Document:

Exhibit  10.28

                           SALIX PHARMACEUTICALS, LTD.
                             1996 STOCK OPTION PLAN
                          (as amended, September 2000)

         1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or Nonstatutory
Stock Options, at the discretion of the Board and as reflected in the terms of
the written option agreement.

         2. Definitions. As used herein, the following definitions shall apply:

                  (a) "Administrator" shall mean the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.

                  (b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under the corporate laws and securities
regulations of applicable Canadian provincial securities laws, U.S. state
corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted and
the applicable laws of any foreign country or jurisdiction where Options are, or
will be, granted under the Plan.

                  (c) "Associate" shall mean (i) any company of which such
person or company beneficially owns, directly or indirectly, voting securities
carrying more than 10 per cent of the voting rights attached to all voting
securities of the company for the time being outstanding, (ii) any partner of
that person or company, (iii) any trust or estate in which such person or
company has a substantial beneficial interest or as to which such person or
company serves as trustee or in a similar capacity, (iv) any relative of that
person who resides in the same home as that person, (v) any person of the
opposite sex who resides in the same home as that person and to whom that person
is married or with whom that person is living in a conjugal relationship outside
marriage, or (vi) any relative of a person mentioned in clause (v) who has the
same home as that person.

                  (d) "Board" shall mean the Board of Directors of the Company.

                  (e) "Change in Control" shall mean a change in control of a
nature that would required to be reported in response to item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act as such Schedule,
Regulation and Act were in effect on the date of adoption of this Plan by the
Board, assuming that such Schedule, Regulation and Act applied to the Company,
provided that such a change in control shall be deemed to have occurred at such
time as:

                           (i) any "person" (as that term is used in Section
13(d) and 14(d)(2) of the Exchange Act) (other than the Company, a Subsidiary or
an Affiliate of the Company) becomes, directly or indirectly, the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of securities
representing a 33-1/3% or more of the combined voting power for election of
members of the Board of the then outstanding voting securities of the Company or
any successor of the Company;

                           (ii) during any period of two consecutive years or
less, individuals who at the beginning of such period constituted the Board of
the Company cease, for any reason, to constitute at least a majority of the
Board, unless the election of nomination for election of each new member of the
Board was approved by a vote of at least two-thirds of the members of the Board
then still in office who were members of the Board at the beginning of the
period;

                           (iii) the equityholders of the Company approve any
merger or consolidation to which the Company is a party as a result of which the
persons who were equityholders of the Company immediately prior to the
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effective date of the merger or consolidation (and excluding, however, any
shares held by any party to such merger or consolidation and their affiliates)
shall have beneficial ownership of less than 50% of the combined voting power
for election of members of the Board (or equivalent) of the surviving entity
following the effective date of such merger or consolidation; or

                           (iv) the equityholders of the Company approve any
merger or consolidation as a result of which the equity interests in the Company
shall be changed, converted or exchanged (other than a merger with a
wholly-owned Subsidiary of the Company) or any liquidation of the Company or any
sale or other disposition of all or substantially all of the assets of the
Company.

         However, in no event shall a Change in Control be deemed to have
occurred with respect to a Optionee, if the Optionee is part of a purchasing
group which consummates the Change in Control transaction. The Optionee shall be
deemed "part of a purchasing group" for purposes of the preceding sentence if
the Optionee is either directly or indirectly an equity participant in the
purchasing group (except for (i) passive ownership of less than 3% of the stock
of the purchasing group, or (ii) ownership of equity participation in the
purchasing group which is otherwise not significant, as determined prior to the
Change in Control by the Committee).

                  (f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor thereto.

                  (g) "Committee" shall mean any Committee appointed by the
Board of Directors in accordance with Section 4(a) of the Plan, if one is
appointed.

                  (h) "Common Stock" shall mean the Common Stock of the Company.

                  (i) "Company" shall mean Salix Pharmaceuticals, Ltd., a
British Virgin Islands International Business Company.

                  (j) "Consultant" shall mean any person, including an advisor,
engaged by the Company or any Parent or Subsidiary to render services to such
entity, and any director of the Company whether compensated for such services or
not.

                  (k) "Continuous Status as an Employee or Consultant" shall
mean the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute. For purposes of this Plan, a change
in status from Employee to Consultant or from Consultant to Employee will not
constitute a termination of employment.

                  (l) "Director" shall mean a member of the Board.

                  (m) "Employee" shall mean any person, including officers and
Named Executives (including officers and Named Executives who are also
directors), employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

                  (n) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

                  (o) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

                           (i) Subject to clauses (ii) and (iii) hereof, if the
Common Stock is listed on The Toronto Stock Exchange, its Fair Market Value per
Share shall be not less than the closing price of the Common Stock on The
Toronto Stock Exchange on the last business day preceding the date of grant;
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                           (ii) If the Common Stock is listed principally on any
established stock exchange or national market system in the United States,
including without limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported, as quoted on such exchange or system for
the last market trading day prior to the time of determination) as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

                           (iii) If the Common Stock is quoted principally on
the NASDAQ System (but not on The National Market System thereof) or regularly
quoted by a recognized securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean between the high bid and low asked
prices for the Common Stock; or

                           (iv) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.

         In the event the Fair Market Value is determined in accordance with
clause (i) above, such Fair Market Value shall be priced in United States
dollars converted at the then prevailing exchange rate between Canada and the
United States.

                  (p) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

                  (q) "Named Executive" shall mean any individual who, on the
last day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief executive officer). Such officer
status shall be determined pursuant to the executive compensation disclosure
rules under the Exchange Act.

                  (r) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.

                  (s) "Officer" shall mean a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder, or any successor thereto and (a) every
director or senior officer of the Company, (b) every director or senior officer
of a company that is itself an insider or subsidiary of the Company, (c) any
person or company who beneficially owns, directly or indirectly, voting
securities of the Company or who exercises control or direction over voting
securities of the Company or a combination of both carrying more than 10% of the
voting rights attached to all voting securities of the Company for the time
being outstanding other than voting securities held by the person or company as
underwriter in the course of a distribution, and (d) the Company where it has
purchased, redeemed or otherwise acquired any of its securities, for so long as
it holds any of its securities;

                  (t) "Option" shall mean a stock option granted pursuant to the
Plan.

                  (u) "Optioned Stock" shall mean the Common Stock subject to an
Option.

                  (v) "Optionee" shall mean an Employee or Consultant who
receives an Option.

                  (w) "Outstanding Issue" shall mean the number of Shares that
are outstanding immediately prior to the share issuance in question, excluding
Shares issued pursuant to share compensation arrangements over the preceeding
one-year period.

                  (x) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

                  (y) "Plan" shall mean this 1996 Stock Option Plan, as amended.
<PAGE>

                  (z) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the
Exchange Act as the same may be amended from time to time, or any successor
provision.

                  (aa) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 14 of the Plan.

                  (bb) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.

         3. Stock Subject to the Plan. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 2,677,207 provided that in no event shall the number of
shares that may be optioned and sold under the Plan exceed the sum of (i)
2,238,382 shares of Common Stock plus (ii) such number of shares as are subject
to outstanding and unexercised stock options under the Company's 1994 Stock
Plan, as of the date of adoption of this Plan by the stockholders, which options
are thereafter canceled or otherwise terminated without exercise. The Shares may
be authorized, but unissued, or reacquired Common Stock.

         If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares that were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.

         4. Administration of the Plan.

                  (a) Procedure.

                           (i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of
Employees and Consultants.

                           (ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

                           (iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

                           (iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
<PAGE>

                  (b) Powers of the Administrator. Subject to compliance with
Applicable Laws, and further subject to the provisions of the Plan and in the
case of a Committee, the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion:

                           (i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;

                           (ii) to select the Employees and Consultants to whom
Options may from time to time be granted hereunder;

                           (iii) to determine whether and to what extent Options
are granted hereunder;

                           (iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;

                           (v) to approve forms of agreement for use under the
Plan;

                           (vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in its sole
discretion);

                           (vii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be deferred either automatically or at the election
of the participant (including providing for and determining the amount, if any,
of any deemed earnings on any deferred amount during any deferral period);

                           (viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan; and

                           (ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;

                           (x) to institute an option exchange program;

                  (c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

         5. Eligibility.

                  (a) Nonstatutory Stock Options may be granted only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted an additional Option or Options.

                  (b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Options that are exercisable for the first time by an
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

                  (c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
<PAGE>

                  (d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

                  (e) The terms of any Option shall comply with Applicable Laws.

                  (f) Not more than 50% of the total number of shares reserved
under the Plan shall be allocated to any one participant under the Plan within
any twelve calendar month period.

                  (g) The maximum number of shares that may be allocated to any
one participant upon the grant of stock Options may not exceed 5% of the issued
and outstanding Common Stock at the time of grant.

                  (h) The following limitations shall apply to grants of
Options:

                           (i) No Employee or Consultant shall be granted, in
any fiscal year of the Company, Options to purchase more than 250,000 Shares.

                           (ii) In connection with his or her initial service,
an Employee or Consultant may be granted Options to purchase up to an additional
500,000 Shares which shall not count against the limit set forth in subsection
(i) above.

                           (iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.

                           (iv) If an Option is canceled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the canceled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.

         6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years, unless sooner terminated under Section 16 of the Plan.

         7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Incentive Stock Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.

         8. Limitation on Grants to Officers. Subject to adjustment as provided
in this Plan and subject to the other limitations set forth herein:

                  (a) The maximum number of Shares which may be reserved for
issuance to all Officers under the Plan may not exceed 10% of the Outstanding
Issue.

                  (b) The maximum number of Shares which may be issued to
Officers under the Plan in any 12 month period shall be 10% of the Outstanding
Issue.

                  (c) The maximum number of Shares which may be issued to any
one Officer and such Officer's Associates under the Plan in any 12 month period
shall be 5% of the Outstanding Issue.

         9. Option Exercise Price and Consideration.
<PAGE>

                  (a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

                           (i) In the case of an Incentive Stock Option

                                    (A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant;

                                    (B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

                           (ii) In the case of a Nonstatutory Stock Option
granted to a person who, at the time of the grant of such Option, is a Named
Executive of the Company, the per share Exercise Price shall be no less than
100% of the Fair Market Value on the date of grant;

                  (b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares that (x) in the case of Shares acquired upon exercise of
an Option either have been owned by the Optionee for more than six months on the
date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (4) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (5) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds required to
pay the exercise price, (6) any combination of the foregoing methods of payment,
or (7) such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. No Optionee shall receive
financial assistance from the Company in connection with the exercise of any
Option and the purchase price of the Common Stock issuable pursuant to any
Option shall be paid in full prior to the issuance of such Common Stock. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

         10. Exercise of Option.

                  (a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.

                           An Option may not be exercised for a fraction of a
Share.

                           An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 9(b)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 14 of the Plan.

                           Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
<PAGE>

                  (b) Termination of Status as an Employee or Consultant. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such other
period of time, not exceeding three (3) months in the case of an Incentive Stock
Option or six (6) months in the case of a Nonstatutory Stock Option, as is
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. To the extent that the Optionee was not entitled to
exercise the Option at the date of such termination, or if the optionee does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.

                  (c) Disability of Optionee. Notwithstanding the provisions of
Section 10(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his or her disability, he or
she may, but only within twelve (12) months (or such other period of time not
exceeding twelve (12) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that he
or she was not entitled to exercise the Option at the date of termination, or if
he does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.

                  (d) Death of Optionee. In the event of the death of an
Optionee:

                           (i) during the term of the Option who is at the time
of his death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or such
other period of time, not exceeding six (6) months, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) following the date of death (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or Consultant
three (3) months (or such other period of time as is determined by the
Administrator as provided above) after the date of death, subject to the
limitation set forth in Section 5(b); or

                           (ii) within thirty (30) days (or such other period of
time not exceeding three (3) months as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the termination of Continuous Status as an
Employee or Consultant, the Option may be exercised, at any time within twelve
(12) months following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.

         11. Withholding Taxes. As a condition to the exercise of Options
granted hereunder, the Optionee shall make such arrangements as the
Administrator may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise, receipt or vesting of such Option. The Company shall not be required
to issue any Shares under the Plan until such obligations are satisfied.

         12. Satisfaction of Withholding Tax Obligations. At the discretion of
the Administrator, Optionees may satisfy withholding obligations as provided in
this paragraph. When an Optionee incurs tax liability in connection with an
Option which tax liability is subject to tax withholding under applicable tax
laws, and the Optionee is obligated to pay the Company an amount required to be
withheld under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by one or some combination of the following methods: (a) by cash
payment, or (b) out of Optionee's current compensation, (c) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares that (i)
in the case of Shares previously acquired from the Company, have been owned by
the Optionee for more than six months on the date of surrender, and (ii) have a
fair market value on the date of surrender equal to or less than Optionee's
marginal tax rate times the ordinary income recognized, or (d) by electing to
have the
<PAGE>

Company withhold from the Shares to be issued upon exercise of the Option that
number of Shares having a fair market value equal to the amount required to be
withheld. For this purpose, the fair market value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").

                  All elections by an Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form
acceptable to the Administrator.

         13. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

         14. Adjustments Upon Changes in Capitalization or Merger.

                  (a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, the maximum number of shares of Common Stock for which Options may
be granted to any employee under Section 8 of the Plan, and the price per share
of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.

                  (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
as soon as practicable prior to the effective date of such proposed action. To
the extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.

                  (c) Acceleration upon Change in Control. In the event of a
Change in Control of the Company, all outstanding options granted under the Plan
shall become vested and immediately and fully exercisable, and may either (i) be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation or (ii)
terminate 10 days after the Administrator shall notify the Optionee of such
vesting and termination. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the option
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the Option,
to be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.

                  (e) Certain Distributions. In the event of any distribution to
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
<PAGE>

         15. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.

         16. Amendment and Termination of the Plan.

                  (a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable.

                  (b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

                  (c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

         17. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

                  As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

         18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

         19. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.EXECUTION COPY

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

         This AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT is dated as of
October 18, 2000, 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 the date hereof, the Company issued certain Preferred Units
and Common Units to BACI, New York Life and Northwestern;

         WHEREAS, the Company and the Equityholders (as defined below) desire
(i) to amend and restate the Original Agreement in its entirety as set forth
herein; (ii) to terminate the New Equityholders Agreement and, as it relates to
New York Life and Northwestern, the Members Agreement; and (iii) 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.

         "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.

<PAGE>
         "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).

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

                                       2
<PAGE>
         "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" means, collectively, the Class A Units and
the Class A-1 Units.

         "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 Third Amended and Restated Limited Liability
Company Agreement of the Company, dated as of the date hereof, as amended from
time to time.

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

         "Members Agreement" means the Amended and Restated Members Agreement,
dated March 18, 1999, 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.

                                       3
<PAGE>
         "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 the date hereof, 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.

         "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.

                                       4
<PAGE>
         "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 the date hereof 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.

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

         2.       Board of Directors.

                                       5
<PAGE>
         (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));

                  (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

                                       6
<PAGE>
         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));

                  (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);

                                       7
<PAGE>
                  (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.

         (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.

                                       8
<PAGE>
         (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
         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,

                                       9
<PAGE>
         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;

                                    (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

                                       10
<PAGE>
                           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 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.

                                       11
<PAGE>
         (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%
                  (divided by) 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 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

                                       12
<PAGE>
         "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.

                  (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

                                       13
<PAGE>
         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.

         (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

                                       14
<PAGE>
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 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

                                       15
<PAGE>
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.

         (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

                                       16
<PAGE>
         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 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

                                       17
<PAGE>
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 AN
         AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT DATED AS OF OCTOBER 18,
         2000, 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 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

                                       18
<PAGE>
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
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

                                       19
<PAGE>
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.

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

                                       20
<PAGE>
         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 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).

                                       21
<PAGE>
         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 Audio
Communications Network, LLC (n/k/a Muzak LLC), as borrower, the Company and
certain subsidiaries of Audio Communications Network, 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 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

                                       22
<PAGE>
(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: President

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

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

                                       23
<PAGE>
                  and:

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

         To MEM Holdings:

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

         To BACI:

                  BancAmerica Capital Investors I, L.P.
                  Bank of America Corporate Center
                  100 North Tryon Street, 25th Floor

                                       24
<PAGE>
                  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, 42nd 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.

         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.

                                       25
<PAGE>
         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 Amended and
Restated Securityholders Agreement as of the date first above written.

                                 MUZAK HOLDINGS LLC

                                 By: /s/ Michael F. Zendan II
                                    --------------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title: Vice President and General Counsel
                                             -----------------------------------

                                 MEM HOLDINGS, LLC

                                 By: /s/ Peni Garber
                                    --------------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title: Vice President
                                             -----------------------------------

                                 AMFM SYSTEMS, INC.

                                 By: /s/ Julie Hill
                                    --------------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title: Senior Vice President - Finance
                                             -----------------------------------

                                   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/ J. Travis Hain
                                            ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       27
<PAGE>
                 [CONTINUATION TO SIGNATURE PAGE TO THIS AMENDED
                     AND RESTATED SECURITYHOLDERS AGREEMENT]

                                   NEW YORK LIFE CAPITAL PARTNERS, L.P.

                                   By:  NYLCAP Manager, LLC, Its Investment
                                   Manager

                                   By:  /s/ Steven Benevento
                                       _________________________________________
                                         Name: _________________________________
                                         Title: ________________________________

                                   THE NORTHWESTERN MUTUAL LIFE INSURANCE
                                   COMPANY

                                   BY:  /s/ Jeffery J. Lueken
                                       _________________________________________
                                          Name:  Jeffery J. Lueken
                                                ________________________________
                                          Title:  Its Authorized Representative
                                                 _______________________________

                                       28
<PAGE>
                                                                       EXHIBIT A

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

         THIS JOINDER to the Amended and Restated Securityholders Agreement
dated as of October 18, 2000 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 [ABRY/AMFM/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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