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EXHIBIT 2.3
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") dated as of December 8,
1997, is entered into by and among TCI Music, Inc., a Delaware corporation ("TCI
Music"), TCI Para Merger Sub, Inc., a Delaware corporation and wholly owned
subsidiary of TCI Music ("Merger Sub"), and Paradigm Music Entertainment
Company, a Delaware corporation (the "Company").
RECITALS
TCI Music has proposed that it will acquire the Company in a transaction
in which Merger Sub will merge with and into the Company, as a result of which
TCI Music will become the holder of all the outstanding shares of common stock
of the Company and the holders of shares of common stock of the Company
outstanding immediately prior to such merger will become holders of shares of
Series A Common Stock of TCI Music (the "Merger").
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, the
parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
with initial capital letters will have the meanings set forth below:
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, controls, is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with correlative
meaning, "controlling," "controlled by" and "under common control with") means
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person (whether through the
ownership of voting securities, by contract or otherwise).
"Box Prospectus" means the registration statement of TCI Music on Form
S-4 declared effective by the SEC on November 12, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Common Stock" means the shares of Class A Common Stock, Class B
Common Stock and Class E Common Stock, each par value $0.01 per share, of the
Company.
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"Environmental Law" means any applicable Legal Requirement relating to
the protection, preservation or restoration of the environment (including, air,
water vapor, surface water, ground water, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource).
"Equity Affiliate" means, as to any Person, any other Person in which
such Person or any of its Subsidiaries holds a five percent or greater equity
interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, as to any Person, any trade or business
(whether or not incorporated) that is treated as a single employer with such
Person under Section 414(b), (c), (m) or (o) of the Code.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority, department, agency or
instrumentality, whether domestic or foreign.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Knowledge" means the actual present knowledge of a Person that is a
human being and, in the case of a Person that is not a human being, the present
actual knowledge of the directors and officers (or the human beings having
duties comparable to those of directors and officers) of such Person.
"Legal Requirement" means any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Entity, including judicial decisions applying
common law or interpreting any other Legal Requirement or any agreement entered
into with a Governmental Entity in resolution of a dispute or otherwise.
"Lien" means any lien, security interest, pledge, charge, claim, option,
right to acquire, restriction on transfer, voting restriction or encumbrance of
any nature.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, condition (financial or otherwise), liabilities or
operations of a Person and its Subsidiaries, taken as a whole, or on the ability
of such Person to perform its obligations under this Agreement.
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"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.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form of Exhibit C among the Company and the Persons who receive TCI Music
Common Stock in the Merger, to be executed and delivered at the Closing.
"SEC" means the United States Securities and Exchange Commission.
"Subsidiary" means, as to any Person, any other Person more than 20% of
whose outstanding voting securities or partnership or other equity interests, as
the case may be, are directly or indirectly owned by such Person.
"Tax" means 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,
together with all interest, penalties and additions imposed with respect to such
amounts.
"TCI Music Common Stock" means the Series A Common Stock of TCI Music,
par value $.01 per share.
"TCI Music Common Stock Unit" means one share of TCI Music Common Stock
and the corresponding, non-detachable TCI Right.
"TCI Music Loan" means the loan made by TCI Music to the Company
pursuant to the Loan and Security Agreement dated September 18, 1997 between TCI
Music and the Company.
"TCI Music Series A Common Stock Value" means the average of the mean
daily closing bid and asked prices of one TCI Music Common Stock Unit for a
period of 20 consecutive trading days ending on the third trading day prior to
the Closing, as reported on the SmallCap Market of the National Association of
Securities Dealers, Inc.
"TCI Right" means the right of the holder of a share of TCI Music Common
Stock issued on July 11, 1997 to require Tele-Communications, Inc., to purchase
such share under certain conditions on or before August 10, 1998, unless such
right is extended by its terms.
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"Voting Agreement" means the Voting Agreement dated as of September 18,
1997 among TCI Music, the Company and the Company Stockholders (as defined
therein).
"Warrants" means securities or other obligations of the Company that are
convertible into or exercisable or exchangeable for shares of Company Common
Stock, whether or not such securities or obligations are vested, exercisable,
conditional or contingent upon one or more events.
Section 1.2 Other Definitions. The following terms are defined in the
Sections indicated:
Term Section
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Act 2.1
Acquisition Proposal 7.9
Agreement Preamble
Xxxxx 2.1(e)
Xxxxx Contract 2.1(e)
Box Merger Agreement 4.7(c)
Bylaws 2.1(b)
Certificates 3.3
Certificate of Incorporation 2.1(a)
Closing 3.13
Closing Date 3.13
Common Conversion Number 3.1(b)
Company Preamble
Company Benefit Plans 5.11(a)
Company Bylaws 3.10
Company Charter 2.3
Company Permits 5.8(a)
Company Stock Certificates 3.3(a)
Dissenting Shares 3.8
DMX Prospectus 4.7(b)
Effective Time 2.2
Escrow Agreement 8.3(d)
Exchange Act 4.6
Exchange Agent 3.3(a)
Executive 7.10(a)
Filings 7.2(a)
Meeting 7.3
Merger 2.1
Merger Shares 3.1(a)
Merger Stock Value 3.1(a)
Merger Sub Preamble
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Most Recent Company Balance Sheet 5.7(c)
Most Recent TCI Music Balance Sheet 4.7(c)
Per-Share Merger Value 3.1(b)
Proxy Statement/Private Placement Memorandum 7.3
Representation Letter 7.13
Securities Act 4.6
Surviving Corporation 2.1
TCI 8.2(b)
TCI Music Preamble
TCI Music Certificates 3.3(a)
TCI Music Permits 4.8(a)
TCI Music SEC Reports 4.7(a)
Warrant Cancellation 3.1(b)
Warrant Certificates 3.3
Warrant Conversion Number 3.1(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 II
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 "Act"), 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 (iii) the name of the Surviving Corporation will be Paradigm
Music Entertainment Company. 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 the Act, 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
Certificate of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, will become the Certificate of Incorporation of the
Surviving Corporation (the "Certificate of Incorporation"), and the Certificate
of Incorporation may thereafter be amended or restated as provided therein and
by the Act.
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(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 (the "Bylaws"), and the Bylaws may thereafter be amended
or repealed in accordance with their terms and the Certificate of Incorporation
and as provided by the Act.
(c) Directors. At the Effective Time, the directors of Merger Sub
immediately prior to the Effective Time will become the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation, the Bylaws and the Act 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. At the Effective Time Xx. Xxxxxx XxXxxxxxxx will
become a director of TCI Music and TCI Music's Board of Directors will consider
nominating Xx. Xxxxxx Xxxxxxxxx as a director of TCI Music.
(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, the Bylaws and the Act 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. At the Effective Time if Xx. Xxxxxx XxXxxxxxxx
has accepted TCI Music's offer described in Section 7.12, Xx. Xxxxx Xxxx will
resign as President and Chief Executive Officer of TCI Music and Xx. Xxxxxx
XxXxxxxxxx will be appointed to replace Xx. Xxxx as President and Chief
Executive Officer of TCI Music.
(e) Properties and Liabilities. At the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and Merger
Sub will vest in the Surviving Corporation. At the Effective Time, except for
the amounts, if any, payable by the Company to X.X. Xxxxx & Co., Inc. ("Xxxxx")
pursuant to the letter agreement dated November 4, 1996 (the "Xxxxx
Contract")($200,000 of which will be paid by the Company's stockholders by
granting options to Xxxxx, exercisable at $.05 per share, to purchase shares of
TCI Music Common Stock valued at the Per-Share Merger Value and $125,000 of
which will be paid by TCI Music in cash immediately prior to the Effective
Time), 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, on the Closing Date the parties will deliver a
certificate of merger complying with Section 251(c) of the Act to the Secretary
of State of the State of Delaware for filing pursuant to the Act. The Merger
will become effective upon the filing of such certificate 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.
Section 2.3 Actions Prior to Merger. Immediately prior to the Effective
Time the issued and outstanding shares of the Company's Class E Common Stock
will be converted into an equal number of shares of the Company's Class A Common
Stock by the filing of a restatement to the Company's Second Restated
Certificate of Incorporation (the "Company Charter") in the form
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attached as Exhibit E with the Secretary of State of Delaware effecting such
conversion and eliminating therefrom all provisions relating to Class E Common
Stock.
ARTICLE III
CONVERSION OF CAPITAL STOCK
Section 3.1 Consideration and Conversion of Stock.
(a) Consideration. The aggregate consideration deliverable by TCI
Music in the Merger will be $24,000,000 (less the product of the Per-Share
Merger Value (as defined below) and the number of Dissenting Shares) (the
"Merger Stock Value") payable in a number of shares of TCI Music Common Stock
(collectively, the "Merger Shares") determined by dividing the Merger Stock
Value by the TCI Music Series A Common Stock Value. The Merger Shares will be
allocated among holders of Company Common Stock and Warrants as provided in
Section 3.1. In addition, TCI Music will, if the Merger occurs, provide to the
Company $4,970,831 cash, payable, at the election of TCI Music, either by TCI
Music purchasing debt owed by the Company at the Effective Time (other than the
TCI Music Loan) as follows: cash to the Company at the Effective Time. Such
amount will be used for working capital and other purposes (as pre-approved by
TCIM) and to repay an aggregate principal amount of indebtedness of Paradigm
equal to approximately $4,300,000, together with accrued and unpaid interest as
follows: (i) approximately $3,600,000 in aggregate principal amount pursuant to
certain bridge loan promissory notes payable to the holders of Warrants, (ii)
$450,000 for aggregate principal amount under certain promissory notes issued to
a partnership, the limited partners of which are the grandchildren of the sole
stockholder of Xxxxx, (iii) the balance of the $312,500 in aggregate principal
amount under a loan from an officer of the Company and (iv) $125,000 to pay
additional accrued 1997 consulting fees under the consulting agreements of the
Company.
(b) Conversion of Company Common Stock and Warrants. The Merger
Shares will be deliverable to holders of Company Common Stock at the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any shares of Company Common Stock. Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (except shares subject
to Section 3.1(c) and Dissenting Shares) will be converted into and will
thereafter evidence and become that number of shares of TCI Music Common Stock
equal to the Common Conversion Number. For purposes of this Agreement, "Common
Conversion Number" means the quotient (rounded to the nearest one hundredth)
resulting from dividing (x) the Per-Share Merger Value by (y) the TCI Series A
Common Stock Value. At the Effective Time, the Company will allocate a portion
of the Merger Shares and such Merger Shares will be deliverable to each holder
of Warrants who has agreed to cancel the Warrants (the "Warrant Cancellation")
held by such holder and receive in exchange therefor with respect to each share
of Company Common Stock issuable upon conversion, exercise or exchange of
Warrants that number of shares of TCI Music Common Stock equal to the Warrant
Conversion Number. For purposes of this Agreement, the "Warrant Conversion
Number" means the quotient (rounded to the nearest one hundredth) resulting
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from dividing (x) the difference between the Per-Share Merger Value and the
exercise price of such Warrant by (y) the TCI Series A Common Stock Value. As
used in this Section 3.1, "Per-Share Merger Value" means the quotient resulting
from dividing (x) the sum of $24,000,000 and the aggregate exercise price of all
Warrants subject to the Warrant Cancellation by (y) the total number of shares
of Company Common Stock outstanding at the Effective Date, including as shares
of Company Common Stock deemed to be outstanding for purposes of calculating the
Per-Share Merger Value, without duplication, all shares of Company Common Stock
issuable upon the conversion, exercise or exchange of Warrants. If the total
number of shares of Company Common Stock held by any stockholder or underlying
any Warrant is not convertible into a whole number of shares of TCI Music Common
Stock, such stockholder or holder of Warrants will have the right to receive
cash in lieu of any fractional share of TCI Music Common Stock as provided in
Section 3.5.
(c) Cancellation. Any shares of Company Common Stock held by the
Company or any subsidiary of the Company (not including shares held by the
Company under escrow arrangements) will be canceled at the Effective Time and no
TCI Music Common Stock or other consideration will be delivered in exchange
therefor.
(d) Merger Sub Shares. (i) Each share of capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time (except shares
subject to clause (ii)) 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; and (ii) any shares of
the issued and outstanding capital stock of Merger Sub that are owned directly
or indirectly by Merger Sub immediately prior to the Effective Time 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 Deleted.]
Section 3.3 Exchange of Certificates.
(a) Exchange Agent. The Bank of New York (or, if The Bank of New
York is unable or unwilling to serve in such capacity, another bank or trust
company selected by TCI Music and reasonably acceptable to the Company) will act
as exchange agent (the "Exchange Agent") in connection with the surrender of
certificates that, prior to the Effective Time, evidenced outstanding shares of
Company Common Stock ("Company Stock Certificates") and Warrants ("Warrant
Certificates") (collectively, the "Certificates"). Prior to the Closing Date,
TCI Music will deposit with the Exchange Agent for exchange in accordance with
this Section 3.3 certificates evidencing the shares of TCI Music Common Stock to
be issued in the Merger ("TCI Music Certificates"), which shares of TCI Music
Common Stock issuable to holders of Company Common Stock and Warrants will be
deemed to be issued at the Effective Time. At and following the Effective Time,
TCI Music will deliver to the Exchange Agent such cash as may be required from
time to time to make payments of cash in lieu of fractional shares of TCI Music
Common Stock in accordance with Section 3.5.
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(b) Exchange. As soon as practicable after the Effective Time, but
subject to the provisions of Section 3.8 regarding Dissenting Shares, TCI Music
will cause the Exchange Agent to mail to each Person who was a holder of record
of Company Common Stock or Warrants 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 Certificates will pass, only upon delivery of the
Certificates to the Exchange Agent and will be in such form and will have such
other provisions that are specified by TCI Music and reasonably acceptable to
the Company); and (ii) instructions for effecting the surrender of Certificates
in exchange for TCI Music Certificates (together with any cash to be paid in
lieu of fractional shares of TCI Music Common Stock pursuant to Section 3.5).
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by TCI Music, together with such
letter of transmittal, duly executed, and such other documents as may be
required by the Exchange Agent or such other agent, the holder of such
Certificate will be entitled to receive in exchange therefor TCI Music
Certificates representing the number of whole shares of TCI Music Common Stock
that such holder has the right to receive pursuant to this Agreement (together
with any cash to be paid in lieu of fractional shares of TCI Music Common Stock
pursuant to Section 3.5) and the Certificates so surrendered will be canceled.
In the event of a transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, TCI Music Certificates
representing the proper number of shares of TCI Music Common Stock may be issued
to a Person other than the Person in whose name the surrendered Company Stock
Certificate is registered if the Company Stock Certificate representing such
Company Common Stock is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence
reasonably satisfactory to TCI Music that any applicable stock transfer tax has
been paid. TCI Music will not directly or indirectly pay or reimburse any Person
for any transfer taxes of the type referred to in the preceding sentence. If any
TCI Music Certificates are to be delivered to a Person other than the Person in
whose name the Certificates surrendered in exchange therefor are registered, it
will be a condition to the delivery of such TCI Music Certificates that the
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 and Warrant Certificate subject to the
Warrant Cancellation will, until surrendered for exchange in accordance with
this Section 3.3, be deemed for all purposes to evidence ownership of the number
of whole shares of TCI Music Common Stock into which the shares of Company
Common Stock and Warrants (which, prior to the Effective Time, were represented
thereby) are converted in accordance with Section 3.1, together with the right,
if any, to receive dividends or distributions with respect thereto made after
the Effective Time pursuant to Section 3.4 and any cash to be paid in lieu of
fractional shares of TCI Music Common Stock pursuant to Section 3.5.
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(d) Delivery of Representation Letter. No TCI Music Certificate will
be issued pursuant to this Section 3.3 to any Person who was a holder of Company
Common Stock or Warrants until TCI Music receives a duly executed Representation
Letter from such holder.
(e) Stock Certificate Legend. All certificates representing Merger
Shares will bear a legend substantially in the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
state securities laws, and may not be sold, pledged or otherwise
transferred or encumbered unless they are so registered or
unless an exemption from registration is available. As of the
date of their issuance the shares represented hereby are not
listed for trading on Nasdaq or any other securities exchange.
Certain shares of TCI Music Series A Common Stock trade together
with associated rights issued by Tele-Communications, Inc.
('Rights') on the Nasdaq SmallCap Market, under the symbol
'TUNE.' Such Rights will terminate prior to, or expire on,
August 10, 1998 unless extended pursuant to their terms. The
shares of TCI Music Series A Common Stock represented by this
certificate do not include associated Rights and are not
tradeable on the Nasdaq SmallCap Market under the symbol 'TUNE'
until the Rights terminate or expire. Prior to the termination
or expiration of the Rights, no public trading market is
available for the shares of TCI Music Series A Common Stock
represented by this certificate unless an application for
listing the TCI Music Series A Common Stock without the
associated Rights has been approved by Nasdaq."
(f) Expenses. Except as otherwise expressly provided in this
Agreement, TCI Music will pay all charges and expenses, including those of the
Exchange Agent, in connection with the exchange of shares of TCI Music Common
Stock for shares of Company Common Stock and Warrants, except any charges or
expenses that are otherwise solely the liability of one or more holders of
Company Common Stock or Warrants. Any TCI Music Certificates deposited with the
Exchange Agent that remain unclaimed by the former holders of Company Common
Stock and Warrants after six months following the Effective Time will be
delivered to TCI Music upon its demand, and any former holders of Company Common
Stock and Warrants who have not then complied with the instructions for
exchanging their Certificates will thereafter look only to TCI Music for
exchange of Certificates and for any dividend or distribution with respect
thereto made after the Effective Time pursuant to Section 3.4 and any cash to be
paid in lieu of fractional shares of TCI Music Common Stock pursuant to Section
3.5.
Section 3.4 Dividends and Other Distributions. No dividends or other
distributions declared or made after the Effective Time with respect to shares
of TCI Music Common Stock with a record date after the Effective Time will be
paid to the holder of any unsurrendered
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Certificate with respect to the shares of TCI Music Common Stock issuable upon
surrender thereof until the holder of such Certificate surrenders such
Certificate in accordance with Section 3.3. Subject to the effect of applicable
Legal Requirements, following surrender of any such Certificate, TCI Music will
pay or cause to be paid, without interest, to the record holder of TCI Music
Certificates issued in exchange therefor, (a) the amount, if any, of TCI Music
dividends and other distributions declared or authorized to be made by TCI Music
with a record date after the Effective Time payable with respect to the shares
of TCI Music Common Stock represented thereby and (b) at the appropriate payment
date, the amount of dividends and other distributions (if any) declared or
authorized to be made by TCI Music with a record date after the Effective Time
and a payment date subsequent to surrender of such Certificates that are payable
with respect to such holder's shares of TCI Music Common Stock.
Section 3.5 No Fractional Shares.
(a) Cash Payment in Lieu of Fractional Shares. No certificates or
scrip representing fractional shares of TCI Music Common Stock will be issued
upon the surrender of Certificates pursuant to Section 3.3. No such fractional
interest will entitle the owner thereof to any rights as a security holder of
TCI Music. In lieu of any such fractional shares of TCI Music Common Stock, each
holder of Company Common Stock and Warrants entitled to receive shares of TCI
Music Common Stock in the Merger, upon surrender of such Person's Certificates
for exchange pursuant to Section 3.3, will be entitled to receive an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
the TCI Music Series A Common Stock Value by the fractional share interest in
TCI Music Common Stock to which such holder otherwise would be entitled.
(b) Deposit with Exchange Agent. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of shares of
TCI Music Common Stock in lieu of any fractional shares, TCI Music will promptly
deposit with the Exchange Agent cash in the required amounts and the Exchange
Agent will mail such amounts without interest to such holders; provided,
however, that no such amount will be paid to any holder with respect to any
Certificate prior to the surrender by such holder of such Certificate.
Section 3.6 No Liability. None of TCI Music, Merger Sub, the Company,
the Surviving Corporation or the Exchange Agent will be liable to any holder of
shares of Company Common Stock or Warrants for any shares of TCI Music Common
Stock, dividends or distributions with respect thereto or cash payable in lieu
of fractional shares of TCI Music Common Stock delivered to a state abandoned
property administrator or other public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 3.7 Lost Certificates. If any Certificate is lost, stolen or
destroyed, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of TCI Music Common Stock (and any dividend or
distribution with respect thereto payable pursuant to Section 3.4 and any cash
payable in lieu of fractional shares of TCI Music Common Stock
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pursuant to Section 3.5) deliverable in respect thereof as determined in
accordance with the terms of this Agreement, subject to the condition that the
Person to whom the TCI Music Common Stock (and any dividend or distribution with
respect thereto payable pursuant to Section 3.4 and any cash payable in lieu of
fractional shares pursuant to Section 3.5) are to be issued, shall have (a)
delivered to TCI Music an affidavit claiming such Certificate to be lost,
stolen, or destroyed and (b) if required by TCI Music, given TCI Music an
indemnity satisfactory to TCI Music against any claim that may be made against
TCI Music with respect to the Certificate alleged to have been lost, stolen or
destroyed.
Section 3.8 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, holders of shares of Company Common Stock outstanding
immediately prior to the Effective Time 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 the Act (the "Dissenting Shares") will
not have their shares of Company Common Stock converted into or be exchangeable
for the right to receive shares of TCI Music Common Stock or any dividend or
distribution with respect thereto made after the Effective Time or any cash
payable in lieu of fractional shares of TCI Music Common Stock pursuant to
Section 3.5, but instead will be entitled to receive payment of the fair value
of their Dissenting Shares in accordance with the provisions of the Act 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 Act will not be considered Dissenting
Shares. The Company will give TCI Music prompt notice of any written demands for
appraisal of any shares of Company Common Stock, attempted withdrawals of such
demand and any other notices or other documents received by the Company pursuant
to the Act relating to stockholders' rights of appraisal. The Company will make
all payments required by the Act to be made in respect of Dissenting Shares,
including any costs assessed against the Company pursuant to the Act, and TCI
Music or any of its Affiliates will directly or indirectly reimburse or
otherwise provide funds to the Company with respect to such payments.
Section 3.9 [Intentionally Deleted.]
Section 3.10 Stockholders' Approval. Subject to fiduciary duty
obligations of the Board of Directors of the Company under applicable Legal
Requirements, the Company will use its best efforts, in accordance with
applicable Legal Requirements and the Company Charter and bylaws of the Company
(the "Company Bylaws"), to have this Agreement, the Merger and the transactions
contemplated by this Agreement approved by the holders of capital stock of the
Company entitled to vote thereon. The Company will notify TCI Music of the date
set for any stockholder action to be taken in connection with approval of the
Merger not later than 20 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 the transactions contemplated by this
Agreement, and will use best efforts to solicit from such holders proxies in
favor of such approval and adoption and take all other action necessary or
helpful to secure such favorable vote.
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Section 3.11 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company will be closed and no transfer of
shares of Company Common Stock will be made thereafter. In the event that, after
the Effective Time, Company Stock Certificates are presented to the Surviving
Corporation, they will be canceled and exchanged for the TCI Music Certificates
(and, if required, cash) as provided in Section 3.3(b) and Section 3.5.
Section 3.12 Assistance in Consummation of the Merger. Each of TCI
Music, 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.
Section 3.13 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place (i) at the offices of Xxxx &
Priest LLP, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 9:00 a.m. local time on
the date that is the first business day after the day on which the last of the
conditions set forth in Article VIII (excluding delivery of opinions and
certificates) is fulfilled or waived or (ii) at such other place and time as TCI
Music and the Company agree in writing. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TCI MUSIC AND MERGER SUB
TCI Music and Merger Sub jointly and severally represent and warrant to
the Company as follows:
Section 4.1 Organization and Qualification. Each of TCI Music and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and each has all requisite corporate power and
authority to carry on its business as it is now being conducted. Each of TCI
Music and 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 4.2 Capitalization.
(a) TCI Music. As of the date of this Agreement, the authorized
capital stock of TCI Music consists of: (i) 495,000,000 shares of common stock,
par value $.01 per share, divided into the following classes: 295,000,000 shares
of common stock designated as Series A Common Stock, of which 14,896,649 shares
are issued and outstanding as of the date of this Agreement, and 200,000,000
shares of common stock, designated as Series B Common Stock, of which 62,500,000
shares are issued and outstanding as of the date of this Agreement and (ii)
5,000,000 shares of
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preferred stock, par value $.01 per share, none of which is issued and
outstanding as of the date of this Agreement. All shares of TCI Music 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.
(b) Merger Sub. As of the Effective Time, the authorized capital
stock of Merger Sub will consist of 1,000 shares of common stock, par value $.01
per share, of which 1,000 shares will be issued and outstanding, all of which
will be owned beneficially and of record by TCI Music immediately prior to the
Effective Time.
Section 4.3 Subsidiaries. Schedule 4.3 to this Agreement reflects the
percentage and nature of TCI Music's ownership of each Subsidiary and Equity
Affiliate of TCI Music as of the date of this Agreement. Each of TCI Music's
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or formation and has the corporate or
partnership power to carry on its business as it is now being conducted or
currently proposed to be conducted. Each of TCI Music's Subsidiaries is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect on TCI Music. All the
outstanding shares of capital stock of each of TCI Music's Subsidiaries that is
a corporation are validly issued, fully paid and nonassessable. Except as set
forth on Schedule 4.3, the shares of capital stock or partnership or other
ownership interests in each of TCI Music's Subsidiaries or Equity Affiliates
that are owned by TCI Music or by a Subsidiary of TCI Music are owned free and
clear of any Liens except Liens securing indebtedness for borrowed money or the
deferred purchase price of property, 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
disclosed in the TCI Music SEC Reports, the Box Prospectus or on Schedule 4.3,
there are not, as of the date hereof, and at the Effective Time there will not
be, any outstanding options, warrants, calls or other rights, agreements or
commitments of any character, to which TCI Music or any of its Subsidiaries is a
party, relating to the issued or unissued capital stock, other securities or
partnership or other ownership interests in any of the Subsidiaries or Equity
Affiliates of TCI Music.
Section 4.4 Authority Relative to this Agreement. Each of TCI Music and
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 Music and Merger Sub have
been duly authorized by the Boards of Directors of TCI Music and Merger Sub and
by TCI Music as the sole stockholder of Merger Sub, and no other corporate
proceedings on the part of TCI Music 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 Music 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
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of indemnification and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general principles of
equity.
Section 4.5 No Breach; Required Consents. The execution and delivery of
this Agreement by TCI Music and Merger Sub do not, and the consummation of the
transactions contemplated by this Agreement by TCI Music and Merger Sub will
not: (a) violate or conflict with the certificate of incorporation or bylaws of
TCI Music or Merger Sub; (b) constitute a breach or default (or an event that
with notice or lapse of time or both would become a breach or default) or give
rise to any Lien, third-party right of termination, cancellation, modification
or acceleration under any agreement or undertaking to which TCI Music or Merger
Sub is a party or by which either of them is bound, except where such breach,
default, Lien, third-party right of termination, cancellation, modification or
acceleration would not have a Material Adverse Effect on TCI Music or Merger
Sub; or (c) subject to obtaining the approvals and making the filings described
in Section 4.6, constitute a violation of any applicable Legal Requirement,
except where such violation would not have a Material Adverse Effect on TCI
Music or Merger Sub.
Section 4.6 Consents and Approvals. Neither the execution and delivery
of this Agreement by TCI Music and Merger Sub nor the consummation of the
transactions contemplated by this Agreement by TCI Music and Merger Sub will
require TCI Music or Merger Sub to make any filing or registration with, or
obtain any authorization, consent or approval of, any Governmental Entity,
except those required in connection, or in compliance, with the provisions of
(i) the Communications Act of 1934, as amended, (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 Music or Merger Sub or prevent the consummation
of the transactions contemplated by this Agreement. With respect to the lack of
any filing being required under the HSR Act, such representation and warranty is
made solely in reliance on the representation and warranty of the Company set
forth in the last sentence of Section 5.6.
Section 4.7 Reports and Financial Statements.
(a) SEC Reports. TCI Music has filed all required forms, reports and
documents required to be filed with the SEC since TCI Music was incorporated
(collectively, the "TCI Music SEC Reports"). As of their respective dates or
effective dates and except as the same may have been corrected, updated or
superseded by means of a subsequent filing with the SEC prior to the date of
this Agreement, none of the TCI Music SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. TCI Music has delivered to the Company, in the forms
filed with the SEC, all the TCI Music SEC Reports.
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(b) Financial Statements. The audited consolidated financial
statements of TCI Music and DMX Inc. contained in the Box Prospectus 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 financial condition and results of operations of each company,
respectively, as of the relevant dates thereof and for the periods covered
thereby. The unaudited condensed pro forma combined interim financial statements
of TCI Music contained in the Box Prospectus present the financial condition and
results of operations of TCI Music as of the dates and for the periods indicated
therein on a pro forma basis and such financial statements, as of the date of
the Box Prospectus, conformed in all material respects with the requirements for
pro forma financial statements set forth in Article 11 of Regulation S-X under
the Exchange Act.
(c) Absence of Certain Changes. Except as disclosed in the TCI Music
SEC Reports and the Box Prospectus, except for TCI Music's intention to purchase
the preferred stock of The Box Worldwide, Inc. owned by EMAP plc prior to the
Effective Time and except for the transactions contemplated by the Merger
Agreement dated August 12, 1997 among TCI Music, TCI Music Acquisition Sub, Inc.
and The Box Worldwide, Inc. (the "Box Merger Agreement"), since the date of the
most recent balance sheet of TCI Music included in the Box Prospectus (the "Most
Recent TCI Music Balance Sheet"), there has not been any: (i) transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) that, individually
or in the aggregate, has had, or would have, a Material Adverse Effect on TCI
Music (other than as a result of changes in laws or regulations of general
applicability or any changes resulting from general economic, financial, market
or industry-wide conditions); (ii) declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the capital stock of TCI Music; or (iii) entry into any commitment or
transaction material to TCI Music and its Subsidiaries taken as a whole
(including any borrowing or sale of assets) except in the ordinary course of
business consistent with past practice.
(d) Absence of Undisclosed Liabilities. Except as disclosed in the
TCI Music SEC Reports or the Box Prospectus, TCI Music does not have any
indebtedness, liability or obligation required by GAAP to be reflected on a
balance sheet that is not reflected or reserved against in the Most Recent TCI
Music Balance Sheet other than liabilities, obligations and contingencies that
(i) were incurred after the date of the Most Recent TCI Music Balance Sheet in
the ordinary course of business, (ii) were incurred pursuant to the Box Merger
Agreement or (iii) would not, in the aggregate, have a Material Adverse Effect
on TCI Music.
(e) Proxy Statement Disclosure. The Proxy Statement/Private
Placement Memorandum delivered to Company stockholders in connection with the
Merger, to the extent it relates to TCI Music, its Subsidiaries and their
respective businesses, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make such statements, in light of the circumstances in which they were
made, not misleading.
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Section 4.8 Compliance with Law; Litigation.
(a) Permits. Except as disclosed in the TCI Music SEC Reports, TCI
Music and its Subsidiaries hold all permits, licenses, franchises, variances,
exemptions, concessions, leases, instruments, orders and approvals (the "TCI
Music Permits") of all Governmental Entities required to be held under
applicable Legal Requirements, except for such TCI Music Permits the failure of
which to hold, individually or in the aggregate, does not have and, in the
future is not likely to have, a Material Adverse Effect on TCI Music. To TCI
Music's Knowledge, TCI Music and its Subsidiaries are in compliance with the
terms of the TCI Music Permits, except for such failures to comply that,
individually or in the aggregate, would not have a Material Adverse Effect on
TCI Music. To TCI Music's Knowledge, the businesses of TCI Music and its
Subsidiaries are not being conducted in violation of any Legal Requirement,
except for such violations which, individually or in the aggregate, would not
have a Material Adverse Effect on TCI Music. No investigation or review by any
Governmental Entity with respect to TCI Music or any of its Subsidiaries is
ongoing, pending, or, to the Knowledge of TCI Music, threatened, nor has any
Governmental Entity indicated to TCI Music in writing an intention to conduct
the same, other than those the outcome of which would not have a Material
Adverse Effect on TCI Music.
(b) Litigation. Except as disclosed in the TCI Music SEC Reports,
the Box Prospectus or on Schedule 4.8(b), there is no suit, action or proceeding
pending or, to the Knowledge of TCI Music, threatened, against or affecting TCI
Music or any of its Subsidiaries that has had or is likely to have a Material
Adverse Effect on TCI Music, nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding against TCI Music
or any of its Subsidiaries that has had or is likely to have a Material Adverse
Effect on TCI Music.
Section 4.9 Title to Assets. Except as disclosed in the TCI Music SEC
Reports or the Box Prospectus, TCI Music and its Subsidiaries have good and
merchantable title to all material assets reflected on the unaudited pro forma
combined balance sheet as of March 31, 1997 included in TCI Music's Amendment
No. 1 to Registration Statement on Form S-4 filed with the SEC on June 12, 1997,
free and clear of any Lien except: (a) landlord's Liens and Liens for property
taxes not delinquent; (b) statutory Liens that were created in the ordinary
course of business and do not materially detract from the value of such assets
or materially impair the use thereof in the operation of TCI Music's business;
(c) the Liens listed on Schedule 4.3; (d) Liens securing indebtedness for
borrowed money or securing the deferred purchase price of any property; (e)
leased interests in property owned by others and leased interests in property
leased to others; and (f) zoning, building or similar restrictions, easements,
rights-of-way, reservations of rights, conditions, or other restrictions or
encumbrances relating to or affecting real property that do not, individually or
in the aggregate, materially interfere with the use of such real property in the
operation of TCI Music's business.
Section 4.10 Labor and Employee Matters. TCI Music is not a party to any
contract with any labor organization and has not agreed to recognize any union
or other collective bargaining unit. No union or other collective bargaining
unit has been certified as representing any of
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TCI Music's employees. To TCI Music's Knowledge, there is no representation or
organizing effort pending or threatened against or affecting or involving TCI
Music. TCI Music and its Subsidiaries are in compliance with all applicable
Legal Requirements relating to the employment of employees, including any
obligations relating to employment standards legislation, pay equity,
occupational health and safety, labor relations and human rights legislation
except for such failures to comply as do not have, and are not likely to have, a
Material Adverse Effect on TCI Music.
Section 4.11 ERISA.
(a) Benefit Plans. Schedule 4.11(a) sets forth all "employee benefit
plans," as defined in ERISA, and all other material employee benefit
arrangements, programs or payroll practices, including severance pay, sick
leave, vacation pay, salary continuation for disability, deferred compensation,
bonus, stock purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement, employee assistance and employee discounts, that TCI
Music or any of its ERISA Affiliates maintains or has an obligation to make
contributions (the "TCI Music Benefit Plans").
(b) Multi-Employer Plans. Neither TCI Music nor any of its ERISA
Affiliates has incurred any unsatisfied withdrawal liability, as defined in
Section 4201 of ERISA, with respect to any multiemployer plan, nor has any of
them incurred any liability due to the termination or reorganization of any
multiemployer plan, except any such liability that would not have a Material
Adverse Effect on TCI Music. To the Knowledge of TCI Music, neither TCI Music
nor any of its ERISA Affiliates reasonably expects to incur any liability due to
a withdrawal from or termination or reorganization of a multiemployer plan,
except any such liability that would not have a Material Adverse Effect on TCI
Music.
(c) Plan Qualification. Each TCI Music Benefit Plan that is intended
to qualify under Section 401 of the Code and the trust maintained pursuant
thereto has been determined to be exempt from federal income taxation under
Section 501 of the Code by the Internal Revenue Service, and to the Knowledge of
TCI Music, nothing has occurred with respect to any such plan since such
determination that is likely to result in the loss of such exemption or the
imposition of any material liability, penalty or tax under ERISA or the Code.
Each TCI Music Benefit Plan has at all times been maintained in all material
respects, by its terms and in operation, in accordance with all applicable Legal
Requirements.
(d) Contributions. All contributions (including all employer
contributions and employee salary reduction contributions) required to have been
made under the TCI Music Benefit Plans or pursuant to applicable Legal
Requirements (without regard to any waivers granted under Section 412 of the
Code) to any funds or trusts established thereunder or in connection therewith
have been made by the due date thereof (including any valid extension or grace
period) and no accumulated funding deficiency exists with respect to any of the
TCI Music Benefit Plans subject to Section 412 of the Code.
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(e) No Violations. To the Knowledge of TCI Music, there have been no
violations of ERISA or the Code with respect to the filing of applicable
reports, documents and notices regarding the TCI Music Benefit Plans with the
Secretary of Labor and the Secretary of the Treasury or the furnishing of such
reports, documents and notices to the participants or beneficiaries of the TCI
Music Benefit Plans, except such violations that, individually or in the
aggregate, would not have a Material Adverse Effect on TCI Music.
(f) Litigation. There are no pending actions, claims or lawsuits
that have been asserted or instituted against the TCI Music Benefit Plans, the
assets of any of the trusts under such plans or the plan sponsor or the plan
administrator, or against any fiduciary of the TCI Music Benefit Plans, with
respect to the operation of such plans (other than routine benefit claims), nor
does TCI Music have Knowledge of facts that reasonably could be expected to form
the basis for any such action, claim or lawsuit, except any such actions, claims
or lawsuits that, individually or in the aggregate, would not have a Material
Adverse Effect on TCI Music.
Section 4.12 Operations of Merger Sub. As of the date of this Agreement,
Merger Sub has engaged in no business activities other than in connection with
this Agreement and the transactions contemplated by this Agreement and has no
material assets or liabilities other than its rights and obligations under this
Agreement.
Section 4.13 No Broker. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of TCI Music or Merger Sub.
Section 4.14 Taxes. TCI Music and each of its Subsidiaries have timely
filed all Tax returns required to be filed by any of them and have timely paid
or have established an adequate reserve for the payment of, all Taxes owed in
respect of the periods covered by such returns, except where the failure to file
such Tax returns or timely pay or establish an adequate reserve for the payment
of such Taxes will not have a Material Adverse Effect on TCI Music. The
information contained in such Tax returns is complete and accurate in all
material respects. Neither TCI Music nor any Subsidiary of TCI Music is
delinquent in the payment of any Tax or other amount owed to any Governmental
Entity, except where the amount owed, when paid, or the delinquency in paying
the amount owed will not have a Material Adverse Effect on TCI Music. There are
no claims or investigations pending or, to TCI Music's Knowledge, threatened
against TCI Music or any of its Subsidiaries for past Taxes, except claims and
investigations that would not have a Material Adverse Effect on TCI Music and
adequate provision for which has been made on the Most Recent TCI Music Balance
Sheet. None of TCI Music or its Subsidiaries has waived or extended any
applicable statute of limitations relating to the assessment of any Taxes that
would be payable by TCI Music or such Subsidiary.
Section 4.15 Environmental Laws. Each of TCI Music and its Subsidiaries
is in compliance in all respects with all Environmental Laws, except where the
failure to so comply would
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not have a Material Adverse Effect on TCI Music. No orders, directions or
notices have been issued pursuant to any Environmental Law and no Governmental
Entity has submitted to any of TCI Music and its Subsidiaries any request for
information pursuant to any Environmental Law.
Section 4.16 Transactions with Affiliates. Except as disclosed in the
TCI Music SEC Reports, the Box Prospectus or as contemplated by this Agreement,
there is no lease, sublease, indebtedness, contract, agreement, commitment,
understanding or other arrangement of any kind entered into by TCI Music or
Merger Sub with any officer, director or shareholder of TCI Music or Merger Sub
or any "affiliate" or "associate" (as those terms are defined in the Exchange
Act) of either of them, except, in each case, for compensation paid to directors
and officers consistent with previously established policies (including normal
merit increases in such compensation in the ordinary course of business),
reimbursements of ordinary and necessary expenses incurred in connection with
their employment and amounts paid or benefits granted pursuant to TCI Music
Benefit Plans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to TCI Music and Merger Sub as
follows:
Section 5.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of 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 5.2 Capitalization.
(a) Capital Stock. The authorized capital stock of the Company
consists of 31,999,900 shares of Series A Common Stock, $.01 par value per
share, of which 2,084,204 shares are issued and outstanding (6,000 of which
currently are held in escrow), 1,000,100 shares of Series B Common Stock, $.01
par value per share, of which 1,000,005 shares are issued and outstanding
(566,670 of which currently are held in escrow), 2,000,000 shares of Series E
Common Stock, $.01 par value per share, of which 1,187,965 shares are issued and
outstanding (none of which currently is held in escrow), and 5,000,000 shares of
preferred stock, par value $.01 per share, of which no shares are issued and
outstanding.
(b) Options and Other Rights. Except as set forth on Schedule
5.2(b), there are no options, warrants, calls, subscriptions or other rights,
agreements or commitments of any kind (including preemptive rights), to which
the Company or any of its Subsidiaries is a party, relating
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to the issued or unissued capital stock or other securities of the Company or
any Subsidiary. Schedule 5.2(b) sets forth, for all such options, warrants,
calls, subscriptions or other rights, agreements or commitments that are
outstanding (i) the number of shares and the class or series of capital stock of
the Company issuable pursuant thereto, (ii) the exercise or conversion price,
(iii) the exercise or conversion period and (iv) if not immediately exercisable
or convertible, the date on which they can be exercised or converted.
(c) Due Authorization. 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 5.3 Subsidiaries. Schedule 5.3 reflects the percentage and
nature of the Company's ownership of each Subsidiary and Equity Affiliate of the
Company as of the date of this Agreement. 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 to do business as a foreign corporation or
partnership, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
will not have a Material Adverse Effect on the Company. All the outstanding
shares of capital stock of each of the Company's Subsidiaries that is a
corporation are validly issued, fully paid and nonassessable. Except as set
forth on Schedule 5.3, the shares of capital stock or partnership or other
ownership interests in each of the Company's Subsidiaries or Equity Affiliates
that are owned by the Company or by a Subsidiary of the Company are owned free
and clear of any Liens, are not subject to and have not been issued in violation
of any preemptive rights and have not been issued in violation of any federal or
state securities laws or any other Legal Requirement. Except as set forth on
Schedule 5.3, there are not as of the date hereof, and at the Effective Time
there will not be, any outstanding options, warrants, calls or other rights,
agreements or commitments of any character, to which the Company or any of its
Subsidiaries is a party, relating to the issued or unissued capital stock, other
securities or partnership or other ownership interests in any of the
Subsidiaries or Equity Affiliates of the Company.
Section 5.4 Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement by the holders of a majority of the
outstanding shares of 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. Except for the approval by
a vote of the holders of a majority of the voting power represented by all of
the outstanding shares of Company Common Stock and the filing of a restatement
of the Company Charter deleting the provisions relating to Class E Common Stock,
no other corporate proceedings on the part of the Company are
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necessary to authorize this Agreement and the transactions contemplated by this
Agreement. Subject to approval by the holders of a majority of the outstanding
shares of Company Common Stock in accordance with the Act, this Agreement
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms except (i) as enforcement may be limited by
bankruptcy, insolvency or other similar Legal Requirements affecting the
enforcement of creditors' rights generally, (ii) as the availability of
indemnification and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general principles of
equity.
Section 5.5 No Breach; Required Consents. The execution and delivery of
this Agreement by the Company does not, and the consummation of the transactions
contemplated by this Agreement by the Company will not: (a) subject to the
approval of the holders of a majority of the outstanding shares of Company
Common Stock, violate or conflict with the Company Charter or Company Bylaws;
(b) constitute a breach or default (or an event that with notice or lapse of
time or both would become a breach or default) or give rise to any Lien,
third-party right of termination, cancellation, modification or acceleration
under any agreement or undertaking to which the Company is a party or by which
it is bound, except where such breach, default, Lien, third-party right of
termination, cancellation, modification, or acceleration would not have a
Material Adverse Effect on the Company; or (c) subject to obtaining the
consents, approvals or authorizations and making the filings or registrations
described in Section 5.6, constitute a violation of any Legal Requirement,
except where such violation would not have a Material Adverse Effect on the
Company.
Section 5.6 Consents and Approvals. Except as set forth on Schedule 5.6,
neither the execution and delivery of this Agreement by the Company nor the
consummation of the transactions contemplated by this Agreement will require the
Company to make any filing or registration with, or obtain any authorization,
consent or approval of, any Governmental Entity or any other Person, except
those required in connection, or in compliance, with the provisions of (i) the
Communications Act of 1934, as amended, (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. The Company is an ultimate parent
entity, as such term is defined in 16 C.F.R. Section 801.1(a)(3). Neither the
Company nor any entity controlled by the Company is engaged in manufacturing,
and the Company's total assets are (and, immediately prior to the Effective
Time, will be) less than $10,000,000, all as determined in accordance with 16
C.F.R. Sections 801.1(a)-(c), 801.1(j) and 801.11.
Section 5.7 Reports and Financial Statements.
(a) SEC Reports. The Company has not been required by any applicable
Legal Requirement to file any form, report or document with the SEC. The Company
filed a registration statement on Form SB-2/A and a Form 8-A12G with the SEC on
August 19, 1997, file no. 333-23781 (collectively, the "Company SEC Reports").
As of their respective dates or effective dates
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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 which
has been delivered by the Company to TCI Music and except for information about
Xxxxx that was provided by Xxxxx, none of the Company SEC Reports, including the
financial statements and schedules included or incorporated by reference
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Company has delivered to TCI
Music, in the forms filed with the SEC, all the Company SEC Reports.
(b) Financial Statements. The audited consolidated financial
statements of the Company, Purple Demon, Inc. and SonicNet, Inc. contained in
the Company 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, Purple Demon, Inc.'s and
SonicNet, Inc.'s consolidated financial condition and the results of their
operations as of the relevant dates thereof and for the periods covered thereby.
The unaudited consolidated interim financial statements of the Company, Purple
Demon, Inc. and SonicNet, Inc. contained in the Company SEC Reports comply in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, were prepared
on a basis consistent with prior interim periods (except as required by
applicable changes in GAAP or in SEC accounting policies) and include all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the Company's consolidated financial condition and results of
operations for such periods.
(c) Absence of Certain Changes. Except as provided on Schedule
5.7(c), since the date of the most recent consolidated balance sheet of the
Company included in the Company SEC Reports (the "Most Recent Company 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) 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. The Company does not have
any indebtedness, liability or obligation required by GAAP to be reflected on a
balance sheet that is not reflected or reserved against in the Most Recent
Company Balance Sheet other than liabilities, obligations and contingencies that
(i) were incurred after the date of the Most Recent Company
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Balance Sheet in the ordinary course of busi ness or (ii) would not, in the
aggregate, have a Material Adverse Effect on the Company.
(d) Proxy Statement Disclosure. The Proxy Statement/Private
Placement Memorandum delivered to Company stockholders in connection with the
Merger, to the extent it relates to the Company, its Subsidiaries and their
respective businesses, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make such statements, in light of the circumstances in which they were
made, not misleading.
Section 5.8 Compliance with Law; Litigation.
(a) Permits. The Company and its Subsidiaries hold all permits,
licenses, franchises, variances, exemptions, concessions, leases, instruments,
orders and approvals (the "Company Permits") of all Governmental Entities
required to be held under applicable Legal Requirements, except such Company
Permits the failure of which to hold, individually or in the aggregate, does not
have and, in the future is not likely to have, a Material Adverse Effect on the
Company. To the Company's Knowledge, the Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except for such failures to
comply that, individually or in the aggregate, would not have a Material Adverse
Effect on the Company. To the Company's Knowledge, the businesses of the Company
and its Subsidiaries are not being conducted in violation of any Legal
Requirement, except for such violations which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. No investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is ongoing, 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) Litigation. Except as provided on Schedule 5.8(b), there is no
suit, action or proceeding pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries that has
had or is likely to have a Material Adverse Effect on the Company nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries that has
had or is likely to have a Material Adverse Effect on the Company.
Section 5.9 Title to Assets. Except as set forth on Schedule 5.9, the
Company and its Subsidiaries have good and merchantable title to all material
assets reflected on the Most Recent Company Balance Sheet, free and clear of any
Lien except: (a) landlord's Liens and Liens for property taxes not delinquent;
(b) statutory Liens that were created in the ordinary course of business and do
not materially detract from the value of such assets or materially impair the
use thereof in the operation of the Company's business; (c) the Lien that
secures the TCI Music Loan; (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,
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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.
The Company has purchased all of the assets of the Addicted to Noise business
for consideration that did not exceed $220,000 in cash and promissory notes and
75,000 shares of Class A Common Stock of the Company.
Section 5.10 Labor and Employee Matters. The Company is not a party to
any contract with any labor organization and has not agreed to recognize any
union or other collective bargaining unit. No union or other collective
bargaining unit has been certified as representing any of the Company's
employees. To the Company's Knowledge, there is no representation or organizing
effort pending or threatened against or affecting or involving the Company. The
Company and its Subsidiaries are in compliance with all applicable Legal
Requirements relating to the employment of employees, including any obligations
relating to employment standards legislation, pay equity, occupational health
and safety, labor relations and human rights legislation except for such
failures to comply as do not have, and are not likely to have, a Material
Adverse Effect on the Company. Schedule 5.10 sets forth all agreements or
arrangements with any employee of the Company, whether oral or in writing, with
respect to such employee's employment with the Company other than agreements or
arrangements otherwise disclosed on Schedule 5.11(a).
Section 5.11 ERISA.
(a) Benefit Plans. Schedule 5.11(a) sets forth all "employee benefit
plans," as defined in ERISA, and all other material employee benefit
arrangements, programs or payroll practices, including severance pay, sick
leave, vacation pay, salary continuation for disability, deferred compensation,
bonus, stock purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement, employee assistance and employee discounts, that the
Company or any of its ERISA Affiliates maintains or has an obligation to make
contributions (the "Company Benefit Plans").
(b) Multiemployer Plan. Neither the Company nor any of its ERISA
Affiliates has incurred any unsatisfied withdrawal liability, as defined in
Section 4201 of ERISA, with respect to any multiemployer plan, nor has any of
them incurred any liability due to the termination or reorganization of any
multiemployer plan, except any such liability that would not have a Material
Adverse Effect on the Company. To the Knowledge of the Company, neither the
Company nor any of its ERISA Affiliates reasonably expects to incur any
liability due to a withdrawal from or termination or reorganization of a
multiemployer plan, except any such liability that would not have a Material
Adverse Effect on the Company.
(c) Plan Qualification. Each Company Benefit Plan that is intended
to qualify under Section 401 of the Code, and a form of trust that is similar in
all material respects to the trust maintained pursuant thereto, have been
determined to be exempt from federal income taxation under Section 501 of the
Code by the Internal Revenue Service, and to the Knowledge of the Company,
nothing has occurred with respect to any such plan since such determination that
is likely to result
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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) Contributions. 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) No Violations. 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) Litigation. 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) Medical/Welfare Plans. Except as provided in Schedule 5.11(g)
and as may be required under Section 4980B of the Code, neither the Company nor
any of its ERISA Affiliates maintains any Company Benefit Plan that provides
medical or welfare benefits to former employees.
Section 5.12 Approval.
(a) Board of Directors. The Board of Directors of the Company at
meetings 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, this Agreement and the transactions contemplated by this
Agreement in accordance with the provisions of the Act; and (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 in accordance with the provisions of the
Act.
(b) Stockholders. The vote of a majority of the outstanding shares
of the Company Common Stock entitled to vote, voting as a single class, is the
only vote required for the
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adoption and approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement. The Persons who are beneficial owners of the
shares of the Company's Class B Common Stock that are held in escrow will not
vote with respect to amending the escrow provisions to which such shares are
subject to release them from escrow due to conflicts of interest with respect to
such amendment and release. No class or series of shares of capital stock of the
Company is entitled to vote on the adoption and approval of this Agreement, the
Merger or the other transactions contemplated by this Agreement as a separate
class or series.
Section 5.13 Financial Advisor/Investment Banker. Except for amounts, if
any, payable to Xxxxx pursuant to the Xxxxx Contract, $200,000 of which will be
paid by the Company's stockholders by granting options to Xxxxx, exercisable at
$.05 per share, to purchase shares of TCI Music Common Stock valued at the
Per-Share Merger Value and $125,000 of which will be paid by TCI Music in cash
immediately prior to the Effective Time, the Company or the Surviving
Corporation, 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. The Company has delivered to TCI Music a true and
complete copy of the Xxxxx Contract.
Section 5.14 Taxes. The Company and each of its Subsidiaries have timely
filed all Tax returns required to be filed by any of them and have timely paid
or have established an adequate reserve for the payment of, all Taxes owed in
respect of the periods covered by such returns, except where the failure to file
such Tax returns or timely pay or establish an adequate reserve for the payment
of such Taxes, will not have a Material Adverse Effect on the Company. The
information contained in such Tax returns is complete and accurate in all
material respects. Neither the Company nor any Subsidiary of the Company is
delinquent in the payment of any Tax or other amount owed to any Governmental
Entity, except where the amount owed, when paid, or the delinquency in paying
the amount owed will not have a Material Adverse Effect on the Company. There
are no claims or investigations pending or, to the Company's Knowledge,
threatened against the Company or any of its Subsidiaries for past Taxes, except
claims and investigations that would not have a Material Adverse Effect on the
Company and adequate provision for which has been made on the Most Recent
Balance Sheet. Except as set forth on Schedule 5.14, none of the Company or its
Subsidiaries has waived or extended any applicable statute of limitations
relating to the assessment of any Taxes that would be payable by the Company or
such Subsidiary.
Section 5.15 Environmental Laws. 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. No orders, directions or notices have been issued pursuant to
any Environmental Law and no Governmental Entity has submitted to any of the
Company and its Subsidiaries any request for information pursuant to any
Environmental Law.
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Section 5.16 Transactions with Affiliates. Except as disclosed in the
Company SEC Reports, 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) or of the Company, except, in each case, for compensation paid to
directors and officers consistent with previously established policies
(including normal merit increases in such compensation in the ordinary course of
business), reimbursements of ordinary and necessary expenses incurred in
connection with their employment and amounts paid or benefits granted pursuant
to Company Benefit Plans.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business of the Company. Prior to the Effective
Time, without the prior written consent of TCI Music:
(a) Ordinary Course. The Company will conduct, and will cause each
of its Subsidiaries to conduct, its business in the ordinary course
substantially in accordance with past practice, and will use, and will cause
each of its Subsidiaries to use, its reasonable best efforts to preserve intact
its current business organization and to preserve relationships with customers,
suppliers and others having business dealings with them.
(b) Absence of Changes. Except as required by this Agreement the
Company will not, and will not permit or cause any of its Subsidiaries to,
directly or indirectly: (i) pledge or otherwise encumber any capital stock or
other interest in the Company or any of its Subsidiaries; (ii) amend or propose
to amend the Company Charter or Company Bylaws or similar constituent or
governing documents of any of its Subsidiaries; (iii) split, combine or
reclassify the outstanding capital stock of, or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of, or other ownership interests in,
the Company or any of its Subsidiaries; (iv) declare, set aside or pay any
dividend, distribution or other payment to any stockholder, director or officer
of the Company or any of it Subsidiaries other than regularly scheduled payroll;
(v) redeem, purchase or otherwise acquire any shares of capital stock of, or
other ownership interests in, the Company or any of its Subsidiaries; (vi)
issue, deliver or sell any shares of capital stock of, or other ownership
interests (including 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; (vii) acquire, lease or
dispose of any assets, other than in the ordinary course of business consistent
with past practice; (viii) create, assume or incur any indebtedness, other than
the TCI Music Loan and other indebtedness incurred to refinance outstanding
indebtedness of the Company for borrowed money in an amount not exceeding
$10,000; (ix) mortgage, pledge or subject to any Lien any of its assets except
Liens described in clauses (b) or (c) of Section 5.9; (x) enter into any other
material transaction except in the ordinary course of business consistent with
past practice; (xi) make any payment or transfer any property with respect
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to any indebtedness of the Company or any Subsidiary except such payments with
respect to the indebtedness of the Company as are scheduled to come due prior to
the Effective Time; (xii) acquire by merging or consolidating with, by acquiring
assets of, by purchasing an ownership interest in, or by any other method, any
business or any other Person; or (xiii) agree to do, or to cause or permit any
Subsidiary to do, any of the foregoing.
(c) Compensation. Except as required to comply with applicable Legal
Requirements or with employment agreements of the Company, SonicNet, Inc. or
Addicted to Noise, or with Company Benefit Plans that were entered into or
established on or before August 1, 1997, or as required by this Agreement, the
Company will not, and will not permit any of its Subsidiaries to: (i) adopt,
terminate or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other 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, consultant or employee; (iii) grant any award or option under
any bonus, benefit, incentive, performance or other compensation plan or
arrangement; (iv) take any action to fund or in any other way secure the payment
of compensation or benefits under any employee plan, agreement, contract,
benefit plan or arrangement; or (v) agree to do, or to cause or permit any
Subsidiary to do, any of the foregoing.
(d) Affiliate Transactions. The Company will not, and will not
permit any of its Subsidiaries to, enter into any transaction, contract or
arrangement with any officer, stockholder, director, consultant, employee of the
Company or any Subsidiary or any Person that is an "affiliate" or "associate" of
any of the foregoing, as those terms are defined in Rule 12b-2 under the
Exchange Act, whether or not such transaction would be in the ordinary course of
business.
(e) Cooperation. 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 or result in any breach of this Agreement or (ii)
result in any of the conditions of this Agreement set forth in Sections 8.1 or
8.3 of this Agreement not being satisfied as of the Effective Time.
(f) Use of Loan Proceeds. The Company will use the proceeds of the
TCI Music Loan only for the purposes permitted by the Loan Agreement.
(g) Financial Statements. Upon the request of TCI Music at any time
prior to the Effective Time, the Company will prepare and deliver to TCI Music,
within 20 days after such request, such financial statements (including audited
financial statements) as may be required by TCI Music to meet its financial
reporting obligations, including requirements under applicable securities laws.
To the extent the Company would not otherwise be required to prepare such
financial statements, all costs and expenses of preparing such financial
statements will be borne by TCI Music.
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Section 6.2 Conduct of Business of TCI Music. Prior to the Effective
Time, except as contemplated or permitted by this Agreement TCI Music will not
take or agree to take, and will cause its Subsidiaries not to take or agree to
take, any action that would (i) make any representation or warranty of TCI Music
or Merger Sub set forth in this Agreement untrue or incorrect so as to cause the
condition set forth in Section 8.2(a) of this Agreement not to be fulfilled as
of the Effective Time or (ii) result in any of the other conditions set forth in
Sections 8.1 or 8.2 of this Agreement not to be satisfied as of the Effective
Time.
Section 6.3 Remedies for Breach. The sole remedies (i) of TCI Music and
Merger Sub for any breach by the Company of Section 6.1(a), and (ii) of the
Company for any breach by TCI Music of Section 6.2, will be injunctive relief or
termination of this Agreement pursuant to Article IX, unless such breach is
willful or intentional, in which event any and all available legal or equitable
remedies may be obtained.
ARTICLE
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of the Company and TCI Music
and their respective Subsidiaries will afford to the other and to the other's
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Time to all of its properties,
books, contracts, commitments, records and personnel.
Section 7.2 Proxy Statement/Private Placement Memorandum/Filings.
(a) Proxy Statement/Private Placement Memorandum. The Company and
TCI Music will prepare jointly a proxy statement/private placement memorandum
(the "Proxy Statement/Private Placement Memorandum") comprising proxy materials
of the Company and the private placement memorandum of TCI Music with respect to
the TCI Music Common Stock to be issued in the Merger and the Company will cause
the Proxy Statement/Private Placement Memorandum to be mailed to holders of
record of Company Common Stock and Warrants as promptly as practicable after the
Proxy Statement/Private Placement Memorandum is prepared.
(b) Filings. As soon as reasonably practicable after the date
hereof, the Company and TCI Music will prepare and file any other filings
relating to the Merger and the other transactions contemplated hereby that are
required to be filed by each under the Exchange Act and other applicable Legal
Requirements (collectively "Filings"), and will use their reasonable best
efforts to respond to any comments of any appropriate Governmental Entity with
respect thereto. The Company, on the one hand, and TCI Music and Merger Sub, on
the other, will cooperate with each other and provide all information necessary
to prepare the Filings and will provide promptly to the other party any
information that such party may obtain that could necessitate amending any such
document.
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(c) Cooperation. Each of the Company and TCI Music will notify the
other promptly of the receipt of any comments from any Governmental Entity and
of any requests by the SEC or its staff or any other government official for
amendments or supplements to any of the 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 Music or any of its representatives, as
the case may be, on the one hand, and any Governmental Entity, 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 Filings, the Company and TCI Music promptly will prepare and file
such amendment or supplement and will distribute such amendment or supplement as
required by applicable Legal Requirements.
Section 7.3 Meeting of Stockholders of the Company. The Company will
take all action necessary, in accordance with the Act and the Company Charter
and Company Bylaws, 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, the Merger and the other transactions
contemplated by this Agreement (the "Meeting"), to the extent such approval is
required by the Act and the Company Charter and Company Bylaws.
Section 7.4 Reasonable Best Efforts. Subject to the fiduciary duty
obligations of the Board of Directors of the Company, each of the parties to
this Agreement will use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements to consummate
and make effective the transactions contemplated by this Agreement in the most
expeditious manner practicable, including the satisfaction of all conditions to
the Merger.
Section 7.5 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 that may, in its reasonable judgment, be required or
advisable in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement so long as such
party gives timely notice to the other parties of the anticipated disclosure and
cooperates with the other parties in designing reasonable procedural and other
safeguards to preserve, to the maximum extent possible, the confidentiality of
all information furnished by the other parties pursuant to this Agreement.
Section 7.6 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,
obligations or covenants set forth herein, each party to this Agreement promptly
will give notice thereof to the other parties and will use its reasonable best
efforts to prevent or remedy such breach.
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Section 7.7 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
Filings.
Section 7.8 Employee Matters.
(a) Employment. Immediately prior to the Effective Time, if so
requested by TCI Music the Company will give notice of termination of employment
to all of its employees other than Xxxxxx XxXxxxxxxx, Xxxxx Xxxxxxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxxxx Xxxxxxxxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxx, which
termination will be conditional upon the consummation of the Merger. The Company
will provide TCI Music with executed agreements between the Company and each of
Xxxxxx X. Xxxxxxxxx and Xxx Xxxxxxxx terminating their consulting agreements
with the Company on terms satisfactory to TCI Music prior to the Effective Time.
TCI Music may, but will have no obligation to, employ or offer employment to any
employees of the Company other than Xxxxxx XxXxxxxxxx. The Company has provided
to TCI Music a list of all employees of the Company and its Subsidiaries as of
September 1, 1997, showing their current positions, rates of compensation and
dates of hire. Within 30 days after the date of execution of this Agreement (or
such earlier date as TCI Music and the Company may mutually agree) but in any
event prior to the Effective Time, TCI Music will provide to the Company in
writing a list of employees TCI Music desires to employ following the Closing,
subject to satisfaction of TCI Music's conditions for employment (the "Desired
Employees"). The Company will coordinate in all reasonable respects with TCI
Music to allow TCI Music to evaluate personnel files and interview employees of
the Company and its Subsidiaries to make hiring decisions.
(b) Compensation. The Company will pay or cause to be paid to all
employees of the Company and its Subsidiaries all compensation, including
salaries, commissions, bonuses, deferred compensation, reasonable severance,
insurance, pensions, profit sharing, vacation (other than vacation that is
allowed to be carried over pursuant to this Section), sick pay and other
compensation or benefits to which they are entitled for periods prior to the
Closing, including all amounts, if any, payable on account of the termination of
their employment. As to any employees who are entitled to severance payments but
are offered employment with TCI Music, the Company will use its reasonable best
efforts to obtain waivers of such employees' rights to severance payments upon
acceptance of such offers of employment.
(c) Benefits. The Company will be responsible for maintenance and
distribution of benefits accrued under any employee benefit plan (as defined in
ERISA) maintained by the Company or any of its Subsidiaries pursuant to the
provisions of such plans. TCI Music will not
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assume any obligation or liability for any such accrued benefits nor any
fiduciary or administrative responsibility to account for or dispose of any such
accrued benefits under any employee benefit plans maintained by the Company or
any of its Subsidiaries.
(d) Claims and Obligations. All claims and obligations under,
pursuant to or in connection with any welfare, medical, insurance, disability or
other employee benefit plans of the Company or any of its Subsidiaries or
arising under any Legal Requirement affecting employees of the Company or any of
its Subsidiaries incurred on or before the Closing Date or resulting or arising
from events or occurrences occurring or commencing on or before the Closing Date
will be satisfied or accrued by the Company prior to the Closing, and TCI Music
will not have or assume any obligation or liability in connection with any such
plan.
(e) Coverage. The Company will retain full responsibility and
liability for offering and providing "continuation coverage" of any "qualified
beneficiary" who is covered by a "group health plan" sponsored or contributed to
by such party and who has experienced a "qualifying event" or is providing
"continuation coverage" on or prior to the Closing Date. "Continuation
coverage," "qualified beneficiary," "group health plan," and "qualified event"
all will have the meanings given such terms under Code Section 4980B.
(f) No Third Party Liability. Nothing in this Agreement will (i)
require TCI Music to assume any collective bargaining agreement between the
Company or any of its Subsidiaries and any labor organization or (ii) be deemed
to make any employee of any of the parties a third-party beneficiary of this
Agreement.
(g) Surviving Company Benefits. To the extent permitted under the
TCI Music Benefits Plans, each person who was an employee of the Company or any
of its Subsidiaries immediately prior to the Effective Time and who is hired by
the Surviving Corporation or TCI Music at or after the Effective Time (i) will
receive credit for past service with the Company or any of its Subsidiaries 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 or any of its Subsidiaries for
purposes of eligibility and vesting under the Surviving Corporation's plans and
policies with respect to seniority benefits, including vacation and sick leave.
Section 7.9 No Solicitation. Neither the Company nor any of its
Subsidiaries or any of their respective officers, directors, representatives or
agents will take any action to (i) initiate the submission of any Acquisition
Proposal, (ii) enter into any agreement with respect to any Acquisition Proposal
or (iii) participate in negotiations with, or provide information concerning the
Company, its assets, liabilities or business to, any Person in connection with
any Acquisition
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Proposal. The Company will promptly communicate to TCI Music any solicitation or
inquiry received by the Company and the terms of any proposal or inquiry that it
may receive in respect of any Acquisition Proposal, or of any such information
requested from it or of any such negotiations or discussions being sought to be
initiated with it. Nothing in this Section 7.9 will 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 7.9. "Acquisition Proposal" means any proposed (i) merger, consolidation
or similar transaction involving the Company or any Subsidiary, (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 any Subsidiary, (iii) issue, sale or other disposition of securities
representing 10% or more of the voting power of the Company Common Stock or (iv)
transaction in which any Person proposes to acquire beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of, or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act) has been formed which beneficially owns or has the right to
acquire beneficial ownership of, 10% or more of the outstanding Company Common
Stock.
Section 7.10 Indemnification of Executives.
(a) Indemnification. TCI Music will cause the Surviving Corporation
to, and, if the Surviving Corporation fails or is unable to do so, TCI Music
will, indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date of this Agreement or who becomes prior to the
Effective Time, an officer or director of the Company (each, an "Executive"),
against all losses, expenses, damages, liabilities, costs, judgments and amounts
paid in settlement in connection with any claim, action, suit, proceeding, or
investigation based on or arising out of, in whole or in part, any actions or
omissions of such Executive as an officer or director of the Company on or prior
to the Effective Time, including actions or omissions relating to any of the
transactions contemplated by this Agreement, to the fullest extent permitted
under the Act, the Company Charter and Company Bylaws and the Indemnification
Agreements listed on Schedule 7.10(a). TCI Music will cause the Surviving
Corporation to pay expenses in advance of the final disposition of any such
claim, action, suit, proceeding, or investigation to each Executive to the
fullest extent permitted by applicable Legal Requirements 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
officers or directors of the Company on or prior to the Effective Time relating
to any of the transactions contemplated by this Agreement and (ii) TCI Music
will cause the Surviving Corporation to direct, at the election of any
Executive, that the determination of any such approval shall be made by
independent counsel selected by the Executive and reasonably acceptable to TCI
Music. If any such claim, action, suit, proceeding, or investigation is brought
against any Executive (whether arising before or after the Effective Time), (i)
the Executive may retain counsel satisfactory to him or her that is reasonably
acceptable to TCI Music, and (ii) TCI Music will pay or will cause the Surviving
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Corporation to pay all reasonable fees and expenses of such counsel for the
Executive, as such fees and expenses are incurred, upon receipt of a written
undertaking by the Executive that the Executive will repay the amounts so paid
if it ultimately is determined that he or she is not entitled to be indemnified
by the Surviving Corporation as authorized by the Act. Neither TCI Music nor the
Surviving Corporation will have any obligation hereunder to any Executive when
and if a court of competent jurisdiction ultimately determines, after exhaustion
of all avenues of appeal, that such Executive is not entitled to indemnification
hereunder.
(b) Successors. If TCI Music or the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into any other Person
and is not 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, proper provisions will be made so that the successors and assigns of TCI
Music or the Surviving Corporation assume the obligations set forth in this
Section 7.10.
Section 7.11 Cancellation of Warrants, Options, Etc. The Company will
use its best efforts to cause no Warrants to be exercised and all Warrants to be
canceled at the Effective Time without the payment of cash or any other
consideration by the Company or any Subsidiary (other than the allocation of
Merger Shares to the holders thereof pursuant to Section 3.1).
Section 7.12 XxXxxxxxxx Employment. Prior to the Effective Time TCI
Music will offer to employ Xxxxxx XxXxxxxxxx as the President and Chief
Executive Officer of TCI Music after the Effective Time on terms set forth in
the employment agreement dated January 1, 1996 between the Company and Xx.
XxXxxxxxxx and such offer will include as a provision that he be entitled to
participate in bonus, incentive, stock option and other benefit programs on a
basis consistent with the practice of TCI Music in compensating senior
executives.
Section 7.13 Representation Letter. The Company will mail to each holder
of record of Company Common Stock and Warrants at the same time the Proxy
Statement/Private Placement Memorandum is mailed to such Persons, a letter in
the Form attached as Exhibit D (the "Representation Letter"). The Company will
use its best efforts to obtain and deliver to TCI Music a duly executed original
Representation Letter from each holder of record of Company Common Stock and
Warrants prior to the Effective Time.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger will be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
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(a) Stockholders' Action. This Agreement, the Merger and the
transactions contemplated by this Agreement shall have been duly approved by a
vote of the holders of the number of the outstanding shares of Company Common
Stock required to approve the Merger and such transactions pursuant to the Act
and the Company Charter and the Company Bylaws.
(b) Third Party Action. 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 Company or its business, it
being agreed that each party will use its reasonable best efforts to have any
such injunction lifted.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger will be subject to
the fulfillment at or prior to the Effective Time of the additional following
conditions:
(a) Performance/Representations and Warranties. TCI Music 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 Music 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 Music and Merger Sub executed on behalf
of each such corporation by the President or a Vice President of such
corporation to that effect.
(b) Legal Opinion. The Company shall have received the opinion of
counsel to TCI Music and Merger Sub (which counsel may be an employee of TCI)
substantially to the effect set forth in Exhibit A.
(c) Absence of Changes. There shall have been no material adverse
change in the financial condition, results of operations, assets, liabilities,
business or prospects of TCI Music since the date of this Agreement.
(d) Registration Rights Agreement. TCI Music shall have executed and
delivered the Registration Rights Agreement in substantially the form set forth
on Exhibit C.
(e) TCI Agreement. The Company shall have received a letter from
Tele-Communications, Inc. ("TCI") or one or more Affiliates controlled by TCI
pursuant to which TCI or such Affiliates agree to continue to be beneficial
owners (as determined pursuant to Rule 13d-3 under the Exchange Act) of shares
of TCI Music capital stock representing at least one-third of the total voting
power of all voting stock of TCI Music through the earlier of the date the
Merger Shares
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are registered, or such registration obligations expire, pursuant to the terms
of the Registration Rights Agreement.
Section 8.3 Conditions to Obligations of TCI Music and Merger Sub to
Effect the Merger. The obligations of TCI Music 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) Performance/Representations and Warranties. The Company shall
have performed in all material respects its agreements contained in this
Agreement required to be performed by it at or prior to the Effective Time and,
except as contemplated or permitted by this Agreement, the representations and
warranties of the Company set forth in this Agreement, if qualified by
materiality, are true in all respects and if not so qualified, are true in all
material respects, when made and at and as of the Effective Time as if made at
and as of such time, and TCI Music and 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) Consents. All consents of third parties required to be obtained
with respect to the Merger and the other transactions contemplated by this
Agreement shall have been obtained.
(c) Cancellation of Warrants and Registration Rights; No Exercise of
Warrants. TCI Music shall have received evidence satisfactory to it of (i) the
unanimous consent of the holders of all Warrants that are outstanding or
effective as of the date of this Agreement to be subject to the Warrant
Cancellation and that such consent is still in effect at the Effective Time;
(ii) the consent of any Person that has registration rights with respect to the
Company's Warrants or capital stock of the cancellation or termination thereof
and that such consent is still in effect at the Effective Time; and (iii) no
notice of exercise of Warrants was received by the Company and no Warrants were
exercised after the date of this Agreement and prior to the Effective Time.
(d) Stockholders; Escrow Shares. TCI Music shall have received
evidence satisfactory to it that (i) the number of Dissenting Shares do not
exceed 10% of the issued and outstanding shares of Company Common Stock and (ii)
all shares of Series A, Series B and Series E Common Stock of the Company
currently held in escrow pursuant to the Stock Escrow Agreement dated as of
November 21, 1995 among the Company, certain of its stockholders and American
Stock Transfer & Trust Company (the "Escrow Agreement"), the Company Charter or
otherwise, have been released. To the extent permitted by law and the Escrow
Agreement, if the Company's stockholders and Xxxxx do not consent to the release
of the Class B Shares held in escrow prior to the Effective Time and the
beneficial owners of such shares do not otherwise receive Merger Shares in
replacement therefor in connection with the Merger, TCI Music will vote for or
consent to the release from escrow of the TCI Music Series A Common Stock into
which such shares will be converted at the Effective Time. Such release of TCI
Music Series A Common Stock will be accomplished in a manner that does not
require the recipients of those shares to recognize income or gain if that
method of releasing the shares is not likely to have any adverse effect on TCI
Music.
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(e) Absence of Changes. There shall have been no material adverse
change (other than a decrease in the Company's working capital consistent with
decreases experienced in recent periods) in the financial condition, results of
operations, assets, liabilities, business or prospects of the Company since the
date of the Most Recent Company Balance Sheet included in the Company SEC
Reports.
(f) Legal Opinion. TCI Music shall have received the opinion of Xxxx
& Priest LLP, counsel to the Company, substantially to the effect set forth in
Exhibit B.
(g) Representation Letter. TCI Music shall have received from each
holder of Company Common Stock or Warrants a duly executed Representation Letter
in the form of Exhibit D.
(h) Termination of Consulting Agreements. TCI Music shall have
received executed agreements between the Company and each of Xxxxxx X. Xxxxxxxxx
and Xxx Xxxxxxxx terminating their consulting agreements with the Company as of
the Effective Time on terms satisfactory to TCI Music.
(i) Xxxxx Release and Waiver. TCI Music and the Company shall have
received from Xxxxx, in forms acceptable to TCI Music, a receipt with respect to
payment of all amounts payable under the Xxxxx Contract and release and waiver
with respect to any other amounts claimed by Xxxxx to be payable in connection
with the Company's proposed initial public offering.
(j) Filing of Restatement to Company Charter Stock. TCI Music shall
have received evidence satisfactory to it that the restatement to the Company
Charter in the form of Exhibit E has been duly filed with the Secretary of State
of the State of Delaware.
ARTICLE
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger by
the stockholders of the Company:
(a) By Mutual Consent. By mutual consent of the Board of Directors
of TCI Music and the Board of Directors of the Company.
(b) By TCI Music or the Company. By either TCI Music or the Company
(i) if at the Meeting (including any postponement or adjournment thereof), this
Agreement, the Merger and the transactions contemplated by this Agreement are
not approved and adopted by the affirmative vote specified herein or (ii) at any
time after January 15, 1998, if the Merger has not been consummated on or before
such date, and in either case so long as the terminating party is not in
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breach of any of its obligations hereunder in any material respect as of the
time such party gives notice of its election to terminate this Agreement and, if
the Company is the terminating party, so long as the TCI Music Loan has been
repaid in full, together with accrued interest, and none of the Company
Stockholders (as defined in the Voting Agreement) is in breach of any
obligations under the Voting Agreement as of the time that the Company gives
notice of its election to terminate this Agreement.
(c) By the Company. By the Company (provided the Company is not in
breach of any of its obligations under this Agreement in any material respect
and none of the Company Stockholders is in breach of any obligations under the
Voting Agreement, in each case as of the time that the Company gives notice of
its election to terminate this Agreement) if any of the conditions specified in
Section 8.1 or Section 8.2 have not been waived by the Company (or, in the case
of Section 8.1, waived by the Company, TCI Music and Merger Sub) or satisfied,
at such time as such condition is no longer capable of satisfaction.
(d) By TCI Music. By TCI Music (provided that neither TCI Music nor
Merger Sub is in breach of any of its obligations hereunder in any material
respect as of the time TCI Music gives notice of its election to terminate this
Agreement) if any of the conditions specified in Section 8.1 or Section 8.3 have
not been waived by TCI Music (or, in the case of Section 8.1, waived by TCI
Music, Merger Sub and the Company) or satisfied, at such time as such condition
is no longer capable of satisfaction.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either TCI Music or the Company, as provided above, this Agreement
will forthwith become void and (except for the willful breach of this Agreement
by any party to this Agreement occurring prior to such termination) there will
be no liability on the part of any of the Company, TCI Music or Merger Sub,
except that the Company will remain liable under the TCI Music Loan.
Section 9.3 Amendment. This Agreement may be amended by the parties to
this Agreement, by or pursuant to action taken by all of their Boards of
Directors, at any time before or after approval of this Agreement by the
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 7.2 or changes the ratio at which Company Common Stock is to be
converted into TCI Music Common Stock as provided in Section 3.2 without
stockholder approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties to this Agreement.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
to this Agreement, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for performance of any of the obligations or
other acts of the other parties to this Agreement, (ii) waive any inaccuracies
in the representations and warranties set forth in this Agreement or in any
documents delivered pursuant to this Agreement and (iii) waive compliance with
any of the agreements or conditions set forth in this Agreement. Any agreement
on the part of
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a party to this Agreement to any such extension or waiver will be valid if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS; DEFINITIONS
Section 10.1 Non-Survival of Representations, Warranties and Agreements.
No representations and warranties contained in this Agreement will survive
beyond the Closing Date. This Section 10.1 will not limit any covenant or
agreement of the parties to this Agreement that by its terms requires
performance after the Closing Date.
Section 10.2 Notices. All notices or other communications under this
Agreement will be in writing and will be given (and will be deemed to have been
duly given upon receipt) by delivery in person, by cable, telegram, telex or
other standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Company: Paradigm Music Entertainment Company
00 Xxxxxx Xxxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telecopy: (000) 000-0000
With a copy to: Xxxx & Priest LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
If to TCI Music or
Merger Sub: TCI Music, Inc.
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
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With a copy to: Legal Department
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxx, President
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
or to such other addresses as any party may have furnished to the other parties
in writing in accordance with this Section.
Section 10.3 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement (other than any fees payable
to Xxxxx, which will be paid as provided in Section 5.13) will be paid by the
party incurring such expenses. The Company's expenses relating to the
transactions contemplated by this Agreement, including fees of Xxxx & Priest
LLP, counsel to the Company, will be paid or accrued by the Company prior to the
Effective Time.
Section 10.4 Specific Performance. The parties to this Agreement agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties will be
entitled to enforce specifically the terms and provisions of this Agreement in
any court of the United States or any state having jurisdiction, in addition to
any other remedy to which they are entitled at law or in equity.
Section 10.5 Entire Agreement. This Agreement will be of no force or
effect until executed and delivered by all of the parties to this Agreement.
This Agreement (including the documents and instruments referred to in this
Agreement), when executed and delivered, constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter of this
Agreement, except that the letter agreement dated September 18, 1997 between the
Company and TCI Music will remain in effect to the extent necessary to preserve
the rights and obligations of the parties accruing prior to the date hereof.
Section 10.6 Miscellaneous. This Agreement may be executed in two or
more counterparts which together will constitute a single agreement. Any
certificate delivered pursuant
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to this Agreement will be made without personal liability on the part of the
officer or employee of the Person giving such certificate.
Section 10.7 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT WILL BE DEEMED TO BE MADE UNDER, AND IN ALL
RESPECTS WILL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH,
THE LAW OF THE STATE OF DELAWARE. The parties hereby irrevocably submit to the
jurisdiction of the court of the State of Delaware and the federal courts of the
United States of America located in the State of Delaware solely in respect of
the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding will
be heard and determined in such a Delaware state or federal court. The parties
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in the
manner provided in Section 10.2 or in such other manner as may be permitted by
law will be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.7.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective duly authorized officers all as of the date first written
above.
TCI MUSIC, INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Name: Xxxxx X. Xxxx
Title: President
TCI PARA MERGER SUB, INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Name: Xxxxx X. Xxxx
Title: President
PARADIGM MUSIC ENTERTAINMENT
COMPANY
By: /s/ Xxxxxx XxXxxxxxxx
--------------------------------------
Name: Xxxxxx XxXxxxxxxx
Title: President
