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EXHIBIT 10.2
SERVICES AGREEMENT
Services Agreement (this "Agreement"), dated as of July 11,
1997, between Tele-Communications, Inc., a Delaware corporation ("TCI"), and TCI
Music, Inc., a Delaware corporation (the "Company").
RECITALS
A. TCI owns all the issued and outstanding capital stock
of the Company (the "Company Stock").
B. TCI and the Company are parties to an Agreement and
Plan of Merger dated as of February 6, 1997, as amended by Amendment One dated
May 29, 1997, among TCI, the Company, TCI Merger Sub, Inc., a Delaware
corporation and wholly owned subsidiary of the Company ("Merger Sub"), and DMX
Inc., a Delaware corporation ("DMX"), pursuant to which Merger Sub will merge
with and into DMX (the "Merger").
C. As a result of the Merger, the Company will cease to
be a wholly owned subsidiary of TCI, and TCI and the Company will be separate
public companies.
D. This Agreement sets forth the general terms upon
which TCI will provide to the Company certain facilities, services, benefits,
and personnel to the Company after consummation of the Merger.
In consideration of the mutual covenants contained in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, TCI and the Company hereby agree
as follows:
SECTION 1. SERVICES. At the request of the Company, TCI shall provide
services to the Company for the administration and operation of the businesses
of the Company and its subsidiaries and affiliates and shall devote thereto
such time as may be necessary for the proper and efficient administration and
operation of such businesses. The services to be provided by TCI to the
Company pursuant to this Agreement (collectively, the "Services") shall include
such of the following services as the Company may request from time to time:
(i) tax reporting, financial reporting, payroll,
employee benefit administration, workers' compensation
administration, telephone, fleet management, package delivery,
management information systems, billing, lock box, remittance
processing and risk management services;
(ii) other services typically performed by TCI's
executive, accounting, finance, treasury, corporate, legal,
tax, benefits, insurance, facilities, purchasing, fleet
management and advanced information technology department
personnel;
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(iii) use of telecommunications and data facilities
and of systems and software developed, acquired or licensed by
TCI from time to time for financial forecasting, budgeting and
similar purposes, including without limitation any such
software for use on personal computers, in any case to the
extent available under copyright law or any applicable
third-party contract;
(iv) technology support and consulting services;
and
(v) such other management, supervisory, strategic
planning or other services as the Company may from time to
time request.
SECTION 2. SUPPLY COMMITMENTS.
(a) Certain Definitions. As used in this Agreement, the
capitalized terms listed below have the following meanings (with the singular
including the plural and vice versa):
"Equipment": Any equipment and materials that are
available for purchase by TCI and its O&O Subsidiaries on terms that include
volume discounts and would not restrict TCI or the applicable O&O Subsidiary
from complying with Section 2(b).
"O&O Subsidiaries": those of TCI's subsidiaries in
which TCI owns, directly or indirectly, all of the common equity.
"Territory": The United States and Canada
(b) Equipment Purchase Commitment. TCI shall, and shall
cause its O&O Subsidiaries to, make available to the Company in the manner
provided below the benefit of the volume discounts, if any, that are available
to TCI and its O&O Subsidiaries in purchasing Equipment and can be made
available to the Company (the foregoing being referred to herein as, TCI's
"Equipment Commitment"). The Company shall give TCI notice from time to time,
as much in advance as is practicable, of its intention to purchase Equipment
and, promptly after receipt of such notice. If TCI or an O&O Subsidiary can
make such Equipment available TCI shall give notice to the Company stating the
price and the terms on which TCI, or its applicable O&O Subsidiary, can make
such Equipment available to the Company (the "Terms Notice"). If the Company
determines to purchase the requested Equipment on the terms specified in the
Terms Notice, it shall deliver a purchase order for such Equipment to TCI and,
upon receipt thereof, (i) TCI shall use commercially reasonable efforts to
cause its supplier to sell such Equipment directly to the Company at the price
and on the terms specified in the Terms Notice or (ii) at TCI's sole election,
TCI shall, or shall cause the applicable O&O Subsidiary, to purchase such
Equipment and resell it to the Company at the price and on the terms specified
in the Terms Notice. If TCI elects the option set forth in clause (ii) of the
preceding sentence, it shall take all action necessary to assure that all
warranties and other rights available to the original purchaser of such
Equipment are assigned and extend to, or otherwise
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enforce such warranties and rights on behalf of, the Company. TCI shall in no
event have, or be required to incur, any liability to any of its suppliers for
any Equipment ordered by the Company unless (and then only to the extent that)
it has elected the option set forth in clause (ii) of the second preceding
sentence.
(c) Termination of Commitments. TCI's obligations under
this Section 2 shall terminate immediately and without any requirement of
notice if any of the events described in clause (iii) of the first sentence of
Section 5(b) shall occur with respect to the Company. If the Company delivers
an executed purchase order for Equipment to TCI pursuant to Section 2(a) and
fails to purchase the same in accordance with the terms and conditions
specified in the Terms Notice, then TCI may terminate the Equipment Commitment
and its obligations under Section 2(b) by giving notice to such effect to the
Company within 30 days thereafter.
SECTION 3. COMPENSATION FOR SERVICES. As a compensation for Services
rendered to the Company pursuant to this Agreement, the Company shall reimburse
TCI for (i) all direct expenses incurred by TCI in providing the Services,
provided that the incurrence of such expenses is consistent with practices
generally followed by TCI in managing or operating its own business and the
businesses of its subsidiaries and affiliates and (ii) the Company's pro rata
share of TCI's indirect overhead expenses based on an annual determination by
TCI management of the usage by the Company of such services during the prior
year. Such indirect expenses shall include (i) the salaries and other
compensation of TCI's officers and employees who perform the Services for the
Company, (ii) general and administrative overhead expenses and (iii) the costs
and expenses of TCI's physical facilities that are utilized by the Company.
TCI shall keep true, complete and accurate books of account containing such
particulars as may be necessary for the purpose of calculating the above costs.
SECTION 4. EMPLOYEE BENEFIT PLANS. Subject to Section 5 hereunder, TCI
shall permit the present and future employees of the Company and its
majority-owned subsidiaries (collectively, the "TCI Music Employees") to
continue to participate in each of the benefit plans listed on Schedule A
hereto (the "TCI Plans"). Notwithstanding the foregoing, nothing in this
Agreement shall impair TCI's right to terminate one or more of the TCI Plans or
to modify or amend their terms and conditions, including those that determine
the right to participate in such plans, provided that such modification or
amendment is applicable to all employees of TCI and its subsidiaries, including
the Company. For so long as the Company shall remain a participating employer
in the TCI Plans, the Company shall make the required employer contributions to
such plans with respect to the TCI Music Employees and shall, where applicable,
deduct and accumulate from applicable sources the required employee
contributions to such plans. The determination of the total amount of
contributions required under each such TCI Plan shall be made by the Company
from time to time, and the Company shall remit such contributions in the manner
and at the times prescribed by TCI, consistent with TCI's normal practices for
determining, collecting or otherwise charging out the respective benefit plan
costs of its participating subsidiary corporations.
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SECTION 5. TERM.
(a) Commencement. This Agreement shall become effective
immediately at the Effective Time of the Merger.
(b) Termination. Except as otherwise expressly provided
herein, this Agreement and the rights and obligations of the parties hereunder
shall remain in effect until terminated as provided below or, with respect to
the parties' rights and obligations under Section 2(b), as provided in Section
2(c).
(i) The obligation of TCI to provide the Services
as provided in Section 1 of this Agreement shall remain in
effect until terminated by actions of one of the parties as
follows: (A) by TCI at any time after three years from the
effective date of this Agreement on not less than six months
prior written notice to the Company; and (B) by the Company at
any time on not less than 60 days' prior written notice to
TCI.
(ii) The obligation of TCI to permit the TCI Music
Employees to participate in the TCI Plans pursuant to Section
4 hereof shall remain in effect until TCI no longer
beneficially owns shares of the Company's Series A Common
Stock and Series B Common Stock representing at least a
majority in voting power of the outstanding shares of capital
stock of the Company entitled to vote generally in the
election of directors.
(iii) Either party may terminate this Agreement
upon written notice to the other party if such other party
shall file a petition in bankruptcy or insolvency, or a
petition for reorganization or adjustment of debts or for the
appointment of a receiver or trustee of all or a substantial
portion of its property, or shall make an assignment for the
benefit of creditors, or if a petition in bankruptcy or other
petition described in this paragraph shall be filed against
such other party and shall not be discharged within 120 days
thereafter.
(c) Effect of Termination. In the event of any
termination of this Agreement, each party shall remain liable for all
obligations of such party accrued hereunder prior to the date of such
termination, including, without limitation, all obligations of the Company (i)
to reimburse TCI for the Services provided hereunder through the termination
date, in each case as provided in Section 3 hereof, and (ii) to pay for any
Equipment supplied pursuant hereto. The provisions of Section 6 of this
Agreement shall survive indefinitely, notwithstanding any termination hereof.
SECTION 6. LIMITATION OF LIABILITY. TCI, its affiliates, directors,
officers, employees, agents and permitted assigns (each, a "TCI Party" and,
together, the "TCI Parties") shall not be liable (whether such liability is
direct or indirect, in contract or tort or otherwise) to the Company or any of
the Company's affiliates, directors, officers, employees, agents,
securityholders, creditors or permitted
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assigns, for any liabilities, claims, damages, losses or expenses (including,
without limitation, any special, indirect, incidental or consequential damages)
("Losses") arising out of, related to, or in connection with the Services, the
Equipment Commitment or this Agreement except to the extent that such Losses
result from the gross negligence or willful misconduct of TCI, in which case
TCI's liability with respect to the Services shall be limited to a refund of
that portion of the amounts actually paid by the Company hereunder which, as
determined by TCI, represented the cost to the Company of the Services in
question. The remedies, if any, available with respect to any Equipment
supplied shall be as provided in the applicable purchase. The Company hereby
agrees to indemnify and hold harmless the TCI Parties from and against any and
all Losses (including, without limitation, reasonable fees and expenses of
counsel) incurred by any TCI Party arising out of or in connection with or by
reason of the Services provided under this Agreement, other than any liability
of TCI to the Company as contemplated by the foregoing provisions of this
Section 6.
SECTION 7. MISCELLANEOUS.
(a) Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all previous agreements, negotiations, understandings and
commitments with respect to such subject matter, whether or not in writing.
(b) Governing Law. This Agreement and the legal
relations between the parties with respect hereto shall be governed by and
construed in accordance with the laws of the State of Colorado, without regard
to conflicts of laws rules thereof.
(c) Notices. All notices, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given: (i) on the day of delivery if delivered personally to
the party to whom notice is to be given; (ii) on the day of transmissions if
sent via facsimile transmission to the facsimile number given below (answer
back received); (iii) on the day of delivery by Federal Express or similar
overnight courier; or (iv) on the third day after mailing, if mailed to the
party to whom notice is to be given, by United States first class mail,
registered or certified, postage prepaid and properly addressed, to the party
as follows:
If to TCI:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
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If to the Company:
TCI Music, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, President and CEO
Facsimile: (000) 000-0000
Any party may change its address for the purpose of this Section by giving the
other party written notice of its new address in the manner set forth above.
(d) Amendment. This Agreement may not be amended or
modified in any respect except by a written agreement signed by the parties
hereto.
(e) Successors and Assigns; No Third-Party Beneficiaries.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interests and
obligations hereunder shall be assigned by either party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
Nothing contained in this Agreement, except as expressly set forth, is intended
to confer upon any other persons other than the parties hereto and their
respective successors and permitted assigns, any rights or remedies.
(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(g) No Waiver. No waiver by either party hereto of any
term or condition of this Agreement, in any one or more instances, shall
operate as a waiver of such term or condition at any other time. No waiver of
any term or condition hereof shall be effective unless in a writing signed by
the party entitled to give such waiver.
(h) Relations Between the Parties. The parties are
independent contractors. Nothing in this Agreement shall constitute either
party, or any of such party's officers, directors, agents or employees, a
partner, agent or employee of, or joint venturer with, the other party.
(i) Severability. If any provision of this Agreement or
the application thereof to any person or circumstances shall be held to be
invalid or unenforceable, the remainder of this Agreement, or the application
of such provision to persons or circumstances other than those to which it was
held to be invalid or unenforceable, shall not be affected thereby, provided
that the parties shall negotiate in good faith with respect to an equitable
modification of the provision or application thereof held to be invalid.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.
TELE-COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
TCI MUSIC, INC.
By: /s/ Xxxxx X. Xxxx
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Name: Xxxxx X. Xxxx
Title: President and Chief Executive
Officer
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