EXHIBIT 10.13
MUZAK HOLDINGS LLC
FORM OF
INCENTIVE UNIT AGREEMENT
THIS INCENTIVE UNIT AGREEMENT (the "Agreement") is made as of _________, 1999 by
and between Muzak Holdings LLC, a Delaware limited liability company (the
"Company"), __________________(the "Recipient") and ABRY Broadcast Partners III,
L.P., a Delaware limited partnership "ABRY").
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 hereto, intending to be legally bound, agree as
follows:
1. Issuance of Incentive Units. The Company hereby issues to the Recipient
---------------------------
___ Class B-1 Units, ___ Class B-2 Units and ___ Class B-3 Units. The Class B-
1, Class B-2 and Class B-3 Units together comprise the incentive units (the
"Incentive Units").
2. Vesting of Incentive Units. The Incentive Units of each Class shall "vest"
--------------------------
as provided in this Section 2. As of any date, the total number of Incentive
Units of any Class which will be "Vested Units" shall equal the product of the
total number of Incentive Units of such Class multiplied by the applicable
"Percentage" set forth in the following Schedule for such date; provided that
all of the Incentive Units shall be "Vested Units" upon a Sale of the Company;
provided further, that on the date upon which Recipient's employment by the
Company or any of its Subsidiaries terminates, vesting shall immediately cease,
with the effect that from and after such date the total number of Incentive
Units of any Class which will be "Vested Units" shall equal the number of
Incentive Units of such Class which were "Vested Units" on the date of such
termination, whether or not a Sale of the Company occurs thereafter.
Schedule
Anniversary of Date of Grant Vesting Percentage
---------------------------- ------------------
Prior to March 18, 2000 0%
March 18, 2000-March 17, 2001 20%
March 18, 2001-March 17, 2002 40%
March 18, 2002-March 17, 2003 60%
March 18, 2003-March 17, 2004 80%
After March 17, 2004 100%
As of any date, the term "Unvested Units" of any Class means the Incentive Units
of such Class which are not "Vested Units."
3. Repurchase of Unvested Units. The Company or ABRY may repurchase the
----------------------------
Unvested Units of each Class in the event that the Recipient's employment by the
Company or any of its Subsidiaries terminates (the "Repurchase Right"). Such
right shall be exercisable at any time within 18 months after the date of such
termination. The aggregate repurchase price for all Unvested Units shall be
$1.00.
4. Restrictions on Transfer. Without the Company's prior written consent, the
------------------------
Recipient will not, directly or indirectly, sell, transfer, assign, pledge or
otherwise dispose of (a "Transfer") any interest in any Incentive Unit except as
--------
provided in Section 2 above. The restrictions contained in this Section 4 will
not apply to any Transfer of Incentive Units to the Recipient's spouse or
descendants (whether natural, step or adopted) or, upon the Recipient's death,
to the Recipient's heirs, executors or administrators, so long as the transferee
(a "Permitted Transferee") executes a counterpart of this Agreement agreeing to
--------------------
be bound by all provisions hereof. The provisions of this Section 4 will cease
to be effective upon a Qualified Public Offering.
5. Approved Company Sale.
---------------------
(a) If the Majority of the Board and a Majority in Voting Interest approve
a Sale of the Company (an "Approved Company Sale"), then the Recipient
---------------------
will consent to and raise no objections against the Approved Company
Sale. If the Approved Company Sale is structured as a merger or
consolidation, then the Recipient will waive any dissenters rights,
appraisal rights or similar rights in connection with such merger or
consolidation. If the Approved Company Sale is structured as a
Transfer of membership interests, then subject to the following
sentence the Recipient will agree to sell all of his or her Incentive
Units on the terms and conditions approved by the Majority of the
Board and a Majority in Voting Interest. The Recipient will take all
necessary or desirable actions in connection with the consummation of
an Approved Company Sale as requested by the Majority of the Board,
including, without limitation, executing a sale contract pursuant to
which the Company's members or other selling Persons will severally
(but not jointly) make the same representations, warranties and
indemnities regarding the Company and its assets, liabilities and
business (collectively, the "Company Reps") and such representations
------------
and warranties concerning such Person and the membership interests to
be sold by such Person as may be set forth in any agreement approved
by the Majority of the Board; provided, that if any Person pays any
--------
amount in connection with any claim under the Company Reps by the
purchaser or purchasers in such Approved Company Sale (a "Company
-------
Loss"), then the Recipient will simultaneously contribute to such
----
Person an amount equal to the Recipient's pro rata share (based upon
the amount of consideration received in such Approved Company Sale) of
such Company Loss.
(b) The obligations of the holders of Securities pursuant to Section 5(a)
are subject to the satisfaction of the following conditions: (i) upon
the consummation of the
-2-
Approved Company Sale, the selling Persons will receive the same form
of consideration and the same portion of the aggregate consideration
such Persons would have received if such aggregate consideration had
been distributed by the Company in complete liquidation pursuant to
the rights and preferences set forth in the LLC Agreement as in effect
immediately prior to the consummation of the Approved Company Sale
(and, if less than all of the outstanding membership interests of the
Company are being sold in the Approved Company Sale, then the form and
portions of aggregate consideration shall be determined as if the
membership interests included in the Approved Company Sale were all of
the outstanding membership interests of the Company then outstanding);
and (ii) if any selling Persons are given an option as to the form and
amount of consideration to be received, each selling Person will be
given the same option.
(c) If the Majority of the Board, the Company or any member of the Company
enters into any negotiation or transaction for which Rule 506 under
the Securities Act (or any similar rule then in effect) promulgated by
the Securities Exchange Commission may be available with respect to
such negotiation or transaction (including a merger, consolidation or
other reorganization), then if the Recipient is not an "accredited
investor," as that term is defined in Regulation D as promulgated
under the Securities Act, then at the request of the Company the
Recipient will appoint either a purchaser representative (as such term
is defined in Rule 501 under the Securities Act) designated by the
Company, in which event the Company will pay the fees of such
purchaser representative, or another purchaser representative
(reasonably acceptable to the Company), in which event such holder
will be responsible for the fees of the purchaser representative so
appointed.
(d) All selling Persons will bear their pro rata share (based upon the
amount of consideration received or proposed to be received in the
applicable actual or proposed Approved Company Sale) of the costs of
any actual or proposed Approved Company Sale to the extent such costs
are incurred for the benefit of all such Persons and are not otherwise
paid by the Company or the acquiring party.
6. Further Assurances. In the event that the Majority of the Board approves a
------------------
recapitalization of or a transaction requiring the recapitalization of, the
Company or its subsidiaries, including, without limitation, a public offering
and sale of securities pursuant to an effective registration statement under the
Securities Act, then the Recipient will take all necessary or desirable actions
in connection with the consummation of such recapitalization or transaction as
the Majority of the Board or a Majority in Voting Interest so request subject to
the following limitation: immediately after any such recapitalization or
transaction, each member of the Company shall hold securities of the applicable
surviving entity with rights, preferences and privileges substantially
equivalent to the securities held by such member immediately prior to such
recapitalization or transaction. Without limiting the generality of the
foregoing, if requested as provided in the immediately preceding sentence, then
the Recipient will take such actions as may be necessary or desirable for
-3-
the Company to convert to a corporate form, including without limitation the
approval of a merger of the Company with and into a corporation, with the result
that each member of the Company shall hold capital stock of such surviving
corporation.
7. Lock-Up. The Recipient will not effect any Transfer (including sales
-------
pursuant to Rule 144) of Incentive Units during the seven days prior to and the
180-day period beginning on the effective date of any underwritten registered
offering of securities of the Company unless the underwriter(s) managing such
underwritten registration otherwise agree.
8. Legend. Each instrument evidencing Incentive Units will be stamped or
------
otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO AN
INCENTIVE UNIT AGREEMENT DATED AS OF _____________, 1999 AMONG
THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE INITIAL
HOLDER THEREOF, AS AMENDED FROM TIME TO TIME. A COPY OF SUCH
INCENTIVE UNIT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
9. Definitions. When used in this Agreement, the following terms have the
-----------
respective meanings set forth in the Amended and Restated Limited Liability
Company Agreement of the Company, dated as of March 18, l999, as amended or
restated from time to time, by and among and the Members of the Company (the
"LLC Agreement"):
--------------
Class A Unit
Class B-1 Unit
Class B-2 Unit
Class B-3 Unit
Common Unit
Majority in Voting Interest
Majority of the Board
Person
Unpaid Yield
Unreturned Capital Value
In addition, the following terms have the following respective meanings:
"Person" means an individual, a partnership, a corporation, an association, a
------
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization or any other entity (including, without limitation,
any governmental entity or any department, agency or political subdivision
thereof).
-4-
"Qualified Public Offering" means the sale in a public offering registered under
-------------------------
the Securities Act of membership interests of the Company or any of its
successors (A)(i) providing net proceeds to the Company or any of its successors
and the selling equity holders of at least $25,000,000 or (ii) where at least
25% (determined after such offering) of the outstanding Common Units or any of
its successors have been sold in such sale and (B) the offering price per Common
Unit in such public offering is greater than the highest Unpaid Yield and
Unreturned Capital Value attributable to any Class A Unit as of immediately
prior to such public offering (as adjusted for any unit or stock split, or
dividend or distribution or any other recapitalization in contemplation of such
public offering).
"Sale of the Company" means the sale of the Company and/or its subsidiaries to
-------------------
one or more Persons in which the purchaser(s) directly or indirectly acquire (i)
membership interests of the Company constituting a majority (by voting power) of
the membership interests of the Company on a fully-diluted basis (whether by
merger, consolidation, sale or Transfer of any or all of the Company's
outstanding securities) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis (including the equity securities or assets of
the Company's Subsidiaries).
"Securities Act" means the Securities Act of 1933, as amended from time to time.
10. General Provisions
------------------
(a) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a 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.
(b) Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of and be enforceable by the Company, Recipient and ABRY and
their respective successors and assigns (including subsequent holders
of Incentive Units); provided that the rights and obligations of
--------
Recipient (and his Permitted Transferees) under this Agreement shall
not be assignable except in connection with a transfer of Incentive
Units permitted by this Agreement.
(c) 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 parties hereto 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.
-5-
(d) Amendment and Waiver. The provisions of this Agreement may be amended
--------------------
and waived only with the prior written consent of the Company,
Recipient and ABRY.
(e) Business Days. If any time period for giving notice or taking action
-------------
hereunder 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.
(f) Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this
Agreement.
(g) Governing Law. All issues and questions concerning the construction,
-------------
validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Delaware, 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.
(h) Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable
overnight courier service (charges prepaid), or mailed to the
recipient by certified or registered mail, return receipt requested
and postage prepaid. Such notices, demands and other communications
shall be sent to the Company, Recipient and ABRY at the respective
addresses listed below:
If to the Company, to:
Muzak Holdings LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
With a copy to (which will not constitute notice to the Company) to:
ABRY Partners, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
-6-
If to the Recipient:
To the most recent address listed within the personnel records of the
Company. Such recipient may then forward a copy to his personal
attorney.
If to ABRY, to:
ABRY Broadcast Partners III, L.P.
c/o ABRY Partners, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy (which will not constitute notice to ABRY) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Or to such other address or to the attention of such other person as
the recipient party has specified by prior written notice to the
sending party.
(i) Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, any one of which need not contain the signatures of
more than one party, but all such, counterparts taken together shall
constitute one and the same Agreement.
(j) 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
ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
(k) No Strict Construction. The parties hereto 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
hereto, 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.
-7-
(l) Entire Agreement. Except as otherwise expressly set forth herein, this
----------------
Agreement and the other agreements referred to herein embodies the
complete agreement and understanding among the parties hereto with
respect to the subject matter hereof 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
hereof in any way.
11. Forward-Looking Projections. The Recipient hereby acknowledges that he was
---------------------------
shown forward-looking projections regarding the potential future value of the
Incentive Units. The Recipient further acknowledges by initialing below that the
actual future value of the Incentive Units, if any, is not guaranteed and is
subject to fluctuation, with any such future value being determined by the
actual performance of the Company and the timing and terms of its sale.
_________ (Initials of Recipient).
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Incentive Unit
Agreement as of the date first written above.
MUZAK, HOLDING LLC
By:
-------------------------------
Name:
Title:
----------------------------------
[Recipient]
ABRY BROADCAST PARTNERS III, L.P.
By: ABRY Equity Investors, L.P.
Its: General Partner
By: ABRY Holdings III, Inc.
Its: General Partner
By:
-------------------------------
Name:
Title:
