Document:

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                                                                    Exhibit 10.3
                                                                    ------------

                          PINNACLE ENTERTAINMENT, INC.
                       NONQUALIFIED STOCK OPTION AGREEMENT

     THIS STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as
of the 10th day of April, 2002 by and between Pinnacle Entertainment, Inc., a
Delaware corporation (the "Company"), and Daniel R. Lee ("Optionee").

     A. The Board of Directors of the Company has determined that it is to the
advantage and best interest of the Company to grant to Optionee a nonqualified
stock option (the "Option") to purchase 250,801 shares of the common stock of
the Company (the "Common Stock") in order to more closely align Optionee's
interests with those of other stockholders of the Company, and has approved the
execution of this Agreement between the Company and Optionee.

     B. The Option granted hereby is not intended to qualify as an "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").

     NOW, THEREFORE, in consideration of the mutual agreements contained herein,
Optionee and the Company hereby agree as follows:

1. Grant and Terms of Stock Option.
   -------------------------------

     1.1 Grant of Option. The Company hereby grants to Optionee the right and
         ---------------
option to purchase, subject to the terms and conditions set forth in this
Agreement, all or any part of an aggregate of 250,801 shares of Common Stock at
a purchase price per share equal to $8.45.

     1.2 Vesting and Exercisability. Subject to the other provisions of this
         --------------------------
Agreement, this Option shall vest and become exercisable with respect to 25% of
the shares of Common Stock subject to this Option on the first anniversary of
the date hereof and, on each subsequent anniversary of the date hereof, shall
vest and become exercisable with respect to an additional 25% of the shares
subject hereto so that this Option shall be vested and exercisable with respect
to 100% of the shares subject hereto on the fourth anniversary of the date
hereof. Notwithstanding the foregoing:

          1.2.1 If, before the fourth anniversary of the date hereof, Optionee
     dies or Optionee's employment with the Company is terminated on account of
     Optionee's disability under Section 6.1.4 of Optionee's employment
     agreement with the Company of even date herewith (the "Employment
     Agreement"), this Option shall vest as of the date of death or disability
     (in addition to any vesting that previously occurred) with respect to a
     percentage of the shares subject to this Option determined by multiplying
     25% by a fraction, the numerator of which is the number of days from the
     first day of the year in which such death or disability occurs until the
     date of such death or disability, and the denominator of which is 365;

          1.2.2 This Option shall vest and become fully exercisable prior to the
     scheduled dates above if Optionee's employment with the Company pursuant to
     the Employment Agreement is terminated prior to the expiration of the term
     thereof by

<PAGE>

     the Company without cause (as such term is used in the Employment
     Agreement) or by Optionee for good reason pursuant to Section 6.3 of the
     Employment Agreement.

     1.3 Term of Option. No portion of this Option may be exercised more than
         --------------
ten years from the date of this Agreement. In the event of termination of
Optionee's employment by or cessation of Optionee's services to the Company or
any of its subsidiaries for any reason, with or without cause, including as a
result of death or disability within the meaning of Section 6.1.4 of the
Employment Agreement, the portion of this Option that is not vested and
exercisable as of the date of termination or cessation, and that does not become
vested by reason of such termination or cessation, shall be immediately
cancelled and terminated. In addition, the portion of this Option that is vested
and exercisable as of the date of termination of Optionee's employment by or
cessation of Optionee's services to the Company or any of its subsidiaries shall
terminate and be cancelled on the earlier of (i) the expiration of the ten year
period set forth in the first sentence of this Section 1.3, or (ii) 12 months
after termination of Optionee's employment or cessation of Optionee's services,
regardless of the cause of such termination or cessation; provided, however,
                                                          --------  -------
that if Optionee's employment is terminated by the Company for cause or by
Optionee without good reason (in each case within the meaning of the Employment
Agreement), such portion of this Option shall terminate and be cancelled on the
earlier of (i) the expiration of the ten year period set forth in the first
sentence of this Section 1.3, or (ii) 90 days after such termination.

2.   Method of Exercise.
     -------------------

     2.1 Delivery of Notice of Exercise. This Option shall be exercisable by
         ------------------------------
written notice in the form attached hereto as Exhibit A which shall state the
election to exercise this Option, the number of shares of Common Stock in
respect of which this Option is being exercised, and such other representations
and agreements with respect to such shares as may be required by the Company
pursuant to the provisions of this Agreement. Such written notice shall be
signed by Optionee (or by Optionee's beneficiary or other person entitled to
exercise this Option in the event of Optionee's death pursuant to Section 3
hereof) and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price. This Option shall not be deemed exercised until the Company
receives such written notice accompanied by the exercise price and any other
applicable terms and conditions of this Agreement are satisfied. This Option may
not be exercised for a fraction of a share.

     2.2 Restrictions on Exercise. No shares of Common Stock will be issued
         ------------------------
pursuant to the exercise of this Option unless and until there shall have been
full compliance with all applicable requirements of the Securities Act of 1933,
as amended (whether by registration or satisfaction of exemption conditions),
all applicable listing requirements of any national securities exchange or other
market system on which the Common Stock is then listed and all applicable
requirements of other laws (including, without limitation, state corporations
laws, state securities laws and federal and state tax laws) and of any
regulatory bodies having jurisdiction over such issuance. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be necessary or appropriate,
in the judgment of the Board of Directors (or

                                      -2-

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the Compensation Committee thereof (the "Committee")), to comply with any
applicable laws.

     2.3 Method of Payment. Payment of the exercise price and, if applicable,
         -----------------
any required withholding taxes (as contemplated by Section 6 hereof) shall be
made in full at the time of exercise in cash or by check payable to the order of
the Company, or, subject in each case to the advance approval of the Board of
Directors (or the Committee) in its sole discretion, by delivery of shares of
Common Stock already owned by Optionee, by delivery of a full recourse
promissory note made by Optionee in favor of the Company or by any combination
of the foregoing. Shares of Common Stock used to satisfy the exercise price of
this Option shall be valued at their Fair Market Value (as defined in Section
7.3 hereof) determined on the date of exercise (or if such date is not a
business day, as of the close of the business day immediately preceding such
date). In addition, the Board of Directors (or the Committee) may impose such
other conditions in connection with the delivery of shares of Common Stock in
satisfaction of the exercise price as it deems appropriate in its sole
discretion, including without limitation a requirement that the shares of Common
Stock delivered have been held by Optionee for a specified period of time. Any
promissory note delivered pursuant to this Section 2.3 shall have terms and
provisions (including, without limitation, those relating to the maturity date,
payment schedule and interest rate) as determined by the Board of the Directors
(or the Committee) in its sole discretion, shall be secured by the shares
acquired and shall comply with all applicable laws (including, without
limitation, state and federal margin requirements)

     2.4 No Rights as a Stockholder. Until the stock certificate evidencing
         --------------------------
shares of Common Stock issued upon exercise of this Option is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder will exist with respect to the shares,
notwithstanding the exercise of the Option.

3. Non-Transferability of Option. This Option may not be transferred in any
   -----------------------------
manner otherwise than by will or by the laws of descent or distribution or to a
beneficiary designated by written designation, and may be exercised during the
lifetime of Optionee only by Optionee. Subject to all of the other terms and
conditions of this Agreement, following the death of Optionee, this Option may,
to the extent it is vested and exercisable by Optionee in accordance with its
terms on the date of death, be exercised by Optionee's beneficiary, estate or
other person who acquired the right to exercise this Option by bequest or
inheritance. Notwithstanding the first sentence of this Section 3, (i) this
Option may be assigned pursuant to a qualified domestic relations order as
defined by the Code, and exercised by the spouse of Optionee who obtained such
Option pursuant to such qualified domestic relations order, and (ii) this Option
may be assigned, in connection with Optionee's estate plan, in whole or in part,
during Optionee's lifetime to one or more members of Optionee's immediate family
or to a trust established exclusively for one or more of such immediate family
members. Rights under the assigned portion may be exercised by the person or
persons who acquire a proprietary interest in such Option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the Option immediately before such assignment and shall be
set forth in such documents issued to the assignee as the Board of Directors (or
the Committee) deems

                                      -3-

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appropriate. For purposes of this Section 3, the term "immediate family" means
an individual's spouse, children, stepchildren, grandchildren and parents.

4. Restrictions; Restrictive Legends. Ownership and transfer of shares issued
   ---------------------------------
pursuant to the exercise of this Option will be subject to the provisions of,
including ownership and transfer restrictions (including, without limitation,
ownership and transfer restrictions imposed by applicable gaming laws) contained
in, the Company's Certificate of Incorporation, as amended from time to time,
restrictions imposed by applicable laws and restrictions set forth or referenced
in legends imprinted on certificates representing such shares.

5. Adjustments Upon Changes in Capitalization, Etc.
   -----------------------------------------------

     5.1 Changes in Capitalization. Subject to any required action by the
         -------------------------
stockholders of the Company, if the outstanding shares of Common Stock are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or a successor entity, or for other
property (including without limitation, cash), through reorganization,
recapitalization, reclassification, stock combination, stock dividend, stock
split, reverse stock split, spin off or other similar transaction, an
appropriate and proportionate adjustment will be made in the maximum number and
kind of shares or securities receivable upon exercise of this Option. Any such
adjustment will be made without change in the aggregate purchase price
applicable to the unexercised portion of this Option but with a corresponding
adjustment in the price for each share or other unit of any security covered by
this Option. Such adjustment will be made by the Board of Directors (or the
Committee), whose determination in that respect will be final, binding, and
conclusive.

     5.2 Dissolution or Liquidation. In the event of the proposed dissolution or
         --------------------------
liquidation of the Company, to the extent that this Option had not been
previously exercised, it will terminate immediately prior to the consummation of
such proposed dissolution or liquidation. In such instance, the Company may, in
the exercise of its sole discretion, declare that this Option will terminate as
of a date fixed by the Company and give Optionee the right to exercise this
Option as to all or any part of the optioned stock, including shares as to which
this Option would not otherwise be exercisable.

     5.3 Corporate Transaction. Upon the happening of a "change in control" of
         ---------------------
the Company (within the meaning of the Employment Agreement), the Company may,
in its sole discretion, do one or more of the following: (i) shorten the period
during which this Option is exercisable (provided that it remains exercisable
for at least 30 days after the date notice of such shortening is given to
Optionee); (ii) accelerate the vesting of this Option; (iii) arrange to have the
surviving or successor entity or any parent entity thereof assume this Option or
grant a replacement option with appropriate adjustments in the option prices and
adjustments in the number and kind of securities issuable upon exercise or
adjustments so that this Option or its replacement represents the right to
purchase the shares of stock, securities or other property (including cash) as
may be issuable or payable as a result of such transaction with respect to or in
exchange for the number of shares of Common Stock purchasable and receivable
upon exercise of this Option had such exercise occurred in full prior to such
transaction; or (iv) (A) to the extent this Option is vested (including, if

                                      -4-

<PAGE>

applicable, any acceleration of vesting as contemplated in clause (ii) above),
cancel this Option upon payment to Optionee in cash of an amount that is the
equivalent of the excess of the Fair Market Value of the Common Stock (at the
effective time of the change in control) over the exercise price of this Option,
and (B) to the extent this Option is not vested, either cancel this Option upon
a cash payment to Optionee in the manner set forth in clause (iv)(A) of this
sentence, or arrange for the assumption of this Option in the manner set forth
in clause (iii) of this sentence, in the sole discretion of the Company.

6. Withholding Taxes. The Company will have the right to take whatever steps the
   -----------------
Board of Directors (or the Committee) deems necessary or appropriate to comply
with all applicable federal, state, local, and employment tax withholding
requirements, and the Company's obligations to deliver shares of Common Stock
upon the exercise of this Option will be conditioned upon compliance with all
such withholding tax requirements. Without limiting the generality of the
foregoing, upon the exercise of this Option, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to
Optionee, or to require Optionee to pay to the Company the amount of any taxes
which the Company may be required to withhold with respect to the shares issued
on such exercise. Without limiting the generality of the foregoing, the Board of
Directors (or the Committee) in its discretion may authorize Optionee to satisfy
all or part of any withholding tax liability by (a) having the Company withhold
from the shares of Common Stock which would otherwise be issued on the exercise
of an Option that number of shares having a Fair Market Value, as of the date
the withholding tax liability arises, equal to or less than the amount of the
Company's withholding tax liability, or (b) by delivering to the Company
previously-owned and unencumbered shares of the Common Stock having a Fair
Market Value, as of the date the withholding tax liability arises, equal to or
less than the amount of the Company's withholding tax liability.

7. General.
   --------

     7.1 Governing Law. This Agreement shall be governed by and construed under
         -------------
the laws of the state of Delaware applicable to agreements made and to be
performed entirely in Delaware, without regard to the conflicts of law
provisions of Delaware or any other jurisdiction.

     7.2 Notices. Any notice required or permitted under this Agreement shall be
         -------
given in writing by express courier or by postage prepaid, United States
registered or certified mail, return receipt requested, to the address set forth
below or to such other address for a party as that party may designate by 10
days advance written notice to the other parties. Notice shall be effective upon
the earlier of receipt or 3 days after the mailing of such notice.

     If to the Company:         Pinnacle Entertainment, Inc.
                                330 N. Brand Blvd., Suite 1100
                                Glendale, California 91203
                                Attention: President

                                      -5-

<PAGE>

     If to Optionee:            Dan Lee
                                7521 Amigo Road, Suite 200
                                Las Vegas, Nevada 89119
                                Attention: Dan Lee

     7.3 Determination of Fair Market Value. "Fair Market Value" means, as of
         ----------------------------------
any date, the value of Common Stock determined as follows:

         7.3.1 If the Common Stock is listed on any established stock exchange
     or a national market system, including without limitation, the National
     Market System of NASDAQ, the Fair Market Value of a share of Common Stock
     will be the closing sales price for such stock (or the closing bid, if no
     sales are reported) as quoted on that system or exchange (or the system or
     exchange with the greatest volume of trading in Common Stock) on the last
     market trading day prior to the day of determination, as reported in the
     Wall Street Journal or any other source the Board of Directors (or the
     -------------------
     Committee) considers reliable.

         7.3.2 If the Common Stock is quoted on the NASDAQ System (but not on
     the NASDAQ National Market System) or is regularly quoted by recognized
     securities dealers but selling prices are not reported, the Fair Market
     Value of a share of Common Stock will be the mean between the high bid and
     low asked prices for the Common Stock on the last market trading day prior
     to the day of determination, as reported in the Wall Street Journal or any
                                                     -------------------
     other source the Board of Directors (or the Committee) considers reliable.

         7.3.3 If the Common Stock is not traded as set forth above, the Fair
     Market Value will be determined in good faith by the Board of Directors (or
     the Committee) with reference to the earnings history, book value and
     prospects of the Company in light of market conditions generally, and any
     other factors the Board of Directors (or the Committee) considers
     appropriate, such determination by the Board of Directors (or the
     Committee) to be final, conclusive and binding.

     7.4 Community Property. Without prejudice to the actual rights of the
         ------------------
spouses as between each other, for all purposes of this Agreement, Optionee
shall be treated as agent and attorney-in-fact for that interest held or claimed
by his or her spouse with respect to this Option and the parties hereto shall
act in all matters as if Optionee was the sole owner of this Option. This
appointment is coupled with an interest and is irrevocable.

     7.5 No Employment Rights. Nothing herein contained shall be construed as an
         --------------------
agreement by the Company or any of its subsidiaries, express or implied, to
employ Optionee or contract for Optionee's services, to restrict the Company's
or such subsidiary's right to discharge Optionee or cease contracting for
Optionee's services or to modify, extend or otherwise affect in any manner
whatsoever the terms of any employment agreement or contract for services which
may exist between Optionee and the Company or any of its subsidiaries.

                                      -6-

<PAGE>

     7.6  Modifications. This Agreement may be amended, altered or modified only
          -------------
by a writing signed by each of the parties hereto.

     7.7  Application to Other Stock. In the event any capital stock of the
          --------------------------
Company or any other corporation shall be distributed on, with respect to, or in
exchange for shares of Common Stock as a stock dividend, stock split,
reclassification or recapitalization in connection with any merger or
reorganization or otherwise, all restrictions, rights and obligations set forth
in this Agreement shall apply with respect to such other capital stock to the
same extent as they are, or would have been applicable, to the shares on or with
respect to which such other capital stock was distributed.

     7.8  Additional Documents. Each party agrees to execute any and all further
          --------------------
documents and writings, and to perform such other actions, which may be or
become reasonably necessary or expedient to be made effective and carry out this
Agreement.

     7.9  No Third-Party Benefits. Except as otherwise expressly provided in
          -----------------------
this Agreement, none of the provisions of this Agreement shall be for the
benefit of, or enforceable by, any third-party beneficiary.

     7.10 Successors and Assigns. Except as provided herein to the contrary,
          ----------------------
this Agreement shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns.

     7.11 No Assignment. Except as otherwise provided in this Agreement,
          -------------
Optionee may not assign any of his rights under this Agreement without the prior
written consent of the Company, which consent may be withheld in its sole
discretion. The Company shall be permitted to assign its rights or obligations
under this Agreement, but no such assignment shall release the Company of any
obligations pursuant to this Agreement.

     7.12 Severability. The validity, legality or enforceability of the
          ------------
remainder of this Agreement shall not be affected even if one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect.

     7.13 Equitable Relief. Optionee acknowledges that, in the event of a
          ----------------
threatened or actual breach of any of the provisions of this Agreement, damages
alone will be an inadequate remedy, and such breach will cause the Company
great, immediate and irreparable injury and damage. Accordingly, Optionee agrees
that the Company shall be entitled to injunctive and other equitable relief, and
that such relief shall be in addition to, and not in lieu of, any remedies it
may have at law or under this Agreement.

     7.14 Arbitration.
          -----------

          7.14.1 General. Any controversy, dispute, or claim between the
                 -------
parties to this Agreement, including any claim arising out of, in connection
with, or in relation to the formation, interpretation, performance or breach of
this Agreement shall be settled exclusively by arbitration, before a single
arbitrator, in accordance with this Section 7.14 and the then most applicable
rules of the American Arbitration Association. Judgment upon any award rendered
by the arbitrator may be entered by any state or federal court having
jurisdiction thereof. Such arbitration shall be administered by the American
Arbitration

                                      -7-

<PAGE>

Association. Arbitration shall be the exclusive remedy for determining any such
dispute, regardless of its nature. Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court for provisional relief, including
a temporary restraining order or a preliminary injunction, on the ground that
the award to which the applicant may be entitled in arbitration may be rendered
ineffectual without provisional relief. Unless mutually agreed by the parties
otherwise, any arbitration shall take place in the City of Los Angeles,
California.

          7.14.2 Selection of Arbitrator. In the event the parties are unable to
                 -----------------------
agree upon an arbitrator, the parties shall select a single arbitrator from a
list of nine arbitrators drawn by the parties at random from the "Independent"
(or "Gold Card") list of retired judges or, at the option of Optionee, from a
list of nine persons (which shall be retired judges or corporate or litigation
attorneys experienced in stock options and buy-sell agreements) provided by the
office of the American Arbitration Association having jurisdiction over Los
Angeles, California. If the parties are unable to agree upon an arbitrator from
the list so drawn, then the parties shall each strike names alternately from the
list, with the first to strike being determined by lot. After each party has
used four strikes, the remaining name on the list shall be the arbitrator. If
such person is unable to serve for any reason, the parties shall repeat this
process until an arbitrator is selected.

          7.14.3 Applicability of Arbitration; Remedial Authority. This
                 ------------------------------------------------
agreement to resolve any disputes by binding arbitration shall extend to claims
against any parent, subsidiary or affiliate of each party, and, when acting
within such capacity, any officer, director, stockholder, employee or agent of
each party, or of any of the above, and shall apply as well to claims arising
out of state and federal statutes and local ordinances as well as to claims
arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the
discretion of the arbitrator. The remedial authority of the arbitrator (which
shall include the right to grant injunctive or other equitable relief) shall be
the same as, but no greater than, would be the remedial power of a court having
jurisdiction over the parties and their dispute. The arbitrator shall, upon an
appropriate motion, dismiss any claim without an evidentiary hearing if the
party bringing the motion establishes that he or it would be entitled to summary
judgement if the matter had been pursued in court litigation. In the event of a
conflict between the applicable rules of the American Arbitration Association
and these procedures, the provisions of these procedures shall govern.

          7.14.4 Fees and Costs. Any filing or administrative fees shall be
                 --------------
borne initially by the party requesting arbitration. The Company shall be
responsible for the costs and fees of the arbitration, unless Optionee wishes to
contribute (up to 50%) of the costs and fees of the arbitration. Notwithstanding
the foregoing, the prevailing party in such arbitration, as determined by the
arbitrator, and in any enforcement or other court proceedings, shall be
entitled, to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party's costs (including but not limited to the
arbitrator's compensation), expenses, and attorneys' fees.

          7.14.5 Award Final and Binding. The arbitrator shall render an award
                 -----------------------
and written opinion, and the award shall be final and binding upon the parties.
If any of the provisions of this paragraph, or of this Agreement, are determined
to be unlawful or

                                      -8-

<PAGE>

otherwise unenforceable, in whole or in part, such determination shall not
affect the validity of the remainder of this Agreement, and this Agreement shall
be reformed to the extent necessary to carry out its provisions to the greatest
extent possible and to insure that the resolution of all conflicts between the
parties, including those arising out of statutory claims, shall be resolved by
neutral, binding arbitration. If a court should find that the arbitration
provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any
subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.

     7.15 Headings. The section headings in this Agreement are inserted only as
          --------
a matter of convenience, and in no way define, limit, extend or interpret the
scope of this Agreement or of any particular section.

     7.16 Number and Gender. Throughout this Agreement, as the context may
          -----------------
require, (a) the masculine gender includes the feminine and the neuter gender
includes the masculine and the feminine; (b) the singular tense and number
includes the plural, and the plural tense and number includes the singular; (c)
the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties,
sections, paragraphs and exhibits of and to this Agreement; and (e) periods of
days, weeks or months mean calendar days, weeks or months.

     7.17 Counterparts. This Agreement may be executed simultaneously in two or
          ------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                                      -9-

<PAGE>

     7.18 Complete Agreement. This Agreement and the Employment Agreement
          ------------------
constitute the total and complete agreement of the parties and supersede all
prior and contemporaneous understandings and agreements heretofore made, and
there are no other representations, understandings or agreements.

                                PINNACLE ENTERTAINMENT, INC.

                                By: /s/ Loren S. Oatrow
                                   ------------------------------------
                                Its:___________________________________

                                DANIEL R. LEE

                                    /s/ Daniel R. Lee
                                ---------------------------------------
                                Name:

                                      -10-

<PAGE>

                                 SPOUSAL CONSENT

     By his or her signature below, the spouse of Optionee agrees to be bound by
all of the terms and conditions of the foregoing Option Agreement.

                                             OPTIONEE'S SPOUSE

                                              /s/ Suzanne Lee
                                             --------------------------------
                                             Signature

                                              Suzanne Lee
                                             --------------------------------
                                             Print Name

                                      -11-

<PAGE>

                                    EXHIBIT A
                 NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
                 -----------------------------------------------

Pinnacle Entertainment, Inc.
330 N. Brand Blvd., Suite 1100
Glendale, California 91203
Attn: President

Ladies and Gentlemen:

     The undersigned hereby elects to exercise the option indicated below:

Option Grant Date: ____________________
Number of Shares as to which Option is Being Exercised:  ____________
Exercise Price Per Share: _________________
Total Exercise Price: $_____________
Method of Payment: ______________

     Enclosed herewith is payment in full of the total exercise price and a copy
of the Grant Notice.

     My exact name, current address and social security number for purposes of
the stock certificate to be issued and the stockholder list of the Company are:

                  Name:__________________________________

                  Address:_______________________________

                          _______________________________

                  Social Security Number:________________

                                                  Sincerely,

Dated:_________________                           ______________________________
                                                  (Optionee's Signature)

                                      -12-<PAGE>

                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

              SECOND AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
              -----------------------------------------------------

         This SECOND AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT is dated as
of March 15, 2002, by and among Muzak Holdings LLC (f/k/a ACN Holdings, LLC), a
Delaware limited liability company (the "Company"); MEM Holdings, LLC ("MEM
                                         -------                        ---
Holdings"); AMFM Systems, Inc. ("AMFM"); BancAmerica Capital Investors I, L.P.
--------                         ----
("BACI"); New York Life Capital Partners, L.P. ("New York Life"); and The
  ----                                           -------------
Northwestern Mutual Life Insurance Company ("Northwestern").
                                             ------------

         WHEREAS, the Company, MEM Holdings and Capstar Broadcasting Corporation
("Capstar") entered into that certain Securityholders Agreement, dated as of
  -------
March 18, 1999 (the "Original Agreement");
                     ------------------

         WHEREAS, on November 1, 1999, Capstar transferred all of its Class A
Units to CBC Acqusition Corp., Inc. (n/k/a AMFM), which succeeded to all rights
and obligations of Capstar under the Original Agreement.

         WHEREAS, on September 14, 2000, the Company issued Class A-1 Units to
New York Life and Northwestern and in connection with such issuance New York
Life and Northwestern became parties to the Members Agreement and entered into
the New Equityholders Agreement, dated as of September 14, 2000 (the "New
                                                                      ---
Equityholders Agreement") with the Company and MEM Holdings;
-----------------------

         WHEREAS, on October 18, 2000, the Company issued certain Preferred
Units and Common Units to BACI, New York Life and Northwestern;

         WHEREAS, the Company, MEM Holdings, AMFM, BACI, New York Life and
Northwestern entered into that certain Amended and Restated Securityholders
Agreement, dated as of October 18, 2000 (the "First Amended and Restated
                                              --------------------------
Agreement");
---------

         WHEREAS, the Company and the Equityholders (as defined below) desire
(i) to amend and restate the First Amended and Restated Agreement in its
entirety as set forth herein and (ii) to enter into this Agreement for the
purposes, among others, of (a) establishing the composition of the Board (as
defined below), (b) assuring continuity in the management and ownership of the
Company and (c) limiting the manner and terms by which the Equityholder Units
(as defined below) may be transferred;

         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 hereby agree as follows:

         1.    Definitions.  As used herein, the following terms shall have the
               -----------
following meanings:

         "ABRY" means ABRY Broadcast Partners III, L.P., a Delaware limited
          ----
partnership.

<PAGE>

         "ABRY Investor" means any of (i) MEM Holdings, (ii) a Section 10
          -------------
Assignee (as hereinafter defined) of an ABRY Investor, or (iii) any of their
respective Permitted Transferees.

         "ABRY Management Services Agreement" means the Amended and Restated
          ----------------------------------
Management and Consulting Services Agreement, dated as of March 18, 1999,
between ABRY Partners, LLC (as successor to ABRY Partners, Inc.) and Muzak, as
amended, restated, supplemented or otherwise modified from time to time.

         "ABRY Units" means all Equityholder Units owned by any ABRY Investor.
          ----------

         "Affiliate" means, when used with reference to a specified Person, any
          ---------
Person that directly or indirectly controls or is controlled by or is under
common control with the specified Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise). With respect to any Person who is an individual, "Affiliates" shall
also include, without limitation, any member of such individual's Family Group.

         "AMFM Investor" means any of (i) AMFM, (ii) a Section 10 Assignee (as
          -------------
hereinafter defined) of any AMFM Investor, (iii) any of their respective
Permitted Transferees.

         "AMFM Units" means all Equityholder Units owned by any AMFM Investor.
          ----------

         "Board" means the Company's board of directors.
          -----

         "Board Observer" has the meaning set forth in Section 2(b) hereof.
          --------------

         "Business Day" means any day other than a Saturday, Sunday or any other
          ------------
day on which commercial banks in Charlotte, North Carolina or New York, New York
are authorized or required by law or other governmental action to close.

         "Capstar Contribution Agreement" means the Contribution Agreement dated
          ------------------------------
as of February 19, 1999 between Capstar and the Company.

         "Class A Director" shall have the meaning ascribed to such term in the
          ----------------
LLC Agreement.

         "Class A Units" means the Company's Class A Units (as such term is
          -------------
defined in the LLC Agreement).

         "Class A-1 Units" means the Company's Class A-1 Units (as such term is
          ---------------
defined in the LLC Agreement).

         "Class B Units" means the Company's Class B Units (as such term is
          -------------
defined in the LLC Agreement).

                                       2

<PAGE>

         "Class B Director" shall have the meaning ascribed to such term in the
          ----------------
LLC Agreement.

         "Common Equityholder Units" means (i) all Common Units held, directly
          -------------------------
or indirectly, by the Equityholders, and (ii) all equity securities issued
directly or indirectly with respect to any Common Units referred to in clause
(i) above by way of a unit or stock dividend or other distribution, or unit or
stock split, or in connection with a combination of units or shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular units or shares constituting Common Equityholder Units, such units or
shares will cease to be Common Equityholder Units when they have been
Transferred in a Public Sale.

         "Common Investment Units" shall have the meaning ascribed to such term
          -----------------------
in the LLC Agreement.

         "Common Units" means collectively the Common Investment Units, the
          ------------
Class B Units and any other equity securities of the Company which is not
limited to a fixed sum or percentage of par value or stated value in respect of
the rights of the holders thereof to participate in dividends and in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the issuer of such securities (including, by way of
example and without limitation, the common stock of any Successor Corporation
(as herein defined)).

         "Distributions" has the meaning which the LLC Agreement assigns to that
          -------------
term.

         "Equityholder Units" means, collectively, the Common Equityholder Units
          ------------------
and the Preferred Equityholder Units.

         "Equityholders" means collectively the ABRY Investors, the AMFM
          -------------
Investors and the Preferred Investors.

         "Family Group" means, with respect to any Person who is an individual,
          ------------
(i) such Person's spouse, former spouse, ancestors and descendants (whether
natural or adopted), parents and their descendants and any spouse of the
foregoing persons (collectively, "relatives") or (ii) the trustee, fiduciary or
personal representative of such Person and any trust solely for the benefit of
such Person and/or such Person's relatives.

         "Independent Third Party" means any Person who, immediately prior to
          -----------------------
the contemplated transaction, does not own in excess of 5% of the number of
Common Units on a fully diluted basis (a "5% Owner"), who is not an Affiliate of
                                          --------
any such 5% Owner and who is not the spouse or descendant (by birth or adoption)
of any such 5% Owner or a trust for the benefit of any such 5% Owner and any/or
such other Persons.

         "LLC Agreement" means the Fourth Amended and Restated Limited Liability
          -------------
Company Agreement of the Company, dated as of March 15, 2002, as amended,
restated, supplemented or otherwise modified from time to time.

         "Majority in Voting Interest" has the meaning which the LLC Agreement
          ---------------------------
assigns to that term.

                                       3

<PAGE>

         "Members Agreement" means the Second Amended and Restated Members
          -----------------
Agreement, dated as of October 18, 2000, among the Company, MEM Holdings and the
other equityholders of the Company named therein, as amended, restated,
supplemented or otherwise modified from time to time.

         "Muzak" means Muzak, LLC, a Delaware limited liability company, the
          -----
successor entity to the merger of Muzak Limited Partnership with and into Audio
Communications Network, LLC (f/k/a ACN Operating, LLC) and a wholly-owned
subsidiary of the Company.

         "Other Investors" means, collectively, the AMFM Investors and the
          ---------------
Preferred Investors.

         "Permitted Transferee" has the meaning set forth in Section 5(d)(iii)
          --------------------
hereof.

         "Permitted Sponsor Subordinated Debt" has the meaning set forth in the
          -----------------------------------
Preferred Unit Purchase Agreement.

         "Person" means an individual, a partnership, a corporation, a limited
          ------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.

         "Preferred Default" means a Class A Default or a Class B Default, each
          -----------------
as defined in the Preferred Unit Purchase Agreement.

         "Preferred Equityholder Units" means (i) all Preferred Units held,
          ----------------------------
directly or indirectly, by the Equityholders, and (ii) all equity securities
issued directly or indirectly with respect to any Preferred Units referred to in
clause (i) above by way of a unit or stock dividend or other distribution, or
unit or stock split, or in connection with a combination of units or shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular units or shares constituting Preferred Equityholder Units, such units
or shares will cease to be Preferred Equityholder Units when they have been
Transferred in a Public Sale.

         "Preferred Investor" means any of (i) BACI, New York Life or
          ------------------
Northwestern, (ii) a Section 10 Assignee (as hereinafter defined) of BACI, New
York Life or Northwestern or (iii) any of their respective Permitted
Transferees.

         "Preferred Investor Units" means all Equityholder Units owned by any
          ------------------------
Preferred Investor.

         "Preferred Unit Purchase Agreement" means the Securities Purchase
          ---------------------------------
Agreement, dated as of October 18, 2000, by and among the Company and the
Preferred Investors as amended, restated, supplemented or otherwise modified
from time to time.

         "Preferred Units" has the meaning which the LLC Agreement assigns to
          ---------------
that term.

                                        4

<PAGE>

         "Public Offering" means an underwritten public offering and sale of
          ---------------
Common Units pursuant to an effective registration statement under the
Securities Act; provided that a Public Offering shall not include an offering
made in connection with a business acquisition or combination pursuant to a
registration statement on Form S-4 or any similar form, or an employee benefit
plan pursuant to a registration statement on Form S-8 or any similar form.

         "Public Sale" means any sale of Equityholder Units to the public
          -----------
pursuant to an offering registered under the Securities Act or, after the
consummation of an initial Public Offering, to the public pursuant to the
provisions of Rule 144 (or any similar rule or rules then in effect) under the
Securities Act.

         "Qualified Public Offering" means the sale in a public offering
          -------------------------
registered under the Securities Act of Common Units of the Company or any of its
successors (i) providing net proceeds to the Company or any of its successors
and the selling equity holders of at least $25,000,000 or (ii) where at least
25% (determined after such offering) of the outstanding Common Units of the
Company or any of its successors have been sold in such sale.

         "Registration Agreement" means the Second Amended and Restated
          ----------------------
Registration Agreement dated as of October 18, 2000 by and among the Company and
the securityholders named therein, as amended, restated, supplemented or
otherwise modified from time to time.

         "Securities Act" means the Securities Act of 1933, as amended.
          --------------

         "Subsidiary" means, with respect to any Person, any corporation,
          ----------
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability Company,
Association or other business entity gains or losses or shall be or control the
managing director, managing member, manager or a general partner of such
partnership, limited liability company, association or other business entity.

         "Transfer" means any direct or indirect sale, transfer, assignment,
          --------
pledge or other disposition.

         "Unpaid Series A Preferred Return" has the meaning which the LLC
          --------------------------------
Agreement assigns to that term.

         "Unpaid Yield" has the meaning which the LLC Agreement assigns to that
          ------------
term.

         "Unreturned Common Investment Unit Capital Value" has the meaning which
          -----------------------------------------------
the LLC Agreement assigns to that term.

                                        5

<PAGE>

         "Unreturned Series A Preferred Unit Capital Value" has the meaning
          ------------------------------------------------
which the LLC Agreement assigns to that term.

         2.    Board of Directors.
               ------------------

         (a)   To the extent permitted by law, each Equityholder shall vote all
voting securities of the Company over which such Equityholder has voting
control, and shall take all other reasonably necessary or desirable actions
within such Equityholder's control (whether in such Equityholder's capacity as a
equityholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, call special board
and equityholder or member meetings), so that:

               (i)   at any time no Class A Default is continuing, holders of
         record of a majority of the ABRY Units will designate a number of
         directors of the Board (whether Class A Directors and/or Class B
         Directors or otherwise) which possess a majority of the votes of the
         Board (each an "ABRY Director");
                         -------------

               (ii)  if a Class A Default is continuing, holders of record of a
         majority of the ABRY Units will designate a number of directors of the
         Board (whether Class A Directors and/or Class B Directors or otherwise)
         which possess the number of the votes of the Board equal to the largest
         whole number that is less than 50% of the number of votes entitled to
         be cast by the members of the Board (also, each an "ABRY Director");
                                                             -------------

               (iii) so long as the AMFM Investors own a majority of the number
         of Equityholder Units issued to Capstar pursuant to the Capstar
         Contribution Agreement (such number to be appropriately adjusted for
         any split, reverse split, dividend or other subdivision, combination or
         restructuring of Common Units after the date hereof), holders of record
         of a majority of the AMFM Units shall have the right to designate two
         Class B Directors of the Board (each, an "AMFM Director") or, if
                                                   -------------
         applicable, at any time upon the written request of the holders of
         record of a majority of the AMFM Units to the ABRY Investors, such
         greater number of Class B Directors of the Board (any such additional
         Class B Director, also an "AMFM Director") as is necessary so that all
                                    -------------
         of the then AMFM Directors possess a percentage of the votes of the
         then Board (other than the votes entitled to be cast by the Preferred
         Directors, if any) approximately equal to the percentage of then
         outstanding voting Common Units then owned by the AMFM Investors;
         provided that any individual designated as an AMFM Director must be
         --------
         approved by the holder(s) of record of a majority of the ABRY Units,
         which approval shall not be unreasonably withheld; provided, further,
                                                            --------  -------
         that Randall Mays and Julie Hill shall be deemed approved by the
         holders of the ABRY Units (the provisions of this clause (iii) shall
         terminate on the date the AMFM Investors cease to own a majority of the
         number of Equityholder Units issued to Capstar pursuant to the Capstar
         Contribution Agreement (such number to be appropriately adjusted for
         any split, reverse split, dividend or other subdivision, combination or
         restructuring of Common Units after the date hereof));

                                        6

<PAGE>

                  (iv) so long as the AMFM Investors own at least twenty percent
         (20%), but less than a majority of, the number of Equityholder Units
         issued to Capstar pursuant to the Capstar Contribution Agreement (such
         numbers to be appropriately adjusted for any split, reverse split,
         dividend or other subdivision, combination or restructuring of Common
         Units after the date hereof), holders of record of a majority of the
         AMFM Units shall have the right to designate one Class B Director of
         the Board (also, a "AMFM Director") or, if applicable, at any time upon
                             -------------
         the written request of the holders of record of a majority of the AMFM
         Units to the ABRY Investors, such greater number of Class B Directors
         of the Board (any such additional Class B Director, also an "AMFM
                                                                      ----
         Director") as is necessary so that all of the then AMFM Directors
         --------
         possess a percentage of the votes of the then Board (other than the
         votes entitled to be cast by the Preferred Directors, if any,)
         approximately equal to the percentage of then outstanding voting Common
         Units then owned by the AMFM Investors; provided that any individual
         designated as an AMFM Director must be approved by the holder(s) of
         record of a majority of the ABRY Units, which approval shall not be
         unreasonably withheld; provided, further, that Randall Mays and Julie
                                --------  -------
         Hill shall be deemed approved by the holders of the ABRY Units (the
         provisions of this clause (iv) shall terminate on the date the AMFM
         Investors cease to own at least twenty percent (20%) of the number of
         Equityholder Units issued to Capstar pursuant to the Capstar
         Contribution Agreement (such number to be appropriately adjusted for
         any split, reverse split, dividend or other subdivision, combination or
         restructuring of Common Units after the date hereof));

                  (v)  upon the occurrence of and during the continuance of a
         Preferred Default, so long as the Preferred Investors own at least
         twenty percent (20%) of the number of Preferred Equityholder Units
         issued to the Preferred Investors pursuant to the Preferred Unit
         Purchase Agreement (such number to be appropriately adjusted for any
         split, reverse split, dividend or other subdivision, combination or
         restructuring of Preferred Equityholder Units after the date hereof),
         BACI and New York Life shall each have the right to designate one
         member of the Board (each, a "Preferred Director"), which Preferred
                                       ------------------
         Directors shall each be (A) Class A Directors if such Preferred Default
         is a Class A Default (as defined in the Preferred Unit Purchase
         Agreement) or (B) Class B Directors if such Preferred Default is a
         Class B Default (as defined in the Preferred Unit Purchase Agreement)
         and no Class A Default is then continuing; provided, that (1) if upon
                                                    --------
         cure or waiver of any Class A Default, a Class B Default is continuing,
         the Preferred Directors shall cease to be Class A Directors and shall
         become Class B Directors; (2) any individual designated as a Preferred
         Director, other than an employee or officer of BACI or New York Life,
         must be approved by the holder(s) of record of a majority of the ABRY
         Units, which approval shall not be unreasonably withheld; and (3) any
         individual acting as a Board Observer (as defined in Section 2(b)) for
         BACI or New York Life at the time of the Preferred Default shall be
         deemed approved by the holders of the ABRY Units (the provisions of
         this clause (v) shall terminate on the date the Preferred Investors
         cease to own at least 20% of the number of Equityholder Units issued to
         the Preferred Investors pursuant to the Preferred Unit Purchase
         Agreement (such number to be appropriately adjusted for any split,
         reverse split, dividend or other subdivision, combination or
         restructuring of Preferred Equityholder Units after the date hereof));

                                        7

<PAGE>

               (vi)   any director designated pursuant to clause (i), (ii),
         (iii) (iv), or (v) above shall be removed from the Board (with or
         without cause) at the written request of the Equityholder or
         Equityholders which have the right to designate such director
         hereunder, but only upon such written request and under no other
         circumstances (in each case, determined on the basis specified in
         clause (i), (ii), (iii), (iv) or (v) above, as the case may be);

               (vii)  in the event that any director designated hereunder for
         any reason ceases to serve as a member of the Board during such
         director's term of office, the resulting vacancy on the Board shall be
         filled by a director designated by the Equityholders referred to in
         clause (i), (ii), (iii), (iv) or (v) above, as the case may be; and

               (viii) if, within a reasonable period of time, any
         Equityholder(s) fail to designate in writing a representative to fill a
         director position pursuant to the terms of this Section 2, and such
         failure shall continue for more than 30 days after notice from the
         Company to such Equityholder(s) with respect to such failure, the
         election of an individual to such director position shall be
         accomplished in accordance with the LLC Agreement and applicable law;
         provided that such individual shall be removed from such director
         --------
         position if such Equityholder(s) so direct.

         (b)   Board Observers. So long as the Preferred Investors own any
               ---------------
Units, BACI, New York Life and Northwestern may each select one representative
to attend all meetings of the Board and each committee thereof, including
telephonic meetings, as an observer (each a "Board Observer"). The Company shall
                                             --------------
give BACI, New York Life and Northwestern written notice of each meeting of the
Board and committees thereof at the same time and in the same manner as notice
is given to the directors; provided, that the failure of the Company to provide
                           --------
such a notice shall not affect the validity of any action taken at that meeting
or constitute a Preferred Default. Such Board Observers shall also be provided
with all written materials and other information (including minutes of meetings)
given to directors in connection with such meetings and any proposed written
consents of the Board at the same time such materials and information are given
to the directors. If the Company proposes to take any action by written consent
in lieu of a meeting of its Board, the Company shall give a copy thereof to
BACI, New York Life and Northwestern within three (3) Business Days following
the effective date of such consent; provided, that the failure of the Company to
                                    --------
provide copies of any written consent shall not affect the validity of any
action taken in that written consent. Notwithstanding anything herein, the
Company shall have the right not to provide information and to exclude a Board
Observer from any meeting or portion thereof if delivery of such information or
attendance at such meeting by such Board Observer (i) would result in disclosure
of trade secrets to such Board Observer; (ii) would adversely affect the
attorney-client privilege between the Company and its counsel (upon advice from
such counsel); (iii) would materially impair deliberations by the Board because
of a conflict of interest between the Company or any of its Subsidiaries and the
party who appointed such Board Observer; or (iv) upon advice from counsel that
such exclusion or failure to provide information is reasonably necessary to
preserve legal or evidentiary privilege with respect to a material matter. Such
Board Observers shall not disclose any confidential information disclosed at a
board meeting or in connection with any written consent of the Board and, if
requested by the Company as a condition to attend any meeting or to the delivery
of any materials, shall execute a confidentiality agreement in the form
customarily executed by other members of the Board.

                                        8

<PAGE>

         (c)   In the event that, at any time, any provision of the LLC
Agreement is inconsistent with the requirements of any provision of this Section
2, the Equityholders shall take such action as may be necessary and is within
their legal rights to amend any such provision in the LLC Agreement to conform
with such requirements.

         (d)   None of the terms or provisions hereof shall be deemed to limit
the ability of the agents or lenders under the "Senior Loan Documents" (as
defined in the Preferred Unit Purchase Agreement) to exercise any and all rights
and remedies available at law, in equity or under the Senior Loan Documents upon
the occurrence of an Event of Default resulting from a Change of Control (as
each such term is defined in the Senior Loan Agreement).

         3.    Conflicting Agreements. Each Equityholder represents that such
               ----------------------
Equityholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement, and no holder of Equityholder Units shall grant any proxy or
become party to any voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement.

         4.    Restrictions on Transactions with Affiliates. Except (a) for
               --------------------------------------------
transactions contemplated by the ABRY Management Services Agreement, (b) for
transactions contemplated by the Preferred Unit Purchase Agreement, (c) for
transactions related to Permitted Sponsor Subordinated Debt and (d) in
connection with the issuance of equity securities of the Company, after the date
hereof, the Company will not, and will not permit any of its Subsidiaries to,
enter into any material transactions with any Equityholder or any employee,
officer, director or Affiliate (other than David Unger, Joseph Koff, the Company
or any of the Company's Subsidiaries) of any Equityholder on any basis less
favorable, in all material respects, to the Company or its Subsidiary, as the
case may be, than would be the case in an arms-length transaction with an
unrelated third party, unless such transaction has been approved by a majority
of the votes of the directors of the Board without a conflict of interest in
such transaction.

         5.    Restrictions on Transfer of Equityholder Units.
               ----------------------------------------------

         (a)   General Restrictions. Subject to Article XI of the LLC Agreement,
               --------------------
an Equityholder may Transfer Equityholder Units only (i) in Public Sales, (ii)
if such Equityholder has complied with the terms and requirements of Sections
5(b) and 5(c), to the extent applicable, or if such Equityholder is exercising a
participation right granted to such Equityholder pursuant to Section 5(c), then
to any Person, provided, that such Person shall have complied with the
               -------
requirements of Section 5(d)(iii), or (iii) pursuant to an Approved Company Sale
(as herein defined).

         (b)   Right of First Offer granted to the ABRY Investors and the AMFM
               -----------------------------------------------------------------
Investors.  Subject to Section 5(d)(i):
---------
               (i)  If at any time any ABRY Investor (a "Selling ABRY Investor")
                                                         ---------------------
         or any AMFM Investor (a "Selling AMFM Investor") proposes to Transfer
                                  ---------------------
         any Equityholder Units or any Preferred Investor (a "Selling Preferred
                                                              -----------------
         Investor" and, together with each Selling ABRY Investor and each
         --------
         Selling AMFM Investor, a "Selling Holder") proposes to Transfer
                                   --------------

                                        9

<PAGE>

         any Common Equityholder Units (other than, in the case of each Selling
         Holder, pursuant to a Public Sale, pursuant to an Approved Company
         Sale, if such Selling Holder is exercising a participation right
         granted to such Selling Holder pursuant to Section 5(c), or if any ABRY
         Investor is assigning rights to any Other Investor pursuant to Section
         12 hereof), then such Selling Holder will, not fewer than fifteen (15)
         Business Days prior to making such Transfer, give notice (the "Proposed
                                                                        --------
         Transfer Notice"), (A) if the Selling Holder is an ABRY Investor, then
         ---------------
         to each of the AMFM Investors, (B) if the Selling Holder is an AMFM
         Investor, then to each of the ABRY Investors, or (C) if the Selling
         Holder is a Preferred Investor, then to each of the ABRY Investors and
         the AMFM Investors, specifying the Equityholder Units proposed to be
         Transferred (the "Offered Units").
                           -------------

                  (ii)   At any time within ten (10) Business Days after
         delivery of the Proposed Transfer Notice (the "Exercise Period") (A) if
                                                        ---------------
         the Selling Holder is an ABRY Investor, then holders of a majority of
         the then outstanding number of AMFM Units, (B) if the Selling Holder is
         an AMFM Investor, then holders of a majority of the then outstanding
         number of ABRY Units or (C) if the Selling Holder is a Preferred
         Investor, then holders of a majority of the then outstanding number of
         AMFM Units and holders of a majority of the then outstanding number of
         ABRY Units (in any case, the "Offering Holders") may each notify the
                                       ----------------
         Selling Holder in writing of their offer (the "Offer") to purchase all
                                                        -----
         of the Offered Units and the price (the "Offered Price") and the other
                                                  -------------
         terms and conditions upon which such Offering Holder(s) proposes to
         purchase such Offered Units (such offer must be solely for cash) (the
         "Offer Notice"). The Offer Notice will constitute an irrevocable offer
          ------------
         by the Offering Holder(s) to acquire the Offered Units from the Selling
         Holder at the Offered Price and on the terms specified in the Offer
         Notice.

                  (iii)  At any time during the 60 day period commencing upon
         the expiration of the Exercise Period, the Selling Holder may:

                         (A)   if an Offer Notice has been delivered to the
                  Selling Holder during the applicable  Exercise Period, then

                               (x)   deliver notice (1) to any Offering Holders
                         accepting the applicable Offer from such Offering
                         Holder(s) (the "Acceptance Notice"); provided, that the
                                         -----------------    --------
                         Selling Holder shall not accept any Offer unless it
                         also accepts all other Offers made at an equal or
                         higher price and (2) to each other Offering Holder
                         whose Offer is not being accepted, a copy of such
                         Acceptance Notice, in which case each such Offering
                         Holder shall have the right, by delivery of written
                         notice (the "Matching Notice") to the Selling Holder
                                      ---------------
                         within five (5) Business Days after receipt of the copy
                         of the Acceptance Notice from the Selling Holder, to
                         match the terms of the Offer that has been accepted
                         pursuant to such Acceptance Notice, and upon receipt of
                         a Matching Notice, the Selling Holder shall be
                         obligated to sell a portion of the Offered Units to the
                         Offering Holder having delivered the Matching Notice
                         (the "Matching Holder"), as set forth below;
                               ---------------

                                       10

<PAGE>

                             (y) provided the Selling Holder has also complied
                        with any applicable provisions of Section 5(c), Transfer
                        all (unless reduced pursuant to the exercise of rights
                        granted to other Equityholders in Section 5(c) and/or,
                        if applicable, to other equityholders of the Company in
                        the Members Agreement) of the Offered Units, at a price
                        which is greater than the highest price specified in
                        Offer Notices and on other terms and conditions which
                        are not in the aggregate more favorable to the
                        transferee thereof than those specified in the Offer
                        Notice specifying the highest price, to any Person(s),
                        or

                        (B)  if an Offer Notice has not been delivered to the
                  Selling Holder during the applicable Exercise Period, then,
                  provided the Selling Holder has also complied with any
                  applicable provisions of Section 5(c), Transfer all (unless
                  reduced pursuant to the exercise of rights granted to other
                  Equityholders in Section 5(c) and/or, if applicable, to other
                  equityholders of the Company in the Members Agreement) of the
                  Offered Units to any Person(s).

                  (iv)  Subject to Section 5(b)(viii) hereof, upon the proper
         delivery of an Acceptance Notice, each Offering Holder whose Offer was
         accepted by such Acceptance Notice, each Matching Holder and the
         Selling Holder shall be firmly bound to consummate the purchase and
         sale of all of the Offered Units (subject to adjustment as provided in
         Section 5(b)(viii)) in accordance with the terms hereof and the
         applicable Proposed Transfer Notice, Offer Notice, Acceptance Notice
         and Matching Notice, if any. Subject to the provisions hereof
         (including Section 5(b)(viii)), within sixty (60) days after the
         Offering Holders' receipt of the applicable Acceptance Notice, each
         Offering Holder whose offer was accepted and the Matching Holders, if
         any, (collectively "Buying Holders") shall purchase, pro rata based on
                             --------------
         the number of Common Units each Buying Holder owns divided by the total
         number of Common Units owned by all of the Buying Holders, and the
         Selling Holder shall sell all of the Offered Units (subject to
         adjustment as provided in Section 5(b)(vii)) at a mutually agreeable
         time and place (the "Offered Units Closing").
                              ---------------------

                  (v)   At the Offered Units Closing, the Selling Holder shall
         deliver to the Buying Holder certificates representing the Offered
         Units (if certificated) to be purchased by such Buying Holder, duly
         endorsed with signature guaranteed, and each Buying Holder shall
         deliver to the Selling Holder the Offered Price by wire transfer of
         immediately available funds to an account designated by such Selling
         Holder.

                  (vi)  Any Offered Units not Transferred within the applicable
         time periods specified above will again be subject to the provisions of
         this Section 5(b) upon any subsequent proposed Transfer.

                  (vii) The AMFM Investors and the Preferred Investors
         (collectively the "Other Investors") hereby acknowledge and agree that
                            ---------------
         in connection with any Transfer of Equityholder Units from any ABRY
         Investor(s) to any Other Investor (including pursuant to this Section
         5(b)), such ABRY Investor(s) must offer the Non-ABRY Members (as such
         term is defined in the Members Agreement) the right to participate in
         such Transfer pursuant to the terms of Sections 1(b), 1(c) and 1(d) of
         the Members Agreement and the applicable Other

                                       11

<PAGE>

         Investors will include in any such Transfer any Securities (as such
         term is defined in the Members Agreement) that such Non-ABRY Members
         elect to include in such Transfer pursuant to Sections 1(b), 1(c) and
         1(d) of the Members Agreement.

                  (viii) The provisions of this Section 5(b) shall terminate
         upon the consummation of a Qualified Public Offering.

         (c)      Participation Rights.  Subject to Section 5(d)(i):
                  --------------------

                  (i)    Participation Rights in a Sale by ABRY Investors. In
                         ------------------------------------------------
         the event of a Transfer of Equityholder Units by any ABRY Investor (a
         "Selling ABRY Investor") (other than pursuant to a Public Sale or
          ---------------------
         pursuant to an Approved Company Sale), at least 15 Business Days prior
         to such Transfer, such Selling ABRY Investor will deliver a written
         notice (the "ABRY Sale Notice") to the Other Investors specifying in
                      ----------------
         reasonable detail the Equityholder Units to be sold, the terms and
         conditions of the Transfer and the identity of the proposed
         transferee(s). Subject to Section 5(c)(iii), such Other Investors may
         elect to participate in the contemplated Transfer by delivering written
         notice to such Selling ABRY Investor within 10 Business Days after
         delivery of the applicable ABRY Sale Notice. If any Other Investor has
         elected to participate in such Transfer, each such Other Investor will
         be entitled to include in the contemplated Transfer, at the same price
         and on the same terms (subject to Sections 5(c)(iv) and 5(c)(v)), (1) a
         number of Common Equityholder Units (regardless of the class thereof)
         equal to the product of (x) the quotient determined by dividing the
         number of such Common Equityholder Units (regardless of the class
         thereof) on a fully diluted basis, held by such Other Investor by the
         aggregate number of Common Equityholder Units, on a fully diluted
         basis, owned by the Other Investors participating in such Transfer and
         the Selling ABRY Investor and (y) the number of Common Equityholder
         Units (regardless of the class thereof) to be sold in the contemplated
         Transfer; and (2) a number of Preferred Equityholder Units of the class
         described in the ABRY Sale Notice equal to the product of (x) the
         quotient determined by dividing the number of Preferred Equityholder
         Units of such class on a fully diluted basis, held by such Other
         Investor by the aggregate number of Preferred Equityholder Units of
         such class, on a fully diluted basis, owned by the Other Investors
         participating in such Transfer and the Selling ABRY Investor and (y)
         the number of Preferred Equityholder Units of such class, if any, to be
         sold in the contemplated Transfer

                  For example, if the ABRY Sale Notice contemplated a sale of
                  -----------
                  100 Class A Units in the aggregate by certain of the ABRY
                  Investors, and if the Selling ABRY Investor at such time own
                  80% of all Class A Units (on a fully diluted basis) and if one
                  Other Investor elects to participate and owns 5% of all Class
                  A Units and if no Class B Units are then outstanding, such
                  Other Investor would be entitled to sell 6 Class A Units (5% /
                  85% x 100 Common Units).

         Any ABRY Investor Transferring Equityholder Units pursuant to this
         Section 5(c)(i) shall use its best efforts to obtain the agreement of
         the prospective Transferee(s) to the participation of the Other
         Investors in any contemplated Transfer, and such ABRY Investor shall
         not Transfer any of its Equityholder Units to the prospective
         Transferee(s) if the

                                       12

<PAGE>

         prospective Transferee(s) declines to allow the participation of the
         Other Investors as contemplated by this Section 5(c)(i).

                  (ii)  Participation Rights in a Sale by AMFM Investors. In the
                        ------------------------------------------------
         event of a Transfer of Equityholder Units by any AMFM Investor (a
         "Selling AMFM Investor") (other than pursuant to a Public Sale, or
          ---------------------
         pursuant to an Approved Company Sale), at least 15 Business Days prior
         to such Transfer, such Selling AMFM Investor will deliver a written
         notice (the "AMFM Sale Notice") to the ABRY Investors and the Preferred
                      ----------------
         Investors specifying in reasonable detail the Equityholder Units to be
         sold, the terms and conditions of the Transfer and the identity of the
         proposed transferee(s). Subject to Section 5(c)(iii), such Preferred
         Investors and, unless the proposed transferee is an ABRY Investor, the
         ABRY Investors may elect to participate in the contemplated Transfer by
         delivering written notice to such Selling AMFM Investor within 10
         Business Days after delivery of the applicable AMFM Sale Notice. If any
         ABRY Investor or Preferred Investor has elected to participate in such
         Transfer, each such ABRY Investor or Preferred Investor will be
         entitled to include in the contemplated Transfer, at the same price and
         on the same terms (subject to Sections 5(c)(iv) and 5(c)(v)), (1) a
         number of Common Equityholder Units (regardless of the class thereof)
         equal to the product of (x) the quotient determined by dividing the
         number of such Common Equityholder Units (regardless of the class
         thereof) on a fully diluted basis, held by such ABRY Investor or
         Preferred Investor by the aggregate number of Common Equityholder
         Units, on a fully diluted basis, owned by the ABRY Investors and
         Preferred Investors participating in such Transfer and the Selling AMFM
         Investor and (y) the number of Common Equityholder Units (regardless of
         the class thereof) to be sold in the contemplated Transfer; and (2) a
         number of Preferred Equityholder Units of the class described in the
         AMFM Sale Notice equal to the product of (x) the quotient determined by
         dividing the number of Preferred Equityholder Units of such class on a
         fully diluted basis, held by such ABRY Investor or Preferred Investor
         by the aggregate number of Preferred Equityholder Units of such class,
         on a fully diluted basis, owned by the ABRY Investors and Preferred
         Investors participating in such Transfer and the Selling AMFM Investor
         and (y) the number of Preferred Equityholder Units of such class, if
         any, to be sold in the contemplated Transfer. Any AMFM Investor
         Transferring Equityholder Units pursuant to this Section 5(c)(ii) shall
         use its best efforts to obtain the agreement of the prospective
         Transferee(s) to the participation of the ABRY Investors and Preferred
         Investors in any contemplated Transfer, and such AMFM Investor shall
         not Transfer any of its Equityholder Units to the prospective
         Transferee(s) if the prospective Transferee(s) declines to allow the
         participation of the ABRY Investors or Preferred Investors as
         contemplated by this Section 5(c)(ii).

                  (iii) Limitations on Participation Rights. An Equityholder may
                        -----------------------------------
         exercise its participation rights in accordance with Section 5(c)(i) or
         Section 5(c)(ii), as the case may be; provided, that no Class B Unit
                                               --------
         may be included by any Equityholder participating in any Transfer
         pursuant to Section 5(c) unless the aggregate purchase price to be paid
         for all Common Investment Units to be included by the applicable
         Selling ABRY Investor, or Selling AMFM Investor in such Transfer is
         equal to or greater than the aggregate Unpaid Yield and Unreturned
         Common Investment Unit Capital Value for such Common Investment Units
         to be included by such Selling ABRY Investor or Selling AMFM Investor.

                                       13

<PAGE>

                (iv) Allocation of Transfer Price. In any event, each Person
                     ----------------------------
         Transferring Equityholder Units pursuant to Section 5(c)(i) or Section
         5(c)(ii) shall receive, in exchange for the Equityholder Units to be
         Transferred by such Person, the same portion of the aggregate
         consideration from the aggregate Transfer that such Person would have
         received if such aggregate consideration had been distributed by the
         Company pursuant to Section 7.1 of, subject to Sections 7.2 and 7.3 of,
         the LLC Agreement as in effect immediately prior to the Transfer and
         the Equityholder Units included in such Transfer constituted all of the
         outstanding Equityholder Units of the Company at such time.

                (v)  Termination of Participation Rights. The provisions of this
                     -----------------------------------
         Section  5(c)  shall  terminate  upon the consummation of an initial
         Public Offering.

         (d)      Permitted Transfers.
                  -------------------

                (i)  The restrictions contained in Sections 5(a), 5(b) and 5(c)
         shall not apply with respect to any Transfer of Equityholder Units by
         any Equityholder (A) in the case of an individual Equityholder,
         pursuant to applicable laws of descent and distribution or to any
         member of such Equityholder's Family Group, (B) in the case of a
         non-individual Equityholder, to its employees, consultants and
         Affiliates, or (C) in addition to the rights granted in clause (B)
         above, in the case of ABRY (if it becomes a Permitted Transferee), in a
         pro rata distribution to its partners; provided, in each case, that any
                                                --------
         such transferee shall have complied with the requirements of Section
         5(d)(ii).

                (ii) Prior to any proposed transferee's acquisition of
         Equityholder Units pursuant to a Transfer permitted by Section 5(a)(ii)
         or Section 5(d)(i), such proposed transferee must agree to take such
         Equityholder Units subject to and to be fully bound by the terms of
         this Agreement applicable to such Equityholder Units by executing a
         joinder to this Agreement substantially in the form attached hereto as
         Exhibit A and delivering such executed joinder to the Secretary of the
         ---------
         Company prior to the effectiveness of such Transfer (unless such
         Transfer is pursuant to applicable laws of descent and distribution, in
         which case, such executed joinder shall be delivered to the Secretary
         of the Company as soon as reasonably possible after such Transfer). All
         transferees acquiring Equityholder Units and executing a joinder in
         compliance with this Section 5(d)(ii) are collectively referred to
         herein as "Permitted Transferees".
                    ---------------------

         (e)    If (i) any Transfer occurs of a majority interest in the common
equity securities of a Equityholder, other than a Preferred Investor, owning
Equityholder Units to a transferee(s) that is not an Affiliate of such
Equityholder, or (ii) any Equityholder Transfers Equityholder Units to an
Affiliate and an event occurs which causes such Affiliate to cease to be an
Affiliate of such Equityholder, such event or Transfer shall be deemed a
Transfer of Equityholder Units subject to all of the restrictions on Transfers
of Equityholder Units set forth in this Agreement, including without limitation,
this Section 5; provided, that no transfer of Equityholder Units shall be deemed
                --------
to occur hereunder by virtue of the issuance and distribution of additional
common equity securities of an Equityholder pursuant to an underwritten public
offering.

         6.     Approved Company Sale.
                ---------------------

                                       14

<PAGE>

         (a) If the Board and a Majority in Voting Interest approve a sale of
all or substantially all of the Company's assets determined on a consolidated
basis or a sale of all (or a lesser percentage, if the acquiring Person(s)
reasonably requests for accounting or tax reasons) of the Company's outstanding
Common Units (in either case, whether by merger, recapitalization,
consolidation, reorganization, combination or otherwise) or any other
transaction which has the same effect as any of the foregoing to an Independent
Third Party or group of Independent Third Parties (each such sale or
transaction, an "Approved Company Sale"), then each holder of Equityholder Units
                 ---------------------
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 each
holder of Equityholder Units shall 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 Equityholder Units, then
subject to the following sentence each holder of Equityholder Units shall agree
to sell all of his or its Equityholder Units and rights to acquire Equityholder
Units on the terms and conditions approved by the Board and a Majority in Voting
Interest. Each holder of Equityholder Units shall take all necessary or
desirable actions in connection with the consummation of an Approved Company
Sale as requested by the Board, including, without limitation, executing a sale
contract pursuant to which each ABRY Investor and each AMFM Investor 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 each holder of Equityholder Units will
                    ------------
severally (but not jointly) make such representations and warranties concerning
such holder and the Equityholder Units to be sold by it or him as may be set
forth in any agreement approved by the Board; provided, that if any holder of
                                              --------
Equityholder Units 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 each other holder of Equityholder Units will
 ------------
simultaneously contribute to such holder of Equityholder Units an amount equal
to such contributing holder's pro rata share (based upon the amount of
consideration received in such Approved Company Sale with respect to Common
Equityholder Units) of such Company Loss; provided further, that a holder of
                                          -------- -------
Equityholder Units shall be required to make the Company Reps only if the sale
contract which such holder is required to sign provides that such holder's
maximum liability for any breach of the Company Reps shall be the purchase price
received by such holder for the sale of its Equityholder Units.

         (b) The obligations of the holders of Equityholder Units pursuant to
Section 6(a) are subject to the satisfaction of the following conditions: (i)
unless the holders of at least sixty percent (60%) of the Preferred Equityholder
Units agree otherwise, the aggregate consideration to be received in respect of
the Preferred Units shall be in immediately available funds in an amount not
less than the aggregate Unpaid Series A Preferred Return plus the Unreturned
Series A Preferred Unit Capital Value; (ii) upon the consummation of the
Approved Company Sale, each holder of Equityholder Units shall receive the same
form of consideration, except as necessary to comply with the provisos set forth
below, and the same portion of the aggregate consideration such holder would
have received if such aggregate consideration had been distributed by the
Company pursuant to Section 7.1 of, subject to Sections 7.2 and 7.3 of, the LLC
Agreement as in effect immediately prior to the consummation of the Approved
Company Sale (and, if less than all of the outstanding Common Units are being
sold in the Approved Company Sale, then the form and portions of aggregate
consideration shall be determined as if the Equityholder Units included in the
Approved Company Sale were all of the outstanding Common Units then
outstanding); (iii) except as necessary

                                       15

<PAGE>

to comply with the proviso set forth below, if any holders of Common
Equityholder Units are given an option as to the form and amount of
consideration to be received, each holder of Common Equityholder Units shall be
given the same option; and (iv) each holder of then currently exercisable rights
to acquire Equityholder Units shall be given an opportunity to exercise such
rights prior to the consummation of the Approved Company Sale and participate in
such sale as a holder of such Equityholder Units; provided, that notwithstanding
                                                  --------
clauses (i) - (iv) above, if all or part of the consideration that would
otherwise be paid to any holder of Common Equityholder Units issued pursuant to
the Preferred Unit Purchase Agreement is not cash, then such holder will have
the right to elect to receive, in lieu of such non-cash consideration, cash in
an amount equal to the market value of such non-cash consideration (it is
understood that notwithstanding clause (iii) above, the right to make such an
election may not be provided to other holders). If all or any part of the
consideration that would otherwise be paid to any holder of Common Equityholder
Units issued pursuant to the Preferred Unit Purchase Agreement is not cash, then
such holder shall have the right to make the election described in the foregoing
proviso by giving written notice to the Company to that effect within ten (10)
Business Days after such holder receives written notice from the Company
describing in reasonable detail such non-cash consideration and setting forth
the Company's good faith estimate of the market value thereof, and such election
(or lack thereof) will be binding on any subsequent holder of such Common
Equityholder Units issued pursuant to the Preferred Unit Purchase Agreement as
to the Approved Company Sale in question.

     (c)  If the Board, the Company or any of the holders of Equityholder Units
enter 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), each
holder of Equityholder Units who is not an "accredited investor," as that term
is defined in Regulation D as promulgated under the Securities Act, will, at the
request of the Company, 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 holders of Equityholder Units will bear their pro rata share
(based upon the amount of consideration received or proposed to be received with
respect to Common Equityholder Units 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 holders
of Equityholder Units and are not otherwise paid by the Company or the acquiring
party. Costs incurred by the holders of Equityholder Units on their own behalf
will not be considered costs of the Approved Company Sale; provided, that in any
                                                           --------
event the Company shall pay the reasonable attorney's fees and expenses of one
counsel chosen by a Majority in Voting Interest in connection with the Approved
Company Sale.

     (e)  Termination of Restrictions and Requirements. The restrictions and
          --------------------------------------------
requirements set forth in this Section 6 will continue with respect to the
Equityholders and their Equityholder Units until the consummation of a Qualified
Public Offering.

     7.   Financial Statements and Information.
          ------------------------------------

                                       16

<PAGE>

     (a)  Prior to the consummation of an initial Public Offering, the Company
shall deliver to each AMFM Investor who holds more than 5% of the then
outstanding number of Common Units:

          (i)   within 60 days after the end of each monthly accounting period
     in each fiscal year of the Company (other than any monthly accounting
     period ending on the last day of a fiscal quarter of the Company) (or such
     earlier date as such financial statements are delivered to the providers of
     any of the Company's debt financing), unaudited consolidated statements of
     income and cash flows of the Company and its Subsidiaries for such monthly
     period (and, if otherwise available, unaudited consolidated statements of
     income of the Company and its Subsidiaries for the period from the
     beginning of the fiscal year to the end of such month) and unaudited
     consolidated balance sheets of the Company and its Subsidiaries as of the
     end of such monthly period (and, if otherwise available, such financial
     statements shall set forth in each case comparisons to the Company's and
     its Subsidiaries' corresponding period in the preceding fiscal year). Such
     financial statements shall be prepared, in all material respects, in
     accordance with generally accepted accounting principles, consistently
     applied, subject to the absence of footnote disclosures and to normal
     year-end adjustments;

          (ii)  within 60 days after the end of each quarterly accounting period
     in each fiscal year of the Company (other than any quarterly accounting
     period ending on the last day of a fiscal year of the Company) (or such
     earlier date as such financial statements are delivered to the providers of
     any of the Company's debt financing), unaudited consolidated statements of
     income and cash flows of the Company and its Subsidiaries for such
     quarterly period (and, if otherwise available, unaudited consolidated
     statements of income of the Company and its Subsidiaries for the period
     from the beginning of the fiscal year to the end of such quarter) and
     unaudited consolidated balance sheets of the Company and its Subsidiaries
     as of the end of such quarterly period (and, if otherwise available, such
     financial statements shall set forth in each case comparisons to the
     Company's and its Subsidiaries' corresponding period in the preceding
     fiscal year). Such financial statements shall be prepared, in all material
     respects, in accordance with generally accepted accounting principles,
     consistently applied, subject to the absence of footnote disclosures and to
     normal year-end adjustments; and

          (iii) within 120 days after the end of each fiscal year of the Company
     (or such earlier date as such financial statements are delivered to the
     providers of any of the Company's, debt financing), audited consolidated
     statements of income and cash flows of the Company and its Subsidiaries for
     such fiscal year, and audited consolidated balance sheets of the Company
     and its Subsidiaries as of the end of such fiscal year (and, if otherwise
     available, such financial statements shall set forth in each case
     comparisons to the Company's and its Subsidiaries' corresponding period in
     the preceding fiscal year). Such financial statement shall be prepared, in
     all material respects, in accordance with generally accepted accounting
     principles, consistently applied.

     (b)  Prior to the consummation of an initial Public Offering, as may be
reasonably requested from time to time, the Company shall cooperate with and
provide financial information to each AMFM Investor who holds more than 5% of
the then outstanding number of Common Units for purposes of such AMFM Investor's
reporting obligations under the Securities Exchange Act of

                                       17

<PAGE>

1934, as amended, or as may otherwise be required by such AMFM Investor for
disclosure to the securities analysts who follow such AMFM Investor's publicly
traded securities.

     8.   Legend. From and after the date hereof, each certificate or instrument
          ------
evidencing Equityholder Units and each certificate or instrument issued in
exchange for or upon the Transfer of any Equityholder Units (if such securities
remain Equityholder Units (as defined herein) after such Transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SECOND
     AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT DATED AS OF MARCH 15, 2002,
     AS THE SAME MAY BE AMENDED FROM TIME TO TIME, BY AND AMONG THE ISSUER AND
     CERTAIN OF THE ISSUER'S EQUITYHOLDERS. A COPY OF SUCH SECURITYHOLDERS
     AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER
     HEREOF UPON WRITTEN REQUEST."

The legend set forth above shall be removed from the certificates evidencing any
securities which cease to be Equityholder Units.

     9.   Transfers in Violation of Agreement. Any Transfer or attempted
          -----------------------------------
Transfer of any Equityholder Units in violation of any provision of this
Agreement or the LLC Agreement shall be null and void, and the Company shall not
record such Transfer on its books or treat any purported transferee of such
Equityholder Units as the owner of such securities for any purpose.

     10.  Preemptive Rights.
          -----------------

     (a)  If at any time after the date hereof and prior to the consummation of
a Qualified Public Offering the Company wishes to issue any Preferred Units,
Common Units or any options, warrants or other rights to acquire Preferred
Units, Common Units or any notes or other securities convertible or exchangeable
into Preferred Units, Common Units (all such Preferred Units, Common Units and
other rights and securities, collectively, the "Equity Equivalents") to any
                                                ------------------
Person or Persons, the Company shall promptly deliver a notice of intention to
sell or otherwise issue (the "Company's Notice of Intention to Sell") to each
                              -------------------------------------
Equityholder setting forth a description and the number of the Equity
Equivalents and any other securities proposed to be issued and the proposed
purchase price and terms of sale. Upon receipt of the Company's Notice of
Intention to Sell, each Equityholder shall have the right to elect to purchase,
at the price and on the terms stated in the Company's Notice of Intention to
Sell, a number of the Equity Equivalents equal to the product of (i) such
Equityholder's proportionate ownership of the then outstanding number of Common
Units (calculated on a fully-diluted basis assuming all holders of then
outstanding warrants, options and convertible securities of the Company which
are convertible or exercisable on such date and which have preemptive rights
with respect to the applicable issuance of Equity Equivalents have converted
such convertible securities or exercised such warrants or options) held by all
Persons multiplied by (ii) the number of Equity Equivalents proposed to be
issued (as described in the applicable Company's Notice of Intention to Sell).
Notwithstanding anything contained herein to the contrary, if the Company is
issuing Equity Equivalents together as a unit with the issuance of any debt or
other equity securities

                                       18

<PAGE>

of the Company or any of its Subsidiaries, then any Equityholder who elects to
purchase such Equity Equivalents pursuant to this Section 10 must also purchase
a corresponding proportion of such other debt or equity securities, all at the
proposed purchase price and on terms of sale as specified in the applicable
Company's Notice of Intention to Sell. Such election shall be made by the
electing Equityholder by written notice to the Company within ten (10) Business
Days after receipt by such Equityholder of the Company's Notice of Intention to
Sell (the "Acceptance Period"). With respect to any Company's Notice of
           -----------------
Intention to Sell delivered to any Equityholder which is BACI, New York Life,
Northwestern, AMFM or ABRY, or an Affiliate of these entities, such Equityholder
may assign in whole or in part its preemptive rights pursuant to this Section 10
with respect to the sale or issuance of the Equity Equivalents which are the
subject of such Company's Notice of Intention to Sell to any Affiliate of such
Equityholder (a "Section 10 Assignee"); provided, that as a condition to the
                 -------------------    --------
sale or issuance of the applicable Equity Equivalents to such Section 10
Assignee, such Section 10 Assignee must execute and deliver to the Company a
joinder to this Agreement substantially in the form of Exhibit A hereto pursuant
                                                       ---------
to which such Section 10 Assignee shall be deemed to be (A) a "Preferred
Investor," an "AMFM Investor," or an "ABRY Investor," (B) as applicable for the
assignee of any rights from BACI, New York Life, Northwestern and AMFM, an
"Other Investor," and (C) an "Equityholder" for purposes of this Agreement.

     (b)  Notwithstanding the foregoing, if the Company intends to issue Equity
Equivalents solely to ABRY, MEM Holdings or any of their respective Affiliates
or would be prohibited under the provisions of any Credit Document (as defined
in the Preferred Unit Purchase Agreement) from issuing such Equity Equivalents
to any other Person, the Company may issue such Equity Equivalents without
following the procedures set forth in Section 10(a) above; provided, that (i)
                                                           --------
the Company will provide written notice to the Equityholders not later than five
(5) days after such issuance of Equity Equivalents to ABRY, MEM Holdings or any
of their respective Affiliates; and (ii) notwithstanding such issuance of Equity
Equivalents to ABRY, MEM Holdings or any of their respective Affiliates, the
Company will either issue or provide in the terms of the Equity Equivalents
issued to ABRY, MEM Holdings or any of their respective Affiliates, as the case
may be, that ABRY, MEM Holdings or any of their respective Affiliates must (A)
transfer (so long as the transferee agrees as provided in Section 13(b)), on
identical terms to each Equityholder (to the extent their rights are exercised
under this Section 10 within 10 Business Days of such 5-day notice), an amount
of such Equity Equivalents issued by the Company so that after giving effect to
such issuance or transfer to such Equityholders and any redemption or any
repayment of any such Equity Equivalents issued to ABRY, MEM Holdings or any of
their respective Affiliates, each such Equityholder will have had the
opportunity to purchase its pro rata share of such Equity Equivalents as
required by clause (a) above or (B) to the extent any transfers necessary to
comply with the foregoing proviso would be prohibited by the provisions of any
Credit Document (as defined in the Preferred Unit Purchase Agreement), sell a
participation or similar right in such Equity Equivalents to each Equityholder
(to the extent their rights are exercised under this Section 10 within 10
Business Days of such 5-day notice), so as to provide to such Equityholder, as
nearly as possible, the economic benefits that would arise out of such
Equityholder's ownership of such Equity Equivalents which it would have
otherwise purchased pursuant to the preceding clause (ii); provided, further,
                                                           --------  -------
that, if such Equity Equivalents held by ABRY, MEM Holdings or any of their
respective Affiliates pursuant to this clause (ii)(B) convert into or are
exchanged for other securities, the transfer of which is not restricted, ABRY,
MEM Holdings and/or any of their respective Affiliates, as applicable shall

                                       19

<PAGE>

transfer (notwithstanding the provisions of Section 5) the applicable portion of
such other securities to each Equityholder having a participation right therein.

     (c)  To the extent an effective election to purchase has not been received
from an Equityholder pursuant to subsection (a) above in respect of the Equity
Equivalents proposed to be issued pursuant to the applicable Company's Notice of
Intention to Sell, the Company may, at its election, during a period of one
hundred and eighty (180) days following the expiration of the applicable
Acceptance Period, issue and sell the remaining Equity Equivalents to be issued
and sold to any Person at a price and upon terms not more favorable to such
Person than those stated in the applicable Company's Notice of Intention to
Sell; provided, however, that failure by an Equityholder to exercise its option
      --------  -------
to purchase with respect to one issuance and sale of Equity Equivalents shall
not affect its option to purchase Equity Equivalents in any subsequent offering,
sale and purchase. In the event the Company has not sold any Equity Equivalents
covered by a Company's Notice of Intention to Sell within such one hundred and
eighty (180) day period, the Company shall not thereafter issue or sell such
Equity Equivalents, without first offering such Equity Equivalents to each
Equityholder in the manner provided in this Section 10.

     (d)  If an Equityholder gives the Company notice, pursuant to the
provisions of this Section l0, that such Equityholder desires to purchase any
Equity Equivalents, payment therefor shall be by check or wire transfer of
immediately available funds, against delivery of the securities (which
securities shall be issued free and clear of any liens or encumbrances) at the
executive offices of the Company no later than the last closing date fixed by
the Company for the sale of the applicable Equity Equivalents, which last
closing date shall be no earlier than 20 Business Days after the date the
Company delivers the applicable Company's Notice of Intention to Sell or notice
pursuant to Section 10(b), as applicable. In the event that any proposed sale is
for a consideration other than cash, such Equityholder may pay cash in lieu of
all (but not part) of such other consideration, in the amount determined
reasonably and in good faith by the Board to represent the fair value of such
consideration other than cash.

     (e)  The preemptive rights contained in this Section 10 shall not apply to
(i) the issuance of shares or units of Common Units or Equity Equivalents
convertible solely into or exercisable solely for Common Units (collectively,
"Common Equity Equivalents") as a stock or unit dividend or other distribution
or upon any subdivision, split or combination of the outstanding Common Units;
(ii) the issuance of Common Equity Equivalents upon conversion, exchange or
redemption of any outstanding convertible or exchangeable securities; (iii) the
issuance of Common Equity Equivalents upon exercise of any outstanding options
or warrants; (iv) the issuance of Common Equity Equivalents to any employee or
director of the Company or any of its Subsidiaries (unless such employee or
director is also an officer or employee of ABRY or any of ABRY's Affiliates
(other than David Unger, Joseph Koff, the Company or any of the Company's
Subsidiaries)); (v) the issuance of Common Equity Equivalents to any Independent
Third Party or group of Independent Third Parties as consideration (whether
partial or otherwise) for the purchase by the Company or any of its Subsidiaries
from such Independent Third Party or group of Independent Third Parties, as the
case may be, of assets constituting a business unit or of the stock or other
equity securities of any Person or Persons; (vi) the issuance of Class B-4 Units
pursuant to Section 5.6 of the LLC Agreement; (vii) the issuance of Common
Equity Equivalents pursuant to the Preferred Unit Purchase Agreement; or (viii)
the issuance of Common Equity Equivalents pursuant to a Qualified Public
Offering.

                                       20

<PAGE>

         (f)   The provisions of this Section 10 shall terminate upon the
consummation of a Qualified Public Offering.

         11.   Further Assurances. In the event that the Board approves a
               ------------------
recapitalization of, or a transaction requiring the recapitalization of, the
Company or its Subsidiaries, including, without limitation, an initial Public
Offering, including pursuant to the Registration Agreement, then the Company and
all holders of Equityholder Units shall take all necessary or desirable actions
in connection with the consummation of such recapitalization or transaction as
the Board or a Majority in Voting Interest so request subject to the following
limitation: immediately after any such recapitalization or transaction, each
Equityholder shall hold securities of the applicable surviving entity with
rights, preferences and privileges substantially equivalent to the Equityholder
Units held by such Equityholder immediately prior to such recapitalization or
transaction. Without limiting the generality of the foregoing, if requested as
provided in the immediately preceding sentence, then (i) the Company and each
Equityholder shall 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 Equityholder shall hold capital stock of such surviving corporation
(the "Successor Corporation") with rights, preferences and privileges
      ---------------------
substantially equivalent to the Equityholder Units held by such Equityholder,
and (ii) the Company and each Equityholder shall take such actions as may be
necessary or desirable to cause the Successor Corporation to assume all of the
obligations of the Company under this Agreement.

         12.   Participation Rights Granted to the AMFM Investors. If at any
               --------------------------------------------------
time any ABRY Investor(s) (collectively, a "Purchasing ABRY Investor") exercises
                                            ------------------------
its right of first refusal pursuant to Section 3 of the Members Agreement with
respect to the transfer by any MHC Member (as such term is defined in the
Members Agreement) of any Securities (as such term is defined in the Members
Agreement) by delivering an Acceptance Notice (as such term is defined in the
Members Agreement) to such MHC Member, then, no later than five (5) Business
Days after delivering such Acceptance Notice to such MHC Member, such Purchasing
ABRY Investor shall give notice (a "Participation Notice") to the AMFM Investors
                                    --------------------
specifying (x) the Securities to be purchased by such Purchasing ABRY Investor
from such MHC Member and (y) the price and the other terms and conditions upon
which such Purchasing ABRY Investor shall purchase such Securities. Each AMFM
Investor will have five (5) Business Days after its receipt of a Participation
Notice during which to notify the applicable Purchasing ABRY Investor in writing
of its election to participate with such Purchasing ABRY Investor's purchase of
the applicable Securities (an "Election to Participate Notice"). If any AMFM
                               ------------------------------
Investor elects to participate with a Purchasing ABRY Investor in the purchase
of Securities from an MHC Member pursuant to the terms of this Section 12, then
such Purchasing ABRY Investor shall assign to such AMFM Investor the right to
purchase from such MHC Member a number of Securities equal to the product of (x)
the quotient determined by dividing the number of Equityholder Units on a fully
diluted basis owned by such AMFM Investor by the aggregate number of
Equityholder Units on a fully-diluted basis owned by all AMFM Investors
participating in such purchase of Securities from such MHC Member and all of the
ABRY Investors and (y) the number of Securities which the applicable Purchasing
ABRY Investor originally elected to purchase from such MHC Member pursuant to
the applicable Acceptance Notice. Upon delivery of an Election to Participate
Notice, the AMFM Investor which delivered such Election to Participate Notice
shall be firmly bound to consummate the purchase of the applicable Securities in
accordance

                                       21

<PAGE>

with the terms of this Section 12 and Section 3 of the Members Agreement and
such purchase shall occur at the applicable Offered Securities Closing (as such
term is defined in the Members Agreement).

         13.   Permitted Sponsor Subordinated Debt. MEM Holdings agrees that (a)
               -----------------------------------
immediately upon the occurrence of any of the events described in Section
12.01(f) or 12.01(g) of the Preferred Unit Purchase Agreement, without regard to
the grace period set forth in Section 12.01(f)(ii) of the Preferred Unit
Purchase Agreement, notwithstanding anything in any instrument evidencing any
Permitted Sponsor Subordinated Debt to the contrary, it shall convert or cause
to be converted into Common Units all Permitted Sponsor Subordinated Debt held
by it and (b) it will not transfer the Permitted Sponsor Subordinated Debt to
any Person unless such transferee expressly agrees to hold such Permitted
Sponsor Subordinated Debt subject to the provisions this Section 13. Muzak LLC
shall be a third party beneficiary of this Section 13.

         14.   Amendment and Waiver. No modification or amendment of any
               --------------------
provision of this Agreement shall be effective against the Equityholders or the
Company unless such modification or amendment is made in accordance with the
provisions of the Credit and Guaranty Agreement dated as of March 18, 1999 among
Muzak LLC, as borrower, the Company and certain subsidiaries of Muzak LLC, as
guarantors, various lenders, Goldman Sachs Credit Partners L.P., as syndication
agent, Canadian Imperial Bank of Commerce, as administrative agent, and Goldman
Sachs Credit Partners L.P., and CIBC Oppenheimer Corp. as co-lead arrangers, as
amended, restated, supplemented or otherwise modified from time to time, and is
approved in writing by (i) the Company, (ii) the holder(s) of a majority of the
number of then outstanding ABRY Units, (iii) the holder(s) of a majority of the
number of the then outstanding AMFM Units and (iv) the Required Holders (as
defined in the Preferred Unit Purchase Agreement). No waiver of any provision of
this Agreement shall be effective against any Equityholder unless such waiver is
approved in writing by such Equityholder. No waiver of any provision of this
Agreement shall be effective against the Company unless such waiver is approved
in writing by the Company. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms. Each
Equityholder shall remain a party to this Agreement only so long as such person
is the holder of record of Equityholder Units.

         15.   Severability. Whenever possible, each provision of this Agreement
               ------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity; illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

         16.   Entire Agreement. Except as otherwise expressly set forth herein,
               ----------------
this document 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

                                       22

<PAGE>

hereof in any way. Without limitation of the foregoing, (a) this Agreement
amends and restates the Original Agreement in its entirety, (b) the New
Equityholders Agreement is hereby terminated, and (c) New York Life and
Northwestern shall have no further rights or obligations under the Members
Agreement.

         17.   Termination. This Agreement will automatically terminate and be
               -----------
of no further force or effect immediately after the consummation of an Approved
Company Sale.

         18.   Successors and Assigns. Except as otherwise provided herein, this
               ----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Equityholders and any subsequent
holders of Equityholder Units and the respective successors, heirs and assigns
of each of them, so long as they hold Equityholder Units.

         19.   Counterparts. This Agreement may be executed in separate
               ------------
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.

         20.   Remedies. The parties hereto shall be entitled to enforce their
               --------
rights under this Agreement specifically to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their 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 the Company and any Equityholder may in his, hers, or its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.

         20.   Notices. All notices, demands or other communications to be given
               -------
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered if delivered
personally, sent via a nationally recognized overnight courier, or sent via
facsimile to the recipient, or if sent by certified or registered mail, return
receipt requested, will be deemed to have been given two Business Days
thereafter. Such notices, demands and other communications will be sent to the
address indicated below:

         To the Company:
         ---------------

                Muzak Holdings LLC
                3318 Lakemont Boulevard
                Fort Mill, SC 29715
                Attention: Chief Executive Officer

         With a copy, which shall not constitute notice, to:
         ---------------------------------------------------

                ABRY Partners, Inc.
                18 Newbury Street
                Boston, MA 02116
                Attention: Royce Yudkoff

                                       23

<PAGE>

                             Peni Garber
                  Telecopy No.: (617) 859-8797

                  and:

                  Kirkland & Ellis
                  153 East 53rd Street
                  New York, NY 10022
                  Attention: John L. Kuehn, Esq.
                             Lisa Anastos, Esq.
                  Telecopy No.: (212) 446-4900

         To MEM Holdings:
         ---------------

                  MEM Holdings, LLC
                  ABRY Partners, Inc.
                  18 Newbury Street
                  Boston, MA 02116
                  Attention: Royce Yudkoff
                             Peni Garber
                  Telecopy No.:  (617) 859-8797

         With a copy, which shall not constitute notice, to:
         ---------------------------------------------------

                  Kirkland & Ellis
                  153 East 53rd Street
                  New York, NY 10022
                  Attention: John L. Kuehn, Esq.
                             Lisa Anastos, Esq.
                  Telecopy No.:  (212) 446-4900

         To AMFM:
         -------

                  AMFM Systems, Inc.
                  200 E. Basse Road
                  San Antonio, Texas 78209
                  Attention: Randall T. Mays
                  Telecopy No.: (210) 822-2929

         With a copy, which shall not constitute notice, to:
         ---------------------------------------------------

                  Clear Channel Communications, Inc.
                  200 E. Basse Road
                  San Antonio, Texas 78209
                  Attention: Legal Department
                  Telecopy No.: (210) 832-3428

                                       24

<PAGE>

         To BACI:
         -------

                  BancAmerica Capital Investors I, L.P.
                  Bank of America Corporate Center
                  100 North Tryon Street, 25/th/ Floor
                  Charlotte, NC 28255-0001
                  Attention:  J. Travis Hain
                  Telecopy No.: (704) 386-6432

         With a copy, which shall not constitute notice, to:
         --------------------------------------------------

                  Kennedy, Covington, Lobdell & Hickman, L.L.P.
                  Bank of America Corporate Center
                  100 North Tryon Street, 42/nd/ Floor
                  Charlotte, NC 28202-4006
                  Attention: Henry W. Flint, Esq.
                  Telecopy No.: (704) 331-7598

         To New York Life:
         ----------------

                  New York Life Capital Partners, L.P.
                  51 Madison Avenue, Suite 3009
                  New York, NY 10010
                  Attention: Amanda Parness
                  Telecopy No.: (212) 576-5591

         With a copy, which shall not constitute notice, to:
         --------------------------------------------------

                  Office of the General Counsel
                  New York Life Insurance Company
                  51 Madison Avenue-Room 1107
                  New York, New York 10010
                  Telecopy No.: (212) 576-8340

         To Northwestern:
         ---------------

                  The Northwestern Mutual Life Insurance Company
                  720 East Wisconsin Avenue
                  Milwaukee, WI 53202
                  Attention: Tim Wegener / Securities Department
                  Telecopy No.: (414) 665-7124

or such other address, telecopy number or to the attention of such other person
as the recipient party shall have specified by prior written notice to the
sending party.

                                       25

<PAGE>

         21.   Governing Law.  This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the state of Delaware, without giving effect to
any rules, principles or provisions of choice of law or conflict of laws.

         22.   Descriptive Headings.  The descriptive headings of this Agreement
               --------------------
are inserted for convenience only and do not constitute a part of this
Agreement.

         23.   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.

                                    * * * * *

                                       26

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Second
Amended and Restated Securityholders Agreement as of the date first above
written.

                                MUZAK HOLDINGS LLC

                                By: /s/ Michael F. Zendan II
                                    --------------------------------------------
                                      Name:  Michael F. Zendan II
                                             -----------------------------------
                                      Title: Assistant Secretary
                                             -----------------------------------

                                MEM HOLDINGS, LLC

                                By: /s/ Royce Yudkoff
                                    --------------------------------------------
                                      Name:  Royce Yudkoff
                                             -----------------------------------
                                      Title: President
                                             -----------------------------------

                                AMFM SYSTEMS, INC.

                                By: /s/ Randall T. Mays
                                    --------------------------------------------
                                      Name:  Randall T. Mays
                                             -----------------------------------
                                      Title: Exec VP / CFO
                                             -----------------------------------

                                BANCAMERICA CAPITAL INVESTORS I, L.P.

                                By: BancAmerica Capital Management I, L.P., Its
                                    general partner

                                By: BACM I GP, LLC, Its general partner

                                    By: /s/ Scott R. Poole
                                        ----------------------------------------
                                    Name:  Scott R. Poole
                                           -------------------------------------
                                    Title: Vice President
                                           -------------------------------------

                                       27

<PAGE>

             [CONTINUATION TO SIGNATURE PAGE TO THIS SECOND AMENDED
                     AND RESTATED SECURITYHOLDERS AGREEMENT]

                                      NEW YORK LIFE CAPITAL PARTNERS, L.P.

                                      By: NYLCAP Manager, LLC, Its Investment
                                      Manager

                                      By: /s/ James M. Barker V
                                          --------------------------------------
                                            Name:  James M. Barker V
                                                   -----------------------------
                                            Title: Vice President
                                                   -----------------------------

                                      THE NORTHWESTERN MUTUAL LIFE INSURANCE
                                      COMPANY

                                      By: /s/ Jeffery J. Lueken
                                          --------------------------------------
                                            Name:  Jeffery J. Lueken
                                                   -----------------------------
                                            Title: Authorize Representative
                                                   -----------------------------

                                       28

<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

                      FORM OF JOINDER TO SECOND AMENDED AND
                       RESTATED SECURITYHOLDERS AGREEMENT
                       ----------------------------------

         THIS JOINDER to the Second Amended and Restated Securityholders
Agreement dated as of March 15, 2002 by and among Muzak Holdings LLC, a Delaware
limited liability company (the "Company"), and certain equityholders of the
                                -------
Company (the "Agreement"), is made and entered into as of ____________ by and
              ---------
between the Company and ____________________ ("Holder"). Capitalized terms used
                                               ------
herein but not otherwise defined shall have the meanings set forth in the
Agreement.

         WHEREAS, Holder has acquired certain Equityholder Units and the
Agreement and the Company require Holder, as a holder of such Equityholder
Units, to become a party to the Agreement, and Holder agrees to do so in
accordance with the terms hereof.

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Joinder hereby agree as
follows:

         1.  Agreement to be Bound. Holder hereby agrees that upon execution of
             ---------------------
this Joinder, it shall become a party to the Agreement and shall be fully bound
by, and subject to, all of the covenants, terms and conditions of the Agreement
as though an original party thereto and shall be deemed [an ABRY Investor/an
AMFM Investor/a Preferred Investor] and an Equityholder for all purposes
thereof. In addition, Holder hereby agrees that all Common Units held by Holder
shall be deemed [an ABRY/an AMFM Investor/a Preferred Investor] Units and
Equityholder Units for all purposes of the Agreement.

         2.  Successors and Assigns. Except as otherwise provided herein, this
             ----------------------
Joinder shall bind and inure to the benefit of and be enforceable by the Company
and its successors, heirs and assigns and Holder and any subsequent holders of
Equityholder Units and the respective successors, heirs and assigns of each of
them, so long as they hold any Equityholder Units.

         3.  Counterparts.  This  Joinder may be executed in separate
             ------------
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.

         4.  Notices.  For purposes of Section 20 of the Agreement, all notices,
             -------
demands or other communications to the Holder shall be directed to:

                               [Name]
                               [Address]
                               [Facsimile Number]

         5.  Governing Law.  This  Joinder shall be governed by and construed in
             -------------
accordance with the laws of the state of Delaware, without giving effect to any
rules, principles or provisions of choice of law or conflict of laws.

                                        1

<PAGE>

         6.  Descriptive Headings.  The descriptive headings of this Joinder are
             --------------------
inserted for convenience only and do not constitute a part of this Joinder.

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

                                         MUZAK HOLDINGS LLC

                                         By:____________________________________
                                         Title:_________________________________

                                         (HOLDER)

                                         By:____________________________________
                                            Name:_______________________________
                                            Title:______________________________

                                       2

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