1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 12, 1997
AMONG
TCI MUSIC, INC.,
TCI MUSIC ACQUISITION SUB, INC.
AND
THE BOX WORLDWIDE, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.....................................................................................1
Section 1.2 Other Definitions...............................................................................4
Section 1.3 Use of Terms....................................................................................5
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.1 The Merger......................................................................................5
Section 2.2 Effective Time of the Merger....................................................................6
ARTICLE III
CONVERSION OF CAPITAL STOCK
Section 3.1 Merger Consideration and Conversion of Stock....................................................6
Section 3.2 Calculation of Exchange Rate....................................................................7
Section 3.3 Exchange of Certificates........................................................................8
Section 3.4 Dividends and Other Distributions...............................................................9
Section 3.5 No Fractional Shares............................................................................9
Section 3.6 No Liability...................................................................................10
Section 3.7 Lost Certificates..............................................................................10
Section 3.8 Dissenting Shares..............................................................................10
Section 3.9 Treatment of Stock Options, Etc................................................................11
Section 3.10 Shareholders' Approval.........................................................................11
Section 3.11 Closing of the Company's Transfer Books........................................................12
Section 3.12 Assistance in Consummation of the Merger.......................................................12
Section 3.13 Closing........................................................................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TCI MUSIC AND ACQUISITION SUB
Section 4.1 Organization and Qualification.................................................................12
Section 4.2 Capitalization.................................................................................12
Section 4.3 Subsidiaries...................................................................................13
3
Section 4.4 Authority Relative to this Agreement...........................................................13
Section 4.5 No Breach; Required Consents...................................................................14
Section 4.6 Consents and Approvals.........................................................................14
Section 4.7 Reports and Financial Statements...............................................................14
Section 4.8 Compliance with Law; Litigation................................................................16
Section 4.9 Title to Assets................................................................................16
Section 4.10 Labor and Employee Matters.....................................................................16
Section 4.11 ERISA..........................................................................................17
Section 4.12 Operations of Acquisition Sub..................................................................18
Section 4.13 No Broker......................................................................................18
Section 4.14 Taxes..........................................................................................18
Section 4.15 Environmental Laws.............................................................................19
Section 4.16 Transactions with Affiliates...................................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization and Qualification.................................................................19
Section 5.2 Capitalization.................................................................................20
Section 5.3 Subsidiaries...................................................................................20
Section 5.4 Authority Relative to this Agreement...........................................................21
Section 5.5 No Breach; Required Consents...................................................................21
Section 5.6 Consents and Approvals.........................................................................21
Section 5.7 Reports and Financial Statements...............................................................22
Section 5.8 Compliance with Law; Litigation................................................................23
Section 5.9 Title to Assets................................................................................23
Section 5.10 Labor and Employee Matters.....................................................................24
Section 5.11 ERISA..........................................................................................24
Section 5.12 Approval.......................................................................................25
Section 5.13 Financial Advisor..............................................................................26
Section 5.14 Taxes..........................................................................................26
Section 5.15 Environmental Laws.............................................................................26
Section 5.16 Transactions with Affiliates...................................................................26
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business of the Company.............................................................27
Section 6.2 Conduct of Business of TCI Music...............................................................28
Section 6.3 Remedies for Breach. ..........................................................................28
(ii)
4
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information.........................................................................29
Section 7.2 SEC Filings....................................................................................29
Section 7.3 Meeting of Shareholders of the Company.........................................................32
Section 7.4 Compliance with the Securities Act.............................................................32
Section 7.5 Listing........................................................................................33
Section 7.6 Reasonable Best Efforts........................................................................33
Section 7.7 Public Announcements...........................................................................33
Section 7.8 Notification...................................................................................33
Section 7.9 HSR Act Filings................................................................................33
Section 7.10 Further Assurances.............................................................................34
Section 7.11 Employee Matters...............................................................................34
Section 7.12 No Solicitation................................................................................35
Section 7.13 Indemnification of Executives..................................................................36
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.....................................37
Section 8.2 Conditions to Obligation of the Company to Effect the Merger...................................38
Section 8.3 Conditions to Obligations of TCI Music and Acquisition Sub to Effect the Merger................38
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination....................................................................................39
Section 9.2 Effect of Termination..........................................................................40
Section 9.3 Amendment......................................................................................40
Section 9.4 Waiver.........................................................................................40
ARTICLE X
GENERAL PROVISIONS; DEFINITIONS
Section 10.1 Non-Survival of Representations, Warranties and Agreements.....................................41
Section 10.2 Notices........................................................................................41
Section 10.3 Fees and Expenses..............................................................................42
(iii)
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Section 10.4 Specific Performance...........................................................................42
Section 10.5 Third Party Beneficiaries......................................................................42
Section 10.6 Entire Agreement...............................................................................42
Section 10.7 Miscellaneous..................................................................................42
Section 10.8 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL..................................................43
(iv)
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EXHIBITS
Exhibit Description
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A Certificate of Designations for TCI Music Preferred Stock
B Form of Opinion of TCI Music Counsel
C Form of Opinion of Company Counsel
SCHEDULES
Schedule No. Description
3.9 Option Cancellation/Exercise Terms
4.3 TCI Music Subsidiaries and Equity Affiliates
4.6 TCI Music Consents
4.8(b) TCI Music Litigation
4.9 TCI Music Liens
4.10 TCI Music Employment Agreements
4.11(a) TCI Music Benefit Plans
4.14 TCI Music Taxes
5.2(b) Rights To Acquire Company Stock
5.3 Company Subsidiaries and Equity Affiliates
5.6 Company Consents
5.7(c) Material Changes
5.9 Company Liens
5.10 Company Employment Agreements
5.11(a) Company Benefit Plans
5.11(g) Benefits to Former Employees
5.14 Company Taxes
5.16 Company Affiliate Transactions
6.1 Conduct of Business Pending the Merger
7.13(a) Company Indemnification Agreements
8.2(e) Term Sheet for Amendment to Contribution Agreement
(v)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August
12, 1997, is entered into by and among TCI Music, Inc., a Delaware corporation
("TCI Music"), TCI Music Acquisition Sub, Inc., a Florida corporation and wholly
owned subsidiary of TCI Music ("Acquisition Sub"), and The Box Worldwide, Inc.
(formerly known as Video Jukebox Network, Inc.), a Florida corporation (the
"Company").
RECITALS
A. TCI Music has proposed that it will acquire the Company in a
transaction in which Acquisition Sub will merge with and into the Company, as a
result of which TCI Music will become the holder of all the outstanding shares
of common stock of the Company and the holders of shares of common stock of the
Company outstanding immediately prior to such merger will become holders of
shares of convertible preferred stock of TCI Music.
B. The Boards of Directors of TCI Music, Acquisition Sub and the
Company have each determined that the Merger is in the best interests of their
respective corporations and shareholders.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, the
parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following terms
with initial capital letters will have the meanings set forth below:
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, controls, is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with correlative
meaning, "controlling," "controlled by" and "under common control with") means
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person (whether through the
ownership of voting securities, by contract or otherwise).
"Certificate of Designations" means the Certificate of Designations in
the form attached as Exhibit A.
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"Company Shareholders" means certain shareholders of the Company as
defined in the Voting Agreement.
"Company Common Stock" means the shares of common stock, par value
$.001 per share, of the Company.
"Company Preferred Stock" means the shares of 6% Convertible Redeemable
Preferred Stock, par value $.15 per share and stated value $1.50 per share, of
the Company.
"Company Stock" means shares of Company Common Stock and shares of
Company Preferred Stock.
"Contribution Agreement" means the Contribution Agreement dated July
11, 1997, by and between TCI and TCI Music.
"Code" means the Internal Revenue Code of 1986, as amended.
"Environmental Law" means any applicable Legal Requirement relating to
the protection, preservation or restoration of the environment (including, air,
water vapor, surface water, ground water, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource).
"Equity Affiliate" means, as to any Person, any other Person in which
such Person or any of its Subsidiaries holds a five percent or greater equity
interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, as to any Person, any trade or business
(whether or not incorporated) that is treated as a single employer with such
Person under Section 414(b), (c), (m) or (o) or the Code.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Knowledge" means the actual present knowledge of a Person that is a
human being and, in the case of a Person that is not a human being, the present
actual knowledge of any director or officer (or any human being having duties
comparable to those of a director or officer) of such Person.
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"Legal Requirement" means any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Entity, including judicial decisions applying
common law or interpreting any other Legal Requirement or any agreement entered
into with a Governmental Entity in resolution of a dispute or otherwise.
"Lien" means any lien, security interest, pledge, charge, claim,
option, right to acquire, restriction on transfer, voting restriction or
encumbrance of any nature.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, condition (financial or otherwise), liabilities or
operations of a Person and its Subsidiaries, taken as a whole, or on the ability
of such Person to perform its obligations under this Agreement.
"NASDAQ" means the over-the-counter market of the National Association
of Securities Dealers, Inc.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any human being or any partnership, limited liability
company, corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity.
"SEC" means the United States Securities and Exchange Commission.
"Subsidiary" means, with respect to any Person, any other Person more
than 50% of whose outstanding voting securities or partnership or other equity
interests, as the case may be, are directly or indirectly owned by such Person.
"TCI" means Tele-Communications, Inc.
"TCI Music Preferred Stock" means the Series A Convertible Preferred
Stock of TCI Music, par value $.01 per share, having the powers, designations,
rights, qualifications and restrictions set forth in the Certificate of
Designations in the form attached as Exhibit A.
"TCI Music Series A Common Stock Value" means the average of the
average daily closing bid and asked prices of one share of TCI Music Series A
Common Stock for a period of 20 consecutive trading days ending on the third
trading day prior to the Closing, as reported on the NASDAQ SmallCap Market.
"Voting Agreement" means the Voting Agreement dated as of the date
hereof by and among TCI Music and the Company Shareholders (as defined therein).
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Section 1.2 OTHER DEFINITIONS. The following terms are defined in the
Sections indicated:
TERM SECTION
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Acquisition Proposal 7.12
Acquisition Sub Preamble
Articles of Incorporation 2.1(a)
Agreement Preamble
Antitrust Division 7.9
Articles of Merger 2.2
Capitalization Amendment 2.1(a)
Closing 3.13
Closing Date 3.13
Company Preamble
Company Benefit Plans 5.11(a)
Company Permits 5.8(a)
Company SEC Reports 5.7(a)
Company Stock Certificates 3.3(a)
Dissenting Shares 3.8
Effective Time 2.2
Exchange Act 4.6
Exchange Agent 3.3(a)
Exchange Rate 3.2
Executive 7.13(a)
FBCA 2.1
FTC 7.9
Governmental Entity 4.8(a)
HSR Act 4.6
Indemnified Party 7.2(h)(iii)
Indemnifying Party 7.2(h)(iii)
Joint Proxy Statement/Prospectus 7.2(a)
Losses 7.2(h)(i)
Meeting 7.3
Merger 2.1
Merger Consideration 3.1
Most Recent Company Balance Sheet 5.7(c)
Most Recent TCI Music Balance Sheet 4.7(c)
Other Filings 7.2(b)
Preliminary Joint Proxy Statement/ 7.2(a)
Prospectus
SEC Filings 7.2(c)
Securities Act 4.6
Surviving Corporation 2.1
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Tax 4.14
TCI Music Preamble
TCI Music Certificates 3.3(a)
TCI Music Permits 4.8(a)
TCI Music SEC Reports 4.7(a)
Section 1.3 USE OF TERMS. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. All pronouns (and any variations) will be deemed
to refer to the masculine, feminine or neuter, as the identity of the Person may
require. The singular or plural includes the other, as the context requires or
permits. The word include (and any variation) is used in an illustrative sense
rather than a limiting sense. The word day means a calendar day. All accounting
terms not otherwise defined in this Agreement will have the meanings ascribed to
them under GAAP.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.1 THE MERGER. Subject to the terms and conditions of this
Agreement, and the Florida Business Corporation Act ("FBCA"), at the Effective
Time: (i) Acquisition Sub will be merged with and into the Company (the
"Merger"); (ii) the separate existence of Acquisition Sub will cease and the
Company will continue as the surviving corporation in the Merger (the "Surviving
Corporation"); and (iii) the name of the Surviving Corporation will be The Box
Worldwide, Inc. From and after the Effective Time, and without any further
action on the part of any Person, the Merger will have all the effects provided
by applicable Legal Requirements, including Sections 607.1302 and 607.1320 of
the FBCA, the effects described in Section 3.1 with respect to the capital stock
of Acquisition Sub and the Company and, subject to applicable Legal
Requirements, the following additional effects:
(a) ARTICLES OF INCORPORATION. The Fourth Amended and Restated Articles
of Incorporation of the Company, as amended, as in effect on the date of this
Agreement, will be amended (the "Capitalization Amendment") to increase the
authorized number of shares of Company Common Stock from 40,000,000 shares to
100,000,000 shares. At the Effective Time, the Fourth Amended and Restated
Articles of Incorporation of the Company, as so amended (the "Articles of
Incorporation"), will become the Articles of Incorporation of the Surviving
Corporation, and such Articles of Incorporation may thereafter be amended and/or
restated as provided therein and by the FBCA.
(b) BYLAWS. At the Effective Time, the Bylaws of Acquisition Sub, as in
effect immediately prior to the Effective Time, will become the Bylaws of the
Surviving Corporation, and such Bylaws may thereafter be amended or repealed in
accordance with their terms and the Articles of Incorporation of the Surviving
Corporation and as provided by the FBCA.
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(c) DIRECTORS. At the Effective Time, the directors of Acquisition Sub
immediately prior to the Effective Time will become the directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation and the FBCA and until the
earlier of such director's resignation or removal or such director's successor
is duly elected and qualified, as the case may be.
(d) OFFICERS. At the Effective Time, the officers of Acquisition Sub
immediately prior to the Effective Time will become the officers of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation and the FBCA and until the
earlier of such officer's resignation or removal or such officer's successor is
duly appointed and qualified, as the case may be.
(e) PROPERTIES AND LIABILITIES. At the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and
Acquisition Sub will vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition Sub will become the debts,
liabilities and duties of the Surviving Corporation.
Section 2.2 EFFECTIVE TIME OF THE MERGER. Subject to the terms and
conditions in this Agreement, the parties will prepare, sign and acknowledge, in
accordance with the FBCA, articles of merger (the "Articles of Merger") and
deliver the Articles of Merger to the Secretary of State of the State of Florida
for filing pursuant to the FBCA on the Closing Date. The Merger will become
effective upon the filing of the Articles of Merger with the Secretary of State
of the State of Florida. As used in this Agreement, the "Effective Time" means
the time at which the Articles of Merger are filed with the Secretary of State
of the State of Florida.
ARTICLE III
CONVERSION OF CAPITAL STOCK
Section 3.1 MERGER CONSIDERATION AND CONVERSION OF STOCK. The aggregate
consideration deliverable by TCI Music in the Merger (the "Merger
Consideration") will be equal to (a) the sum of (i) $38,502,672 and (ii) $1.50
times the number of shares of Company Common Stock issued prior to the Effective
Time upon the exercise or conversion of options, warrants, convertible
securities or other rights to acquire Company Common Stock that are outstanding
as of the date of this Agreement minus (b) the sum of (i) $1.50 times the number
of Dissenting Shares (as defined in Section 3.8), (ii) $1.50 times the number of
shares of Company Preferred Stock outstanding at the Effective Time that are not
Dissenting Shares and (iii) all accrued and unpaid dividends on shares of
Company Preferred Stock as of the Effective Time, whether or not such shares are
Dissenting Shares. The Merger Consideration will be deliverable at the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any shares of capital stock of any corporation as follows:
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(a) Each share of Company Common Stock outstanding immediately prior to
the Effective Time (except shares subject to Section 3.1(b) and Dissenting
Shares) will be converted into and will thereafter evidence and become (i) a
fraction (rounded to the nearest one-hundredth), representing the Exchange Rate
calculated in accordance with Section 3.2, of one share of TCI Music Preferred
Stock and (ii) as to any holder of shares of Company Common Stock, if the total
number of shares of Company Common Stock of such holder is not convertible into
a whole number of shares of TCI Music Preferred Stock, the right to receive cash
in lieu of any fractional share of TCI Music Preferred Stock as provided in
Section 3.5.
(b) Each share of the capital stock of the Company issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by the Company, if any, will be canceled and retired, and no TCI
Music Preferred Stock or other consideration will be delivered in exchange
therefor.
(c) Each share of common stock, par value $.01 per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
(except shares subject to Section 3.1(d)) will be converted into and will
thereafter evidence and become that number of validly issued, fully paid, and
nonassessable shares of common stock, par value $.001 per share, of the
Surviving Corporation equal to the quotient of (a) the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time divided
by (b) the number of shares of common stock of Acquisition Sub outstanding
immediately prior to the Effective Time rounded, in the case of any fractional
share, down to the nearest whole number.
(d) Each share of the capital stock of Acquisition Sub issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by Acquisition Sub, if any, will be canceled and retired, and no
common stock of the Surviving Corporation or other consideration will be
delivered in exchange therefor.
(e) Each share of Company Preferred Stock outstanding immediately prior
to the Effective Time will continue to be outstanding with all the rights,
privileges and preferences set forth in the Articles of Incorporation and the
FBCA, unless such share is a Dissenting Share, in which case such share only
will have the rights prescribed by Sections 607.1302 and 607.1320 of the FBCA.
Section 3.2 CALCULATION OF EXCHANGE RATE. For purposes of this
Agreement, the "Exchange Rate" will be the quotient (rounded to the nearest
hundredth) of (a) the quotient (rounded to the nearest hundredth) of the Merger
Consideration divided by three times the TCI Music Series A Common Stock Value,
divided by (b) the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time, less the number of shares of Company
Common Stock that are Dissenting Shares.
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Section 3.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. The Bank of New York (or, if The Bank of New York
is unable or unwilling to serve in such capacity, another bank or trust company
selected by TCI Music and reasonably acceptable to the Company) will act as
exchange agent (the "Exchange Agent") in connection with the surrender of
certificates that, prior to the Effective Time, evidenced outstanding shares of
Company Common Stock ("Company Stock Certificates"). Prior to the Closing Date,
TCI Music will deposit with the Exchange Agent for exchange in accordance with
this Section 3.3 certificates evidencing the shares of TCI Music Preferred Stock
to be issued in the Merger ("TCI Music Certificates"), which shares of TCI Music
Preferred Stock will be deemed to be issued at the Effective Time. At and
following the Effective Time, TCI Music will deliver to the Exchange Agent such
cash as may be required from time to time to make payments of cash in lieu of
fractional shares of TCI Music Preferred Stock in accordance with Section 3.5.
(b) EXCHANGE. As soon as practicable after the Effective Time, but
subject to the provisions of Section 3.8 regarding Dissenting Shares, TCI Music
will cause the Exchange Agent to mail to each Person who was a holder of record
of Company Common Stock at the Effective Time: (i) a letter of transmittal
(which will specify that delivery will be effective, and risk of loss and title
to any Company Stock Certificates will pass, only upon delivery of the Company
Stock Certificates to the Exchange Agent and will be in such form and will have
such other provisions that are specified by TCI Music and reasonably acceptable
to the Company); and (ii) instructions for use in effecting the surrender of
Company Stock Certificates in exchange for TCI Music Certificates (together with
any dividend or distribution with respect thereto made after the Effective Time
and any cash to be paid in lieu of fractional shares of TCI Music Preferred
Stock pursuant to Section 3.5). Upon surrender of a Company Stock Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by TCI Music, together with such letter of transmittal, duly
executed, and such other documents as may be required by the Exchange Agent or
such other agent, the holder of such Company Stock Certificate will be entitled
to receive in exchange therefor TCI Music Certificates representing the number
of whole shares of TCI Music Preferred Stock that such holder has the right to
receive pursuant to this Agreement (together with any dividend or distribution
with respect thereto made after the Effective Time and any cash to be paid in
lieu of fractional shares of TCI Music Preferred Stock pursuant to Section 3.5)
and the Company Stock Certificate so surrendered will be canceled. In the event
of a transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, TCI Music Certificates representing the proper
number of shares of TCI Music Preferred Stock may be issued to a Person other
than the Person in whose name the surrendered Company Stock Certificate is
registered if the Company Stock Certificate representing such Company Common
Stock is presented to the Exchange Agent accompanied by all documents required
to evidence and effect such transfer and by evidence reasonably satisfactory to
TCI Music that any applicable stock transfer tax has been paid. TCI Music will
not directly or indirectly pay or reimburse any Person for any transfer taxes of
the type referred to in the preceding sentence. If any TCI Music Certificates
are to be delivered to a Person other than the Person in whose name the Company
Stock Certificates surrendered in exchange therefor are registered, it will be a
condition to the delivery of such TCI Music Certificates that the Company
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Stock Certificates so surrendered are properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise is proper and that the Person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establishes to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid.
(c) CERTIFICATES NOT EXCHANGED. After the Effective Time, each
outstanding Company Stock Certificate will, until surrendered for exchange in
accordance with this Section 3.3, be deemed for all purposes to evidence
ownership of the number of whole shares of TCI Music Preferred Stock into which
the shares of Company Common Stock (which, prior to the Effective Time, were
represented thereby) are converted in accordance with Section 3.1, together with
the right to receive any dividend or distribution with respect thereto made
after the Effective Time and any cash to be paid in lieu of fractional shares of
TCI Music Preferred Stock pursuant to Section 3.5.
(d) EXPENSES. Except as otherwise expressly provided in this Agreement,
TCI Music will pay all charges and expenses, including those of the Exchange
Agent, in connection with the exchange of shares of TCI Music Preferred Stock
for shares of Company Common Stock, except any charges or expenses that are
otherwise solely the liability of one or more holders of Company Common Stock.
Any TCI Music Certificates deposited with the Exchange Agent that remain
unclaimed by the former shareholders of the Company after six months following
the Effective Time will be delivered to TCI Music upon its demand, and any
former shareholders of the Company who have not then complied with the
instructions for exchanging their Company Stock Certificates will thereafter
look only to TCI Music for exchange of Company Stock Certificates and for any
dividend or distribution with respect thereto made after the Effective Time and
any cash to be paid in lieu of fractional shares of TCI Music Preferred Stock
pursuant to Section 3.5.
Section 3.4 DIVIDENDS AND OTHER DISTRIBUTIONS. No dividends or other
distributions declared or made after the Effective Time with respect to shares
of TCI Music Preferred Stock with a record date after the Effective Time will be
paid to the holder of any unsurrendered Company Stock Certificate with respect
to the shares of TCI Music Preferred Stock issuable upon surrender thereof until
the holder of such Company Stock Certificate surrenders such Company Stock
Certificate in accordance with Section 3.3. Subject to the effect of applicable
Legal Requirements, following surrender of any such Company Stock Certificate,
TCI Music will pay or cause to be paid, without interest, to the record holder
of TCI Music Certificates issued in exchange therefor, (a) at the time of such
surrender, the amount of cash in lieu of fractional shares of TCI Music
Preferred Stock to which such holder is entitled pursuant to Section 3.5 and the
amount, if any, of dividends or other distributions by TCI Music with a record
date after the Effective Time theretofore paid with respect to such whole shares
of TCI Music Preferred Stock and (b) at the appropriate payment date, the amount
of dividends or other distributions (if any) by TCI Music with a record date
after the Effective Time but prior to surrender of such Company Stock
Certificate and a payment date subsequent to such surrender payable with respect
to such whole shares of TCI Music Preferred Stock.
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Section 3.5 NO FRACTIONAL SHARES.
(a) CASH PAYMENT IN LIEU OF FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of TCI Music Preferred Stock will be issued upon
the surrender of Company Stock Certificates pursuant to Section 3.3. No such
fractional interest will entitle the owner thereof to any rights as a security
holder of TCI Music. In lieu of any such fractional shares of TCI Music
Preferred Stock, each holder of Company Common Stock entitled to receive shares
of TCI Music Preferred Stock in the Merger, upon surrender of such Person's
Company Stock Certificates for exchange pursuant to Section 3.3, will be
entitled to receive an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying three times the TCI Music Series A Common Stock
Value by the fractional share interest in TCI Music Preferred Stock to which
such holder would otherwise be entitled (after taking into account all shares of
Company Common Stock held of record by such holder immediately prior to the
Effective Time).
(b) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of shares of
TCI Music Preferred Stock in lieu of any fractional unit interests, TCI Music
will promptly deposit with the Exchange Agent cash in the required amounts and
the Exchange Agent will mail such amounts without interest to such holders;
provided however, that no such amount will be paid to any holder with respect to
any Company Stock Certificate prior to the surrender by such holder of such
Company Stock Certificate.
Section 3.6 NO LIABILITY. None of TCI Music, Acquisition Sub, the
Company, the Surviving Corporation or the Exchange Agent will be liable to any
holder of shares of Company Common Stock for any shares of TCI Music Preferred
Stock, dividends or distributions with respect thereto or cash payable in lieu
of fractional shares of TCI Music Preferred Stock delivered to a state abandoned
property administrator or other public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 3.7 LOST CERTIFICATES. If any Company Stock Certificate is
lost, stolen or destroyed, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Company Stock Certificate the shares of TCI Music
Preferred Stock (and any dividend or distribution with respect thereto made
after the Effective Time and any cash payable in lieu of fractional shares of
TCI Music Preferred Stock pursuant to Section 3.5) deliverable in respect
thereof as determined in accordance with the terms of this Agreement, subject to
the condition that the Person to whom the TCI Music Preferred Stock (and any
dividend or distribution with respect thereto made after the Effective Time and
any cash payable in lieu of fractional shares pursuant to Section 3.5) are to be
issued, shall have (a) delivered to TCI Music an affidavit claiming such Company
Stock Certificate to be lost, stolen, or destroyed and (b) if required by TCI
Music, given TCI Music an indemnity satisfactory to TCI Music against any claim
that may be made against TCI Music with respect to the Company Stock Certificate
alleged to have been lost, stolen or destroyed.
Section 3.8 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Stock outstanding immediately prior
to the Effective Time that are
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held by holders of such shares who have not voted in favor of the Merger or
consented thereto in writing and who have demanded appraisal rights with respect
thereto in accordance with Sections 607.1302 and 607.1320 of the FBCA (the
"Dissenting Shares") will not be converted into or be exchangeable for the right
to receive shares of TCI Music Preferred Stock or any dividend or distribution
with respect thereto made after the Effective Time or any cash payable in lieu
of fractional shares of TCI Music Preferred Stock pursuant to Section 3.5, but
holders of Dissenting Shares will be entitled to receive payment of the fair
value of their Dissenting Shares in accordance with the provisions of the FBCA
and this Section 3.8. Any shares of Company Stock held by a shareholder who,
prior to the Effective Time, withdraws a demand for appraisal of such shares or
loses the right to appraisal as provided in the FBCA will not be considered
Dissenting Shares. The Company will give TCI Music prompt notice of any written
demands for appraisal of any shares of Company Stock, attempted withdrawals of
such demand and any other notices or other documents received by the Company
pursuant to the FBCA relating to shareholders' rights of appraisal. The Company
will make all payments required by the FBCA to be made in respect of Dissenting
Shares, including any costs assessed against the Company pursuant to Sections
607.1302 and 607.1320 of the FBCA, and TCI Music or any of its Affiliates will
directly or indirectly reimburse or otherwise provide funds to the Company with
respect to such payments.
Section 3.9 TREATMENT OF STOCK OPTIONS, ETC.. The Company will take all
action necessary to cause any outstanding stock options, warrants or other
rights to acquire any capital stock of the Company to be canceled if not
exercised prior to or at the Effective Time, except for shares of Company
Preferred Stock; provided, however, that, except as provided in Schedule 3.9,
the Company will not pay or agree to pay or deliver any cash or other
consideration to the holder of any such option, warrant or other right in
consideration of the cancellation or termination thereof.
Section 3.10 SHAREHOLDERS' APPROVAL. Subject to fiduciary duty
obligations of the Board of Directors of the Company under applicable Legal
Requirements, the Company will use its best efforts, in accordance with
applicable Legal Requirements and the Articles of Incorporation and Bylaws of
the Company, to have this Agreement, the Merger, the Capitalization Amendment
and the transactions contemplated by this Agreement approved by the holders of
capital stock of the Company entitled to vote thereon. The Company will notify
TCI Music of the date set for any shareholder action to be taken in connection
with approval of the Merger not later than 30 days prior to such date. The Board
of Directors of the Company will, subject to fiduciary duty obligations under
applicable Legal Requirements, recommend that holders of Company Stock vote to
adopt this Agreement and approve the Merger, the Capitalization Amendment and
the transactions contemplated by this Agreement and will use best efforts to
solicit from such holders proxies in favor of such approval and adoption and
take all other action necessary or helpful to secure such favorable vote. Such
efforts will include causing the Joint Proxy Statement/Prospectus to include the
recommendation of the Board of Directors of the Company that its shareholders
approve the Merger and related transactions, including the Capitalization
Amendment; provided however, that the Board of Directors of the Company may
modify or withdraw its recommendation if it determines, with the advice of
outside counsel, that it may be required to do so in the exercise of its
fiduciary duties. Unless the Company's Board of Directors releases TCI Music and
Acquisition Sub from such
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obligation, each of TCI Music and Acquisition Sub will use its best efforts to
cause all shares of Company Stock beneficially owned (within the meaning of
Rule 13d-3 under the Exchange Act) by Liberty VJN, Inc. and any Affiliate of TCI
Music and Acquisition Sub, on the record date for the Meeting, to be voted in
favor of the Merger.
Section 3.11 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective
Time, the stock transfer books of the Company will be closed and no transfer of
shares of Company Common Stock will be made thereafter. In the event that, after
the Effective Time, Company Stock Certificates are presented to the Surviving
Corporation, they will be canceled and exchanged for the TCI Music Certificates
(and, if required, cash) as provided in Section 3.3(b) and Section 3.5.
Section 3.12 ASSISTANCE IN CONSUMMATION OF THE MERGER. Each of TCI
Music, Acquisition Sub and the Company will provide all reasonable assistance
to, and will cooperate with, each other to bring about the consummation of the
Merger as soon as possible in accordance with the terms and conditions of this
Agreement.
Section 3.13 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place (i) at the offices of Xxxxxxx &
Xxxxxx L.L.C., 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx, at
9:00 A.M. local time on the date that is the first business day after the day on
which the last of the conditions set forth in Article VIII (excluding delivery
of opinions and certificates) is fulfilled or waived or (ii) at such other place
and time as TCI Music and the Company agree in writing. The date on which the
Closing occurs is referred to in this Agreement as the "Closing Date."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TCI MUSIC AND ACQUISITION SUB
TCI Music and Acquisition Sub jointly and severally represent and
warrant to the Company as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. TCI Music is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida, and each
has all requisite corporate power and authority to carry on its business as it
is now being conducted. Each of TCI Music and Acquisition Sub is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified will not, individually or in the aggregate, have a
Material Adverse Effect on it.
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Section 4.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
TCI Music consists of: (i) 495,000,000 shares of common stock, par value $.01
per share, divided into the following classes: 295,000,000 shares of common
stock designated as Series A Common Stock of which 14,896,649 shares are issued
and outstanding and 200,000,000 shares of common stock, designated as Series B
Common Stock of which 62,500,000 shares are issued and outstanding; and (ii)
5,000,000 shares of preferred stock, par value $.01 per share, none of which are
issued and outstanding.
(b) All shares of TCI Music Preferred Stock to be issued in connection
with the Merger, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
(c) As of the date of this Agreement, the authorized capital stock of
Acquisition Sub consists of 1,000 shares of common stock, par value $.01 per
share, of which 1,000 shares are issues and outstanding, all of which are owned
beneficially and of record by TCI Music.
Section 4.3 SUBSIDIARIES. All Equity Affiliates of TCI Music are listed
on Schedule 4.3 to this Agreement, which Schedule reflects the percentage and
nature of TCI Music's ownership of each Subsidiary and Equity Affiliate of TCI
Music. Each of TCI Music's Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation and has the corporate or partnership
power to carry on its business as it is now being conducted or currently
proposed to be conducted. Each of TCI Music's Subsidiaries is duly qualified as
a foreign corporation or partnership to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary except
where the failure to be so qualified will not have a Material Adverse Effect on
TCI Music. All the outstanding shares of capital stock of each of TCI Music's
Subsidiaries that is a corporation are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 4.3, the shares of capital stock
or partnership or other ownership interests in each of TCI Music's Subsidiaries
or Equity Affiliates that are owned by TCI Music or by a Subsidiary of TCI Music
are owned free and clear of any Liens, are not subject to and have not been
issued in violation of any preemptive rights and have not been issued in
violation of any federal or state securities laws or any other Legal
Requirement. Except as set forth on Schedule 4.3, there are not, as of the date
hereof, and at the Effective Time there will not be, any outstanding options,
warrants, calls or other rights, agreements or commitments of any character, to
which TCI Music or any of its Subsidiaries is a party, relating to the issued or
unissued capital stock, other securities or partnership or other ownership
interests in any of the Subsidiaries or Equity Affiliates of TCI Music.
Section 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of TCI Music and
Acquisition Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement by TCI Music and Acquisition Sub
have been duly authorized by the Boards of Directors
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of TCI Music and Acquisition Sub and by TCI Music as the sole stockholder of
Acquisition Sub, and no other corporate proceedings on the part of TCI Music or
Acquisition Sub are necessary to authorize this Agreement and the transactions
contemplated by this Agreement. This Agreement constitutes a valid and binding
obligation of each of TCI Music and Acquisition Sub enforceable against each of
them in accordance with its terms, except (i) as enforcement may be limited by
bankruptcy, insolvency or other similar Legal Requirements affecting the
enforcement of creditors' rights generally, (ii) as the availability of
indemnification and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general principles of
equity.
Section 4.5 NO BREACH; REQUIRED CONSENTS. The execution and delivery of
this Agreement by TCI Music and Acquisition Sub do not, and the consummation of
the transactions contemplated by this Agreement by TCI Music and Acquisition Sub
will not: (a) violate or conflict with the Certificate or Articles of
Incorporation or Bylaws of TCI Music or Acquisition Sub; (b) constitute a breach
or default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any Lien, third-party right of termination,
cancellation, modification or acceleration under any agreement or undertaking to
which TCI Music or Acquisition Sub is a party or by which any of them is bound,
except where such breach, default, Lien, third-party right of termination,
cancellation, modification or acceleration would not have a Material Adverse
Effect on TCI Music or Acquisition Sub; or (c) subject to obtaining the
approvals and making the filings described in Section 4.6, constitute a
violation of any applicable Legal Requirement, except where such violation would
not have a Material Adverse Effect on TCI Music or Acquisition Sub.
Section 4.6 CONSENTS AND APPROVALS. Except as set forth on Schedule
4.6, neither the execution and delivery of this Agreement by TCI Music and
Acquisition Sub nor the consummation of the transactions contemplated by this
Agreement by TCI Music and Acquisition Sub will require TCI Music or Acquisition
Sub to make any filing or registration with, or obtain any authorization,
consent or approval of, any Governmental Entity, except those required in
connection, or in compliance, with the provisions of (i) the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
Communications Act of 1934, as amended, (iii) the Securities Act of 1933, as
amended (the "Securities Act"), (iv) the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (v) the corporation, securities or blue sky
laws or regulations, or similar Legal Requirements, of various states of the
United States, and other than such filings, registrations, authorizations,
consents or approvals the failure of which to make or obtain would not have a
Material Adverse Effect on TCI Music or Acquisition Sub or prevent the
consummation of the transactions contemplated by this Agreement.
Section 4.7 REPORTS AND FINANCIAL STATEMENTS.
(a) SEC REPORTS. TCI Music has filed all required forms, reports and
documents required to be filed with the SEC since TCI Music was incorporated
(collectively, the "TCI Music SEC Reports"). As of their respective dates or
effective dates and except as the same may have been corrected, updated or
superseded by means of a subsequent filing with the SEC prior to the date of
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this Agreement, none of the TCI Music SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. TCI Music has delivered to the Company, in the forms
filed with the SEC, all the TCI Music SEC Reports.
(b) FINANCIAL STATEMENTS. The audited consolidated financial statements
of TCI Music contained in the TCI Music SEC Reports comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and present fairly TCI Music's
consolidated financial condition and the results of its operations as of the
relevant dates thereof and for the periods covered thereby. The unaudited
consolidated interim financial statements of TCI Music contained in the TCI
Music SEC Reports comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, were prepared on a basis consistent with prior interim periods
(except as required by applicable changes in GAAP or in SEC accounting policies)
and include all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of TCI Music's consolidated financial
condition and results of operations for such periods.
(c) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the TCI Music
SEC Reports, since the date of the most recent balance sheet of TCI Music
included in TCI Music's Amendment No. 1 to Registration Statement on Form S-4
filed with the SEC on June 12, 1997 (the "Most Recent TCI Music Balance Sheet"),
there has not been any: (i)transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) that, individually or in the aggregate, has had, or
would have, a Material Adverse Effect on TCI Music (other than as a result of
changes in laws or regulations of general applicability or any changes resulting
from general economic, financial, market or industry-wide conditions); (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of TCI
Music; or (iii) entry into any commitment or transaction material to TCI Music
and its Subsidiaries taken as a whole (including any borrowing or sale of
assets) except in the ordinary course of business consistent with past practice.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the TCI
Music SEC Reports, TCI Music does not have any indebtedness, liability or
obligation required by GAAP to be reflected on a balance sheet that is not
reflected or reserved against in the Most Recent TCI Music Balance Sheet other
than liabilities, obligations and contingencies that (i) were incurred after the
date of the Most Recent TCI Music Balance Sheet in the ordinary course of
business or (ii) would not, in the aggregate, have a Material Adverse Effect on
TCI Music.
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Section 4.8 COMPLIANCE WITH LAW; LITIGATION.
(a) Except as disclosed in the TCI Music SEC Reports, TCI Music and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
concessions, leases, instruments, orders and approvals (the "TCI Music Permits")
of all courts, administrative agencies or commissions or other governmental
authorities or instrumentalities, domestic or foreign (each, a "Governmental
Entity") required to be held under applicable Legal Requirements, except for
such TCI Music Permits the failure of which to hold, individually or in the
aggregate, does not have and, in the future is not likely to have, a Material
Adverse Effect on TCI Music. To TCI Music's Knowledge, TCI Music and its
Subsidiaries are in compliance with the terms of the TCI Music Permits, except
for such failures to comply that, individually or in the aggregate, would not
have a Material Adverse Effect on TCI Music. To TCI Music's Knowledge, the
businesses of TCI Music and its Subsidiaries are not being conducted in
violation of any Legal Requirement, except for such violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
TCI Music. No investigation or review by any Governmental Entity with respect to
TCI Music or any of its Subsidiaries is pending, or, to the Knowledge of TCI
Music, threatened, nor has any Governmental Entity indicated to TCI Music in
writing an intention to conduct the same, other than those the outcome of which
would not have a Material Adverse Effect on TCI Music.
(b) Except as disclosed in the TCI Music SEC Reports or on Schedule
4.8(b), there is no suit, action or proceeding pending or, to the Knowledge of
TCI Music, threatened, against or affecting TCI Music or any of its Subsidiaries
that has had or is likely to have a Material Adverse Effect on TCI Music nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against TCI Music or any of its Subsidiaries that has
had or is likely to have a Material Adverse Effect on TCI Music.
Section 4.9 TITLE TO ASSETS. Except as disclosed in the TCI Music SEC
Reports, TCI Music and its Subsidiaries have good and merchantable title to all
material assets reflected on the unaudited pro forma combined balance sheet as
of March 31, 1997, included in TCI Music's Amendment No. 1 to Registration
Statement on Form S-4 filed with the SEC on June 12, 1997, free and clear of any
Lien except: (a) landlord's Liens and Liens for property taxes not delinquent;
(b) statutory Liens that were created in the ordinary course of business and do
not materially detract from the value of such assets or materially impair the
use thereof in the operation of TCI Music's business; (c) the Liens listed on
Schedule 4.3 or Schedule 4.9; (d) leased interests in property owned by others
and leased interests in property leased to others; and (e) zoning, building or
similar restrictions, easements, rights-of-way, reservations of rights,
conditions, or other restrictions or encumbrances relating to or affecting real
property that do not, individually or in the aggregate, materially interfere
with the use of such real property in the operation of TCI Music's business.
Section 4.10 LABOR AND EMPLOYEE MATTERS. TCI Music is not a party to
any contract with any labor organization and has not agreed to recognize any
union or other collective bargaining unit. As of the date of this Agreement, no
union or other collective bargaining unit has been certified as representing any
of TCI Music's employees. To TCI Music's Knowledge, as of the date of this
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Agreement, there is no representation or organizing effort pending or threatened
against or affecting or involving TCI Music. TCI Music and its Subsidiaries are
in compliance with all applicable Legal Requirements relating to the employment
of employees, including any obligations relating to employment standards
legislation, pay equity, occupational health and safety, labor relations and
human rights legislation except for such failures to comply as do not have, and
are not likely to have, a Material Adverse Effect on TCI Music. Schedule 4.10
sets forth all agreements or arrangements with any employee of TCI Music,
whether oral or in writing, with respect to such employee's employment with TCI
Music other than agreements or arrangements otherwise disclosed on Schedule
4.11(a).
Section 4.11 ERISA.
(a) Schedule 4.11(a) sets forth all "employee benefit plans," as
defined in ERISA, and all other material employee benefit arrangements, programs
or payroll practices, including severance pay, sick leave, vacation pay, salary
continuation for disability, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement,
employee assistance and employee discounts, that TCI Music or any of its ERISA
Affiliates maintains or has an obligation to make contributions (the "TCI Music
Benefit Plans").
(b) Neither TCI Music nor any of its ERISA Affiliates has incurred any
unsatisfied withdrawal liability, as defined in Section 4201 of ERISA, with
respect to any multiemployer plan, nor has any of them incurred any liability
due to the termination or reorganization of any multiemployer plan, except any
such liability that would not have a Material Adverse Effect on TCI Music. To
the Knowledge of TCI Music, neither TCI Music nor any of its ERISA Affiliates
reasonably expects to incur any liability due to a withdrawal from or
termination or reorganization of a multiemployer plan, except any such liability
that would not have a Material Adverse Effect on TCI Music.
(c) Each TCI Music Benefit Plan that is intended to qualify under
Section 401 of the Code and the trust maintained pursuant thereto has been
determined to be exempt from federal income taxation under Section 501 of the
Code by the Internal Revenue Service, and to the Knowledge of TCI Music, nothing
has occurred with respect to any such plan since such determination that is
likely to result in the loss of such exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code. Each TCI Music Benefit Plan
has at all times been maintained in all material respects, by its terms and in
operation, in accordance with all applicable Legal Requirements.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under the
TCI Music Benefit Plans or pursuant to applicable Legal Requirements (without
regard to any waivers granted under Section 412 of the Code) to any funds or
trusts established thereunder or in connection therewith have been made by the
due date thereof (including any valid extension or grace period) and no
accumulated funding
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deficiency exists with respect to any of the TCI Music Benefit Plans subject to
Section 412 of the Code.
(e) To the Knowledge of TCI Music, there have been no violations of
ERISA or the Code with respect to the filing of applicable reports, documents
and notices regarding the TCI Music Benefit Plans with the Secretary of Labor
and the Secretary of the Treasury or the furnishing of such reports, documents
and notices to the participants or beneficiaries of the TCI Music Benefit Plans,
except such violations that, individually or in the aggregate, would not have a
Material Adverse Effect on TCI Music.
(f) There are no pending actions, claims or lawsuits that have been
asserted or instituted against the TCI Music Benefit Plans, the assets of any of
the trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the TCI Music Benefit Plans, with respect to the
operation of such plans (other than routine benefit claims), nor does TCI Music
have Knowledge of facts that reasonably could be expected to form the basis for
any such action, claim or lawsuit, except any such actions, claims or lawsuits
that, individually or in the aggregate, would not have a Material Adverse Effect
on TCI Music.
(g) Except as provided in Schedule 4.11(g) and as may be required under
Section 4980B of the Code, neither TCI Music nor any of its ERISA Affiliates
maintains any TCI Music Benefit Plan that provides medical or welfare benefits
to former employees.
Section 4.12 OPERATIONS OF ACQUISITION SUB. As of the date of this
Agreement, Acquisition Sub has engaged in no other business activities other
than this Agreement and the transactions contemplated by this Agreement and has
no material assets or liabilities other than its rights and obligations under
this Agreement.
Section 4.13 NO BROKER. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of TCI Music or Acquisition Sub.
Section 4.14 TAXES. TCI Music and each of its Subsidiaries have timely
filed all Tax returns required to be filed by any of them and have timely paid
or have established an adequate reserve for the payment of, all Taxes owed in
respect of the periods covered by such returns, except where the failure to file
such Tax returns or timely pay or establish an adequate reserve for the payment
of such Taxes will not have a Material Adverse Effect on TCI Music. The
information contained in such Tax returns is complete and accurate in all
material respects. Neither TCI Music's nor any Subsidiary of TCI Music is
delinquent in the payment of any Tax or other amount owed to any Governmental
Entity, except where the amount owed, when paid, or the delinquency in paying
the amount owed will not have a Material Adverse Effect on TCI Music. There are
no claims or investigations pending or, to TCI Music's Knowledge, threatened
against TCI Music or any of its Subsidiaries for past Taxes, except claims and
investigations that would not have a Material Adverse
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Effect on TCI Music and adequate provision for which has been made on the Most
Recent Balance Sheet. Except as set forth on Schedule 4.14, none of TCI Music or
its Subsidiaries has waived or extended any applicable statute of limitations
relating to the assessment of any Taxes that would be payable by TCI Music or
such Subsidiary. For the purposes of this Agreement, the term "Tax" includes all
federal, state, local and foreign income, profits, estimated, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties and assessments of any nature whatsoever together with all
interest, penalties and additions imposed with respect to such amounts.
Section 4.15 ENVIRONMENTAL LAWS.
(a) Each of TCI Music and its Subsidiaries is in compliance in all
respects with all Environmental Laws, except where the failure to so comply
would not have a Material Adverse Effect on TCI Music; and
(b) No orders, directions or notices have been issued pursuant to any
Environmental Law and no Governmental Entity has submitted to any of TCI Music
and its Subsidiaries any request for information pursuant to any Environmental
Law.
Section 4.16 TRANSACTIONS WITH AFFILIATES. Except as disclosed in the
TCI Music SEC Reports or as contemplated by this Agreement, there is no lease,
sublease, indebtedness, contract, agreement, commitment, understanding or other
arrangement of any kind entered into by TCI Music with any officer, director or
shareholder of TCI Music or any "affiliate" or "associate" of any of them (as
those terms are defined in the Exchange Act) or of TCI Music, except, in each
case, for compensation paid to directors and officers consistent with previously
established policies (including normal merit increases in such compensation in
the ordinary course of business), reimbursements of ordinary and necessary
expenses incurred in connection with their employment and amounts paid or
benefits granted pursuant to TCI Music Benefit Plans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to TCI Music and Acquisition Sub as
follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has all requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
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Section 5.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 40,000,000
shares of Company Common Stock, $.001 par value per share, of which 24,001,781
shares are issued and outstanding, 1,800,000 shares of Company Preferred Stock,
of which 1,666,667 shares are issued and outstanding, and 200,000 shares of 8%
convertible preferred stock, $1.00 par value per share, of which no shares are
issued and outstanding.
(b) Except as set forth on Schedule 5.2(b), there are no options,
warrants, calls, subscriptions or other rights, agreements or commitments of any
kind (including preemptive rights), to which the Company or any of its
Subsidiaries is a party, relating to the issued or unissued capital stock or
other securities of the Company. Schedule 5.2(b) sets forth for all such
options, warrants, calls, subscriptions or other rights, agreements or
commitments that are outstanding (i) the number of shares and the class or
series of capital stock of the Company issuable pursuant thereto, (ii) the
exercise or conversion price, (iii) the exercise or conversion period and (iv)
if not immediately exercisable or convertible, the date on which they can be
exercised or converted. Any such options, warrants, calls, subscriptions or
other rights, agreements or commitments set forth on Schedule 5.2(b), if not
exercised before the Effective Time, will be extinguished or otherwise will
cease to be in effect at the Effective Time, except for the preemptive rights of
holders of Company Preferred Stock that remain outstanding after the Effective
Time, which preemptive rights will not, however, apply to the issuance of
Company Common Stock upon conversion of shares of common stock of Acquisition
Sub pursuant to Section 3.1(c).
(c) All issued and outstanding shares of Company Stock have been duly
authorized and validly issued and are fully paid and nonassessable, are not
subject to, and have not been issued in violation of, any preemptive rights, and
have not been issued in violation of any federal or state securities laws or any
other Legal Requirement.
Section 5.3 SUBSIDIARIES. All Equity Affiliates of the Company are
listed on Schedule 5.3 to this Agreement, which Schedule reflects the percentage
and nature of the Company's ownership of each Subsidiary and Equity Affiliate of
the Company. Each of the Company's Subsidiaries is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation and has the corporate or partnership
power to carry on its business as it is now being conducted or currently
proposed to be conducted. Each of the Company's Subsidiaries is duly qualified
as a foreign corporation or partnership to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary except
where the failure to be so qualified will not have a Material Adverse Effect on
the Company. All the outstanding shares of capital stock of each of the
Company's Subsidiaries that is a corporation are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 5.3, the shares of capital stock
or partnership or other ownership interests in each of the Company's
Subsidiaries or Equity Affiliates that are owned by the Company or by a
Subsidiary of the Company are owned free and clear of any Liens, are not subject
to and have not been issued in violation of any preemptive
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rights and have not been issued in violation of any federal or state securities
laws or any other Legal Requirement. Except as set forth on Schedule 5.3, there
are not, as of the date hereof, and at the Effective Time there will not be, any
outstanding options, warrants, calls or other rights, agreements or commitments
of any character, to which the Company or any of its Subsidiaries is a party,
relating to the issued or unissued capital stock, other securities or
partnership or other ownership interests in any of the Subsidiaries or Equity
Affiliates of the Company.
Section 5.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement by the holders of the Company Stock,
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by the Company's Board of Directors.
Except for the approval of the holders of Company Stock, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the transactions contemplated by this Agreement. The Board of Directors of
the Company has received the opinion of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx as
financial advisor to the Company, to the effect that, as of the date of this
Agreement, the consideration to be received in the Merger by the Company's
shareholders is fair to them from a financial point of view. Subject to approval
of the shareholders of the Company in accordance with the FBCA, this Agreement
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms except (i) as enforcement may be limited by
bankruptcy, insolvency or other similar Legal Requirements affecting the
enforcement of creditors' rights generally, (ii) as the availability of
indemnification and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general principles of
equity.
Section 5.5 NO BREACH; REQUIRED CONSENTS. The execution and delivery of
this Agreement by the Company does not, and the consummation of the transactions
contemplated by this Agreement by the Company will not: (a) subject to the
approval of holders of Company Stock, violate or conflict with the Articles of
Incorporation or Bylaws of the Company; (b) constitute a breach or default (or
an event that with notice or lapse of time or both would become a breach or
default) or give rise to any Lien, third-party right of termination,
cancellation, modification or acceleration under any agreement or undertaking to
which the Company is a party or by which it is bound, except where such breach,
default, Lien, third-party right of termination, cancellation, modification, or
acceleration would not have a Material Adverse Effect on the Company; or
(c) subject to obtaining the consents, approvals or authorizations and making
the filings or registrations described in Section 5.6, constitute a violation of
any Legal Requirement, except where such violation would not have a Material
Adverse Effect on the Company.
Section 5.6 CONSENTS AND APPROVALS. Except as set forth on
Schedule 5.6, neither the execution and delivery of this Agreement by the
Company nor the consummation of the transactions contemplated by this Agreement
by the Company will require the Company to make any filing or registration with,
or obtain any authorization, consent or approval of, any Governmental Entity or
any other Person, except those required in connection, or in compliance, with
the provisions
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of (i) the HSR Act, (ii) the Communications Act of 1934, as amended, (iii) the
Securities Act, (iv) the Exchange Act and (v) the corporation, securities or
blue sky laws or regulations, or similar Legal Requirements, of the various
states of the United States, and other than such other filings, registrations,
authorizations, consents or approvals the failure of which to make or obtain
would not have a Material Adverse Effect on the Company or prevent the
consummation of the transactions contemplated by this Agreement.
Section 5.7 REPORTS AND FINANCIAL STATEMENTS.
(a) SEC REPORTS. The Company has filed all required forms, reports and
documents required to be filed with the SEC since July 1, 1995 (collectively,
the "Company SEC Reports"). As of their respective dates or effective dates and
except as the same may have been corrected, updated or superseded by means of a
subsequent filing with the SEC prior to the date of this Agreement, none of the
Company SEC Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company has delivered to TCI Music, in the forms filed with the SEC, all the
Company SEC Reports.
(b) FINANCIAL STATEMENTS. The audited consolidated financial statements
of the Company contained in the Company SEC Reports comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and present fairly the Company's
consolidated financial condition and the results of its operations as of the
relevant dates thereof and for the periods covered thereby. The unaudited
consolidated interim financial statements of the Company contained in the
Company SEC Reports comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, were prepared on a basis consistent with prior interim periods
(except as required by applicable changes in GAAP or in SEC accounting policies)
and include all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the Company's consolidated financial
condition and results of operations for such periods.
(c) ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
consolidated balance sheet of the Company included in the Company's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1997 (the "Most Recent
Company Balance Sheet") and except as set forth on Schedule 5.7(c), there has
not been any: (i) transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the ordinary course
of business) that, individually or in the aggregate, has had, or would have, a
Material Adverse Effect on the Company (other than as a result of changes in
laws or regulations of general applicability or any changes resulting from
general economic, financial, market or industry-wide conditions); (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock
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or property) with respect to the capital stock of the Company; or (iii) entry
into any commitment or transaction material to the Company and its Subsidiaries
taken as a whole (including any borrowing or sale of assets) except in the
ordinary course of business consistent with past practice.
(d) ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
indebtedness, liability or obligation required by GAAP to be reflected on a
balance sheet that is not reflected or reserved against in the Most Recent
Company Balance Sheet other than liabilities, obligations and contingencies that
(i) were incurred after the date of the Most Recent Company Balance Sheet in the
ordinary course of business or (ii) would not, in the aggregate, have a Material
Adverse Effect on the Company.
Section 5.8 COMPLIANCE WITH LAW; LITIGATION.
(a) To the Company's Knowledge, the Company and its Subsidiaries hold
all permits, licenses, franchises, variances, exemptions, concessions, leases,
instruments, orders and approvals (the "Company Permits") of all Governmental
Entities required to be held under applicable Legal Requirements, except such
Company Permits the failure of which to hold, individually or in the aggregate,
does not have and, in the future is not likely to have, a Material Adverse
Effect on the Company. To the Company's Knowledge, the Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except for
such failures to comply that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. To the Company's Knowledge, the
businesses of the Company and its Subsidiaries are not being conducted in
violation of any Legal Requirement, except for such violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. No investigation or review by any Governmental Entity with respect
to the Company or any of its Subsidiaries is pending, or, to the Knowledge of
the Company, threatened, nor has any Governmental Entity indicated to the
Company in writing an intention to conduct the same, other than those the
outcome of which would not have a Material Adverse Effect on the Company.
(b) There is no suit, action or proceeding pending or, to the Knowledge
of the Company, threatened against or affecting the Company or any of its
Subsidiaries that has had or is likely to have a Material Adverse Effect on the
Company nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries that has had or is likely to have a Material Adverse Effect on the
Company.
Section 5.9 TITLE TO ASSETS. The Company and its Subsidiaries have good
and merchantable title to all material assets reflected on the Most Recent
Company Balance Sheet, free and clear of any Lien except: (a) landlord's Liens
and Liens for property taxes not delinquent; (b) statutory Liens that were
created in the ordinary course of business and do not materially detract from
the value of such assets or materially impair the use thereof in the operation
of the Company's business; (c) the Liens listed on Schedule 5.3 or Schedule 5.9;
(d) leased interests in property owned by others; and leased interests in
property leased to others; and (e) zoning, building or similar restrictions,
easements, rights-of-way, reservations of rights, conditions, or other
restrictions or
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encumbrances relating to or affecting real property that do not, individually or
in the aggregate, materially interfere with the use of such real property in the
operation of the Company's business.
Section 5.10 LABOR AND EMPLOYEE MATTERS. The Company is not a party to
any contract with any labor organization and has not agreed to recognize any
union or other collective bargaining unit. As of the date of this Agreement, no
union or other collective bargaining unit has been certified as representing any
of the Company's employees. To the Company's Knowledge, as of the date of this
Agreement, there is no representation or organizing effort pending or threatened
against or affecting or involving the Company. The Company and its Subsidiaries
are in compliance with all applicable Legal Requirements relating to the
employment of employees, including any obligations relating to employment
standards legislation, pay equity, occupational health and safety, labor
relations and human rights legislation except for such failures to comply as do
not have, and are not likely to have, a Material Adverse Effect on the Company.
Schedule 5.10 sets forth all agreements or arrangements with any employee of the
Company, whether oral or in writing, with respect to such employee's employment
with the Company other than agreements or arrangements otherwise disclosed on
Schedule 5.11(a).
Section 5.11 ERISA.
(a) Schedule 5.11(a) sets forth all "employee benefit plans," as
defined in ERISA, and all other material employee benefit arrangements, programs
or payroll practices, including severance pay, sick leave, vacation pay, salary
continuation for disability, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement,
employee assistance and employee discounts, that the Company or any of its ERISA
Affiliates maintains or has an obligation to make contributions (the "Company
Benefit Plans").
(b) Neither the Company nor any of its ERISA Affiliates has incurred
any unsatisfied withdrawal liability, as defined in Section 4201 of ERISA, with
respect to any multiemployer plan, nor has any of them incurred any liability
due to the termination or reorganization of any multiemployer plan, except any
such liability that would not have a Material Adverse Effect on the Company. To
the Knowledge of the Company, neither the Company nor any of its ERISA
Affiliates reasonably expects to incur any liability due to a withdrawal from or
termination or reorganization of a multiemployer plan, except any such liability
that would not have a Material Adverse Effect on the Company.
(c) Each Company Benefit Plan that is intended to qualify under Section
401 of the Code, and a form of trust that is similar in all material respects to
the trust maintained pursuant thereto, have been determined to be exempt from
federal income taxation under Section 501 of the Code by the Internal Revenue
Service, and to the Knowledge of the Company, nothing has occurred with respect
to any such plan since such determination that is likely to result in the loss
of such exemption or the imposition of any material liability, penalty or tax
under ERISA or the Code. Each Company Benefit Plan has at all times been
maintained in all material respects, by its terms and in operation, in
accordance with all applicable Legal Requirements.
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(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under the
Company Benefit Plans or pursuant to applicable Legal Requirements (without
regard to any waivers granted under Section 412 of the Code) to any funds or
trusts established thereunder or in connection therewith have been made by the
due date thereof (including any valid extension or grace period) and no
accumulated funding deficiency exists with respect to any of the Company Benefit
Plans subject to Section 412 of the Code.
(e) To the Knowledge of the Company, there have been no violations of
ERISA or the Code with respect to the filing of applicable reports, documents
and notices regarding the Company Benefit Plans with the Secretary of Labor and
the Secretary of the Treasury or the furnishing of such reports, documents and
notices to the participants or beneficiaries of the Company Benefit Plans,
except such violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(f) There are no pending actions, claims or lawsuits that have been
asserted or instituted against the Company Benefit Plans, the assets of any of
the trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Company Benefit Plans, with respect to the
operation of such plans (other than routine benefit claims), nor does the
Company have Knowledge of facts that reasonably could be expected to form the
basis for any such action, claim or lawsuit, except any such actions, claims or
lawsuits that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(g) Except as provided in Schedule 5.11(g) and as may be required under
Section 4980B of the Code, neither the Company nor any of its ERISA Affiliates
maintains any Company Benefit Plan that provides medical or welfare benefits to
former employees.
Section 5.12 APPROVAL.
(a) The Board of Directors of the Company at a meeting duly called and
held: (i) determined that the Merger is advisable and fair and in the best
interests of the Company and its shareholders; (ii) approved the Merger, the
Capitalization Amendment and this Agreement and the transactions contemplated by
this Agreement in accordance with the provisions of Section 607.1101 of the
FBCA; (iii) recommended the approval of this Agreement, the Capitalization
Amendment and the Merger by the holders of the Company Stock and directed that
the Merger be submitted for consideration by the Company's shareholders at the
Meeting in accordance with the provisions of Section 607.1103 of the FBCA; and
(iv) adopted a resolution having the effect of causing the Merger not to be
subject to Section 607.0902 of the FBCA.
(b) The vote of 75% of the outstanding shares of the Company Stock
entitled to vote, voting as a single class, is the vote required for the
adoption and approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement, except that the vote of a majority of the
outstanding shares of Company Stock entitled to vote, voting as a single class,
will
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be sufficient for adoption and approval of the Capitalization Amendment. No
class or series of shares of capital stock of the Company is entitled to vote on
the adoption and approval of this Agreement, the Merger, the Capitalization
Amendment or the other transactions contemplated by this Agreement as a separate
class or series.
Section 5.13 FINANCIAL ADVISOR/INVESTMENT BANKER. Except for amounts
payable to Xxxxxxxx Xxxxx Xxxxxx & Xxxxx and Communications Equity Associates,
Inc. in the amounts and on the terms and conditions set forth on Schedule 5.13,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. There has been delivered to TCI Music true and complete copies of
the agreements pursuant to which Xxxxxxxx Xxxxx Xxxxxx & Xxxxx has been retained
to act as financial advisor to, and Communications Equity Associates, Inc. has
been retained to obtain financing for, the Company in connection with the
Merger.
Section 5.14 TAXES. The Company and each of its Subsidiaries have
timely filed all Tax returns required to be filed by any of them and have timely
paid or have established an adequate reserve for the payment of, all Taxes owed
in respect of the periods covered by such returns, except where the failure to
file such Tax returns or timely pay or establish an adequate reserve for the
payment of such Taxes, will not have a Material Adverse Effect on the Company.
The information contained in such Tax returns is complete and accurate in all
material respects. Neither the Company nor any Subsidiary of the Company is
delinquent in the payment of any Tax or other amount owed to any Governmental
Entity, except where the amount owed, when paid, or the delinquency in paying
the amount owed will not have a Material Adverse Effect on the Company. There
are no claims or investigations pending or, to the Company's Knowledge,
threatened against the Company or any of its Subsidiaries for past Taxes, except
claims and investigations that would not have a Material Adverse Effect on the
Company and adequate provision for which has been made on the Most Recent
Balance Sheet. Except as set forth on Schedule 5.14, none of the Company or its
Subsidiaries has waived or extended any applicable statute of limitations
relating to the assessment of any Taxes that would be payable by the Company or
such Subsidiary.
Section 5.15 ENVIRONMENTAL LAWS.
(a) Each of the Company and its Subsidiaries is in compliance in all
respects with all Environmental Laws, except where the failure to so comply
would not have a Material Adverse Effect on the Company; and
(b) No orders, directions or notices have been issued pursuant to any
Environmental Law and no Governmental Entity has submitted to any of the Company
and its Subsidiaries any request for information pursuant to any Environmental
Law.
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Section 5.16 TRANSACTIONS WITH AFFILIATES. Except as disclosed in the
Company SEC Reports or Schedule 5.16, there is no lease, sublease, indebtedness,
contract, agreement, commitment, understanding or other arrangement of any kind
entered into by the Company with any officer, director or shareholder of the
Company or any "affiliate" or "associate" of any of them (as those terms are
defined in the Exchange Act) or of the Company, except, in each case, for
compensation paid to directors and officers consistent with previously
established policies (including normal merit increases in such compensation in
the ordinary course of business), reimbursements of ordinary and necessary
expenses incurred in connection with their employment and amounts paid or
benefits granted pursuant to Company Benefit Plans.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS OF THE COMPANY. Prior to the Effective
Time, except as set forth on Schedule 6.1 to this Agreement, without the prior
consent of TCI Music:
(a) The Company will conduct, and will cause each of its Subsidiaries
to conduct, its business in the ordinary course, and will use, and will cause
each of its Subsidiaries to use, its reasonable best efforts to preserve intact
its present business organization and to preserve relationships with customers,
suppliers and others having business dealings with them.
(b) Except as required or permitted by this Agreement the Company will
not, and will not permit any of its Subsidiaries to: (i) sell or pledge or agree
to sell or pledge any capital stock or other ownership interest in any of its
Subsidiaries; (ii) amend or propose to amend the Articles of Incorporation or
Bylaws of the Company or any of its Subsidiaries; (iii) split, combine or
reclassify its outstanding capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of, or other ownership interests in, the Company or
any of its Subsidiaries, or declare, set aside or pay any dividend or other
distribution to shareholders of the Company; (iv) directly or indirectly redeem,
purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire
any shares of capital stock of, or other ownership interests in, the Company or
any of its Subsidiaries; or (v) agree to do any of the foregoing.
(c) The Company will not, and will not permit any of its Subsidiaries
to: (i) issue, deliver or sell or agree to issue, deliver or sell any shares of
capital stock of, or other ownership interests in, the Company or any of its
Subsidiaries, or any option, warrant or other right to acquire, or any security
convertible into, shares of capital stock of, or other ownership interests in,
the Company or any of its Subsidiaries, except as required or permitted by this
Agreement; (ii) acquire, lease or dispose of any assets, other than in the
ordinary course of business consistent with past practice; (iii) (A) create,
assume or incur any indebtedness for borrowed money exceeding $200,000, other
than indebtedness incurred to refinance outstanding indebtedness in an amount
not exceeding the principal amount of the indebtedness being refinanced and
indebtedness owed by the Company
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to any of its Subsidiaries or by way of the Company's Subsidiaries to the
Company or any other Subsidiary of the Company, (B) mortgage, pledge or subject
to any Lien any of its assets except to secure indebtedness permitted by the
foregoing clause (A) and Liens described in clauses (a) through (e) of Section
5.9 or (C) enter into any other material transaction other than in each case in
the ordinary course of business consistent with past practice; (iv) make any
payments with respect to any indebtedness of the Company or its Subsidiaries
except such payments that are scheduled to come due prior to the Effective Time;
(v) acquire by merging or consolidating with, or by acquiring assets of, or by
purchasing a substantial ownership interest in, or by any other method, any
business or any other Person, in each case in this clause (v) that are material,
individually or in the aggregate, to the Company and its Subsidiaries taken as a
whole; or (vi) agree to do any of the foregoing.
(d) Except as required to comply with applicable Legal Requirements or
existing Company Benefit Plans or as otherwise contemplated by this Agreement,
the Company will not, and will not permit any of its Subsidiaries to: (i) adopt
or terminate or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other Company Benefit Plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or current or
former employee; (ii) increase in any manner the compensation or benefits of any
director, officer or employee (except normal increases in the ordinary course of
business consistent with past practice); (iii) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Company
Benefit Plan; (iv) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement, contract
or arrangement or Company Benefit Plan (except in the ordinary course of
business consistent with past practice); or (v) agree to do any of the
foregoing.
(e) The Company will not take or agree to take, and will cause its
Subsidiaries not to take or agree to take, any action that would: (i) make any
representation or warranty of the Company set forth in this Agreement untrue or
incorrect so as to cause the condition set forth in Section 8.3(a) of this
Agreement not to be fulfilled as of the Effective Time; or (ii) result in any of
the other conditions of this Agreement set forth in Section 8.1 or Section 8.3
of this Agreement not to be satisfied as of the Effective Time.
Section 6.2 CONDUCT OF BUSINESS OF TCI MUSIC. Prior to the Effective
Time, except as contemplated or permitted by this Agreement TCI Music will not
take or agree to take, and will cause its Subsidiaries not to take or agree to
take, any action that would (i) make any representation or warranty of TCI Music
or Acquisition Sub set forth in this Agreement untrue or incorrect so as to
cause the condition set forth in Section 8.2(a) of this Agreement not to be
fulfilled as of the Effective Time or (ii) result in any of the other conditions
set forth in Section 8.1 or Section 8.2 of this Agreement not to be satisfied as
of the Effective Time.
Section 6.3 REMEDIES FOR BREACH. The sole remedies (i) of TCI Music and
Acquisition Sub for any breach by the Company of Section 6.1(e), and (ii) of the
Company for any breach by TCI Music of Section 6.2, will be injunctive relief or
termination of this Agreement
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pursuant to Article X, unless, in any case, such breach is willful or
intentional, in which event any and all available legal or equitable remedies
may be obtained.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION. Each of the Company and TCI Music
and their respective Subsidiaries will afford to the other and to the other's
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Time to all of its properties,
books, contracts, commitments, records and personnel.
Section 7.2 SEC FILINGS.
(a) The Company and TCI Music will prepare jointly, and, as soon as
reasonably practicable after the date of this Agreement, file with the SEC a
joint proxy statement/registration statement (the "Preliminary Joint Proxy
Statement/Prospectus") comprising preliminary proxy materials of the Company
under the Exchange Act with respect to the Merger and a Registration Statement
on Form S-4 and preliminary prospectus of TCI Music under the Securities Act
with respect to the TCI Music Preferred Stock and the TCI Music Series A Common
Stock underlying the TCI Music Preferred Stock to be issued in the Merger, and
will thereafter use their respective reasonable best efforts to respond to any
comments of the SEC with respect thereto and to cause a definitive joint proxy
statement/registration statement (including all supplements and amendments
thereto, the "Joint Proxy Statement/Prospectus") and proxy to be mailed to the
Company's shareholders as promptly as practicable.
(b) As soon as reasonably practicable after the date hereof, the
Company and TCI Music will prepare and file any other filings relating to the
Merger and the other transactions contemplated hereby that are required to be
filed by each under the Exchange Act and other applicable Legal Requirements,
including, if required, in the case of TCI Music, a registration statement on
the applicable form under the Exchange Act with respect to the TCI Music
Preferred Stock (collectively "Other Filings"), and will use their reasonable
best efforts to respond to any comments of the SEC or any other appropriate
government official with respect thereto.
(c) The Company, on the one hand, and TCI Music, on the other, will
cooperate with each other and provide all information necessary to prepare the
Preliminary Joint Proxy Statement/Prospectus, the Joint Proxy
Statement/Prospectus and the Other Filings (collectively "SEC Filings") and will
provide promptly to the other party any information that such party may obtain
that could necessitate amending any such document.
(d) Each of the Company and TCI Music will notify the other promptly of
the receipt of any comments from the SEC or its staff or any other government
official and of any
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requests by the SEC or its staff or any other government official for amendments
or supplements to any of the SEC Filings or for additional information and will
supply the other with copies of all correspondence between the Company or any of
its representatives or TCI or TCI Music or any of their respective
representatives, as the case may be, on the one hand, and the SEC or its staff
or any other government official, on the other hand, with respect thereto. If at
any time prior to the Effective Time, any event occurs that should be set forth
in an amendment of, or a supplement to, any of the SEC Filings, the Company and
TCI Music promptly will prepare and file such amendment or supplement and will
distribute such amendment or supplement as required by applicable Legal
Requirements, including, in the case of an amendment or supplement to the Joint
Proxy Statement/Prospectus, mailing such supplement or amendment to the
Company's shareholders.
(e) TCI Music covenants that the SEC Filings (other than any
information provided by the Company for inclusion in the SEC Filings) (i) will
comply in all material respects with the Securities Act and the Exchange Act and
(ii) will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements contained therein, in light of the circumstances under which they
are made, not misleading.
(f) The Company covenants that the SEC Filings (other than any
information provided by TCI for inclusion in the SEC Filings) (i) will comply in
all material respects with the Securities Act and the Exchange Act and (ii) will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(g) TCI Music will be responsible for all reasonable expenses incurred
in complying with this Section 7.2, including all registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel (other
than counsel to the Company) and applicable blue-sky fees and expenses.
(h) (i) TCI Music will indemnify, defend, and hold harmless the
Company, its officers, directors, employees and agents and each other Person, if
any, who controls any of the foregoing within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities (collectively, "Losses"), joint or several, to which any
of the foregoing may become subject under the Securities Act or the Exchange Act
or otherwise, insofar as such Losses (or actions in respect thereof) arise out
of or are based upon (A) an untrue statement or alleged untrue statement of a
material fact contained in any SEC Filing, or (B) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that such misstatement or
omission was based on or omitted from information provided by TCI Music in
writing for inclusion in the SEC Filings or was made in reliance upon and in
conformity with such information. TCI Music promptly will reimburse the Company
and each such officer, director, employee, agent and controlling Person for any
legal or any other expenses
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reasonably incurred by any of them in connection with investigating or defending
any such Losses (or action in respect thereof).
(ii) If this Agreement is terminated prior to the consummation
of the Merger, the Company will indemnify, defend and hold harmless each of TCI
Music and Acquisition Sub and their officers and directors and each other
Person, if any, who controls any of the foregoing within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, against any Losses,
joint or several, to which any of the foregoing may become subject under the
Securities Act or the Exchange Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon (A) an untrue
statement or alleged untrue statement of a material fact contained in any SEC
Filing or (B) the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that the
misstatement or omission was based on or omitted from information provided by
the Company in writing for use in the SEC Filings or was made in reliance upon
and in conformity with such information. The Company promptly will reimburse TCI
Music and Acquisition Sub and each such officer, director and controlling Person
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such Losses (or action in respect
thereof).
(iii) For purposes of this Section 7.2, (A) "Indemnifying
Party" means the Person having an obligation hereunder to indemnify any other
Person pursuant to this Section 7.2, (B) "Indemnified Party" means the Person
having the right to be indemnified pursuant to this Section 7.2 and (C) any
information concerning the Company that is included in any SEC Filing that is
provided to the Company or its counsel for review within a reasonable period
before filing or use thereof and to which the Company has not provided written
notice of objection to TCI Music will be deemed to have been provided by the
Company for inclusion in such SEC Filing. Whenever any claim for indemnification
arises under this Section 7.2, the Indemnified Party will promptly notify the
Indemnifying Party in writing of such claim and, when known, the facts
constituting the basis for such claim (in reasonable detail). Failure by the
Indemnified Party so to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability hereunder except to the extent that such
failure materially prejudices the Indemnifying Party.
(iv) After such notice, if the Indemnifying Party undertakes
to defend any such claim, then the Indemnifying Party will be entitled, if it so
elects, to take control of the defense and investigation with respect to such
claim and to employ and engage attorneys of its own choice to handle and defend
such claim, at the Indemnifying Party's cost, risk and expense, upon notice to
the Indemnified Party of such election, which notice acknowledges the
Indemnifying Party's obligation to provide indemnification hereunder. The
Indemnifying Party will not settle any third- party claim that is the subject of
indemnification without the written consent of the Indemnified Party, which
consent will not be unreasonably withheld; provided however, that the
Indemnifying Party may settle a claim without the Indemnified Party's consent if
the settlement (A) makes no admission or acknowledgment of liability or
culpability with respect to the Indemnified Party, (B) includes a complete
release of the Indemnified Party and (C) does not require the Indemnified Party
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to make any payment or forego or take any action. The Indemnified Party will
cooperate in all reasonable respects with the Indemnifying Party and its
attorneys in the investigation, trial and defense of any lawsuit or action with
respect to such claim and any appeal arising therefrom (including the filing in
the Indemnified Party's name of appropriate cross claims and counterclaims) and
the Indemnifying Party will reimburse the Indemnified Party for all reasonable
direct out-of- pocket expenses incurred by the Indemnified Party in connection
with such cooperation. The Indemnified Party may, at its own expense,
participate in any investigation, trial and defense of such lawsuit or action
controlled by the Indemnifying Party and any appeal arising therefrom. If, after
receipt of a claim notice pursuant to Section 7.2(h)(iii), the Indemnifying
Party does not undertake to defend any such claim, the Indemnified Party may,
but will have no obligation to, contest any lawsuit or action with respect to
such claim and the Indemnifying Party will be bound by the result obtained with
respect thereto by the Indemnified Party (including the settlement thereof
without the consent of the Indemnifying Party). If there are one or more
defenses available to the Indemnified Party that conflict with, or are
additional to, those available to the Indemnifying Party, the Indemnified Party
will have the right, at the expense of the Indemnifying Party, to participate in
the defense of the lawsuit or action; provided however, that the Indemnified
Party may not settle such lawsuit or action without the consent of the
Indemnifying Party, which consent will not be unreasonably withheld.
(v) If the indemnification provided for in this Section 7.2(h)
is for any reason unavailable to the Indemnified Party in respect of any Losses
(or action in respect thereof) then the Indemnifying Party will, in lieu of
indemnifying the Indemnified Party, contribute to the amount paid or payable by
the Indemnified Party as a result of such Losses (or action in respect thereof),
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other with
respect to the statement or omission that resulted in such Losses (or action in
respect thereof) as well as any other relevant equitable considerations.
Relative fault with respect to an untrue or alleged untrue statement or omission
of a material fact will be determined by reference to whether the untrue or
alleged untrue statement or omission of a material fact related to information
supplied by the Indemnifying Party on the one hand or the Indemnified Party on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by the Indemnified Party as a result of the Losses
(or action in respect thereof) referred to above will be deemed to include any
legal or other expenses reasonably incurred by the Indemnified Party in
connection with investigating, trying or defending any such action or claim. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
Section 7.3 MEETING OF SHAREHOLDERS OF THE COMPANY. The Company will
take all action necessary, in accordance with the FBCA and the Articles of
Incorporation and Bylaws of the Company, to duly call, give notice of, convene
and hold a meeting of its shareholders as promptly as practicable, to consider
and vote upon the adoption and approval of this Agreement (as a plan of merger
in accordance with Section 607.1101 of the FBCA), the Merger and the other
transactions
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contemplated by this Agreement (the "Meeting"), to the extent such approval is
required by the FBCA and the Articles of Incorporation of the Company.
Section 7.4 COMPLIANCE WITH THE SECURITIES ACT. Prior to the Closing
Date, the Company will cause to be delivered to TCI Music a letter from the
Company, identifying all Persons who were, in its opinion, at the time of the
Meeting, "affiliates" of the Company as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act. TCI Music may cause the TCI Music
Certificates evidencing shares of TCI Music Preferred Stock issued to such
Persons to bear a legend referring to the applicability of paragraphs (c) and
(d) of Rule 145 under the Securities Act.
Section 7.5 LISTING. TCI Music will use its best efforts to cause the
shares of TCI Music Preferred Stock issued in connection with the Merger and the
shares of TCI Music Series A Common Stock issuable upon conversion of TCI Music
Preferred Stock to be quoted on NASDAQ, subject to satisfaction, in each case,
of applicable NASDAQ requirements upon official notice of issuance.
Section 7.6 REASONABLE BEST EFFORTS. Subject to the fiduciary duty
obligations of the Board of Directors of the Company, each of the parties to
this Agreement will use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements to consummate
and make effective the transactions contemplated by this Agreement in the most
expeditious manner practicable, including the satisfaction of all conditions to
the Merger.
Section 7.7 PUBLIC ANNOUNCEMENTS. No party to this Agreement will make
any public announcements or otherwise communicate with any news media with
respect to this Agreement or any of the transactions contemplated by this
Agreement without prior consultation with the other parties as to the timing and
contents of any such announcement as may be reasonable under the circumstances;
provided however, that nothing contained herein will prevent any party from
promptly making all filings with Governmental Entities that may, in its
reasonable judgment, be required or advisable in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement so long as such party gives timely notice to the
other parties of the anticipated disclosure and cooperates with the other
parties in designing reasonable procedural and other safeguards to preserve, to
the maximum extent possible, the confidentiality of all information furnished by
the other parties pursuant to this Agreement.
Section 7.8 NOTIFICATION. In the event of, or after obtaining knowledge
of the occurrence or threatened occurrence of, any fact or circumstance that
would cause or constitute a breach of any of its representations and warranties
set forth herein, each party to this Agreement promptly will give notice thereof
to the other parties and will use its best efforts to prevent or remedy such
breach.
Section 7.9 HSR ACT FILINGS. TCI Music and the Company each will make
or cause to be made an appropriate filing of a Notification and Report Form
pursuant to the HSR Act
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no later than 15 business days after the date of this Agreement. Each such
filing will request early termination of the waiting period imposed by the HSR
Act. The Company and TCI Music each will use its reasonable best efforts to
respond or cause a response to be made as promptly as reasonably practicable to
any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from any other Governmental
Entity in connection with antitrust matters; provided however, that nothing
contained herein will be deemed to preclude either the Company or TCI from
negotiating reasonably with any Governmental Entity regarding the scope and
content of any such requested information or documentation. The Company and TCI
Music each will use their respective reasonable best efforts to overcome any
objections that may be raised by the FTC, the Antitrust Division or any other
Governmental Entity having jurisdiction over antitrust matters. Notwithstanding
the foregoing, neither TCI Music nor the Company will be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of TCI Music or any of its Affiliates, or of
the Company or any of its Affiliates, as the case may be, if TCI Music or the
Company, as the case may be, determines in good faith that such change would be
materially adverse to the operations or activities of the business (or any
material assets employed therein) of TCI Music or any of its Affiliates or the
Company or any of its Affiliates, as the case may be.
Section 7.10 FURTHER ASSURANCES. Each of the parties to this Agreement
will execute such documents and other instruments and take such further actions
as may be reasonably necessary or desirable to carry out the provisions of this
Agreement and to consummate the transactions contemplated by this Agreement or,
at and after the Closing Date, to evidence the consummation of the transactions
contemplated by this Agreement. Upon the terms and subject to the conditions of
this Agreement, each of the parties to this Agreement will take or cause to be
taken all actions and to do or cause to be done all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement and to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings.
Section 7.11 EMPLOYEE MATTERS.
(a) Prior to the Effective Time, if so requested by TCI Music, the
Company will give notice of termination of employment to its employees. TCI
Music may, but will have no obligation to, employ or offer employment to any
employees of the Company. The Company has provided to TCI Music a list of all
employees of the Company as of July 1, 1997, showing their current positions,
rates of compensation and dates of hire. Within 30 days after the date of
execution of this Agreement (or such later date as TCI Music and the Company may
mutually agree), TCI Music will provide to the Company in writing a list of
employees TCI Music desires to employ following the Closing (subject to
satisfaction of TCI Music's conditions for employment) (the "Desired
Employees"). TCI Music will notify the Company prior to distributing offer
notices to the Desired Employees and will coordinate in all reasonable respects
with TCI Music to allow TCI
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Music to evaluate personnel files and interview employees of the Company to make
hiring decisions. As of the Closing Date, the Company will terminate the
employment of all of its employees.
(b) The Company will pay or cause to be paid to all employees all
compensation, including salaries, commissions, bonuses, deferred compensation,
reasonable severance, insurance, pensions, profit sharing, vacation (other than
vacation which is allowed to be carried over pursuant to this Section), sick pay
and other compensation or benefits to which they are entitled for periods prior
to the Closing, including all amounts, if any, payable on account of the
termination of their employment. As to any employees who are entitled to
severance payments but are offered employment with TCI Music, the Company will
use its best efforts to obtain waivers of such employees' rights to severance
payments upon acceptance of such offers of employment.
(c) The Company will be responsible for maintenance and distribution of
benefits accrued under any employee benefit plan (as defined in ERISA)
maintained by the Company pursuant to the provisions of such plans. TCI Music
will not assume any obligation or liability for any such accrued benefits nor
any fiduciary or administrative responsibility to account for or dispose of any
such accrued benefits under any employee benefit plans maintained by the
Company.
(d) All claims and obligations under, pursuant to or in connection with
any welfare, medical, insurance, disability or other employee benefit plans of
the Company or arising under any Legal Requirement affecting employees of the
Company incurred on or before the Closing Date or resulting or arising from
events or occurrences occurring or commencing on or before the Closing Date will
be satisfied or provided for by the Company prior to the Closing, and TCI Music
will not have or assume any obligation or liability in connection with any such
plan.
(e) The Company will retain full responsibility and liability for
offering and providing "continuation coverage" of any "qualified beneficiary"
who is covered by a "group health plan" sponsored or contributed to by such
party and who has experienced a "qualifying event" or is providing "continuation
coverage" on or prior to the Closing Date. "Continuation coverage," "qualified
beneficiary," "group health plan," and "qualified event" all will have the
meanings given such terms under Code Section 4980B.
(f) Nothing in this Agreement will (i) require TCI Music to assume any
collective bargaining agreement between the Company and any labor organization
or (ii) be deemed to make any employee of the parties a third-party beneficiary
of this Agreement.
(g) To the extent permitted under TCI Music's Benefits Plans, each
employee of the Surviving Corporation who was an employee of the Company
immediately prior to the Effective Time (i) will receive credit for past service
with the Company for purposes of eligibility and vesting under the Surviving
Corporation's employee benefit plans, as defined in Section 3(3) of ERISA, to
the extent such service was credited under the Company Benefit Plans on the
Closing Date, (ii) will not be subject to any waiting periods or limitations on
benefits for pre-existing conditions under the Surviving Corporation's employee
benefit plans, including any group health and disability plans,
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except to the extent such employees were subject to such limitations under the
Company Benefit Plans and (iii) will receive credit for past service with the
Company for purposes of eligibility and vesting under the Surviving
Corporation's plans and policies with respect to seniority benefits, including
vacation and sick leave.
Section 7.12 NO SOLICITATION. Subject to the fiduciary duties of the
Board of Directors of the Company and its Subsidiaries, neither the Company nor
any of its Subsidiaries or any of their respective officers, directors,
representatives or agents will take any action to (i) initiate the submission of
any Acquisition Proposal, (ii) enter into any agreement with respect to any
Acquisition Proposal or (iii) participate in negotiations with, or provide
information concerning the Company, its assets, liabilities or business to, any
Person in connection with any Acquisition Proposal. The Company will promptly
communicate to TCI Music any solicitation or inquiry received by the Company and
the terms of any proposal or inquiry that it may receive in respect of any
Acquisition Proposal, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with it. Nothing
in this Section 7.12 shall be construed as prohibiting the Board of Directors of
the Company from (i) making any disclosure to the Company's shareholders, or
(ii) responding to any unsolicited proposal or inquiry by advising the Person
making such proposal or inquiry of the terms of this Section 7.12. "Acquisition
Proposal" means any proposed (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition directly or
indirectly by merger, consolidation, share exchange or otherwise of all or any
substantial part of the assets of the Company or its Subsidiaries, (iii) issue,
sale or other disposition of securities representing 25% or more of the voting
power of the Company Stock or (iv) transaction in which any Person proposes to
acquire beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of, or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the outstanding Company Stock.
Section 7.13 INDEMNIFICATION OF EXECUTIVES.
(a) INDEMNIFICATION. TCI Music will cause the Surviving Corporation to,
and, should the Surviving Corporation fail or be unable to do so, TCI Music
shall, indemnify, defend and hold harmless each person who is now, or has been
at any time prior to the date of this Agreement or who becomes prior to the
Effective Time, an officer or director of the Company (each, an "Executive"),
against all losses, expenses, damages, liabilities, costs, judgments, and
amounts paid in settlement in connection with any claim, action, suit,
proceeding, or investigation based on or arising out of, in whole or in part,
any actions or omissions of such Executive as an officer or director of the
Company on or prior to the Effective Time, including actions or omissions
relating to any of the transactions contemplated by this Agreement, to the
fullest extent permitted under the FBCA, the Articles of Incorporation and
Bylaws of the Company and the Indemnification Agreements listed on Schedule
7.13(a). TCI Music will cause the Surviving Corporation to pay expenses in
advance of the final disposition of any such claim, action, suit, proceeding, or
investigation to each Executive to the fullest extent permitted by applicable
Legal Requirements
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upon receipt of any undertaking required or contemplated by applicable Legal
Requirements. Without limiting the foregoing, in any case in which approval of
or a determination by the Surviving Corporation is required to effectuate any
indemnification, (i) the Executives will conclusively be deemed to have met the
applicable standards for indemnification with respect to any actions or
omissions of such Executives as an officer or director of the Company on or
prior to the Effective Time relating to any of the transactions contemplated by
this Agreement and (ii) TCI Music shall cause the Surviving Corporation to
direct, at the election of any Executive, that the determination of any such
approval shall be made by independent counsel selected by the Executive and
reasonably acceptable to TCI Music. If any such claim, action, suit, proceeding,
or investigation is brought against any Executive (whether arising before or
after the Effective Time), (i) the Executive may retain counsel satisfactory to
him or her that is reasonably acceptable, and (ii) TCI Music will pay or will
cause the Surviving Corporation to pay all reasonable fees and expenses of such
counsel for the Executive, as such fees and expenses are incurred, upon receipt
of a written undertaking by the Executive that the Executive will repay the
amounts so paid if it ultimately is determined that he is not entitled to be
indemnified by the Surviving Corporation as authorized by the FBCA. Neither TCI
Music nor the Surviving Corporation shall have any obligation hereunder to any
Executive when and if a court of competent jurisdiction shall ultimately
determine, after exhaustion of all avenues of appeal, that such Executive is not
entitled to indemnification hereunder.
(b) SUCCESSORS. If TCI Music or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
will not be the continuing or surviving Person of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provisions will be made so that the
successors and assigns of TCI Music or the Surviving Corporation assume the
obligations set forth in this Section 7.13.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger will be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement, the Merger and the transactions contemplated by
this Agreement shall have been duly approved by the holders of the outstanding
Company Stock entitled to vote.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been earlier terminated.
(c) The Registration Statement on Form S-4 that includes the Joint
Proxy Statement/Prospectus shall have become effective in accordance with the
provisions of the Securities
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Act and any necessary state securities law approvals shall have been obtained
and no stop orders with respect thereto shall have been issued by the SEC and
remain in effect.
(d) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any Legal Requirement that remains in effect and has the
effect of making the transactions contemplated by this Agreement illegal or
otherwise prohibiting the transactions contemplated by this Agreement, or that
questions the validity or the legality of the transactions contemplated by this
Agreement and that could reasonably be expected to materially and adversely
affect the value of the business of the Company, it being agreed that each party
will use its reasonable best efforts to have any such injunction lifted.
Section 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger will be subject to
the fulfillment at or prior to the Effective Time of the additional following
conditions:
(a) TCI Music and Acquisition Sub shall have performed in all material
respects their agreements contained in this Agreement required to be performed
by them at or prior to the Effective Time and the representations and warranties
of TCI Music and Acquisition Sub set forth in this Agreement if qualified by
materiality are true in all respects and if not so qualified are true in all
material respects when made and at and as of the Effective Time as if made at
and as of such time and the Company shall have received a certificate of TCI
Music and Acquisition Sub executed on behalf of each such corporation by the
President or a Vice President of such corporation to that effect.
(b) The Company shall have received the opinion of counsel to TCI Music
and Acquisition Sub (which counsel may be an employee of TCI) substantially to
the effect set forth in Exhibit B.
(c) The Company shall have received the opinion of Xxxx X. Xxxxxx, Esq.
(or such other evidence as may be reasonably satisfactory to the Company) to the
effect that the Merger, when completed in accordance with this Agreement, will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code or otherwise shall have been provided with
evidence reasonably satisfactory to the Company that the Merger will qualify for
such treatment.
(d) There shall have been no material adverse change in the financial
condition, results of operations, assets, liabilities or business of TCI Music
since the date of this Agreement.
(e) TCI (or one or more of its Subsidiaries) and TCI Music shall have
entered into an amendment to the Contribution Agreement in accordance with the
terms set forth in the term sheet attached as Schedule 8.2(e), together with one
or more other agreements as may be necessary to effect the transactions
contemplated by such term sheet.
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(f) TCI shall have agreed to extend the maturity of the promissory note
dated July 11, 1997, payable by TCI Music to the order of TCI in the principal
amount of $40,000,000, for a period, not to exceed 18 months, as may reasonably
be required to permit TCI Music to obtain other financing sufficient to repay
the loan evidenced thereby.
Section 8.3 CONDITIONS TO OBLIGATIONS OF TCI MUSIC AND ACQUISITION SUB
TO EFFECT THE MERGER. The obligations of TCI Music and Acquisition Sub to effect
the Merger will be subject to the fulfillment at or prior to the Effective Time
of the additional following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed by it at or
prior to the Effective Time and, except as contemplated or permitted by this
Agreement, the representations and warranties of the Company set forth in this
Agreement if qualified by materiality are true in all respects and if not so
qualified are true in all material respects when made and at and as of the
Effective Time as if made at and as of such time, and TCI Music and
Acquisition Sub shall have received a certificate of the Company executed on
behalf of the Company by the President or an Executive Vice President of the
Company to that effect.
(b) All consents of third parties required to be obtained with respect
to the Merger and the other transactions contemplated by this Agreement shall
have been obtained, including consents of the Federal Communications Commission
to the acquisition by TCI Music of an interest in VJN LPTV Corp. and other
Governmental Entities.
(c) The number of Dissenting Shares do not exceed 15% of the issued and
outstanding shares of Company Stock.
(d) There shall have been no material adverse change in the financial
condition, results of operations, assets, liabilities or business of the Company
since the date of this Agreement.
(e) TCI Music shall have received the opinion of Xxxxx, Mandler,
Croland, Bronstein, Garbett, Stiphany & Xxxxxxxx, P.A., counsel to the Company,
substantially to the effect set forth in Exhibit C.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of the Company:
(a) by mutual consent of the Board of Directors of TCI Music and the
Board of Directors of the Company;
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(b) by either TCI Music or the Company (i) if at the Meeting (including
any postponement or adjournment thereof), this Agreement, the Merger and the
transactions contemplated by this Agreement are not approved and adopted by the
affirmative vote specified herein or (ii) after July 11, 1998, if the Merger has
not been consummated on or before such date and so long as the terminating party
is not in breach of any of its obligations hereunder in any material respect as
of the time such party gives notice of its election to terminate this Agreement
and, if the Company is the terminating party, so long as none of the Company
Shareholders is in breach of any obligations under the Voting Agreement as of
the time that the Company gives notice of its election to terminate this
Agreement;
(c) by the Company, provided the Company is not in breach of any of its
obligations under this Agreement in any material respect and none of the Company
Shareholders is in breach of any obligations under the Voting Agreement, in each
case as of the time that the Company gives notice of its election to terminate
this Agreement, if any of the conditions specified in Section 8.1 or Section 8.2
have not been satisfied or waived by the Company (or, in the case of
Section 8.1, waived by the Company, TCI Music and Acquisition Sub) at such time
as such condition is no longer capable of satisfaction;
(d) by the Company, provided the Company is not, in any material
respect, in breach of any of its obligations under Section 7.12 or any other
provision of this Agreement and none of the Company Shareholders is in breach of
any obligations under the Voting Agreement, in each case as of the time that the
Company gives notice of its election to terminate this Agreement, if the Company
is presented with an unsolicited Acquisition Proposal that, taking into account
all relevant factors (including the nature and amount of consideration to the
Company's shareholders and the certainty of, and time requirement for,
completion of the transactions proposed in such Acquisition Proposal), is more
favorable to the Company's shareholders from a financial point of view than the
transactions contemplated by this Agreement; or
(e) by TCI Music, provided that neither TCI Music nor Acquisition Sub
is in breach of any of its obligations hereunder in any material respect as of
the time TCI Music gives notice of its election to terminate this Agreement, if
any of the conditions specified in Section 8.1 or Section 8.3 have not been met
or waived by TCI Music (or, in the case of Section 8.1, waived by TCI Music,
Acquisition Sub and the Company) at such time as such condition is no longer
capable of satisfaction.
Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either TCI Music or the Company, as provided above, this Agreement
will forthwith become void and (except for the willful breach of this Agreement
by any party to this Agreement) there will be no liability on the part of any of
the Company, TCI Music or Acquisition Sub.
Section 9.3 AMENDMENT. This Agreement may be amended by the parties to
this Agreement, by or pursuant to action taken by all of their Boards of
Directors, at any time before or after approval of this Agreement by the
shareholders of the Company and prior to the Effective
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Time, but, after such approval, no amendment will be made that alters the
indemnification provisions of Section 7.2, changes the ratio at which Company
Common Stock is to be converted into TCI Music Preferred Stock as provided in
Section 3.2 or changes, in any way adverse to such shareholders, the terms of
the TCI Music Preferred Stock or that in any other way materially adversely
affects the rights of such shareholders, without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties to this Agreement.
Section 9.4 WAIVER. At any time prior to the Effective Time, the
parties to this Agreement, by or pursuant to action taken by their respective
Boards of Directors, may (i) extend the time for performance of any of the
obligations or other acts of the other parties to this Agreement, (ii) waive any
inaccuracies in the representations and warranties set forth in this Agreement
or in any documents delivered pursuant to this Agreement and (iii) waive
compliance with any of the agreements or conditions set forth in this Agreement.
Any agreement on the part of a party to this Agreement to any such extension or
waiver will be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE X
GENERAL PROVISIONS; DEFINITIONS
Section 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. No representations and warranties contained in this Agreement will
survive beyond the Closing Date. This Section 10.1 will not limit any covenant
or agreement of the parties to this Agreement that by its terms requires
performance after the Closing Date.
Section 10.2 NOTICES. All notices or other communications under this
Agreement will be in writing and will be given (and will be deemed to have been
duly given upon receipt) by delivery in person, by cable, telegram, telex or
other standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Company: The Box Worldwide, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxx
Attention: President
Telecopy No.: (000) 000-0000
With a copy to: Xxxxx, Mandler, Croland, Bronstein, Garbett,
Stiphany & Xxxxxxxx, P.A.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
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If to TCI Music or
Acquisition Sub: TCI Music, Inc.
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxx, President
Telecopy No.: 000-000-0000
With a copy to: Legal Department
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
or to such other addresses as any party may have furnished to the other parties
in writing in accordance with this Section.
Section 10.3 FEES AND EXPENSES. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement will be paid by the party
incurring such expenses. Subject to the provisions of Section 7.2(g), the
Company's expenses relating to the transactions contemplated by this Agreement,
including fees of Xxxxx, Mandler, Croland, Bronstein, Garbett, Stiphany &
Xxxxxxxx, P.A., counsel to the Company, will be paid or accrued by the Company
prior to the Effective Time.
Section 10.4 SPECIFIC PERFORMANCE. The parties to this Agreement agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties will be
entitled to enforce specifically the terms and provisions of this Agreement in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 10.5 THIRD PARTY BENEFICIARIES. The parties to this Agreement
agree that the Company's shareholders, officers, directors and employees are
intended third party beneficiaries of the terms of this Agreement, to the extent
such terms refer expressly to such Persons, with full rights hereunder as if
each of them were a party to this Agreement.
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Section 10.6 ENTIRE AGREEMENT. This Agreement will be of no force or
effect until executed and delivered by all of the parties to this Agreement.
Section 10.7 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to in this Agreement) when executed and delivered,
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter of this Agreement. This Agreement may be executed
in two or more counterparts which together will constitute a single agreement.
Any certificate delivered pursuant to this Agreement will be made without
personal liability on the part of the officer or employee of the Person giving
such certificate.
Section 10.8 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE UNDER, AND IN
ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE
WITH, THE LAW OF THE STATE OF DELAWARE. The parties hereby irrevocably submit to
the jurisdiction of the court of the State of Delaware and the Federal courts of
the United States of America located in the State of Delaware solely in respect
of the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10.2 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER
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VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
10.8.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunder duly authorized all as of the date first
written above.
TCI MUSIC, INC.
By: /s/ Xxxxx Xxxx
-------------------------------
Name: Xxxxx Xxxx
Title: President
TCI ACQUISITION SUB, INC.
By: /s/ Xxxxx Xxxx
--------------------------------
Name: Xxxxx Xxxx
Title: President
THE BOX WORLDWIDE, INC.
By: /s/ Xxxx XxXxxxx
-------------------------------
Name: Xxxx XxXxxxx
Title: President and Chief Executive Officer
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