MUZAK HOLDINGS LLC
MUZAK EXHIBIT 10.2
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>a4515426_ex102.txt
<DESCRIPTION>MUZAK EXHIBIT 10.2
<TEXT>
                                                                    Exhibit 10.2

                                                                  EXECUTION COPY

                               MUZAK HOLDINGS LLC

                            INCENTIVE UNIT AGREEMENT

     THIS INCENTIVE UNIT AGREEMENT (the "Agreement"), dated as of October 28,
2003, is by and between Muzak Holdings LLC, a Delaware limited liability company
(the "Company"), Lon Otremba (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.

          (a) Upon execution of this Agreement, the Company will issue to the
Recipient, and the Recipient will acquire, the following: (i) 943 Class B-1
Units, (ii) 943 Class B-2 Units and (iii) 943 Class B-3 Units (collectively, the
"Initial Incentive Units").

          (b) The business model of the Company is attached hereto as Exhibit A
(as in effect from time to time, the "Muzak Model"); provided, that the Muzak
Model may be subject to adjustment from time to time if approved in writing by
the Company, the Recipient and ABRY, provided further, that if Actual EBITDA for
fiscal year 2003 is less than Targeted EBITDA for fiscal year 2003, the Company
will modify the Muzak Model to adjust the Targeted EBITDA for the following
fiscal years accordingly. Commencing with fiscal year 2004 and so long as the
Recipient is still employed by the Company, if the Company's EBITDA (on a
consolidated basis) for a fiscal year as set forth in the audited financial
statements for such fiscal year (the "Actual EBITDA") exceeds the Company's
EBITDA (on a consolidated basis) target set forth in the Muzak Model for such
fiscal year (the "Targeted EBITDA") by at least five percent (5%) (the "EBITDA
Benchmark"), the Company will issue to the Recipient, and the Recipient will
acquire, within thirty (30) days after the audited financial statements for such
fiscal year have been delivered and reviewed by the board of directors of the
Company (each such date of issuance, the "Date of Issuance"), the following: (i)
43 Class B-1 Units, (ii) 43 Class B-2 Units and (iii) 44 Class B-3 Units
(collectively, the "Additional Incentive Units" and together with the Initial
Incentive Units, the "Incentive Units"); provided, that if the Recipient is not
eligible to be issued the Additional Incentive Units as a result of the failure
of the Company to reach the EBITDA Benchmark for a particular fiscal year (a
"Missed Year"), in any subsequent fiscal year(s) after a Missed Year, if Actual
EBITDA for such fiscal year exceeds the EBITDA Benchmark for such fiscal year,
(i) the amount of Actual EBITDA in excess of the EBITDA Benchmark for such
fiscal year (the "Excess EBITDA") may be added to the Actual EBITDA of any
Missed Year(s) and (ii) if upon the addition of all or any portion of such
Excess EBITDA to Actual EBITDA for any Missed Year (the "Combined EBITDA"), the
Combined EBITDA equals or exceeds the EBITDA Benchmark for such Missed Year, in
addition to the Additional Incentive Units for that particular subsequent fiscal
year, the Recipient shall be entitled to be issued the Additional Incentive
Units for such Missed Year, provided further, that the Recipient shall only be
entitled to add any portion of Excess EBITDA for a fiscal year to any Missed
Year's Actual EBITDA once and the Recipient shall not be entitled to be issued
the Additional Incentive Units for a Missed Year more than once.

                                       2

<PAGE>

For example, for fiscal year 2004, Targeted EBITDA equals $84,291,000 and the
EBITDA Benchmark equals $88,505,550. If Actual EBITDA for fiscal year 2004
equals $86,505,550, the Recipient would not be issued Additional Incentive Units
and fiscal year 2004 would be deemed a Missed Year (the "2004 Missed Year"). For
fiscal year 2005, Targeted EBITDA equals $94,836,000 and the EBITDA Benchmark
equals $99,577,800. If Actual EBITDA for fiscal year 2005 equals $98,577,800,
the Recipient would not be issued Additional Incentive Units and fiscal year
2005 would also be deemed a Missed Year (the "2005 Missed Year"). For fiscal
year 2006, Targeted EBITDA equals $106,648,000 and the EBITDA Benchmark equals
$111,980,400. If Actual EBITDA for fiscal year 2006 equal $110,980,400, the
Recipient would not be issued Additional Incentive Units and fiscal year 2006
would also be deemed a Missed Year (the "2006 Missed Year"). For fiscal year
2007, Targeted EBITDA equals $117,624,000 and the EBITDA Benchmark equals
$123,505,200. If Actual EBITDA for fiscal year 2007 equals $126,505,200, the
EBITDA Benchmark for fiscal year 2007 would be met and in addition, there would
be Excess EBITDA equal to $3,000,000 for fiscal year 2007. The Recipient would
then be entitled to (i) add the $2,000,000 of Excess EBITDA from fiscal year
2007 to the $86,505,550 of Actual EBITDA in the 2004 Missed Year to reach the
EBITDA Benchmark for fiscal year 2004 and (ii) add the remaining $1,000,000 of
Excess EBITDA from fiscal year 2007 to (A) the $98,577,800 of Actual EBITDA in
the 2005 Missed Year to reach the EBITDA Benchmark for fiscal year 2005 or (B)
the $110,980,400 of Actual EBITDA in the 2006 Missed Year to reach the EBITDA
Benchmark for fiscal year 2006. As a result, within thirty (30) days after the
audited financials for fiscal year 2007 have been delivered and reviewed by the
board of directors of the Company, the Company would issue to the Recipient
Additional Incentive Units (i) for fiscal year 2007, (ii) for the 2004 Missed
Year and (iii) for the 2005 Missed Year or the 2006 Missed Year.

          (c) Within thirty (30) days after the Recipient is issued any
Incentive Units from the Company, the Recipient will make an effective election
with the Internal Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder in the form of Exhibit B
attached hereto.

                                       3
<PAGE>

     2. Vesting of Incentive Units.

          (a) Initial Incentive Units. The Initial Incentive Units of each class
shall "vest" as provided in this Section 2(a). As of any date, the total number
of Initial Incentive Units of any class which will be "Vested Units" shall equal
the product of the total number of Initial Incentive Units of such class
multiplied by the applicable "Initial Incentive Units Vesting Percentage" set
forth in the following schedule for such date (except if the termination of
Recipient's employment is (i) as a result of death or disability, (ii) without
Company's Good Reason or (iii) for Executive's Good Reason); provided, that all
of the Initial Incentive Units shall be "Vested Units" upon a Sale of the
Company; provided further, that on the effective 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 Initial Incentive Units of any class which will be "Vested Units"
shall equal the number of Initial Incentive Units of such class which were
"Vested Units" on the effective date of such termination, whether or not a Sale
of the Company occurs thereafter. If (a) the Company or any of its Subsidiaries
terminates the Recipient's employment without Company's Good Reason (except if
termination is a result of death or disability) or Recipient terminates his
employment for Executive's Good Reason and (b) Actual EBITDA as of the effective
date of the Recipient's termination equals or exceeds Targeted EBITDA as of such
effective date of the Recipient's termination, on the effective date of such
termination, the total number of Initial Incentive Units of any class which will
be "Vested Units" shall equal (x) the total number of Initial Incentive Units of
such class multiplied by the applicable "Initial Incentive Units Vesting
Percentage" set forth in the following schedule for such date plus (y) the total
number of Initial Incentive Units of such class multiplied by a percentage (%)
equal to (i) twenty (20) multiplied by (ii) the number of days elapsed from the
most recent September 29 through the effective date of Recipient's termination
divided by three hundred and sixty-five (365). If Recipient's employment by the
Company or any of its Subsidiaries terminates as a result of death or
disability, on the effective date of such termination, the total number of
Initial Incentive Units of any class which will be "Vested Units" shall equal
(x) the total number of Initial Incentive Units of such class multiplied by the
applicable "Initial Incentive Units Vesting Percentage" set forth in the
following schedule for such date plus (y) the total number of Initial Incentive
Units of such class multiplied by twenty percent (20%) (the "Additional Vesting
Percentage"); provided, that if the effective date of such termination is either
on September 29, 2004, September 29, 2005, September 29, 2006, September 29,
2007 or September 29, 2008, the Additional Vesting Percentage will not apply to
the Initial Incentive Units; provided further, that except for the application
of the Additional Vesting Percentage to the Initial Incentive Units (if
applicable) on the effective date of such termination, vesting shall immediately
cease, whether or not a Sale of the Company occurs thereafter.

                                                         Initial Incentive Units
                                                         -----------------------
                           Date                            Vesting Percentage
                           ----                            ------------------
Prior to September 29, 2004                                           0 %
September 29, 2004 - September 28 2005                               20.0 %
September 29, 2005 - September 28, 2006                              40.0 %
September 29, 2006 - September 28, 2007                              60.0 %
September 29, 2007 - September 28, 2008                              80.0 %
September 29, 2008 and thereafter                                   100.0 %

                                       4
<PAGE>

          (b) Additional Incentive Units. The Additional Incentive Units of each
class shall "vest" as provided in this Section 2(b). As of any date, the total
number of Additional Incentive Units of any class which will be "Vested Units"
shall equal the product of the total number of Additional Incentive Units of
such class multiplied by the applicable "Additional Incentive Units Vesting
Percentage" set forth in the following schedule for such date (except if the
termination of Recipient's employment is (i) a result of death or disability,
(ii) without Company's Good Reason or (iii) for Executive's Good Reason);
provided, that all of the Additional 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 Additional Incentive Units of any class which will be
"Vested Units" shall equal the number of Additional 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. If (a) the Company or any of its
Subsidiaries terminates the Recipient's employment without Company's Good Reason
(except if termination is a result of death or disability) or Recipient
terminates his employment for Executive's Good Reason and (b) Actual EBITDA as
of the effective date of the Recipient's termination equals or exceeds Targeted
EBITDA as of such effective date of the Recipient's termination, on the
effective date of such termination, the total number of Additional Incentive
Units of any class which will be "Vested Units" shall equal (x) the total number
of Additional Incentive Units of such class multiplied by the applicable
"Additional Incentive Units Vesting Percentage" set forth in the following
schedule for such date plus (y) the total number of Additional Incentive Units
of such class multiplied by a percentage (%) equal to (i) twenty (20) multiplied
by (ii) the number of days elapsed from the most recent September 29 through the
effective date of Recipient's termination divided by three hundred and
sixty-five (365). If Recipient's employment by the Company or any of its
Subsidiaries terminates as a result of death or disability, on the effective
date of such termination, the total number of Additional Incentive Units of any
class which will be "Vested Units" shall equal (x) the total number of
Additional Incentive Units of such class multiplied by the applicable
"Additional Incentive Units Vesting Percentage" set forth in the following
schedule for such date plus (y) the total number of Additional Incentive Units
of such class multiplied by twenty percent (20%) (also, the "Additional Vesting
Percentage"); provided, that if the effective date of such termination is on the
anniversary of a Date of Issuance for any Additional Incentive Units, the
Additional Vesting Percentage will not apply to such Additional Incentive Units;
provided further, that except for the application of the Additional Vesting
Percentage to the Additional Incentive Units (if applicable) on the effective
date of such termination, vesting shall immediately cease, whether or not a Sale
of the Company occurs thereafter.
<TABLE>
<CAPTION>

                                    Date                                            Additional Incentive Units
                                    ----                                            --------------------------
                                                                                        Vesting Percentage
                                                                                        ------------------

<S>                                                                                             <C>
Prior to the 1st anniversary of the applicable Date of Issuance                                 0.0 %
1st anniversary of the applicable Date of Issuance -
     prior to the 2nd anniversary of the Date of Issuance                                      20.0 %
2nd anniversary of the applicable Date of Issuance -
     prior to the 3rd anniversary of the Date of Issuance                                      40.0 %
3rd anniversary of the applicable Date of Issuance -
     prior to the 4th anniversary of the Date of Issuance                                      60.0 %
4th anniversary of the applicable Date of Issuance -
     prior to the 5th anniversary of the Date of Issuance                                      80.0 %
5th anniversary of the applicable Date of Issuance and
     thereafter                                                                               100.0 %
</TABLE>

          (c) 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 (directly or
indirectly) 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
eighteen (18) months after the date of such termination. The aggregate
repurchase price for all Unvested Units shall be $1.00.

                                       5
<PAGE>

     4. Restriction 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. 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 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 the 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 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 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.

                                       6
<PAGE>

          (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 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:

                                       7
<PAGE>

        THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO AN
        INCENTIVE UNIT AGREEMENT DATED AS OF OCTOBER 28, 2003 AMONG THE
        ISSUER OF SUCH SECURITIES (THE "COMPANY"), A CERTAIN PARTY, AND
        THE INITIAL HOLDER THEREOF, AS MAY BE 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. Definition. When used in this Agreement, the following terms have the
respective meaning set forth in the Fourth Amended and Restated Limited
Liability Company Agreement of the Company, dated as of March 15, 2002, as
amended or restated from time to time, by and among and the Members of the
Company (the "LLC Agreement"):

                  Class A Unit
                  Class A-1 Unit
                  Class A-2 Unit
                  Class B-1 Unit
                  Class B-2 Unit
                  Class B-3 Unit
                  Common Unit
                  Majority in Voting Interest
                  Majority of the Board
                  Members
                  Securities
                  Subsidiaries
                  Unpaid Yield
                  Unreturned Common Investment Unit Capital Value


In addition, the following terms have the following respective meanings:

"Company's Good Reason" shall have the meaning ascribed to it in that certain
Executive Employment Agreement, by and among the Company, Muzak LLC, a Delaware
limited liability company, and the Recipient, dated as of September 29, 2003 (as
may be in effect from time to time).

"Executive's Good Reason" shall have the meaning ascribed to it in that certain
Executive Employment Agreement, by and among the Company, Muzak LLC, a Delaware
limited liability company, and the Recipient, dated as of September 29, 2003 (as
may be in effect from time to time).

"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).

                                       8
<PAGE>

"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
twenty-five percent (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 Common Investment Unit Capital Value
attributable to any Class A Unit, Class A-1 Unit and Class A-2 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 the 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.

                                       9
<PAGE>

          (d) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company, the
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, the Recipient and ABRY at the
respective addresses listed below:

If to the Company:

         Muzak Holdings LLC
         3318 Lakemont Blvd
         Fort Mill, SC  29708
         Attn:  General Counsel

         with copies (which will not constitute notice to the Company) to:
         ----------------------------------------------------------------

         ABRY Partners, LLC
         111 Huntington Avenue
         30th Floor
         Boston, MA  02199-7610
         Attn:  Peni Garber

         and

         Kirkland & Ellis LLP
         153 East 53rd Street
         New York, NY  10022
         Attn:  John L. Kuehn, Esq.
                   Lisa A. Anastos, Esq.

If to the Recipient:

         Lon Otremba
         318 Kenmore Road
         Douglaston, NY  11363

         with a copy (which will not constitute notice to the Recipient):
         ---------------------------------------------------------------

         Franklin, Weinrib, Rudell & Vassallo, P.C.
         488 Madison Avenue
         New York, NY  10022
         Attn:  Daniel M. Wasser, Esq.

If to ABRY:

         ABRY Broadcast Partners III, L.P.
         c/o ABRY Partners, LLC
         11 Huntington Avenue
         30th Floor
         Boston, MA  02199-7610
         Attn:  Peni Garber

         with a copy (which will not constitute notice to ABRY) to:
         ---------------------------------------------------------

         Kirkland & Ellis LLP
         153 East 53rd Street
         New York, NY  10022
         Attn:  John L. Kuehn, Esq.
                   Lisa M. Anastos, Esq.


                                       10
<PAGE>

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.

          (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 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)



                                    * * * * *



                                       11
<PAGE>




         IN WITNESS WHEREOF, the parties hereto have executed this Incentive
Unit Agreement as of the date first written above.





                                            ------------------------------------
                                            LON OTREMBA



                                            MUZAK HOLDINGS LLC


                                            By:
                                                     ---------------------------
                                                     Name:
                                                     Title:



                                            ABRY BROADCAST PARTNERS III, L.P.

                                            By:      ABRY Equity Investors, L.P.
                                            Its:     General Partner

                                            By:      ABRY Holdings III, LLC
                                            Its:     General Partner

                                            By:      ABRY Holdings III Co.
                                            Its:     Sole Member


                                            By:
                                                     ---------------------------
                                                     Name:
                                                     Title:


                                       12
<PAGE>







                                    EXHIBIT A

                                   MUZAK MODEL


                                  See attached.


<PAGE>





                                    EXHIBIT B

                      ELECTION TO INCLUDE PROPERTY IN GROSS
                     INCOME PURSUANT TO SECTION 83(b) OF THE
                              INTERNAL REVENUE CODE



Date of Election:  October ___, 2003


     The undersigned purchased certain Class B Units (the "Units") of Muzak
Holdings LLC, a Delaware limited liability company (the "Company"), on the date
of this Election. Under certain circumstances, the Company or its majority
member has the right to repurchase the Units from the undersigned (or from the
holder of the Units, if different from the undersigned) at the undersigned's
original cost should the undersigned cease to be employed by a subsidiary of the
Company. Hence, the Units are subject to a substantial risk of forfeiture and
are nontransferable. The undersigned desires to make an election to have the
Units taxed under the provision of Code ss.83(b) at the time he purchased the
Units.


     Therefore, pursuant to Code ss.83(b) and Treasury Regulation ss.1.83-2
promulgated thereunder, the undersigned hereby makes an election, with respect
to the Units (described below), to report as taxable income for calendar year
2003 the excess (if any) of the Units' fair market value on the date of this
Election over the purchase price thereof.


The following information is supplied in accordance with Treasury Regulation
ss.1.83-2(e):

1.   The name, address and social security number of the undersigned:


                                            Lon Otremba
                                            318 Kenmore Road
                                            Douglaston, NY  11363
                                            SS# __________________

2.   A description of the property with respect to which the election is being
     made:


                                            943  Class B-1 Units
                                            943  Class B-2 Units
                                            943  Class B-3 Units

3.   The date on which the property was transferred: the date of this Election.
     The taxable year for which such election is made: calendar 2003.



                                       13
<PAGE>


4.   The restrictions to which the property is subject: if, at any time, the
     undersigned ceases to be employed by the Company or a subsidiary of the
     Company, all of the unvested Units shall be subject to repurchase by the
     Company within eighteen months after the date of such termination at an
     aggregate price of $1.00.

5.   The fair market value on the date of purchase of the property with respect
     to which the election is being made, determined without regard to any lapse
     restrictions: $_________.

6.   The amount paid for such property: $0.



                                       14
<PAGE>



     A copy of this election has been furnished to the Secretary of the Company
pursuant to Treasury Regulation ss.1.83-2(e)(7).



                                   -----------------------------
                                   Lon Otremba

</TEXT>
</DOCUMENT>
