AGREEMENT AND PLAN
OF MERGER
DATED AS OF
FEBRUARY 6, 1997
AMONG
TELE-COMMUNICATIONS, INC.,
TCI MUSIC, INC.,
TCI MERGER SUB, INC.
AND
DMX INC.
TABLE OF CONTENTS
Page
ARTICLE IDEFINITIONS
Section 1.1 Definitions..............................................2
Section 1.2 Other Definitions........................................3
Section 1.3 Use of Terms.............................................4
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 Conversion of Stock......................................6
Section 3.2 [Intentionally omitted]..................................6
Section 3.3 Exchange of Certificates.................................7
Section 3.4 Distribution With Respect to Shares Represented by
Unsurrendered Company Stock Certificates.................8
Section 3.5 No Fractional Shares.....................................9
Section 3.6 No Liability.............................................9
Section 3.7 Lost Certificates........................................9
Section 3.8 Dissenting Shares.......................................10
Section 3.9 Treatment of Stock Options and Other Company
Benefit Plans...........................................10
Section 3.10 Stockholders' Approval..................................10
Section 3.11 Closing of the Company's Transfer Books.................11
Section 3.12 Assistance in Consummation of the Merger................11
Section 3.13 Closing.................................................11
ARTICLE IV THE CONTRIBUTION; THE RIGHTS
Section 4.1 Contribution to MusicCo.................................11
Section 4.2 Consideration for Contribution..........................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF TCI, MUSICCO AND
MERGER SUB
Section 5.1 Organization and Qualification..........................12
Section 5.2 Capitalization..........................................12
Section 5.3 Authority Relative to this Agreement....................12
Section 5.4 No Breach; Required Consents............................13
Section 5.5 Governmental Consents and Approvals.....................13
Section 5.6 Operations of MusicCo and Merger Sub....................13
Section 5.7 No Broker...............................................13
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 6.1 Organization and Qualification..........................14
Section 6.2 Capitalization..........................................14
Section 6.3 Subsidiaries............................................14
Section 6.4 Authority Relative to this Agreement....................15
Section 6.5 No Breach; Required Consents............................15
Section 6.6 Consents and Approvals..................................16
Section 6.7 Reports and Financial Statements........................16
Section 6.8 Compliance with Law; Litigation.........................17
Section 6.9 Title to Assets.........................................18
Section 6.10 Labor and Employee Matters..............................18
Section 6.11 ERISA...................................................18
Section 6.12 Approval................................................19
Section 6.13 Financial Advisor.......................................20
Section 6.14 Taxes...................................................20
Section 6.15 Environmental Laws......................................20
Section 6.16 Transactions with Affiliates............................21
ARTICLE VIICONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1 Conduct of Business of the Company......................21
Section 7.2 Conduct of Business of TCI..............................22
Section 7.3 Remedies for Breach..23
ARTICLE VIIIADDITIONAL AGREEMENTS
Section 8.1 Access and Information..................................23
Section 8.2 SEC Filings.............................................23
Section 8.3 Meeting of Stockholders of the Company..................27
Section 8.4 Compliance with the Securities Act......................27
Section 8.5 Listing.................................................27
Section 8.6 Reasonable Best Efforts.................................27
Section 8.7 Public Announcements....................................27
Section 8.8 Notification............................................27
Section 8.9 HSR Act Filings.........................................28
Section 8.10 Further Assurances......................................28
Section 8.11 Employee Benefits.......................................28
Section 8.12 No Solicitation.........................................29
Section 8.13 Indemnification of Executives...........................29
ARTICLE IXCONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to
Effect the Merger......................................30
Section 9.2 Conditions to Obligation of the Company to
Effect the Merger......................................31
Section 9.3 Conditions to Obligations of TCI, MusicCo
and Merger Sub to Effect the Merger....................31
ARTICLE XTERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination............................................32
Section 10.2 Effect of Termination..................................33
Section 10.3 Amendment..............................................33
Section 10.4 Waiver.................................................33
ARTICLE XIGENERAL PROVISIONS; DEFINITIONS
Section 11.1 Non-Survival of Representations, Warranties
and Agreements.........................................33
Section 11.2 Notices................................................33
Section 11.3 Fees and Expenses......................................34
Section 11.4 Specific Performance...................................34
Section 11.5 Third Party Beneficiaries..............................34
Section 11.6 Entire Agreement.......................................35
Section 11.7 Miscellaneous..........................................35
EXHIBITS
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Exhibit Description
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A Form of Contribution Agreement
B Form of Rights Agreement
C Form of Opinion of TCI Counsel
D Form of Opinion of Company Counsel
SCHEDULES
---------
Schedule No. Description
------------ -----------
5.4 TCI Consents
6.2(b) Rights To Acquire Company Common Stock
6.3 Subsidiaries and Equity Affiliates
6.5 Company Consents
6.7(c) Certain Changes
6.7(d) Undisclosed Liabilities
6.8(a) Legal Requirements
6.8(b) Litigation
6.9 Liens
6.10 Employment Agreements
6.11(a) Company Benefit Plans
6.11(g) Benefits to Former Employees
6.14 Taxes
6.15 Environmental Matters
6.16 Affiliate Transactions
7.1 Conduct of Business Pending the Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement")
dated as of February 6, 1997, by and among Tele-Communications,
Inc., a Delaware corporation ("TCI"), TCI Music, Inc., a Delaware
corporation and wholly owned subsidiary of TCI ("MusicCo"), TCI
Merger Sub, Inc., a Delaware corporation and wholly owned
subsidiary of MusicCo ("Merger Sub") and DMX Inc., a Delaware
corporation (the "Company"):
RECITALS
--------
A. Pursuant to the form of Contribution Agreement
attached to this Agreement as Exhibit A (the "Contribution
Agreement"), (i) TCI will cause certain of its wholly owned
subsidiaries to contribute to MusicCo the right to receive a
substantial portion of the revenues attributable to the
distribution and sale by those subsidiaries of the Company's
digital music services and (ii) TCI will grant to each
stockholder who becomes a stockholder of MusicCo pursuant to the
Merger, with respect to each whole share of MusicCo stock
acquired by such stockholder in the Merger, one right (a "Right")
requiring TCI to purchase from the holder thereof, at such
holder's election, such stock for the price and at the time
specified in the form of Rights Agreement attached to this
Agreement as Exhibit B (the "Rights Agreement") in consideration
of the issuance of shares of Series B Common Stock, par value
$.01 per share, of MusicCo ("MusicCo Series B Common Stock") and
a promissory note in the amount of $40,000,000.
B. TCI and MusicCo have proposed that MusicCo will
acquire the Company in a transaction in which: (i)
simultaneously with the Contribution, Merger Sub will merge with
and into the Company, as a result of which the Company will
become a wholly owned subsidiary of MusicCo and the stockholders
of the Company immediately prior to such merger will become
stockholders of MusicCo; and (ii) TCI will issue to each
stockholder who becomes a stockholder of MusicCo pursuant to the
Merger, with respect to each whole share of MusicCo stock
acquired by such stockholder in the Merger, one Right.
C. The Boards of Directors of TCI, MusicCo,
Merger Sub and the Company have each determined that the Merger
is in the best interests of their respective corporations and
stockholders.
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 1
---------
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 its correlative meanings,
"controlling," "controlled by" and "under common control with")
means possession, directly or indirectly, of the power to direct
or cause the direction of management and policies of a Person
(whether through the ownership of voting securities, by contract
or otherwise).
"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).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States of America.
"Knowledge" means the actual present personal knowledge
of any director or any officer of the Company.
"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.
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"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.
"MusicCo Series A Common Stock Value" means the product
of (a) $4.00 and (b) a fraction, the numerator of which is
59,586,594 and the denominator of which is the total number of
shares of MusicCo Series A Common Stock issuable to stockholders
of the Company at the Effective Time, assuming no Dissenting
Shares.
"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
corporation or partnership more than 50% of whose outstanding
voting securities or partnership interests, as the case may be,
are directly or indirectly owned by such Person.
Section 1.2 Other Definitions. The following terms
-----------------
are defined in the Sections indicated:
Term Section
---- -------
Acquisition Proposal 8.12
Agreement Preamble
Antitrust Division 8.9
Certificate of Incorporation
of the Company 2.1(a)
Certificate of Merger 2.2
Closing 3.13
Closing Date 3.13
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Company Preamble
Company Benefit Plans 6.11(a)
Company Common Stock 3.1(a)
Company Permits 6.8(a)
Company Stock Certificates 3.3(a)
Contribution 4.1
Contribution Agreement Recital A
DGCL 2.1
Dissenting Shares 3.8
Effective Time 2.2
Equity Affiliate 6.3
ERISA Affiliate 6.11(a)
Exchange Act 5.5
Exchange Agent 3.3(a)
Executive 8.13(a)
FTC 8.9
Governmental Entity 6.8(a)
HSR Act 5.5
Indemnified Party 8.2(h)(iii)
Indemnifying Party 8.2(h)(iii)
Joint Proxy Statement/Prospectus 8.2(a)
Losses 8.2(h)(i)
Meeting 8.3
Merger 2.1
Merger Sub Preamble
Most Recent Balance Sheet 6.7(c)
MusicCo Preamble
MusicCo Certificates 3.3(a)
MusicCo Series A Common Stock 3.1(a)
MusicCo Series B Common Stock Recital A
Other Filings 8.2(b)
Preliminary Joint Proxy Statement/
Prospectus 8.2(a)
Right Recital A
Rights Agreement Recital A
SEC Filings 8.2(c)
SEC Reports 6.7(a)
Securities Act 5.5
Surviving Corporation 2.1
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Tax 6.14
TCI Preamble
Termination Date 10.1(b)
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 2
---------
THE MERGER AND RELATED MATTERS
Section 2.1 The Merger. Subject to the terms and
----------
conditions of this Agreement and the Delaware General Corporation
Law (the "DGCL"), at the Effective Time: (i) Merger Sub will be
merged with and into the Company (the "Merger"); (ii) the
separate existence of Merger Sub will cease and the Company will
continue as the surviving corporation in the Merger (the
"Surviving Corporation"); and the name of the Surviving
Corporation will be DMX 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 Section 262 of the DGCL, the effects
described in Section 3.1 with respect to the capital stock of
Merger Sub and the Company and, subject to applicable Legal
Requirements, the following additional effects:
(a) Certificate of Incorporation. At the Effective
----------------------------
Time, the Amended and Restated Certificate of Incorporation of
the Company, as amended (the "Certificate of Incorporation of the
Company"), as in effect immediately prior to the Effective Time,
will become the Certificate of Incorporation of the Surviving
Corporation, and such Certificate of Incorporation may thereafter
be amended as provided therein and by the DGCL.
(b) Bylaws. At the Effective Time, the Bylaws of
------
Merger 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 Certificate of Incorporation of the Surviving
Corporation and as provided by the DGCL.
(c) Directors. At the Effective Time, the directors
---------
of Merger Sub immediately
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prior to the Effective Time will become the directors of the
Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving
Corporation and the DGCL 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
--------
Merger Sub immediately prior to the Effective Time will become
the officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation and the DGCL 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 xxxx
chises of the Company and Merger Sub will vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company
and Merger 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 DGCL, a
certificate of merger (the "Certificate of Merger") and deliver
the Certificate of Merger to the Secretary of State of the State
of Delaware for filing pursuant to the DGCL on the Closing Date.
The Merger will become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware. As used in this Agreement, the "Effective Time" means
the time at which the Certificate of Merger is filed with the
Secretary of State of the State of Delaware.
ARTICLE 3
---------
CONVERSION OF CAPITAL STOCK
Section 3.1 Conversion of Stock. At the Effective
-------------------
Time, by virtue of the Merger and without any action on the part
of the holder of any shares of capital stock of any corporation:
(a) Each share of Common Stock, $.01 par value per
share, of the Company ("Company Common Stock") issued and out
standing immediately prior to the Effective Time (except shares
subject to Section 3.1(b) and, to the extent provided in Section
3.8, Dissenting Shares) will be converted into and will there
after evidence and become: (i) .5 of a share of Series A common
stock, $.01 par value per share, of MusicCo ("MusicCo Series A
Common Stock"); (ii) one Right with respect to each whole share
of MusicCo Series A Common Stock; and (iii) the right to receive
cash in lieu of fractional shares of MusicCo Series A Common
Stock and Rights in accordance with Section 3.5.
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(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 MusicCo Series A Common Stock,
Rights or other consideration will be delivered in exchange
therefor.
(c) Each share of Common Stock, $.01 par value per
share, of Merger 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 one
validly issued, fully paid, and nonassessable share of Common
Stock, $.01 par value per share, of the Surviving Corporation.
(d) Each share of the capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time
and owned directly or indirectly by Merger 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.
Section 3.2 [Intentionally omitted]
Section 3.3 Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to the Closing Date, TCI
--------------
will select The Bank of New York or another bank or trust company
reasonably acceptable to the Company to 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, MusicCo and TCI will
deposit with the Exchange Agent for exchange in accordance with
this Section 3.3 certificates evidencing the shares of MusicCo
Series A Common Stock and the Rights to be issued in the Merger
("MusicCo Certificates"), which shares of MusicCo Common Stock
and Rights will be deemed to be issued at the Effective Time. At
and following the Effective Time, MusicCo 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 in accordance
with Section 3.5.
(b) Exchange. As soon as practicable after the
--------
Effective Time, MusicCo 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 MusicCo and reasonably acceptable to the
Company); and (ii) instructions for use in effecting the
surrender of Company Stock Certificates in exchange for MusicCo
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 pursuant to Section 3.5). Upon
surrender of a Company Stock Certificate for cancellation
-7-
to the Exchange Agent or to such other agent or agents as may
be appointed by TCI, 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 MusicCo Certificates representing the number of whole
shares of MusicCo Series A Common Stock and one Right with
respect to each whole share of MusicCo Series A Common 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 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,
MusicCo Certificates representing the proper number of shares
of MusicCo Series A Common Stock and Rights 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 MusicCo that any applicable stock transfer tax
has been paid. MusicCo 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 MusicCo 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 MusicCo Certificates that the Company 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 MusicCo Series A Common Stock and the whole
number of Rights 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 pursuant to Section 3.5.
(d) Expenses. Except as otherwise expressly provided
--------
in this Agreement, MusicCo will pay all charges and expenses,
including those of the Exchange Agent, in connection with the
exchange of shares of MusicCo Series A Common Stock and Rights
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 MusicCo Certificates
deposited with the Exchange Agent that remain unclaimed by the
former stockholders of the Company after six months following the
Effective Time will be delivered to MusicCo upon its
-8-
demand, and any former stockholders of the Company who have not
then complied with the instructions for exchanging their
Company Stock Certificates will thereafter look only to MusicCo
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
pursuant to Section 3.5.
Section 3.4 Distribution With Respect to Shares
--------------------------------------
Represented by Unsurrendered Company Stock Certificates. No
-----------------------------------------------------------
dividends or other distributions declared or made after the
Effective Time with respect to MusicCo Series A Common 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 MusicCo Series A Common 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, MusicCo will pay or cause to be paid, without
interest, to the record holder of MusicCo Certificates issued in
exchange therefor, (a) at the time of such surrender, the amount
of cash in lieu of fractional shares to which such holder is
entitled pursuant to Section 3.5 and the amount of dividends or
other distributions by MusicCo with a record date after the
Effective Time theretofore paid with respect to such whole shares
of MusicCo Series A Common Stock and (b) at the appropriate
payment date, the amount of dividends or other distributions by
MusicCo 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 MusicCo Series A Common Stock.
Section 3.5 No Fractional Shares.
--------------------
(a) Cash Payment in Lieu of Fractional Shares. No
-------------------------------------------
certificates or scrip representing fractional shares of MusicCo
Series A Common Stock and Rights will be issued upon the
surrender of Company Stock Certificates pursuant to Section 3.3.
Such fractional share interests will not entitle the owner
thereof to any rights as a security holder of MusicCo. In lieu
of any such fractional shares of MusicCo Series A Common Stock
and any fractional Rights, each holder of Company Common Stock
entitled to receive shares of MusicCo Series A Common Stock and
Rights in the Merger, upon surrender of a Company Stock
Certificate 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 the MusicCo
Series A Common Stock Value by the fractional interest in MusicCo
Series A Common Stock and Rights 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 MusicCo Series A Common Stock
in lieu of any fractional share interests, MusicCo will
promptly deposit with the Exchange
-9-
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, MusicCo,
------------
Merger 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 MusicCo Series A Common Stock,
Rights, dividends or distributions with respect thereto or cash
payable in lieu of fractional shares delivered to a state
abandoned property administrator or other public official pursu
ant 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 MusicCo Series A Common Stock and
Rights (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) deliverable in respect
thereof as determined in accordance with the terms of this
Agreement, subject to the condition that the Person to whom the
MusicCo Series A Common Stock and Rights (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
MusicCo an affidavit claiming such Company Stock Certificate to
be lost, stolen, or destroyed and (b) if required by MusicCo,
given MusicCo an indemnity satisfactory to MusicCo against any
claim that may be made against MusicCo 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
Common Stock outstanding immediately prior to the Effective Time
that are 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
Section 262 of the DGCL (the "Dissenting Shares") will not be
converted into or be exchangeable for the right to receive
MusicCo Series A Common Stock, Rights or any dividend or
distribution with respect thereto made after the Effective Time
or any cash payable in lieu of fractional shares 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 DGCL and this Section 3.8.
Any shares of Company Common Stock held by a stockholder who,
prior to the Effective Time, withdraws a demand for appraisal of
such shares or loses the right to appraisal as provided in the
DGCL will not be considered Dissenting Shares. The Company will
give MusicCo and TCI prompt notice of any written demands for
appraisal of any shares of Company Common Stock, attempted
withdrawals of such demand and any other notices or other
documents received by the Company pursuant to the DGCL
relating to stockholders' rights of appraisal. The Company
will make all payments required by the DGCL to
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be made in respect of Dissenting Shares, including any costs
assessed against the Company pursuant to Section 262 of the DGCL,
and none of TCI, MusicCo or any of their 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 and Other
--------------------------------------
Company Benefit Plans. The Company will use its best efforts to
---------------------
cause each option that is outstanding prior to the Effective Time
that is not terminable pursuant to its terms upon consummation of
the transactions contemplated by this Agreement to be canceled
prior to or at the Effective Time and the Company will take all
action necessary to cause each such other option to be canceled
if not otherwise exercised prior to or at the Effective Time;
provided however that the Company will not pay any amount of cash
or other consideration to the holder of any option in
consideration of the cancellation or termination of such option;
and provided further that with respect to each such option that
remains outstanding after the Effective Time (other than as a
result of a breach by the Company of the provisions of this
Section) any Rights issued upon exercise of such option after the
Effective Time will terminate (or have terminated) at the time
set forth in the Rights Agreement. At or prior to the Effective
Time, DMX will terminate all Company Benefit Plans and the DMX
Inc. Employee Handbook.
Section 3.10 Stockholders' Approval. Subject to the
----------------------
fiduciary duty obligations under applicable Legal Requirements,
the Company will take all action necessary, in accordance with
applicable Legal Requirements and the Certificate of
Incorporation and Bylaws of the Company, to have this Agreement,
the Merger and the transactions contemplated by this Agreement
approved by the holders of capital stock of the Company. The
Company will notify TCI of the date set for any stockholder
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
Common Stock vote to adopt this Agreement and approve the Merger,
and will use reasonable 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 stockholders approve the Merger and related
transactions; 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 from such
obligation, TCI will cause all shares of Company Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the
Exchange Act) by it 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
-11-
Stock Certificates are presented to the Surviving
Corporation, they will be canceled and exchanged for the MusicCo
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, MusicCo, Merger 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. TCI will cause MusicCo and Merger Sub to perform all
of their respective obligations in connection with 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
and the Company agree in writing. The date on which the Closing
occurs is referred to in this Agreement as the "Closing Date."
ARTICLE 4
---------
THE CONTRIBUTION; THE RIGHTS
Section 4.1 Contribution to MusicCo. Subject to the
-----------------------
satisfaction of the conditions to the parties' obligations to
effect the Merger, as set forth in Article IX of this Agreement,
at the Closing, TCI will execute and deliver the Contribution
Agreement and the Rights Agreement substantially in the forms
attached as Exhibits A and B, respectively, and pursuant thereto,
issue the Rights in accordance with the terms and conditions of
the Rights Agreement and cause each TCI System Owner (as defined
in the Contribution Agreement) to assign and contribute to
MusicCo the right to receive Net DMX Revenues (as defined in the
Contribution Agreement) of such TCI System Owner pursuant to the
terms and conditions of the Contribution Agreement. The
foregoing transactions by TCI and the TCI System Owners pursuant
to the Contribution Agreement are referred to in this Agreement
as the "Contribution."
Section 4.2 Consideration for Contribution. In
-------------------------------
consideration for the Contribution, MusicCo will, concurrently
with the Contribution, issue and deliver to TCI, as designee of
the TCI System Owners, 125,000,000 validly issued, fully paid and
nonassessable shares of MusicCo Series B Common Stock and the
Company Note (as defined in the Contribution Agreement).
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF TCI, MUSICCO AND MERGER SUB
-12-
TCI, MusicCo and Merger Sub jointly and severally
represent and warrant to the Company as follows:
Section 5.1 Organization and Qualification. Each of
------------------------------
TCI, MusicCo and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority
to carry on its business as it is now being conducted. Each of
TCI, MusicCo and Merger 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.
Section 5.2 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized
capital stock of MusicCo 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 none of which are issued and outstanding
and 200,000,000 shares of common stock, designated as Series B
Common Stock one share of which is 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 MusicCo Series A Common 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) Merger Sub is a direct, wholly owned subsidiary of
MusicCo. MusicCo will own all the issued and outstanding stock
of (i) Merger Sub immediately prior to the Effective Time and
(ii) Surviving Corporation immediately after the Effective Time.
Section 5.3 Authority Relative to this Agreement.
-------------------------------------
Each of TCI, MusicCo and Merger 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, MusicCo
and Merger Sub have been duly authorized by the Boards of
Directors of TCI, MusicCo and Merger Sub and by MusicCo as the
sole stockholder of Merger Sub, and no other corporate
proceedings on the part of TCI, MusicCo or Merger 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, MusicCo and
Merger 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
-13-
and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general
principles of equity.
Section 5.4 No Breach; Required Consents. The
-------------------------------
execution and delivery of this Agreement by TCI, MusicCo and
Merger Sub do not, and the consummation of the transactions
contemplated by this Agreement by TCI, MusicCo and Merger Sub
will not: (a) violate or conflict with the Certificate of
Incorporation or Bylaws of TCI, MusicCo or Merger Sub; (b) except
as set forth on Schedule 5.4, 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, MusicCo or Merger 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, MusicCo or Merger Sub; or (c) subject to obtaining
the approvals and making the filings described in Section 5.5,
constitute a violation of any applicable Legal Requirement,
except where such violation would not have a Material Adverse
Effect on TCI, MusicCo or Merger Sub.
Section 5.5 Governmental Consents and Approvals.
-------------------------------------
Neither the execution and delivery of this Agreement by TCI,
MusicCo and Merger Sub nor the consummation of the transactions
contemplated by this Agreement by TCI, MusicCo and Merger Sub
will require any filing or registration with, or 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 Securities Act of 1933, as
amended (the "Securities Act"), (iii) the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and (iv) 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,
MusicCo or Merger Sub or prevent the consummation of the
transactions contemplated by this Agreement.
Section 5.6 Operations of MusicCo and Merger Sub.
-------------------------------------
As of the date of this Agreement, each of MusicCo and Merger 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 5.7 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, MusicCo or Merger Sub.
ARTICLE 6
---------
-14-
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to TCI, MusicCo and
Merger Sub as follows:
Section 6.1 Organization and Qualification. The
-------------------------------
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware 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.
Section 6.2 Capitalization.
--------------
(a) The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock. As of
the date of this Agreement, 59,586,594 shares of Company Common
Stock were issued and outstanding.
(b) Except as set forth on Schedule 6.2(b), there are
no options, warrants, calls, subscriptions or other rights,
agreements or commitments of any kind, 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.
(c) All issued and outstanding shares of Company
Common 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 6.3 Subsidiaries. The only Persons in which the
------------
Company directly or through one or more of its Subsidiaries holds
a 5% or greater equity interest (each an "Equity Affiliate")
are those listed on Schedule 6.3 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 such Subsidiary. All the outstanding shares of capital
stock of
-15-
each of the Company's Subsidiaries that is a corporation
are validly issued, fully paid and nonassessable. 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 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
6.3, 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 6.4 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 Common 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, including at
least a majority of the Disinterested Directors (as defined in
the Certificate of Incorporation of the Company). Except for the
approval of the holders of Company Common 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 stockholders is fair from a financial
point of view. Subject to approval of the stockholders of the
Company in accordance with the DGCL, 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 6.5 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 Common Stock, violate or conflict with the
Certificate of Incorporation or Bylaws of the Company; (b) except
as set forth on Schedule 6.5, 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
-16-
Section 6.6, constitute a violation of any Legal Requirement,
except where such violation would not have a Material Adverse
Effect on the Company.
Section 6.6 Consents and Approvals. 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 any filing or registration with, or
authorization, consent or approval of, any Governmental Entity or
any other Person, except those required in connection, or in
compliance, with the provisions of (i) the HSR Act, (ii) the
Securities Act, (iii) the Exchange Act and (iv) 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 6.7 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 October 1, 1994 (collectively, the "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 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, in the forms filed with the SEC, all the SEC Reports.
(b) Financial Statements. The audited consolidated
---------------------
financial statements of the Company contained in the SEC Reports
comply in all material respects with applicable accounting re
quirements 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 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 presen
tation of the Company's consolidated financial condition and
results of operations for such periods.
(c) Absence of Certain Changes. Except as set forth
--------------------------
on Schedule 6.7(c), since
-17-
the date of the most recent balance sheet of the Company
included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996 (the "Most Recent 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 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 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. Except as
-----------------------------------
disclosed on Schedule 6.7(d), 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 Balance Sheet other than liabilities,
obligations and contingencies that (i) were incurred after the
date of the Most Recent Balance Sheet in the ordinary course of
business or (ii) would not, in the aggregate, have a Material
Adverse Effect on the Company.
Section 6.8 Compliance with Law; Litigation.
-------------------------------
(a) Except as disclosed on Schedule 6.8(a), the
Company and its Subsidiaries hold all permits, licenses,
franchises, variances, exemptions, concessions, leases,
instruments, orders and approvals (the "Company 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 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 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 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) Except as set forth on Schedule 6.8(b) to this
Agreement, there is no suit, action or proceeding pending or, to
the Knowledge of the Company, threatened against or
-18-
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 6.9 Title to Assets. The Company has good
---------------
and merchantable title to all material assets reflected on the
Most Recent 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 6.9;
(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 the Company's business.
Section 6.10 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 6.10 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 6.11(a).
Section 6.11 ERISA.
-----
(a) Schedule 6.11(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 trade or business (whether or not
incorporated) that is treated as a single employer with the
Company under Section 414(b), (c), (m) or (o) of the Code ("ERISA
Affiliate") maintains or has an obligation to make contributions
(the "Company Benefit Plans").
-19-
(b) Neither the Company nor any ERISA Affiliate 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 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 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.
(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 6.11(g)
and as may be required under
-20-
Section 4980B of the Code, neither the Company
nor any ERISA Affiliate maintains any Company Benefit Plan that
provides medical or welfare benefits to former employees.
Section 6.12 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
stockholders; (ii) approved the Merger and this Agreement and the
transactions contemplated by this Agreement in accordance with
the provisions of Section 251 of the DGCL; (iii) recommended the
approval of this Agreement and the Merger by the holders of the
Company Common Stock and directed that the Merger be submitted
for consideration by the Company's stockholders at the Meeting;
and (iv) adopted a resolution having the effect of causing the
Company not to be subject (A) to the super majority voting
provisions of the Certificate of Incorporation of the Company and
(B) to the extent applicable, and if applicable, to the extent
permitted by applicable Legal Requirements, to Section 203 of the
DGCL.
(b) The vote of a majority of the outstanding shares
of Company Common Stock is the vote required for the adoption and
approval of this Agreement, the Merger, and the other
transactions contemplated by this Agreement.
Section 6.13 Financial Advisor. Except for Xxxxxxxx
-----------------
Xxxxx Xxxxxx & Zukin, 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 a true and complete
copy of the agreement pursuant to which Xxxxxxxx Xxxxx Xxxxxx &
Xxxxx has been retained to act as financial advisor to the
Company in connection with the Merger.
Section 6.14 Taxes. Except as set forth on Schedule
-----
6.14, 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 the Company has paid on its behalf) or have
established an adequate reserve for the payment of, all Taxes
owed in respect of the periods covered by such returns. The
information contained in such Tax returns is complete and
accurate in all material respects. Except as set forth on
Schedule 6.14, neither the Company nor any Subsidiary of the
Company is delinquent in the payment of any material Tax or other
amount owed to any Governmental Entity. Except as set forth on
Schedule 6.14, there are no claims or investigations pending or,
to the Company's Knowledge, threatened against the Company for
past Taxes, except claims and investigations that would not have
a Material Adverse Effect on the Company, and adequate provision
for the claims or investigations set forth on Schedule 6.14 has
been made as reflected on the Most Recent Balance Sheet. Except
as set forth on Schedule 6.14, the Company has not waived or
extended any applicable statute of limitations relating to the
assessment of any Taxes that would be payable by the Company.
For the purposes of this Agreement, the term "Tax"
-21-
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 6.15 Environmental Laws. Except as described
------------------
on Schedule 6.15:
(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.
Section 6.16 Transactions with Affiliates. Except as
----------------------------
set forth on Schedule 6.16, 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 stockholder of the Company or any
"affiliate" or "associate" of any of them (as those terms are
defined in the Exchange Act), 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 pursuant to
Company Benefit Plans.
ARTICLE 7
---------
CONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1 Conduct of Business of the Company.
------------------------------------
Prior to the Effective Time, except as set forth on Schedule 7.1
to this Agreement, without the prior consent of TCI:
(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 Certificate or 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
-22-
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 stockholders 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) create, assume or
incur any additional indebtedness for borrowed money or mortgage,
pledge or subject to any Lien any of its assets or 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 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 9.3(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 9.1 or Section 9.3 of this
-23-
Agreement not to be satisfied as of the Effective Time.
Section 7.2 Conduct of Business of TCI. Prior to
--------------------------
the Effective Time, except as contemplated or permitted by this
Agreement TCI 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, MusicCo or
Merger Sub set forth in this Agreement untrue or incorrect so as
to cause the condition set forth in Section 9.2(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 9.1 or
Section 9.2 of this Agreement not to be satisfied as of the
Effective Time.
Section 7.3 Remedies for Breach. The sole remedies
-------------------
(i) of TCI, MusicCo and Merger Sub for any breach by the
Company of Section 7.1(e), and (ii) of the Company for any breach
by TCI of Section 7.2, will be injunctive relief or termination
of this agreement pursuant to Article X.
ARTICLE 8
---------
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Except as
-----------------------
otherwise required pursuant to a contractual obligation that
exists as of the date of this Agreement, each of the Company and
TCI 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. Each of the Company and TCI
will hold, and will cause their respective Subsidiaries to hold
in confidence all such information in accordance with the terms
of the Confidentiality Agreement dated October 2, 1996 between
TCI and the Company.
Section 8.2 SEC Filings.
-----------
(a) The Company, MusicCo and TCI 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 MusicCo and
TCI under the Securities Act with respect to the MusicCo Series A
Common Stock to be issued in the Merger and the Rights to be
granted pursuant to the Rights Agreement, 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
-24-
proxy to be mailed to the Company's stockholders as promptly
as practicable.
(b) As soon as reasonably practicable after the date
hereof, the Company, MusicCo and TCI 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, a registration
statement on Form 8-A under the Exchange Act with respect to the
Rights and, in the case of MusicCo, a registration statement on
Form 8-B under the Exchange Act with respect to the MusicCo
Series A Common 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 MusicCo and TCI,
on the other, will cooperate with each other and provide all
information necessary in order 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 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 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 MusicCo 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, MusicCo and
TCI 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
stockholders.
(e) TCI 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
-25-
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) Expenses. Each party will be responsible for all
--------
expenses incurred by it in complying with this Section 8.2,
including all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel, applicable
blue-sky fees and expenses and the expense of any special audit
incident to or required by the registration or proxy solicitation
contemplated by this Agreement.
(h) Indemnification.
---------------
(i) TCI and MusicCo, jointly and severally, 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 or MusicCo in writing for inclusion in the SEC Filings or was
made in reliance upon and in conformity with such information.
TCI promptly will reimburse the Company and each such officer,
director, employee, agent 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).
(ii) If this Agreement is terminated prior to the
consummation of the Merger, the Company will indemnify, defend
and hold harmless each of TCI, MusicCo and Merger Sub and their
officers and directors and each other Person, if any, who con
trols 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, MusicCo and Merger Sub and each such
officer, director and controlling Person for any legal or any
other expenses reasonably
-26-
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 8.2, (A)
"Indemnifying Party" means the Person having an obligation
hereunder to indemnify any other Person pursuant to this Section
8.2, (B) "Indemnified Party" means the Person having the right to
be indemnified pursuant to this Section 8.2 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
MusicCo or TCI 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 8.2, 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 indemnifica
tion 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 Indem
nified Party and (C) does not require the Indemnified Party to
make any payment or forego or take any action. The Indemnified
Party will cooperate in all reasonable respects with the Indem
nifying 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 Indem
nified Party's name of appropriate cross claims and counter
claims) 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 8.2(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
-27-
conflict with 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 8.2(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 knowl
edge, 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 8.3 Meeting of Stockholders of the Company.
--------------------------------------
The Company will take all action necessary, in accordance with
the DGCL and the Certificate of Incorporation and Bylaws of the
Company, to duly call, give notice of, convene and hold a meeting
of its stockholders as promptly as practicable, to consider and
vote upon the adoption and approval of this Agreement (as a plan
of merger under Section 251 of the DGCL), the Merger and the
other transactions contemplated by this Agreement (the
"Meeting"), to the extent such approval is required by the DGCL
and the Certificate of Incorporation of the Company.
Section 8.4 Compliance with the Securities Act.
-------------------------------------
Prior to the Closing Date, the Company will cause to be delivered
to TCI 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 may cause the MusicCo
Certificates evidencing MusicCo Series A Common 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 8.5 Listing. TCI will use its reasonable
-------
best efforts to cause the shares of MusicCo Series A Common Stock
issued in connection with the Merger to be quoted on
-28-
NASDAQ, subject to official notice of issuance.
Section 8.6 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 8.7 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 8.8 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 8.9 HSR Act Filings. TCI and the Company
---------------
will each make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act 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 each will use its reasonable best efforts to
respond 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 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
-29-
foregoing, TCI will not be required to make any significant
change in the operations or activities of the business (or any
material assets employed therein) of TCI or any of its Affiliates
if TCI 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 or
any of its Affiliates.
Section 8.10 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 8.11 Employee Benefits.
-----------------
(a) To the extent permitted under TCI's employee
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,
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 8.12 No Solicitation. Subject to the
----------------
fiduciary duties of the Board of Directors of the Company,
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
any Person in connection with any Acquisition Proposal. The
Company will promptly communicate to TCI 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 8.12 shall be construed as
prohibiting the Board of Directors of the Company from (i) making
any disclosure to the Company's stockholders, or (ii) responding
to any unsolicited proposal or inquiry by advising the Person
making such proposal or inquiry of the terms of this Section 8.12.
-30-
"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 50% or more of the voting power of the
Company Common Stock or (iv) transaction in which any Person
acquires 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, 50% or more of
the outstanding Company Common Stock.
Section 8.13 Indemnification of Executives.
-----------------------------
(a) Indemnification. MusicCo will cause the Surviving
---------------
Corporation to, and, should the Surviving Corporation fail or be
unable to do so, MusicCo 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 until the expiration of the applicable statutes of
limitation, to the fullest extent permitted under the DGCL and
the Certificate of Incorporation and Bylaws of the Company as in
effect on the date of this Agreement. MusicCo 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 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 (including actions relating to the
Company's European operations) and (ii) MusicCo 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 MusicCo, it being agreed that Irell &
Xxxxxxx LLP shall be acceptable to MusicCo. 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) MusicCo will pay or will
cause the Surviving Corporation to pay all reasonable fees and
expenses of such counsel for the Executive. Neither MusicCo 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,
-31-
that such Executive is not entitled to indemnification hereunder.
(b) Successors. If MusicCo 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
MusicCo or the the Surviving Corporation assume the obligations
set forth in this Section 8.13.
ARTICLE 9
---------
CONDITIONS PRECEDENT
Section 9.1 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 Company Common Stock.
(b) The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been
earlier terminated and any other notices or approvals or consents
required by or of any Governmental Entity with respect to the
transactions contemplated by this Agreement noted with an
asterisk on Schedule 5.4 or Schedule 6.5 shall have been either
filed or obtained.
(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 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 9.2 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:
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(a) TCI, MusicCo and Merger 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,
MusicCo and Merger 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, MusicCo and Merger Sub
executed on behalf of each such corporation by the President or a
Vice President of such corporation to that effect.
(b) MusicCo Series A Common Stock issued in connection
with the Merger shall have been authorized for quotation on
NASDAQ upon official notice of issuance.
(c) The Company shall have received the opinion of
counsel to TCI, MusicCo and Merger Sub (which counsel may be an
employee of TCI) substantially to the effect set forth in
Exhibit C.
(d) The transactions contemplated by the Contribution
Agreement shall have been consummated on the terms and conditions
set forth therein.
Section 9.3 Conditions to Obligations of TCI,
--------------------------------------
MusicCo and Merger Sub to Effect the Merger. The obligations of
-------------------------------------------
TCI, MusicCo and Merger 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, MusicCo and Merger 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) Those consents of third parties noted with an
asterisk on Schedule 5.4 or Schedule 6.5 shall have been
obtained.
(c) The number of Dissenting Shares do not exceed 5%
of the issued and outstanding shares of Company Common 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
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this Agreement.
(e) TCI and MusicCo shall have received the opinion of
Irell & Xxxxxxx LLP substantially to the effect set forth in
Exhibit D.
ARTICLE 10
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TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be
-----------
terminated at any time prior to the Effective Time, whether
before or after approval by the stockholders of the Company:
(a) by mutual consent of the Board of Directors of TCI
and the Board of Directors of the Company;
(b) by either TCI 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) so long as the terminating party has not
breached its obligations hereunder in any material respect, after
July 31, 1997 (the "Termination Date") if the Merger shall not
have been consummated on or before such date;
(c) by the Company, provided the Company has not
breached any of its obligations hereunder in any material
respect, if any of the conditions specified in Section 9.1 or
Section 9.2 have not been satisfied or waived by the Company (or,
in the case of Section 9.1, waived by the Company, TCI, MusicCo
and Merger Sub) at such time as such condition is no longer
capable of satisfaction; or
(d) by TCI, provided that none of TCI, MusicCo or
Merger Sub has breached any of its obligations hereunder in any
material respect, if any of the conditions specified in Section
9.1 or Section 9.3 have not been met or waived by TCI (or, in the
case of Section 9.1, waived by TCI, MusicCo, Merger Sub and the
Company) at such time as such condition is no longer capable of
satisfaction.
Section 10.2 Effect of Termination. In the event of
---------------------
termination of this Agreement by either TCI 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, MusicCo or Merger Sub.
Section 10.3 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
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before or after approval of this Agreement by the stockholders of
the Company and prior to the Effective Time, but, after such
approval, no amendment will be made that alters the
indemnification provisions of Section 8.2 or changes the ratio at
which Company Common Stock is to be converted into MusicCo
Series A Common Stock as provided in Section 3.2 or that in any
way materially adversely affects the rights of such stockholders,
without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties to this Agreement.
Section 10.4 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 11
----------
GENERAL PROVISIONS; DEFINITIONS
Section 11.1 Non-Survival of Representations,
----------------------------------
Warranties and Agreements. No representations and warranties
---------------------------
contained in this Agreement will survive beyond the Closing Date.
This Section 11.1 will not limit any covenant or agreement of the
parties to this Agreement that by its terms requires performance
after the Closing Date.
Section 11.2 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: 11400 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President
Telecopy No.: (000) 000-0000
With a copy to: Irell & Xxxxxxx LLP
1800 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
-00-
Xxxxxxxxx: Xxxxx X. Xxxxx, Xxx.
Telecopy No.: (000) 000-0000
If to TCI, MusicCo or
Merger Sub: Tele-Communications, Inc.
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Legal Department
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 11.3 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. The Company's expenses relating to the transactions
contemplated by this Agreement, including fees of Irell & Xxxxxxx
LLP, counsel to the Company, will be paid or accrued by the
Company prior to the Effective Time.
Section 11.4 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 11.5 Third Party Beneficiaries. The parties
-------------------------
to this Agreement agree that the Company's stockholders,
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.
Section 11.6 Entire Agreement. This Agreement will
----------------
be of no force or effect until executed and delivered by all of
the parties to this Agreement.
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Section 11.7 Miscellaneous. This Agreement
-------------
(including the documents and instruments referred to in this
Agreement) (a) 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
(other than as provided in the Confidentiality Agreement dated as
of October 2, 1996, between the Company and TCI as the same may
be amended) and (b) will be governed in all respects, including
validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof
relating to conflicts of law). 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.
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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.
TELE-COMMUNICATIONS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
TCI MUSIC, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
TCI MERGER SUB, INC.
By:
------------------------------
Name:
-----------------------------
Title:
-----------------------------
DMX INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
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