EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made as of
November 5, 2002, by and among Muzak Holdings LLC, a Delaware limited liability
company ("Holdings LLC"), Muzak LLC, a Delaware limited liability company and a
wholly owned subsidiary of Holdings LLC (the "Company"), and Xxxxxxx X. Xxxxx
("Executive").
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 accepts
employment with the Company, upon the terms and conditions set forth in this
Agreement, for the period beginning on October 3, 2001 and ending as provided in
Section 6 (the "Employment Period").
2. Position and Duties. During the Employment Period, Executive will (i)
serve on the board of directors (or equivalent supervising body) of Holdings LLC
(the "Board"), (ii) exclusively serve as the Chief Operating Officer, Chief
Financial Officer, and Treasurer 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 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 his best efforts and substantially all
of his business time and attention (except for permitted vacation periods and
reasonable periods of illness or other incapacity) to the business and affairs
of the Muzak Entities; provided that, during 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 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 and the Chief Executive Officer of the Company. Executive will perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
3. Compensation and Benefits.
(a) Base Salary. During the Employment Period, Executive shall be
entitled to receive $200,000 per annum as base compensation for services (as in
effect from time to time, the "Base Salary"); provided that, effective on
October 1, 2002 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
discretion may award a bonus (as in effect from time to time, the "Bonus") in an
amount up to 50% of the Base Salary as then in effect ("Maximum Bonus") to
Executive following the end of each fiscal year during the 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. 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 reviewed
by 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 any
Bonus.
(c) Reimbursement of Expenses. During the Employment Period, the 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 requirements
with respect to reporting and documentation of such expenses.
(d) Benefits. During the Employment Period, Executive shall be entitled
to participate in any health insurance plan and other similar benefits which the
Company makes available generally to other Company executives and further shall
be entitled to a monthly automobile allowance of $300 or, in lieu thereof and at
Company's discretion, the use of an automobile leased by the Company.
(e) Incentive Units. In the event that the Employment Period has not
terminated as of April 3, 2003, Holdings LLC shall grant to Executive 78 Class
B-1 Xxxxx, 00 Class B-2 Units and 79 Class B-3 Units in Holdings LLC that will
vest ratably over a four (4) year period commencing on April 3, 2003; on or
about April 3, 2003, the Board of Directors of Holdings LLC will confirm such
grant, and such grant will be subject to the terms and conditions of an
Incentive Unit Agreement acceptable in form and substance to Holdings LLC.
4. Vacation Days. Executive shall be entitled to four (4) weeks of 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
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 best efforts to schedule vacations so as not to conflict with the
conduct of the Muzak Entities' business, and Executive shall give to the Board
adequate advance notice of his planned absences.
5. Board Membership. During the Employment Period, Executive shall serve as
a member of the Board, but only if Executive is then serving as the Chief
Operating Officer of Holdings LLC and the Company.
6. Termination. The Employment Period shall terminate under the following
circumstances:
(a) Death. Executive's death, in which case Executive's employment shall
terminate on the date of death.
2
(b) Disability. If, as a result of Executive's illness, physical or
mental disability or other incapacity, Executive is unable to perform his or her
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 or she shall not have returned to the performance of his
or her 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 that
Holdings LLC consolidates with or merges with and into any other entity, effects
a share exchange, sells or causes the Company 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 entity or a sale of a majority of the outstanding voting power of
Holdings LLC's equity securities to a third party occurs such that the
beneficial owners of Holdings LLC have substantially 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, however,
that if as a result of any such consolidation, merger, share exchange, asset
sale, stock sale or comparable transaction, Holdings LLC's stockholders 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 membership interests 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 Section 6(d)(i) for purposes of this
Agreement, including without limitation, for determining termination benefits
under Section 7 hereof.
(d) Voluntary Termination by the Company. The Company may terminate
Executive's employment, upon written notice to Executive, (i) for "Company's
Good Reason," which for purposes of this Agreement shall mean a material breach
by Executive which has not been cured within ten (10) days after written notice
to Executive of any material provision of this Agreement, violation in any
material respect of a written directive of the Board, or violation of a material
Company policy, or (ii) for any other reason or for no reason, in each case,
subject to payment of the termination payments, if any, specified in Section 7
hereof.
(e) Termination by Executive With Good Reason. Executive may terminate
his or her 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 Company. 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 Company.
3
(f) Voluntary Termination by Executive Without Good Reason. Executive
may terminate his or her employment hereunder for any reason other than
Executive's Good Reason as defined above, or for no reason, upon thirty (30)
days prior written notice to the Company (provided that, at the Company's
election, such termination will become effective immediately or at such other
time during such 30-day period as the Company may elect).
(g) Retirement. The Company may require Executive to retire upon
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 Section
6(d)(ii) 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 to
Section 6(a) hereof) shall be entitled to receive the following payments upon
termination of his or her employment hereunder:
(a) In the event of the termination of Executive's employment pursuant
to Section 6(a), 6(c) or 6(f) hereof, or by the Company pursuant to Section
6(d)(i) for Company's Good Reason or pursuant to Section 6(g) , the Company
shall pay to Executive (or his or her 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 Section 3 hereof.
(b) In the event of the termination of Executive's employment pursuant
to Section 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 the Muzak
Entities.
(c) In the event of termination pursuant to Section 6(d)(ii) of
Executive's employment other than for Company's Good Reason, or pursuant to
Section 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 Section 9 or 10 hereof, in the event that Executive violates the
provisions of Section 9 or 10 after the termination of his or her employment
with the Company in a manner reasonably determined by the Company to be
materially injurious to any Muzak-Related Company (as that term is defined in
Section 9), any termination payments provided in this Section 7 remaining unpaid
at the time such violation occurs shall be automatically forfeited.
8. Resignation as Officer or Director. Upon the termination of the
Employment Period, Executive will resign each position (if any) that he then
holds as an officer, director or manager of any of the Muzak Entities
(including, without limitation, his membership on the Board).
4
9. Confidential Information. Executive acknowledges that the information,
observations and data that (i) have been or may be obtained by him during his
employment or other relationship or interaction with any of the Muzak Entities
or any predecessor thereof (any of the Muzak Entities or any such predecessor
being a "Muzak-Related Company," and collectively they are "Muzak-Related
Companies"), prior to and/or after the date of this Agreement concerning the
business or affairs of the Muzak-Related Companies, and (ii) is treated by the
Muzak-Related Companies as confidential information (collectively, "Confidential
Information") are and will be the property of 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
Company 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 Company at the termination of the
Employment Period, or at any other time any of the Muzak Entities 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.
(a) Non-Compete. Executive acknowledges that during his employment or
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, and 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, 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. By
initialing in the space provided below, Executive acknowledges that he has read
carefully and had the opportunity to consult with legal counsel regarding the
provisions of this Section 10(a). _____ [initial].
5
(b) Non-Solicitation. During the Noncompete Period, Executive will 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, or in any way interfere with the
relationship between any such entity and any employee or full-time independent
contractor thereof, (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 (iii) induce
or attempt to induce any customer, supplier or other business relation of any
Muzak-Related Company to cease doing business with such entity or in any way
interfere with the relationship between any such customer, supplier or other
business relation and such entity. By initialing in the space provided below,
Executive acknowledges that he has read carefully and had the opportunity to
consult with legal counsel regarding the provisions of this Section 10(b). _____
[initial].
11. Enforcement. The parties hereto agree that if, at the time of
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, 10, and
11 will survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period. By initialing in the
space provided below, Executive acknowledges that he has read carefully and had
the opportunity to consult with legal counsel regarding the provisions of this
Section 11. _____ [initial].
12. Representations. Executive represents and warrants to the 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 requested
physical examination in connection with any of the Muzak Entities' purchase of a
"key-man" insurance policy. Executive agrees to cooperate fully in connection
with the underwriting, purchase and/or retention of any such key-man insurance
policy.
6
14. Miscellaneous.
(a) 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 address indicated below:
Notices to Executive:
Xxxxxxx X. Xxxxx
00000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Notices to the Company:
Muzak LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxx Xxxxx, XX 00000
Attn: Chief Executive Officer
with copies (which shall not constitute notice to any Muzak-Related
Company) to:
ABRY Partners, LLC
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx
and
Xxxxxxxx & Xxxxx
Citigroup Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Xxxx X. Xxxxxxx, 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
provision of this Agreement will be effective unless such modification,
amendment or waiver is approved in writing by Holdings LLC, the Company,
Executive and ABRY Broadcast Partners III, L.P. ("ABRY"), if ABRY then holds any
equity securities of Holdings LLC. The failure of any party to enforce any of
the provisions of this Agreement will in no way be
7
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
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.
(d) 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 (including that
certain Employment Agreement dated September 27, 2000 by and between Executive
and the Company), which may have related to the subject matter hereof in any
way.
(e) Successors and Assigns. This Agreement will bind and inure to the
benefit of and be enforceable by Holdings LLC, the Company and Executive and
their respective assigns; provided that Executive may not assign his rights
under this Agreement without the prior written consent of each of Holdings LLC,
the Company and ABRY, if ABRY then holds any equity securities of Holdings LLC.
(f) 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 will constitute one and
the same Agreement.
(g) Descriptive Headings; Interpretation. The descriptive headings of
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
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF
SOUTH CAROLINA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT PROVISION
OR RULE (WHETHER OF THE STATE OF SOUTH CAROLINA OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF SOUTH CAROLINA
TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
SOUTH CAROLINA WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, EVEN IF UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW
ANALYSIS, THE
8
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(i) 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 ANY ANCILLARY AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
(j) 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.
* * * * *
9
IN WITNESS WHEREOF, the parties hereto have executed this Executive
Employment Agreement as of the date first written above.
/s/ Xxxxxxx X. Xxxxx
----------------------------------------
XXXXXXX X. XXXXX
MUZAK HOLDINGS LLC
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
MUZAK LLC
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
