EXHIBIT 10.7
EXECUTION COPY
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of March 18, 1999, among
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Muzak Holdings LLC, a Delaware limited liability company ("Holdings LLC"), Muzak
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LLC, a Delaware limited liability company and a wholly-owned subsidiary of
Holdings LLC (the "Company"), and Xxxxxxx X. Xxxx ("Executive").
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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 agree as follows:
1. Employment. The Company will employ Executive, and Executive
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accepts employment with the Company, upon the terms and conditions set forth in
this Agreement, for the period beginning on the date of this Agreement and
ending as provided in Section 6 (the "Employment Period").
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2. Position and Duties. During the Employment Period, Executive
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will (i) serve on the board of directors (or equivalent supervising body) of
Holdings LLC (the "Board"), (ii) exclusively serve as the President and Chief
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Executive Officer of Holdings LLC and the Company and (iii) render such
managerial, analytical, administrative, marketing, creative and other executive
services to Holdings LLC, the Company and their respective subsidiaries (such
entities, the "Muzak Entities") as are from time to time necessary in connection
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with the management and affairs of the Muzak Entities, subject to the authority
of the Board and to the proviso set forth in the following sentence. Executive
will devote substantially all of his business time and attention (except for
permitted vacation periods, community service and service on the boards of non-
competitive entities and reasonable periods of illness or other incapacity) to
the business and affairs of the Muzak Entities, if any; provided that, during
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the Employment Period, Executive will not directly or indirectly own, manage,
control, participate in, consult with, render services for, or in any other
manner engage in the business of providing business music programming and
ancillary communications products and services including broadcast data
delivery, satellite delivered cable television channels, audio marketing and in-
store advertising services to a diverse customer base that includes, among
others, restaurants, retailers, supermarkets and business offices (together with
all reasonably related activities, the "Business") other than (i) on behalf of
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any of the Muzak Entities or (ii) as a passive owner of less than 5% of the
outstanding stock of a corporation of any class which is publicly traded, so
long as Executive has no direct or indirect participation in the business of
such corporation. Executive will report to the Board. Executive will perform
his duties and responsibilities in a diligent, trustworthy, businesslike and
efficient manner.
3. Compensation and Benefits.
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(a) Base Salary. During the Employment Period, Executive shall be
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entitled to receive from the Company $300,000 per annum as base compensation for
services (as in effect from
time to time, the "Base Salary"); provided that, effective on January 1, 2000
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and each anniversary of such date, the Base Salary shall increase by 5% over the
preceding year. The Base Salary will be payable in regular installments in
accordance with the general payroll practices of the Company.
(b) Bonus. In addition to the Base Salary, the Board in its sole
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discretion may award a bonus from the Company (as in effect from time to time,
the "Bonus") in an amount up to $150,000 (as in effect from time to time, the
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"Maximum Bonus") to Executive following the end of each fiscal year during the
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Employment Period as the Board deems appropriate based upon, among other things,
the Company's overall performance and satisfaction of the personal goals of
Executive as established by the Board in advance of each fiscal year; provided
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that, effective on January 1, 2000 and each anniversary of such date the Maximum
Bonus shall increase by 5% over the preceding year. The Bonus, if awarded, for
a fiscal year shall be paid in a single payment within thirty (30) days after
the audited financial statements for such fiscal year have been delivered to the
Board. For any fiscal year which Executive is not employed by the Company at
the end of the fiscal year, Executive shall not be entitled to receive such
Bonus.
(c) Reimbursement of Expenses. During the Employment Period, the
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Company will reimburse Executive for all reasonable expenses incurred by him in
the course of performing his duties under this Agreement and which are
consistent with the Company's policies in effect from time to time with respect
to travel, entertainment and other business expenses, subject to the Company's
reasonable requirements with respect to reporting and documentation of such
expenses.
(d) Benefits. During the Employment Period, Executive shall be
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entitled to participate in any health insurance plan and other similar benefits
which the Company makes available generally to other Company executives and
consistent, in all material respects, with recent past practice at Muzak Limited
Partnership, and shall be entitled to a monthly automobile allowance of $500 and
a monthly housing allowance of $3,000.
4. Vacation Days. Executive shall be entitled to four (4) weeks of
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paid vacation during each year of the Employment Period, in addition to legal
holidays; provided, however, that no such vacation time shall accrue or be
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earned to the extent that such accrual or earning would cause Executive's
accrued or earned, but unused, vacation time to exceed four (4) weeks.
Executive shall make reasonable efforts to schedule vacations so as not to
conflict with the conduct of the Muzak Entities' business.
5. Board Membership. During the Employment Period, Executive shall
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serve as a member of the Board, but only if Executive is then serving as the
President and Chief Executive Officer of Holdings LLC and the Company.
6. Termination. The Employment Period shall terminate under the
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following circumstances:
(a) Death. Executive's death, in which case Executive's employment
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shall terminate on the date of death.
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(b) Disability. If, as a result of Executive's illness, physical or
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mental disability or other incapacity, Executive is unable to perform his duties
under this Agreement for any period of three (3) consecutive months, and within
thirty (30) days after written notice of termination is given by the Company to
Executive (which notice may be given before or after the end of such three-month
period) he shall not have returned to the performance of his duties hereunder on
a full-time basis, the Company may terminate Executive's employment hereunder as
of the latest of (i) the expiration of such three-month period or (ii) the
thirty-first (31st) day following the giving by the Company of the written
notice of termination.
(c) Consolidation, Merger or Comparable Transaction. In the event
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that Holdings LLC consolidates with or merges with and into any other entity,
effects a share exchange, sells or causes its Subsidiaries to sell all or
substantially all of its and its Subsidiaries' consolidated assets or enters
into a comparable capital transaction pursuant to which Holdings LLC is not the
continuing or surviving corporation or sale of a majority of the outstanding
voting power of Holdings LLC's equity securities to a third party occurs such
that a majority of the beneficial ownership of Holdings LLC shall have changed,
Executive's employment may, by written notice of termination, be terminated by
the Company simultaneous with the consummation of such consolidation, merger,
share exchange, asset sale, stock sale or comparable transaction; provided,
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however, that if as a result of any such consolidation, merger, share exchange,
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asset sale, stock sale or comparable transaction, Holdings LLC's common
equityholders do not, directly or indirectly, receive cash and/or marketable
securities having a value of at least fifty percent (50%) of the value of their
common equity of Holdings LLC held immediately prior to such transaction, then
in any such event a termination of Executive's employment by the Company shall
be deemed and treated as a termination of the employment period hereunder by the
Company other than for Company's Good Reason under Paragraph 6(d)(i) for
purposes of this Agreement, including without limitation, for determining
termination benefits under Paragraph 7 hereof.
(d) Voluntary Termination by the Company. The Company may terminate
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Executive's employment (i) for "Company's Good Reason," which for purposes of
this Agreement shall mean a material breach by Executive of any material
provision of this Agreement or violation in any material respect of a written
directive of the Board which has not been cured within ten (10) days after
written notice to Executive, or (ii) for any other reason or for no reason, in
each case, subject to payment of the termination payments, if any, specified in
Paragraph 7 hereof.
(e) Termination by Executive With Good Reason. Executive may
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terminate his employment hereunder at any time for Executive's Good Reason, with
such termination to be effective as of the date stated in a written notice of
termination delivered by Executive to the Board. For purposes of this Agreement,
"Executive's Good Reason" shall mean a material breach by Holdings LLC or the
Company of a material provision of this Agreement which has not been cured
within ten (10) days after written notice of noncompliance has been given by
Executive to the Board.
(f) Voluntary Termination by Executive Without Good Reason. Executive
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may terminate his employment hereunder for any reason other than Executive's
Good Reason as defined above, or for no reason, upon written notice to the
Board.
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(g) Retirement. The Company may require Executive to retire upon
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attaining age 65 if not violative of applicable law, such a decision shall not
be treated as a voluntary termination by the Company for purposes of Paragraph
6(d) above.
In no event shall the termination of Executive's employment affect the
rights and obligations of the parties set forth in this Agreement, except as
expressly set forth herein.
7. Termination Payments. Executive (or his or her estate pursuant
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to Paragraph 6(a) hereof) shall be entitled to receive the following payments
upon termination of his employment hereunder:
(a) In the event of the termination of Executive's employment pursuant
to Paragraph 6(a), 6(c) or 6(f) hereof, or by the Company pursuant to Paragraph
6(d)(i) for Company's Good Reason or pursuant to Paragraph 6(g), the Company
shall pay to Executive (or his estate, as the case may be) as soon as
practicable following such termination any accrued and unpaid Base Salary
through the date of termination as provided in Paragraph 3 hereof.
(b) In the event of the termination of Executive's employment pursuant
to Paragraph 6(b) hereof, the Company shall pay to Executive for a period of
twelve (12) months after the date of termination the amount of the Base Salary
through the end of such twelve (12) month period, less any amounts paid to
Executive pursuant to disability insurance, if any, provided by any of the Muzak
Entities.
(c) In the event of termination pursuant to Paragraph 6(d) of
Executive's employment other than for Company's Good Reason, or pursuant to
Paragraph 6(e) for Executive's Good Reason, the Company shall continue to pay
the Base Salary for twelve (12) months after the date of termination.
(d) Without limiting the remedies available to the Company for breach
by Executive of Paragraph 10 hereof, in the event that Executive violates the
provisions of Paragraph 10 after the termination of his employment with the
Company in a manner materially injurious to the Company (as that term is defined
in Paragraph 10), any termination payments provided in this Paragraph 7
remaining unpaid at the time such violation occurs shall be automatically
forfeited.
8. Resignation as Officer or Director. Upon the termination of the
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Employment Period, Executive will resign each position (if any) that he then
holds as an officer or director of any of the Muzak Entities (including, without
limitation, his membership on the Board).
9. Confidential Information. Executive acknowledges that the
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information, observations and data that (i) have been or may be obtained by him
during his employment or other relationship or interaction with any Muzak Entity
or any predecessor of any Muzak Entity (any such Muzak Entity or any such
predecessor being a "Muzak-Related Company," and collectively they are the
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"Muzak-Related Companies"), prior to and/or after the date hereof concerning the
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business or affairs of the Muzak-Related Companies, and (ii) is treated by the
Muzak-Related Companies as confidential information (collectively, "Confidential
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Information") are and will be the property of
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the Muzak-Related Companies. Therefore, Executive agrees that he will not
disclose to any unauthorized Person or use for his own account any Confidential
Information without the prior written consent of Holdings LLC (by the action of
the Board), unless and to the extent that (x) the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions to act, or (y) disclosure of the aforementioned
matters is required under federal or state law or a duly issued subpoena. In the
event any disclosure pursuant to clause (y) above is to be made, Executive will
give the Board reasonable prior notice thereof and will permit the Muzak-Related
Companies to resist or limit the scope of the disclosure to be made. Executive
will deliver or cause to be delivered to the Company at the termination of the
Employment Period, or at any other time any Muzak Entity or the Board may
request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) containing or
relating to Confidential Information or the business of any Muzak-Related
Company, which he may then possess or have under his control.
10. Non-Compete, Non-Solicitation.
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(a) Non-Compete. Executive acknowledges that during his employment or
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other relationship or interaction with the Muzak-Related Companies, he has and
will become familiar with trade secrets and other confidential information
concerning the Muzak-Related Companies, and with investment opportunities
relating to the business of the Muzak-Related Companies (the "Business"), and
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that his services have been and will be of special, unique and extraordinary
value to the foregoing entities. Therefore, Executive agrees that, during the
Employment Period and thereafter, until the 2nd anniversary of the last day of
the Employment Period (the Employment Period and the remainder of such period
being the "Noncompete Period"), he will not directly or indirectly own, manage,
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control, participate in, consult with, render services for, or in any other
manner engage in any business, or as an investor in or lender to any business
(in each case including, without limitation, on his own behalf or on behalf of
another entity) which constitutes or is competitive with all or part of the
Business (as and where the same is conducted or proposed to be conducted by any
of Muzak-Related Companies during the Employment Period). In addition, in as
much as the Company regularly seeks to acquire additional Muzak franchises
and/or Muzak franchisees, Executive agrees that, during the Employment Period
and thereafter, until the 1st anniversary of the last day of the Employment
Period, he will not directly or indirectly acquire or seek to acquire any Muzak
franchise or the assets or ownership interest of any Muzak franchisee within the
United States. Nothing in this Section 10 will prohibit Executive from being a
passive owner of less than 5% of the outstanding stock of a corporation engaged
in a competing business described above of any class which is publicly traded,
so long as Executive has no direct or indirect participation in the business of
such corporation.
(b) Non-Solicitation. During the Noncompete Period, Executive will
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not directly or indirectly (i) induce or attempt to induce any employee or full-
time independent contractor of any Muzak-Related Company to leave the employ or
contracting relationship with such entity, (ii solicit for employment or as an
independent contractor any person who was an employee or full-time independent
contractor of any Muzak-Related Company, at any time during the Employment
Period, or (ii induce or attempt to induce any customer, supplier or other
business relation of any Muzak-Related Company to cease doing business with such
entity.
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11. Enforcement. The parties hereto agree that if, at the time of
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enforcement of Section 9 or 10, a court holds that any restriction stated in any
such Section is unreasonable under circumstances then existing, then the maximum
period, scope or geographical area reasonable under such circumstances will be
substituted for the stated period, scope or area. Because Executive's services
are unique and because Executive has access to information of the type described
in Sections 9 and 10, the parties hereto agree that money damages would be an
inadequate remedy for any breach of Section 9 or 10. Therefore, in the event of
a breach or threatened breach of Section 9 or 10, any Muzak-Related Company,
may, in addition to other rights and remedies existing in their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions of Section 9 or 10, without posting a bond or other security. The
provisions of Sections 9, 10 and 11 are intended to be for the benefit of the
Company, Holdings LLC, each of the other Muzak Entities, and their respective
successors and assigns, each of which may enforce such provisions and each of
which (other than Holdings LLC and the Company) is an express third-party
beneficiary of such provisions and this Agreement generally. Sections 9 and 10
and this Section 11 will survive and continue in full force in accordance with
their terms notwithstanding any termination of the Employment Period.
12. Representations. Executive represents and warrants to the
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Company and Holdings LLC that Executive is not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement with any
other Person.
13. Key-Man Life Insurance. Executive agrees to submit to any
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requested physical examination in connection with any Muzak Entity's purchase of
a "key-man" insurance policy. Executive agrees to cooperate fully in connection
with the underwriting, purchase and/or retention of a key-man insurance policy
by any Muzak Entity.
14. Miscellaneous.
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(a) Notices. All notices, demands or other communications to be given
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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 address indicated below:
Notices to Executive:
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Xxxxxxx X. Xxxx
c/o Muzak LLC
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
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with a copy (which shall not constitute notice to Executive) to:
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Weil, Gotshal & Xxxxxx
000 Xxxxx Xxxxxx, Xxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Notices to Holdings LLC or the Company:
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Muzak Holdings, LLC
Muzak LLC
c/o ABRY Partners, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
with copies (which shall not constitute notice to any Muzak-Related
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Company) to:
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Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, 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.
(b) Amendment and Waiver. No modification, amendment or waiver of any
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provision of this Agreement will be effective unless such modification,
amendment or waiver is approved in writing by Holdings LLC (with written
approval of the Board), the Company, Executive and ABRY Broadcast Partners III,
L.P. ("ABRY"), if ABRY, directly or indirectly, then holds any common equity
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securities of Holdings LLC. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(c) Severability. Without limiting Section 11, whenever possible, each
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provision of this Agreement will 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 invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect the validity, legality or enforceability of any
other provision of this Agreement in such jurisdiction or affect the validity,
legality or enforceability of any provision in any other jurisdiction, but this
Agreement will be reformed, construed and enforced in that jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained in
this Agreement.
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(d) Entire Agreement. Except as otherwise expressly set forth herein,
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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 (including the
Employment Agreement dated May 30, 1997 between Muzak Limited Partnership (a
predecessor entity to the Company) and Executive which Employment Agreement is
hereby terminated), which may have related to the subject matter hereof in any
way.
(e) Successors and Assigns. This Agreement will bind and inure to the
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benefit of and be enforceable by Holdings LLC, the Company and Executive and
their respective assigns; provided that Executive may not assign his rights
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under this Agreement without the prior written consent of each of Holdings LLC
(with written approval of the Board), the Company and ABRY, if ABRY then holds
any common equity securities of Holdings LLC.
(f) Counterparts. This Agreement may be executed simultaneously in
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two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(g) Descriptive Headings; Interpretation. The descriptive headings of
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this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement.
(h) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
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CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT WILL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE
OF WASHINGTON, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT PROVISION
OR RULE (WHETHER OF THE STATE OF WASHINGTON OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF WASHINGTON TO
BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
WASHINGTON WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
EVEN IF UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(i) WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES,
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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 ANY ANCILLARY AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
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(j) No Strict Construction. The parties hereto have participated
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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.
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IN WITNESS WHEREOF, the parties hereto have executed this Executive
Employment Agreement as of the date first written above.
MUZAK HOLDINGS LLC
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Vice President
MUZAK LLC
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Vice President
/s/ XXXXXXX X. XXXX
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XXXXXXX X. XXXX
