section 18-406 of the
Delaware Act. No individual who is a Director or an officer of the Company, or
any combination of the foregoing, shall be personally liable under any judgment
of a court, or in any other manner, for any debt, obligation, or liability of
the Company, whether that liability or obligation arises in contract, tort, or
otherwise, solely by reason of being an Director or an officer of the Company or
any combination of the foregoing.
3.6 INDEMNIFICATION. Notwithstanding Section 3.4, the Directors and
---------------
officers shall not be liable, responsible or accountable for damages or
otherwise to the Company, or to the Members, and, to the fullest extent allowed
by law, each Director and each officer shall be indemnified and held harmless by
the Company, including advancement of reasonable attorneys' fees and other
expenses, but only to the extent that the Company's assets are sufficient
therefor, from and against all claims, liabilities, and expenses arising out of
any management of Company affairs; provided that (a) such Director's or
officer's course of conduct was pursued in good faith and believed by him to be
in the best interests of the Company and was reasonably believed by him to be
within the scope of authority conferred on such Director or officer pursuant to
this Agreement and (b) such course of conduct did not constitute gross
negligence or willful misconduct on the part of such Director or officer and
otherwise was in accordance with the terms of this Agreement. The rights of
indemnification provided in this Section 3.6 are intended to provide
indemnification of the Directors and the officers to the fullest extent
permitted by Delaware General Corporation Law regarding a corporation's
indemnification of its directors and officers and will be in addition to any
rights to which the Directors or officer may otherwise be entitled by contract
or as a matter of law and shall extend to his heirs, personal representatives
and assigns. The absence of any express provision for indemnification herein
shall not limit any right of indemnification existing independently of this
Section 3.6. Each Director's and each officer's right to indemnification
pursuant to this Section 3.6 may be conditioned upon the delivery by such
Director or such officer of a written undertaking to repay such amount if such
individual is determined pursuant to this Section 3.6 or adjudicated to be
ineligible for indemnification, which undertaking shall be an unlimited general
obligation.
ARTICLE IV
MEMBERS; VOTING RIGHTS
----------------------
4.1 MEETINGS OF MEMBERS.
-------------------
(a) Generally. Meetings of the Members may be called by the Board or
---------
by a Member or Members holding not less than 50% of the then outstanding Voting
Units. Only Members who hold Voting Units shall have the right to attend
meetings of the Members. All meetings of the Members shall be held
telephonically or at the principal office of the Company or at such other place
within or without the State of Delaware as may be determined by the Board or
-15-
Member(s) calling the meeting and set forth in the respective notice or waivers
of notice of such meeting. A record shall be maintained by the Secretary of the
Company of each meeting of the Members.
(b) Notice of Meetings of Members. Written or printed notice stating
-----------------------------
the place, day and hour of the meeting shall be delivered not fewer than 2 days
before the date of the meeting, either personally or by any written method by
which it is reasonable to expect that the Members would receive such notice not
later than the business day prior to the date of the meeting, to each holder of
Voting Units (with a copy to the Secretary of the Company), by or at the
direction of the Member(s) calling the meeting or the Board, as the case may be.
Such notice may, but need not, specify the purpose or purposes of such meeting
and may, but need not, limit the business to be conducted at such meeting to
such purpose(s).
(c) Quorum. Except as otherwise provided herein or by applicable law,
------
at any time, a majority of the then outstanding Voting Units, represented in
person or by proxy, shall constitute a quorum of Members for purposes of
conducting business. Once a quorum is present at the meeting of the Members,
the subsequent withdrawal from the meeting of any Member prior to adjournment or
the refusal of any Member to vote shall not affect the presence of a quorum at
the meeting. If, however, such quorum shall not be present at any meeting of
the Members, the Members entitled to vote at such meeting shall have the power
to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until Members which own a majority of the then outstanding
Voting Units shall be present or represented. Except as otherwise required by
applicable law, resolutions of the Members at any meeting of Members shall be
adopted by the affirmative vote of a majority of the Voting Units represented
and entitled to vote at such meeting at which a quorum is present.
(d) Actions Without a Meeting. Unless otherwise prohibited by law,
-------------------------
any action to be taken at a meeting of the Members may be taken without a
meeting if a consent or consents in writing, setting forth the action so taken,
shall be signed by a Member or Members holding not less than a majority of the
then outstanding Voting Units and such consent or consents are delivered to the
Secretary of the Company. A record shall be maintained by the Secretary of the
Company of each such action taken by written consent of a Member or Members.
4.2 VOTING RIGHTS. Except as specifically provided herein or otherwise
-------------
required by applicable law, for all purposes hereunder, including for purposes
of Article III hereof, each Member shall be entitled to (x) one vote per Voting
Unit held by such Member and (y) no votes for any Nonvoting Units held by such
Member. A Member which owns Voting Units may vote or be present at a meeting
either in person or by proxy. There will be no cumulative voting in the
election or removal of Directors.
4.3 REGISTERED MEMBERS. The Company shall be entitled to treat the owner
------------------
of record of any Units as the owner in fact of such Unit for all purposes, and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such Unit on the part of any other person, whether or not it shall
have express or other notice of such claim or interest, except as expressly
provided by this Agreement or the laws of the State of Delaware.
-16-
4.4 LIMITATION OF LIABILITY. Except as otherwise provided in the Delaware
-----------------------
Act or in this Agreement, no Member will be obligated personally for any debt,
obligation or liability of the Company or of any other Member by reason of being
a Member, whether arising in contract, tort or otherwise. Except as otherwise
provided in the Delaware Act, by law or expressly in this Agreement, no Member
will have any fiduciary or other duty to another Member with respect to the
business and affairs of the Company. No Member will have any responsibility to
restore any negative balance in his or her Capital Account or to contribute to
or in respect of the liabilities or obligations of the Company or return
Distributions made by the Company except as required by the Delaware Act or
other applicable law.
4.5 WITHDRAWAL; RESIGNATION. A Member shall not cease to be a Member as a
-----------------------
result of the Bankruptcy of such Member or as result of any other events
specified in (S) 18-304 of the Delaware Act. So long as a Member continues to
own or hold any Units, such Member shall not have the ability to resign as a
Member prior to the dissolution and winding up of the Company and any such
resignation or attempted resignation by a Member prior to the dissolution or
winding up of the Company shall be null and void. As soon as any Person who is
a Member ceases to own or hold any Units, such Person shall no longer be a
Member.
4.6 DEATH OF A MEMBER. The death of any Member shall not cause the
-----------------
dissolution of the Company. In such event the Company and its business shall be
continued by the remaining Member or Members.
4.7 AUTHORITY. No Member, in its capacity as a Member, shall have the
---------
power to act for or on behalf of, or to bind the Company.
4.8 OUTSIDE ACTIVITIES. Subject to the terms of any agreement by any
------------------
Member to the contrary, a Member may have business interests and engage in
business activities in addition to those relating to the Company, including
business interests and activities which compete with the Company; provided,
--------
however, that MEM Holdings shall not acquire, nor shall it allow any of its
-------
Affiliates (other than the Company or any of its Subsidiaries) to acquire, any
assets which constitute a business unit or substantially all of the equity
securities of any Person, in each case, which consists primarily of Muzak
franchises or some other provider of on location background and foreground music
services to commercial entities. Neither the Company nor any other Member shall
have any rights by virtue of this Agreement in any business interests or
activities of any Member.
ARTICLE V
UNITS; MEMBERSHIP
-----------------
5.1 UNITS GENERALLY; MEMBERSHIP INTERESTS. The Membership Interests of the
-------------------------------------
Members shall be represented by issued and outstanding Units, which may be
divided into one or more types or classes, with each type or class or series
having the rights and privileges, including voting rights, if any, set forth in
this Agreement and any applicable Certificate of Designation. The Secretary of
the Company shall maintain a schedule of all Members from time to time, their
respective mailing
-17-
addresses, the Units held by them (as the same may be amended, modified or
supplemented from time to time, the "Members Schedule"), a copy of which as of
----------------
the date hereof is attached hereto as Schedule B. The Members shall have no
----------
interest in the Company other than the interests conferred by this Agreement and
any applicable Certificate of Designation and represented by the Units, which
shall be deemed to be personal property giving only the rights conferred by this
Agreement and any applicable Certificate of Designation. Ownership of a Unit (or
fraction thereof) shall not entitle a Member to call for a partition or division
of any property of the Company or for any accounting.
5.2 AUTHORIZATION AND ISSUANCE OF UNITS.
-----------------------------------
(a) Preferred Units. The Company hereby authorizes the issuance of
---------------
Preferred Units, none of which are outstanding as of the date hereof. With
respect to the Preferred Units, the Board is authorized, subject to limitations
prescribed by law, to provide for the issuance of such Preferred Units in
series, and by adopting a "Certificate of Designation" (a "Certificate of
--------------
Designation") (which Certificate of Designation shall thereafter be attached as
-----------
Exhibit B hereto), to establish the number of Preferred Units to be included in
---------
each such series, and to fix the relative rights, obligations, preferences and
limitations of the Preferred Units of each such series.
(b) Class A Units. The Company hereby authorizes the issuance of
-------------
Class A Units, as of October 6, 1998; 67,239.197 of which are outstanding as of
the date hereof as set forth on the Members Schedule (as in effect on the date
hereof).
(c) Class B-1 Units. The Company hereby authorizes the issuance of
---------------
Class B-1 Units, as of October 6, 1998; 804 of which are outstanding as of the
date hereof as set forth on the Members Schedule (as in effect on the date
hereof).
(d) Class B-2 Units. The Company hereby authorizes the issuance of
---------------
Class B-2 Units, as of October 6, 1998; 806 of which are outstanding as of the
date hereof as set forth on the Members Schedule (as in effect on the date
hereof).
(e) Class B-3 Units. The Company hereby authorizes the issuance of
---------------
Class B-3 Units, as of October 6, 1998; 804 of which are outstanding as of the
date hereof as set forth on the Members Schedule (as in effect on the date
hereof).
(f) Class B-4 Units. The Company hereby authorizes the issuance of
---------------
Class B-4 Units; 2,902.217 of which are outstanding as of the date hereof as
set forth on the Members Schedule (as in effect on the date hereof).
(g) Class B-5 Units. The Company hereby authorizes the issuance of
---------------
Class B-5 Units; none of which are outstanding as of the date hereof as set
forth on the Members Schedule (as in effect on the date hereof).
(h) Additional Units. Except as expressly provided by this Agreement,
----------------
the Company shall not authorize, issue or sell, or cause to be authorized,
issued or sold, any Units.
-18-
5.3 UNIT CERTIFICATES.
-----------------
(a) All Units shall be represented by certificates. Each such
certificate shall be signed by an officer of the Company, certifying the number
of Units owned by the holder of such Units and stating the type, class and/or
series of such Units. All certificates for each type and class or series of
Units shall be consecutively numbered or otherwise identified. The name of the
Person to whom the Units represented thereby are issued, with the number, type
and class or series of Units and date of issue, shall be entered on the books of
the Company and, until such Units are transferred on the books of the Company
(including the Members Schedule), such Person shall be deemed to be the owner of
such Units for all purposes. Units shall only be Transferred on the books of
the Company (including the Members Schedule) by the holder of record thereof or
by such holder's attorney duly authorized in writing, upon surrender to the
Company of the certificate(s) for such Units endorsed by the appropriate
Person(s), with such evidence of the authenticity of such endorsement, transfer,
authorization, and other matters as the Company may reasonably require, and
accompanied by all necessary transfer stamps. In that event, provided all other
conditions to Transfer have been met, it shall be the duty of the Company to
issue a new certificate to the Person entitled thereto, cancel the old
certificate(s), and record the transaction on its books (including the Members
Schedule).
(b) Any officer of the Company may direct a new certificate(s) to be
issued in place of any certificate(s) previously issued by the Company alleged
to have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost, stolen, or destroyed.
When authorizing such issue of a new certificate(s), such officer may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate(s), or his or her legal
representative, to give the Company a bond sufficient to indemnify the Company
against any claim that may be made against the Company on account of the loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
5.4 ISSUANCE OF UNITS. Subject to Section 5.6 and to the limitations
-----------------
contained in Section 11.5 hereof, the Company (with the approval of the Board)
shall have the right to issue any authorized but unissued Units; provided, that
the Company shall not issue any Units to any Person unless such Person has
executed and delivered to the Secretary of the Company the documents described
in Section 5.5 hereof. Upon the issuance of Units, the Board shall adjust the
Capital Accounts of the Members as necessary in accordance with Section 6.2.
5.5 NEW MEMBERS FROM THE ISSUANCE OF UNITS. In order for a Person to be
--------------------------------------
admitted as a Member of the Company pursuant to the issuance of Units to such
Person, such Person shall have executed and delivered to the Secretary of the
Company a written undertaking to be bound by the terms and conditions of this
Agreement substantially in the form of Exhibit C hereto. Upon the amendment of
---------
the Members Schedule by the Secretary of the Company and the satisfaction of any
other applicable conditions, including the receipt by the Company of payment for
the issuance of the applicable Units, such Person shall be admitted as a Member
and deemed listed as such on the books and records of the Company and thereupon
shall be issued his or its Units. The Board shall also adjust the Capital
Accounts of the Members as necessary in accordance with Section 6.2.
-19-
5.6 CLASS B-4 UNITS.
---------------
(a) Mandatory Issuances of Class B-4 Units. If the Company shall
--------------------------------------
declare a dividend or make a distribution on any of its outstanding Common Units
in Common Units, or (ii) subdivide or reclassify any of its outstanding Common
Units into a greater number of Common Units (other than any dividend,
distribution, subdivision or reclassification equally applicable to all Common
Units), the number of Class B-4 Units held by any Member at the time of the
effective date of or record date for such issuance, dividend, distribution,
subdivision or reclassification shall be adjusted so that it shall equal the
number of Class B-4 Units held by such Member immediately prior to such action
multiplied by a fraction, the numerator of which shall be the number of Common
Units outstanding after giving effect to such action, and the denominator of
which shall be the number of Common Units outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment of the number of Class B-4 Units outstanding upon the
----------------------------------------------------------------
Capstar Issuance. If, after the date hereof, the Company shall issue Common
----------------
Units (or any securities ("Capstar Securities") convertible into or exchangeable
------------------
for Common Units) in connection with the acquisition by the Company of Atlanta,
Ft. ▇▇▇▇▇▇ and/or Omaha Muzak franchises (such issuance, the "Capstar
-------
Issuance"), the sum (such sum, the "Base Number") of (i) the number of Class B-4
-----------
Units held by all Members at the time of the effective date of the Capstar
Issuance (the "Capstar Issuance Date") and (ii) the Reserve Number (as such term
---------------------
is defined in the Muzak Merger Agreement) as of the Capstar Issuance Date (which
shall be the Reserve Number as of the date hereof minus the number of Class B-4
-----
Units issued by the Company to the holders of Unextinguished Options (as such
term is defined in the Muzak Merger Agreement) during the period beginning on
the date hereof and ending on the Capstar Issuance Date) shall be adjusted pro
rata (based upon number of Class B-4 Units) so that after such adjustment: (x)
the Base Number, as adjusted pursuant to this Section 5.6(b), divided by (y) (i)
----------
the number of Common Units outstanding as of the date hereof (calculated on a
fully diluted basis) plus (ii) the number of Common Units (including the maximum
----
number of Common Units issuable upon conversion of or in exchange for any
Capstar Securities) issued in connection with the Capstar Issuance minus (iii)
-----
the number of Common Units outstanding as of the date hereof (calculated on a
fully-diluted basis) which are redeemed or otherwise purchased by the Company on
the date of the Capstar Issuance is equal to four percent (4%). Promptly after
the consummation of any Capstar Issuance, the Company shall deliver written
notice to each holder of Class B-4 Units, which notice shall describe in
reasonable detail the appropriate adjustment pursuant to this Section 5.6(b).
If as a result of the provisions of this Section 5.6(b), (i) the Company is
obligated to issue additional Class B-4 Units, then the Company shall make such
issuance within five business days after the Capstar Issuance or (ii) the
Member(s) holding Class B-4 Units are obligated to return certain Class B-4
Units to the Company for cancellation, then such Member(s) shall return
appropriate certificates representing such Class B-4 Units to the Company within
five business days after the Capstar Issuance and the Company shall thereafter
cancel such certificates.
(c) Restrictions on the Issuance of Class B-4 Units. Without the
-----------------------------------------------
prior consent of holders of a majority of the number of Class B-4 Units then
outstanding, the Company shall not issue any Class B-4 Units except (i) pursuant
to the terms of the Muzak Merger Agreement, (ii)
-20-
pursuant to the terms of the ▇▇▇▇ Contribution Agreement, (iii) in connection
with the exercise of any Unextinguished Options (as such term is defined in the
Muzak Merger Agreement) or (iv) pursuant to Section 5.6(a) or Section 5.6(b).
(d) Qualified Public Offering. Immediately prior to the consummation
-------------------------
of any Qualified Public Offering (as such term is defined in the Members
Agreement), the Members agree to convert Class A Units and Class B-4 Units, on a
per Common Unit basis, into common equity securities of the applicable successor
corporation and that each share of such common equity securities of the
applicable successor corporation shall have equal voting, dividend and
liquidation rights. For greater certainty, the Members agree that upon the
conversion of the Company into a corporation in order to consummate a Qualified
Public Offering, each Class A Unit and each Class B-4 Unit shall be treated
equally in such conversion for all purposes and no Class A Units or Class B-4
Units shall entitle the holder thereof to any preferential rights including,
without limitation, to Distributions of Yield or Unpaid Yield.
ARTICLE VI
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
------------------------------------------
6.1 CAPITAL CONTRIBUTIONS.
---------------------
(a) Prior to the date hereof, each Person who is a Member as of the
date hereof has made or is deemed to have made, the Capital Contributions giving
rise to such Member's initial Capital Account and is deemed to own the number,
type and class or series of Units, in each case, in the amounts set forth
opposite such Member's name on the Members Schedule as in effect on the date
hereof.
(b) No Member shall make or be required to make any additional
contributions to the Company with respect to such Member's Units. Except as
expressly provided herein, no Member, in its capacity as a Member, shall have
the right to receive any cash or any other property of the Company.
6.2 CAPITAL ACCOUNTS. The Company will maintain a separate Capital
----------------
Account for each Member according to the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). For this purpose, the Company may, upon the occurrence of
the events specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
-
increase or decrease the Capital Accounts in accordance with the rules of such
regulation and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a
-
revaluation of Company property.
6.3 METHOD OF DETERMINING PROFIT AND LOSS. For purposes of computing the
-------------------------------------
amount of any item of Company income, gain, loss or deduction to be allocated
pursuant to Article VIII and to be reflected in the Capital Accounts, the
determination, recognition and classification of any such item will be the same
as its determination, recognition and classification for federal income tax
purposes (including any method of depreciation, cost recovery or amortization
used for this purpose); provided that:
--------
-21-
(a) the computation of all items of income, gain, loss and deduction
will include tax-exempt income and those items described in Treasury Regulation
Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not
-
includable in gross income or are not deductible for federal income tax
purposes;
(b) if the Book Value of any Company property is adjusted pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such
- -
adjustment will be taken into account as gain or loss from the disposition of
such property;
(c) items of income, gain, loss or deduction attributable to the
disposition of Company property having a Book Value that differs from its
adjusted basis for tax purposes will be computed by reference to the Book Value
of such property;
(d) items of depreciation, amortization and other cost recovery
deductions with respect to Company property having a Book Value that differs
from its adjusted basis for tax purposes will be computed by reference to the
property's Book Value in accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(g); and
-
(e) to the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required,
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into
-
account in determining Capital Accounts, the amount of such adjustment to the
Capital Accounts will be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such basis).
6.4 NEGATIVE CAPITAL ACCOUNTS. If any Member has a deficit balance in its
-------------------------
Capital Account, such Member shall have no obligation to restore such negative
balance or to make any Capital Contributions to the Company by reason thereof,
and such negative balance shall not be considered an asset of the Company or of
any Member.
6.5 NO WITHDRAWAL. No Member will be entitled to withdraw any part of his
-------------
or its Capital Contribution or Capital Account or to receive any Distribution
from the Company, except as expressly provided in this Agreement.
6.6 LOANS FROM MEMBERS. Loans by Members to the Company shall not be
------------------
considered Capital Contributions.
6.7 STATUS OF CAPITAL CONTRIBUTIONS.
-------------------------------
(a) No Member shall receive any interest, salary or drawing with
respect to its Capital Contributions or its Capital Account, except as otherwise
specifically provided in this Agreement.
(b) Except as otherwise provided by applicable law, no Member shall
be required to lend any funds to the Company or to make any additional Capital
Contributions to the Company.
-22-
No Member shall have any personal liability for the repayment of any Capital
Contribution of any other Member.
ARTICLE VII
DISTRIBUTIONS
-------------
7.1 ORDER OF PRIORITY GENERALLY. As and when determined by the Board, the
---------------------------
Company may make Distributions at any time or from time to time. Subject to
Sections 7.3 and 7.6, all Distributions shall be made in the following order and
priority (subject to Section 7.2 and subject to any applicable Certificates of
Designation):
(a) First, to the holders of Class A Units, in proportion to and to
-----
the extent of the Unpaid Yield on the Class A Units owned by each such holder as
of the time of such Distribution. No Distribution or any portion thereof may be
made pursuant to Sections 7.1(b) through 7.1(d) until the entire amount of the
Unpaid Yield on the Class A Units as of the time of such Distribution has been
paid in full.
(b) Second, to the holders of Class A Units, in proportion to and to
------
the extent of the Unreturned Capital Value in respect of the Class A Units owned
by each such holder as of the time of such Distribution. No Distribution or any
portion thereof may be made pursuant to Section 7.1(c) or 7.1(d) until the
entire amount of Unreturned Capital Value of the Class A Units as of the time of
such Distribution has been paid in full.
(c) Third, to the holders of Common Units upon which less than the
-----
Catch-Up Amount has been paid, until an aggregate amount equal to the Catch-Up
Amount has been paid with respect to each Common Unit. Amounts payable pursuant
to this Section 7.1(c) will be paid first in respect of those Common Units upon
which the least amount of Distributions have theretofore been paid, until
Distributions have been paid in respect of such Common Units in an amount equal
to the amount of Distributions theretofore paid on the Common Units which have
theretofore been paid the second-least amount. Distributions will then be paid
in respect of such former Common Units and such latter Common Units until
Distributions have been paid in respect of all such Common Units in an amount
equal to the amount of Distributions theretofore paid on the Common Units which
have theretofore been paid the third-least amount, and so on until the same
amount has been paid in respect of all Common Units and thereafter Distributions
shall be made pro rata among the holders of Common Units upon which less than
the Catch-Up Amount has been paid. No Distribution or any portion thereof may be
made pursuant to Section 7.1(d) until the aggregate amount of all Distributions
made in respect of each Common Unit is equal to the Catch-Up Amount.
(d) Fourth, to the holders of Common Units, pro rata according to the
------
number of Common Units owned by each such holder.
-23-
7.2 NO RIGHT TO RECEIVE CERTAIN DISTRIBUTIONS. Notwithstanding Section
-----------------------------------------
7.1:
(a) On Class B Unit. A holder of any Class B Unit will forego
---------------
Distributions which would otherwise be made in respect of such Class B Unit from
time to time pursuant to Section 7.1 (including by reason of Section 7.2(b)) in
such amount(s) as may be required so that the aggregate amount of Distributions
foregone with respect to such Class B Unit by reason of this Section 7.2(a) is
equal to the Non-Distribution Amount for such Class B Unit. The amount of any
distribution forgone by a holder of any Class B Unit shall be treated as
received by such holder solely for purposes of calculating the Catch-Up Amount
and such holder's right to receive further distributions under Section 7.1(c).
No holder of any Class B Unit will later have the right to receive any
Distribution which is foregone pursuant to this Section 7.2(a), except to the
extent that any portion of such foregone Distribution may be reallocated to such
holder in accordance with Section 7.2(b).
(b) Reallocation. All Distributions withheld in respect of any Class
------------
B Unit pursuant to Section 7.2(a) will be reallocated and paid instead to the
holders of Common Units in accordance with Sections 7.1(c) and 7.1(d) (subject
again to being foregone pursuant to Section 7.2(a)).
7.3 TAX DISTRIBUTIONS. Notwithstanding the priority of Distributions in
-----------------
Section 7.1 or the effect of the Non-Distribution amount in Section 7.2, the
Company will use reasonable efforts, consistent with any restrictions which may
be imposed by any creditor of the Company or applicable law, to make
Distributions to each Member in amounts such that, prior to April 15 of each
calendar year, each Member has received Distributions (whether pursuant to this
Section 7.3 or otherwise) in aggregate amounts which equal not less than the sum
for the immediately preceding Fiscal Year and for all prior Fiscal Years of (i)
the amount of taxable income allocated to such Member for such Fiscal Years,
reduced by the amount of taxable losses allocated to such Member for such Fiscal
Years, pursuant to Article VI and Article VIII, multiplied by (ii) the maximum
marginal tax rate applicable to individual taxpayers pursuant to the Code in
respect of income recognized during such immediately preceding Fiscal Year. The
Company will use reasonable efforts to cause such Distributions to be made in a
manner which permits such Members to use the proceeds of such Distributions to
make on a timely basis all required estimated payments of income taxes in
respect of the taxable income so allocated to them. The Distributions required
by this Section 7.3 will be made (x) without regard for the relative priorities
and amounts set forth in Section 7.1 and (y) without regard to Section 7.2.
Distributions made pursuant to this Section 7.3 shall be taken into account as
advances on Distributions made pursuant to Section 7.1, and shall (to the extent
not previously taken into account pursuant to this sentence) reduce the
Distributions to be made to any Member under Section 7.1, when and as paid by
the Company. No Member shall be liable to the Company for any amount Distributed
to it pursuant to this Section 7.3, or for any interest on such amount.
7.4 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF OF A MEMBER.
--------------------------------------------------------------------
Except as otherwise provided in this Agreement, if the Company is required by
law (as determined by the Tax Matters Partner based on the advice of legal or
tax counsel to the Company) to make any payment on behalf of a Member in its
capacity as such (including in respect of withholding taxes,
-24-
personal property taxes, and unincorporated business taxes, etc.), then such
Member (the "Indemnifying Member") will indemnify the Company in full for the
-------------------
entire amount paid, including interest, penalties and expenses associated with
such payment. At the option of the Board, the amount to be indemnified may be
charged against a Capital Account of the Indemnifying Member, and, at the option
of the Board, either:
(a) promptly upon notification of an obligation to indemnify the
Company, the Indemnifying Member will make a cash payment to the Company in an
amount equal to the full amount to be indemnified (and the amount paid will be
added to the Indemnifying Member's Capital Account but will not be deemed to be
a Capital Contribution), or
(b) the Company will reduce subsequent Distributions which would
otherwise be made to the Indemnifying Member until the Company has recovered the
amount to be indemnified (and that the amount of such reduction will be deemed
to have been distributed for all purposes, but such deemed Distribution will not
further reduce the Indemnifying Member's Capital Account).
A Member's obligation to make contributions to the Company under this Section
7.4 will survive the termination, dissolution, liquidation and winding up of the
Company, and for purposes of this Section 7.4, the Company will be treated as
continuing in existence. The Company may pursue and enforce all rights and
remedies it may have against each Member under this Section 7.4, including
instituting a lawsuit to collect such contribution with interest calculated at a
rate equal to the Company's and its Subsidiaries' effective cost of borrowed
funds.
7.5 SET-OFF AGAINST DISTRIBUTIONS TO HOLDERS OF CLASS B-4 UNITS. All
-----------------------------------------------------------
Distributions to holders of Class B-4 Units pursuant to this Article VII or any
other amounts payable to holders of Class B-4 Units pursuant to Article X hereof
are subject to set-off in accordance with and pursuant to the terms of the Muzak
Merger Agreement. This Section 7.5 shall be binding upon each and every holder
of Class B-4 Units.
7.6 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding any provision to the
----------------------------
contrary contained in this Agreement, the Company shall not make any
Distribution if such Distribution would violate Section 18-607 of the Delaware
Act or other applicable law or if such Distribution would violate any of the
Company's debt financing agreements or any other debt financing agreement of
which the Company is a guarantor, but shall instead make such Distribution as
soon as practicable after such time as the making of such Distribution would not
cause such violation.
-25-
ARTICLE VIII
ALLOCATIONS
-----------
8.1 REGULAR ALLOCATIONS.
-------------------
(a) Allocations of Net Profit. Except as provided in Section 8.2, Net
-------------------------
Profit for any Fiscal Year or any other period (as the Board may determine) will
be allocated among the Members as follows:
(i) First, to the holders of Class A Units until the aggregate
-----
amount allocated under this Section 8.1(a)(i) over the life of the
Company equals the sum (at the time of the allocation) of (A) the
Unpaid Yield on the Class A Units owned by each such holder at the
time of such allocation, (B) the amount previously distributed under
Section 7.1(a) to each such holder, and (C) the aggregate amount of
Net Loss previously allocated under Section 8.1(b)(v) to each such
holder. The allocation of Net Profit under this Section 8.1(a)(i)
shall be made pro rata to the holders of Class A Units, based upon the
sum of the amounts in (A), (B) and (C) above with respect to each such
holder;
(ii) Second, to the holders of Class A Units in an amount equal
------
to the amount of Net Loss previously allocated to the holders of Class
A Units under Section 8.1(b)(iv) and not previously reversed by a Net
Profit allocation under this Section 8.1(a)(ii). The allocation of Net
Profit under this Section 8.1(a)(ii) shall be made pro rata to the
holders of Class A Units, based upon amount of Net Loss previously
allocated to each such holder under Section 8.1(b)(iv);
(ii) Third, to the holders of Class B Units in an amount equal
-----
to the amount of Net Loss previously allocated to the holders of Class
B Units under Section 8.1(b)(iii) and not previously reversed by a Net
Profit allocation under this Section 8.1(a)(iii). The allocation of
Net Profit under this Section 8.1(a)(iii) shall be made pro rata to
the holders of Class B Units, based upon amount of Net Loss previously
allocated to each such holder under Section 8.1(b)(iii);
(iv) Fourth, to the holders of Common Units until the aggregate
------
amount allocated under this Section 8.1(a)(iv) over the life of the
Company equals the sum (at the time of the allocation) of (A) the
Catch-Up Amount for each Common Unit (assuming all amounts
distributable to holders of Class A Units pursuant to Sections 7.1(a)
and 7.1(b) hereof have been distributed to such holders of Class A
Units) (reduced by the Non-Distribution Amount for each Common Unit)
owned by each such holder at the time of such allocation, and (B) the
aggregate amount of Net Loss previously allocated under Section
8.1(b)(ii) to each such holder. The allocation of Net Profit under
this Section 8.1(a)(iv) shall be made first to the holders of Common
-----
Units who received an allocation of Net Loss under Section 8.1(b)(ii)
not previously reversed by a Net Profit allocation under this Section
8.1(a)(iv) until all such allocations of Net Loss have been reversed,
pro rata according to the amount of Net
-26-
Loss allocated to them, second to the holders of Common Units who
------
received a distribution under Section 7.1(c) not previously subject to
a Net Profit allocation under this Section 8.1(a)(iv) until all such
distributions have been made subject to a Net Profit allocation, pro
rata according to the amount of distributions received by them, and
third to the holders of Common Units who are then entitled to receive
-----
a Catch-Up Amount (assuming all amounts distributable to holders of
Class A Units pursuant to Sections 7.1(a) and 7.1(b) hereof have been
distributed to such holders of Class A Units), according to the
ordering provisions of Section 7.1(c); and
(v) Fifth, to the holders of Common Units, pro rata according
-----
to the number of Common Units owned by each such holder.
(b) Allocations of Net Loss. Except as provided in Section 8.2, Net
-----------------------
Loss for any Fiscal Year or any other period (as the Board may determine) will
be allocated among the Members as follows:
(i) First, to the holders of Common Units in an amount equal to
------
the amount of Net Profit previously allocated to the holders of Common
Units under Section 8.1(a)(v) and not previously subject to a Net Loss
allocation under this Section 8.1(b)(i), pro rata to such holders
according to the amount of Net Profit allocated to them under Section
8.1(a)(v);
(ii) Second, to the holders of Class B Units in an amount equal
------
to the amount of Net Profit previously allocated to the holders of
Class B Units under Section 8.1(a)(iv) and not previously subject to a
Net Loss allocation under this Section 8.1(b)(ii), provided that the
--------
amount of Net Loss allocated under this Section 8.1(b)(ii) shall not
exceed the Catch-Up Amount for all such holders (reduced by the Non-
Distribution Amount for all such holders). The allocation of Net Loss
pursuant to this Section 8.1(b)(ii) shall be made in reverse of the
ordering provisions of Section 7.1(c);
(iii) Third, to the holders of Class B Units to the extent
-----
necessary to make the balance of their Capital Accounts allocable to
Capital Contributions made with respect to the Class B Units equal to
zero. The allocation of Net Loss pursuant to this Section 8.1(b)(iii)
shall be made pro rata to such holders according to balance of the
Capital Accounts allocable to Capital Contributions made with respect
to the Class B Units for each such holder;
(iv) Fourth, to the holders of Class A Units to the extent
------
necessary to make the balance of their Capital Accounts allocable to
Capital Contributions made with respect to the Class A Units equal to
zero. The allocation of Net Loss pursuant to this Section 8.1(b)(iv)
shall be made pro rata to such holders according to balance of the
Capital Accounts allocable to Capital Contributions made with respect
to the Class A Units for each such holder;
-27-
(v) Fifth, to the holders of Class A Units in an amount equal to
-----
the amount of Net Profit previously allocated to the holders of Class
A Units under Section 8.1(a)(i) and not previously subject to a Net
Loss allocation under this Section 8.1(b)(v); provided that the amount
--------
of Net Loss allocated under this Section 8.1(b)(v) shall not exceed
the Unpaid Yield for all such holders. The allocation of Net Loss
pursuant to this Section 8.1(b)(v) shall be made pro rata to such
holders according to the amount of Unpaid Yield for each such holder;
and
(vi) Sixth, to the holders of Common Units pro rata according to
-----
the number of Common Units owned by each such holder.
8.2 SPECIAL ALLOCATIONS.
-------------------
(a) Nonrecourse Debt. Losses attributable to a partner nonrecourse
----------------
debt (as defined in Treasury Regulation Section 1.704-2(b)(4)) will be allocated
in the manner required by Treasury Regulation Section 1.704-2(i)). If there is a
net decrease during a Fiscal Year in partner nonrecourse debt minimum gain (as
defined in Treasury Regulation Section 1.704-2(i)(3)), then Profits for such
Fiscal Year (and, if necessary, for subsequent Fiscal Years) will be allocated
to the Members in the amounts and of such character as determined according to,
and subject to the exceptions contained in, Treasury Regulation Section 1.704-
2(i)(4).
(b) Minimum Gain Chargeback. Except as otherwise provided in Section
-----------------------
8.2(a), if there is a net decrease in the Minimum Gain during any Fiscal Year,
then each Member will be allocated Profits for such Fiscal Year (and, if
necessary, for subsequent Fiscal Years) in the amounts and of such character as
determined according to, and subject to the exceptions contained in, Treasury
Regulation Section 1.704-2(f). This Section 8.2(b) is intended to be a minimum
gain chargeback provision that complies with the requirements of Treasury
Regulation Section 1.704-2(f), and will be interpreted in a manner consistent
with such intention.
(c) Qualified Income Offset. If any Member who unexpectedly receives
-----------------------
an adjustment, allocation, or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6) has an Adjusted Capital Account
- - - -
Deficit as of the end of any Fiscal Year, computed after the application of
Sections 8.2(a) and 8.2(b) but before the application of any other provision of
Section 8.1 or Section 8.2, then Profits for such Fiscal Year will be allocated
to such Member in proportion to, and to the extent of, such Adjusted Capital
Account Deficit. This Section 8.2(c) is intended to be a qualified income
offset provision as described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d) and will be interpreted in a manner consistent with such
-
intention.
(d) Adjustment of Tax Basis. Profits and Losses described in Section
-----------------------
6.3(e) will be allocated in a manner consistent with the manner that the
adjustments to the Capital Accounts are required to be made pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(j), (k) and (m).
- - -
(e) Transaction with Member. If, and to the extent that, any Member
-----------------------
is deemed to recognize any item of income, gain, loss, deduction or credit as a
result of any transaction between
-28-
such Member and the Company pursuant to any of Code Sections 1272-1274, 7872,
483 and 482 or any similar provision now or hereafter in effect, and the Tax
Matters Partner determines that any corresponding Profit or Loss of the Company
should be allocated to the Member who recognized such item in order to reflect
the Member's economic interests in the Company, then the Company may so allocate
such Profit or Loss.
8.3 TAX ALLOCATIONS.
---------------
(a) Generally. The income, gains, losses, deductions and credits of
---------
the Company wi ll be allocated, for federal, state and local income tax
purposes, among the Members in accordance with the allocation of such income,
gains, losses, deductions and credits among the Members for computing their
Capital Accounts, except that if any such allocation is not permitted by the
-----------
Code or other applicable law, the Company's subsequent income, gains, losses,
deductions and credit will be allocated among the Members so as to reflect as
nearly as possible the allocation set forth in this Agreement in computing their
Capital Accounts.
(b) Differences Between Book Value and Tax Basis. Items of Company
--------------------------------------------
taxable income, gain, loss and deduction with respect to any property
contributed to the capital of the Company will be allocated among the Members in
accordance with Code Section 704(c) so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its Book Value.
(c) Adjustments in Book Value. If the Book Value of any Company asset
-------------------------
is adjusted pursuant to Section 6.3, then subsequent allocations of items of
taxable income, gain, loss and deduction with respect to such asset will take
into account any variation between the adjusted basis of such asset for federal
income tax purposes and its Book Value in the same manner as under Code Section
704(c).
(d) Allocations of Credits and the Like. Allocations of tax credits,
-----------------------------------
tax credit recapture, and any items related thereto will be allocated to the
Members according to their interests in such items as determined by the Tax
Matters Partner taking into account the principles of Treasury Regulation
Section 1.704-1(b)(4)(ii).
(e) No Effect on Capital Accounts. Allocations pursuant to this
-----------------------------
Section 8.3 are solely for purposes of federal, state and local taxes and will
not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, Distributions or other items
pursuant to any provision of this Agreement.
8.4 CURATIVE ALLOCATIONS. If the Tax Matters Partner determines, after
--------------------
consultation with counsel experienced in income tax matters, that the allocation
of any item of Company income, gain, loss, deduction or credit (an "unallocated
-----------
item") is not specified in this Agreement or that the allocation of any item of
----
Company income, gain, loss, deduction or credit (a "misallocated item") under
-----------------
this Agreement is in the Board's reasonable judgment inconsistent with the
Members' economic interests in the Company (determined by reference to the
general principles of Treasury Regulation Section 1.704-1(b) and the factors set
forth in Treasury Regulation
-29-
Section 1.704-1(b)(3)(ii)), then the Company may allocate such unallocated
items, or reallocate such misallocated items, to reflect such economic
interests; provided that no such allocation will have any material effect on the
--------
amounts distributable to any Member, including the amounts to be distributed
upon the complete liquidation of the Company.
ARTICLE IX
ELECTIONS AND REPORTS
---------------------
9.1 GENERALLY. The Company will keep appropriate books and records with
---------
respect to the Company's business, including all books and records necessary to
provide any information, lists and copies of documents required to be provided
pursuant to Section 9.3 or pursuant to applicable laws. The Members (subject to
reasonable confidentiality requirements that the Board may impose) shall have
such right to request and receive information concerning the Company and its
affairs as is required by the Delaware Act.
9.2 TAX STATUS. The Members intend that the Company be treated as a
----------
partnership for federal, state and local income tax purposes and the Company and
each Member shall file all tax returns on the basis consistent therewith.
9.3 REPORTS. The Company will use reasonable efforts to deliver or cause
-------
to be delivered, by March 1 (and, in any event, will deliver not later than May
31) of each year, to each person who was a Member at any time during the
previous Fiscal Year, all information necessary for the preparation of such
person's United States federal income tax returns and any state, local and
foreign income tax returns which such person is required to file as a result of
the Company being engaged in a trade or business within such state, local or
foreign jurisdiction, including a statement showing such person's share of
income, gains, losses, deductions and credits for such year for United States
federal income tax purposes (and, if applicable, state, local or foreign income
tax purposes) and the amount of any Distributions made to or for the account of
such person. Upon the written request of any such person made not later than 30
days after the end of each Fiscal Year, the Company will use reasonable efforts
to deliver or cause to be delivered any additional information necessary for the
preparation of any state, local and foreign income tax returns which must be
filed by such person.
9.4 TAX ELECTIONS. The taxable year will be the Fiscal Year, unless the
-------------
Tax Matters Partner determines otherwise in compliance with applicable laws.
The Tax Matters Partner will determine whether to make or revoke any available
election pursuant to the Code. Each Member will upon request supply the
information necessary to give proper effect to any such election.
9.5 TAX CONTROVERSIES. MEM Holdings is designated the "Tax Matters
----------------- -----------
Partner" (as defined in Code Section 6231) for the Company, and is authorized
-------
and required to represent the Company (at the Company's expense) in connection
with all examinations of the Company's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith; provided that the Tax
--------
Matters Partner may be replaced by action of Members which own Voting Units
which represent a
-30-
Majority in Voting Interest. Each Member agrees to cooperate with the Tax
Matters Partner and to do or refrain from doing any or all things reasonably
requested by the Tax Matters Partner with respect to the conduct of such
proceedings. Subject to the foregoing proviso, the Tax Matters Partner will have
sole discretion to determine whether the Company (either in its own behalf or on
behalf of the Members) will contest or continue to contest any tax deficiencies
assessed or proposed to be assessed by any taxing authority. Any deficiency for
taxes imposed on any Member (including penalties, additions to tax or interest
imposed with respect to such taxes) will be paid by such Member, and if required
to be paid (and actually paid) by the Company, will be recoverable from such
Member as provided in Section 7.4.
ARTICLE X
DISSOLUTION AND LIQUIDATION
---------------------------
10.2 DISSOLUTION. The Company shall be dissolved and its affairs wound up
-----------
only upon the happening of any of the following events:
(a) The sale or other disposition by the Company of all or
substantially all of the assets it then owns;
(b) Upon the election to dissolve the Company by action of Members
which own Voting Units which represent a Majority in Voting Interest; or
(c) The entry of a decree of judicial dissolution under (S) 18-802 of
the Delaware Act; provided, that, notwithstanding anything contained herein to
--------
the contrary, no Member shall make an application for the dissolution of the
Company pursuant to (S) 18-802 of the Delaware Act without the unanimous
approval of the Members.
Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate until
the winding up of the Company has been completed, the assets of the Company have
been distributed as provided in Section 10.2 and the Certificate shall have been
canceled.
10.2 LIQUIDATION.
-----------
(a) Liquidator. Upon dissolution of the Company, the Board will
----------
appoint a person to act as the "Liquidator," and such person shall act as the
----------
Liquidator unless and until a successor Liquidator is appointed as provided in
this Section 10.2. The Liquidator will agree not to resign at any time without
30 days' prior written notice to the Board. The Liquidator may be removed at any
time, with or without cause, by notice of removal and appointment of a successor
Liquidator approved by the Board. Any successor Liquidator will succeed to all
rights, powers and duties of the former Liquidator. The right to appoint a
successor or substitute Liquidator in the manner provided in this Section 10.2
will be recurring and continuing for so long as the functions and services of
the Liquidator are authorized to continue under the provisions of this
Agreement, and every reference in this Agreement to the Liquidator will be
deemed to refer also to any such
-31-
successor or substitute Liquidator appointed in the manner provided in this
Section 10.2. The Liquidator will receive as compensation for its services (1)
no additional compensation, if the Liquidator is an employee of the Company or
any of its Subsidiaries, or (2) if the Liquidator is not such an employee, such
compensation as the Board may approve, plus, in either case, reimbursement of
the Liquidator's out-of-pocket expenses in performing its duties.
(b) Liquidating Actions. The Liquidator will liquidate the assets of
-------------------
the Company and apply and distribute the proceeds of such liquidation, in the
following order of priority, unless otherwise required by mandatory provisions
of applicable law:
(i) First, to the payment of the Company's debts and
-----
obligations to its creditors (including Members), including sales commissions
and other expenses incident to any sale of the assets of the Company, in order
of the priority provided by law.
(ii) Second, to the establishment of and additions to such
------
reserves as the Board deems necessary or appropriate.
(iii) Third, to the Members, in accordance with Section 7.1 and
-----
any applicable Certificates of Designation, subject to Section 7.2.
The reserves established pursuant to clause (ii) above will be paid over by the
Liquidator to a bank or other financial institution, to be held in escrow for
the purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the Board deems advisable,
such reserves will be distributed to the Members in accordance with Section 7.1
and any applicable Certificates of Designation, subject to Section 7.2. The
allocations and distributions provided for in this Agreement are intended to
result in the Capital Account of each Member immediately prior to the
distribution of the Company's assets pursuant to this Section 10.2(b) being
equal to the amount distributable to such Member pursuant to this Section
10.2(b). The Company is authorized to make appropriate adjustments in the
allocation of Profits and Losses as necessary to cause the amount of each
Member's Capital Account immediately prior to the distribution of the Company's
assets pursuant to this Section 10.2(b) to equal the amount distributable to
such Member pursuant to this Section 10.2(b).
(c) Distribution in Kind. Notwithstanding the provisions of Section
--------------------
10.2(b) which require the liquidation of the assets of the Company, but subject
to the order of priorities set forth in Section 10.2(b), if upon dissolution of
the Company the Board determines that an immediate sale of part or all of the
Company's assets would be impractical or could cause undue loss to the Members,
the Board may, in its sole discretion, defer the liquidation of any assets
except those necessary to satisfy Company liabilities and reserves, and may, in
its absolute discretion, distribute to the Members, in lieu of cash, as tenants
in common and in accordance with the provisions of Section 10.2(b), undivided
interests in such Company assets as the Liquidator deems not suitable for
liquidation. Any such distribution in kind will be subject to such conditions
relating to the disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing the operating of
such properties at such time. For purposes of any
-32-
such distribution, the Board will determine the Fair Market Value of any
property to be distributed in accordance with any valuation procedure which the
Board reasonably deems appropriate.
(d) Reasonable Time for Winding Up. A reasonable time will be
------------------------------
allowed for the orderly winding up of the business and affairs of the Company
and the liquidation of its assets pursuant to Section 10.2(b) in order to
minimize any losses otherwise attendant upon such winding up. Distributions upon
liquidation of the Company (or any Member's interest in the Company) and related
adjustments will be made by the end of the Fiscal Year of the liquidation (or,
if later, within 90 days after the date of such liquidation) or as otherwise
permitted by Treasury Regulation Section 1.704-1(b)(2)(ii)(b).
(e) Termination. Upon completion of the distribution of the assets
-----------
of the Company as provided in Section 10.2(b) hereof, the Company shall be
terminated and the Liquidator shall cause the cancellation of the Certificate in
the State of Delaware and of all qualifications and registrations of the Company
as a foreign limited liability company in jurisdictions other than the State of
Delaware and shall take such other actions as may be necessary to terminate the
Company.
10.3 VOLUNTARY DISSOLUTION. Notwithstanding anything to the contrary
---------------------
herein, without the prior consent of holders of a majority of the number of
Class B-4 Units then outstanding neither the Board nor the Members shall effect
a voluntary dissolution of the Company (except in connection with an Approved
Company Sale (as such term is defined in the Members Agreement)) unless the
Members holding Class B-4 Units receive their pro rata percentage (based on the
ratio of the number of Class B-4 Units held by such Members to the then number
of outstanding Common Units) share of the assets of the Company in such
dissolution or pro rata percentage interest of the equity securities issued by
any successor entity to the Company.
ARTICLE XI
TRANSFER OF UNITS
-----------------
11.1 RESTRICTIONS. Each Member acknowledges and agrees that such Member
------------
shall not Transfer any Unit(s) except in accordance with the provisions of this
Article XI and the Members Agreement. Any attempted Transfer in violation of
the preceding sentence shall be deemed null and void for all purposes, and the
Company will not record any such Transfer on its books or treat any purported
transferee as the owner of such Unit(s) for any purpose.
11.2 GENERAL RESTRICTIONS ON TRANSFER.
--------------------------------
(a) Notwithstanding anything to the contrary in this Agreement, no
transferee of any Unit(s) received pursuant to a Transfer (but excluding
transferees that were Members immediately prior to such a Transfer, who shall
automatically become a Member with respect to any additional Units they so
acquire) shall become a Member in respect of or be deemed to have any ownership
rights in the Unit(s) so Transferred unless the purported transferee is admitted
as a Member as set forth in Section 11.3(a).
-33-
(b) Following a Transfer of any Unit(s) that is permitted under this
Article XI, the transferee of such Unit(s) shall succeed to the Capital Account
associated with such Unit(s) and shall receive allocations and distributions
under Articles VI, VII, VIII and X in respect of such Unit(s). Notwithstanding
the foregoing, Profits, Losses and other items will be allocated between the
transferor and the transferee according to Code Section 706.
(c) Any Member who Transfers all of his or its Units (i) shall cease
to be a Member upon such Transfer, and (ii) shall no longer possess or have the
power to exercise any rights or powers of a Member of the Company.
11.3 PROCEDURES FOR TRANSFER. Subject in all events to the general
-----------------------
restrictions on Transfers contained in Sections 11.1, 11.2 and 11.5, a Member
may Transfer all or any part of his or its Units in accordance with this Section
11.3.
(a) No Transfer of Unit(s) may be completed until the prospective
transferee is admitted as a Member of the Company by executing and delivering to
the Secretary of the Company a written undertaken to be bound by the terms and
conditions of this Agreement substantially in the form of Exhibit C hereto.
---------
Upon the amendment of the Members Schedule by the Secretary of the Company and
the satisfaction of any other applicable conditions, such prospective transferee
shall be admitted as a Member and deemed listed as such on the books and records
of the Company and thereupon the Company shall reissue the applicable Units in
the name of such prospective transferee.
(b) Unless waived by the Company, no Member may Transfer any
Restricted Securities (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel reasonably acceptable in form and substance to the Company (which
counsel will be reasonably acceptable to the Company) that registration under
the Securities Act is not required in connection with such Transfer. If such
opinion of counsel reasonably acceptable in form and substance to the Company
further states that no subsequent Transfer of such Restricted Securities will
require registration under the Securities Act, the Company will promptly upon
such Transfer deliver new certificates for such securities which do not bear the
Securities Act legend set forth in Section 11.4(b).
11.4 LEGEND.
------
(a) The certificates representing the Units will bear the following
legend:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS
SPECI FIED IN A LIMITED LIABILITY COMPANY
AGREEMENT AMONG THE ISSUER AND ITS MEMBERS. A
COPY OF SUCH LIMITED LIABILITY COMPANY AGREEMENT
AS IN EFFECT FROM TIME TO TIME WILL BE FURNISHED
WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF
UPON WRITTEN REQUEST."
-34-
(b) Each certificate or instrument evidencing Restricted Securities
and each certificate or instrument issued in exchange for or upon the Transfer
of any Restricted Securities (if such securities remain Restricted Securities
after such Transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
AN EXEMPTION FROM REGISTRATION THEREUNDER."
Upon the request of any holder of Restricted Securities, the Company shall
remove the Securities Act legend set forth above from the certificates for such
Restricted Securities; provided, that such Restricted Securities are eligible
--------
for sale pursuant to Rule 144(k) (or any similar rule or rules then in effect)
under the Securities Act.
11.5 LIMITATIONS.
-----------
(a) Notwithstanding anything to the contrary in this Agreement, no
Unit may be Transferred or issued by the Company if such Transfer or issuance
would result in the Company having more than 100 "beneficial owners" as defined
and determined by the Investment Company Act of 1940, as amended from time to
time.
(b) In order to permit the Company to qualify for the benefit of a
"safe harbor" under Code Section 7704, notwithstanding anything to the contrary
in this Agreement, no Transfer of any Unit shall be permitted or recognized by
the Company (within the meaning of Treasury Regulation Section 1.7704-1(d)) and
the Company shall not issue any Units if and to the extent that such Transfer or
issuance would cause the Company to have more than 100 partners (within the
meaning of Treasury Regulation Section 1.7704-1(h), including the look-through
rule in Treasury Regulation Section 1.7704-1(h)(3)).
(c) Notwithstanding anything to the contrary in this Agreement, no
Unit may be Transferred and the Company may not issue any Unit unless (i) such
Transfer or issuance, as the case may be, shall not affect the Company's
existence or qualification as a limited liability company under the Delaware
Act, (ii) such Transfer or issuance, as the case may be, shall not cause the
Company to be classified as other than a partnership for United States federal
income tax purposes, (iii) such Transfer or issuance, as the case may be, shall
not result in a termination of the Company under Code Section 708, unless the
Board determines that any such termination will not have a material adverse
impact on the Members and (iv) such Transfer or issuance, as the case may be,
shall not cause the application of the tax-exempt use property rules of Code
Sections 168(g)(l)(B) and 168(h) to the Company or its Members.
11.6 TAX MATTERS. On the Transfer of any Common Unit, if the transferor
-----------
owns more than 5% of the then outstanding Common Units immediately prior to such
Transfer, then, at the request
-35-
of such transferor at the time of such Transfer, the Board will cause the
Company to elect, pursuant to Section 754 of the Code, to adjust the tax basis
of the Company's properties as provided by Sections 734 and 743 of the Code.
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
12.1 NOTICES.
-------
(a) All notices, requests, demands and other communications under or
in connection with this Agreement shall be given to or made upon (i) any Member,
at such Member's address set forth on the Members Schedule, and (ii) the
Company, at Muzak Holdings LLC, c/o Muzak LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, with copies to MEM Holdings,
LLC, c/o ABRY Partners, Inc., ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq. (or in any case to such other address as the
addressee may from time to time designate in writing to the sender).
(b) All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in writing,
and shall be deemed effectively given upon personal delivery or delivery by
courier to the party to be notified or three (3) business days after deposit
with the United States Post Office, by registered or certified mail, return
receipt requested, postage prepaid and addressed as provided in Section 12.1(a).
12.2 GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE APPLICATION,
-------------
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, AND SPECIFICALLY THE
DELAWARE ACT, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF DELAWARE.
12.3 NO ACTION FOR PARTITION. No Member shall have any right to maintain
-----------------------
any action for partition with respect to the property of the Company.
12.4 HEADINGS AND SECTIONS. The headings in this Agreement are inserted
---------------------
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Agreement or any provision of this
Agreement. Unless the context requires otherwise, all references in this
Agreement to Sections, Articles, Exhibits or Schedules shall be deemed to mean
and refer to Sections, Articles, Exhibits or Schedules of or to this Agreement.
12.5 AMENDMENTS. Except as otherwise expressly set forth in this
- ---------
Agreement, the Certificate and this Agreement may be amended, supplemented or
restated only upon the written consent of Members which own Voting Units which
represent a Majority in Voting Interest;
-36-
provided that no such amendment or waiver shall (x) amend, modify or change the
--------
provisions of Sections 4.8, 5.6 or 10.3 or this Section 12.5 or otherwise
adversely affect the rights, preferences and privileges of the Class B-4 Units
under this Agreement in any material respect without the consent of the
Member(s) holding a majority of the then outstanding Class B-4 Units or (y)
materially and adversely affect the rights hereunder of any Common Member when
compared with its effect on any other Common Member without the prior written
approval of such first Common Member. For purposes of this Section 12.5, any
merger or consolidation that would have the effect of amending this Agreement
pursuant to Section 18-209(f) of the Delaware Act shall be deemed to be an
amendment of this Agreement subject to the provisions of this Section 12.5.
12.6 NUMBER AND GENDER. Where the context so indicates, the masculine
-----------------
shall include the feminine, the neuter shall include the masculine and feminine,
and the singular shall include the plural.
12.7 BINDING EFFECT. Except as otherwise provided to the contrary in this
--------------
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Members, their distributees, heirs, legal representatives, executors,
administrators, successors and permitted assigns.
12.8 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original and shall be
binding upon the Member who executed the same, but all of such counterparts
shall constitute the same agreement.
12.9 SEVERABILITY. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
12.10 REMEDIES. Each of the parties to this Agreement shall be entitled to
--------
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The Members agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
12.11 BUSINESS DAYS. If any time period for giving notice or taking action
-------------
under this Agreement expires on a day which is a Saturday, Sunday or holiday in
the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
12.12 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES,
--------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
-37-
ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
12.13 NO STRICT CONSTRUCTION. The parties to this Agreement have
----------------------
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties to this
Agreement, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
12.14 ENTIRE AGREEMENT. Except as otherwise expressly set forth in this
----------------
Agreement, this Agreement and the other agreements referred to in this Agreement
(including, without limitation, the Related Agreements) embody the complete
agreement and understanding among the parties to this Agreement with respect to
the subject matter of this Agreement and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter of this Agreement in any
way. This Agreement amends and restates the Original Agreement in its entirety.
12.15 PARTIES IN INTEREST. Nothing herein shall be construed to be to the
-------------------
benefit of or enforceable by any third party including, but not limited to, any
creditor of the Company.
12.16 INCONSISTENT PROVISIONS OF THE MEMBERS AGREEMENT. In the event that,
------------------------------------------------
at any time, any provision of this Agreement is inconsistent with the
requirements of any provision of the Members Agreement, the terms of the Members
Agreement shall supersede and prevail over the provisions of this Agreement, and
the Members shall take such action as may be necessary to amend any such
provision in this Agreement to conform with such requirements of the Members
Agreement.
* * * *
-38-
IN WITNESS WHEREOF, the undersigned, have executed this Amended and
Restated Limited Liability Company Agreement as of the date first written above.
MEM HOLDINGS, LLC
By: ___________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
_______________________________________
▇▇▇▇▇▇ ▇▇▇▇
_______________________________________
▇▇▇▇▇ ▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇
MUSIC HOLDINGS CORP.
By: __________________________________
Name:
Title:
CAPSTAR BROADCASTING CORPORATION
By: ___________________________________
Name:
Title:
EXHIBIT A
---------
BOARD RESOLUTIONS WITH RESPECT TO CLASS B-5 UNITS
(AS OF MARCH 18, 1999)
NONE.
EXHIBIT B
---------
CERTIFICATES OF DESIGNATIONS
(AS OF MARCH 18, 1999)
NONE.
EXHIBIT C
---------
FORM OF JOINDER TO
LIMITED LIABILITY COMPANY AGREEMENT
-----------------------------------
THIS JOINDER to the Amended and Restated Limited Liability Company
Agreement of Muzak Holdings LLC, a Delaware limited liability company (the
"Company"), dated as of March 18, 1999, as amended or restated from time to
--------
time, by and among and the Members of the Company (the "Agreement"), is made and
---------
entered into as of _________ by and between the Company and ________________
("Holder"). Capitalized terms used herein but not otherwise defined shall have
--------
the meanings set forth in the Agreement.
WHEREAS, on the date hereof, Holder has acquired ______ [PREFERRED
UNITS/CLASS A UNITS/CLASS B-[1/2/3/4/5] UNITS] from _____________ and the
Agreement and the Company require Holder, as a holder of such [PREFERRED
UNITS/CLASS A UNITS/CLASS B-[1/2/3/4/5] UNITS], to become a party to the
Agreement, and Holder agrees to do so in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Joinder hereby agree as follows:
1. Agreement to be Bound. Holder hereby (i) acknowledges that it has
---------------------
received and reviewed a complete copy of the Agreement and (ii) agrees that upon
execution of this Joinder, it shall become a party to the Agreement and shall be
fully bound by, and subject to, all of the covenants, terms and conditions of
the Agreement as though an original party thereto and shall be deemed, and is
hereby admitted as, a Member for all purposes thereof and entitled to all the
rights incidental thereto.
2. Members Schedule. For purposes of the Members Schedule, the address
----------------
of the Holder is as follows:
[NAME]
[ADDRESS]
[FACSIMILE NUMBER]
3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
-------------
HEREUNDER SHALL BE INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
4. Descriptive Headings. The descriptive headings of this Joinder are
--------------------
inserted for convenience only and do not constitute a part of this Joinder.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Joinder as of
the date first above written.
MUZAK HOLDINGS LLC
By: ___________________________________
Name:
Title:
[HOLDER]
By: ___________________________________
Name:
Title:
SCHEDULE A
----------
OFFICERS OF MUZAK HOLDINGS LLC
(AS OF MARCH 18, 1999)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ President and Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇ Vice President
▇▇▇▇ ▇▇▇▇▇▇ Vice President and Secretary
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Vice President
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Chief Operating Officer
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chief Financial Officer and Treasurer
