EXHIBIT 10.73
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STOCK PURCHASE AND SHAREHOLDERS AGREEMENT
DECEMBER 18, 1996
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TABLE OF CONTENTS
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Page
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ARTICLE 1 Sale of Stock of the Companies........................................................................... 2
1.1 Sale of the Purchased Shares............................................................................. 2
ARTICLE 2 Closing Date; Delivery................................................................................... 3
2.1 Closing Dates............................................................................................ 3
2.2 Delivery by DMX.......................................................................................... 3
2.3 Delivery by DMX-UK....................................................................................... 3
2.4 Delivery by DMX-NV....................................................................................... 4
2.5 Delivery by Purchaser.................................................................................... 4
ARTICLE 3 Representations and Warranties........................................................................... 4
3.1 Representations and Warranties of DMX.................................................................... 4
3.1.1 Corporate Power................................................................................ 4
3.1.2 Capitalization of DMX-UK....................................................................... 4
3.1.3 Capitalization of DMX-NV....................................................................... 5
3.1.4 Capitalization of DMX-UK....................................................................... 5
3.1.5 Authorization; Validity........................................................................ 5
3.1.6 Ownership...................................................................................... 5
3.1.7 Brokers or Finders............................................................................. 5
3.2 Representations and Warranties of Purchaser.............................................................. 6
3.2.1 Investment Purpose; Experience................................................................. 6
3.2.2 Purchaser's Specific Knowledge of the Companies................................................ 6
3.2.3 Brokers or Finders............................................................................. 7
3.3 Survival................................................................................................. 7
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ARTICLE 4 Conditions to Closing; Termination....................................................................... 7
4.1 Conditions to Closing of the Purchaser................................................................... 7
4.1.1 Satisfactory Arrangements with Creditors....................................................... 8
4.1.2 Representations and Warranties Correct......................................................... 8
4.1.3 Covenants...................................................................................... 8
4.1.4 Opinion of UK Counsel.......................................................................... 8
4.2 Conditions to Closing of the DMX......................................................................... 8
4.2.1 Representations and Warranties Correct......................................................... 8
4.2.2 Covenants...................................................................................... 8
4.2.3 Opinion of UK Counsel.......................................................................... 8
4.3 Conditions to Closing related to Satellite Contract...................................................... 9
4.3.1 Uplink and Satellite Transmission Contract..................................................... 9
4.3.2 Guaranty of the Satellite Contract............................................................. 9
4.3.3 Release of DMX by WTCI......................................................................... 9
4.4 Conditions to Closing related to the Restructure of the Companies........................................ 9
4.4.1 Capital Structure of DMX-UK.................................................................... 9
4.4.3 Transfer of NV Common Stock.................................................................... 10
4.4.4 Unissued Shares................................................................................ 10
4.5 Termination.............................................................................................. 10
4.5.1 Coordination with Subscription Agreement....................................................... 10
4.5.2 Termination of Subscription Agreement.......................................................... 10
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ARTICLE 5 Covenants.................................................................................................... 10
5.1 Affirmative Covenants of DMX............................................................................. 10
5.1.1 Recapitalization; Amendment of Constituent Documents; Certain Transfers........................ 11
5.1.2 Qualification under Blue Sky Laws.............................................................. 11
5.1.3 Transactions with Related Entities............................................................. 11
5.1.4 Access......................................................................................... 11
5.1.5 Amendment, Compromise, or Forgiveness of Note or Indebtedness.................................. 11
5.2 Affirmative Covenants of Purchaser....................................................................... 12
5.2.1 [*]............................................................................................ 12
5.2.2 Recapitalization; Amendment of Constituent Documents; Certain Transfers........................ 12
5.2.3 Board Appointment and Nominations.............................................................. 12
5.2.4 Confidentiality of Information Provided by DMX, DMX-UK, and DMX-NV............................. 13
5.2.5 Dilution Protection of DMX's Interest in the Raising of Initial Capital........................ 13
5.3 Affirmative Covenants of the Companies................................................................... 13
5.3.1 Access and Maintenance of Records.............................................................. 13
5.3.2 [*]............................................................................................ 14
5.3.3 Board Appointment and Nominations.............................................................. 14
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* Indicates that material has been omitted and confidential treatment has
been requested therefore. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
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ARTICLE 6 Preemptive Rights............................................................................................ 15
6.1 DMX's Preemptive Rights.................................................................................. 15
6.2 Definition of New Securities............................................................................. 15
6.3 Definition of Purchaser Affiliate........................................................................ 15
6.4 Termination of Preemptive Rights......................................................................... 16
6.5 Incorporation in Articles of Association................................................................. 16
ARTICLE 7 Registration Rights.......................................................................................... 16
7.1 Registration Rights of DMX............................................................................... 16
7.2 Registration Rights on Foreign Exchanges................................................................. 16
ARTICLE 8 Tag-Along and Drag-Along Rights.............................................................................. 16
8.1 Definitions.............................................................................................. 16
8.1.1 Permitted Transfer............................................................................. 16
8.1.2 Permitted Transferee........................................................................... 17
8.1.3 Securities Act................................................................................. 17
8.1.4 Selling Shareholder............................................................................ 17
8.1.5 Shareholder.................................................................................... 17
8.1.6 Stock.......................................................................................... 17
8.1.7 Tag-Along Seller............................................................................... 17
8.1.8 Transfer....................................................................................... 17
8.2 Tag-Along Rights......................................................................................... 17
8.2.1 Right to Participate in Sale................................................................... 17
8.2.2 Exceptions to Tag-Along Rights................................................................. 18
8.2.3 Procedures for Tag-Along Sale.................................................................. 18
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8.3 Application of Tag-Along Rights to Indirect Transfer of Stock............................................ 19
8.4 Drag-Along Rights........................................................................................ 19
8.4.1 Right to Require Sale.......................................................................... 19
8.4.2 Drag-Along Notice.............................................................................. 20
8.4.3 Non-Cash Consideration......................................................................... 20
8.5 Termination of Tag-Along and Drag-Along Rights........................................................... 20
ARTICLE 9 Miscellaneous................................................................................................ 21
9.1 Governing Law............................................................................................ 21
9.2 Jurisdiction and Venue................................................................................... 21
9.3 Waiver of Jury Trial..................................................................................... 21
9.4 Successors and Assigns................................................................................... 21
9.5 Entire Agreement; Amendment.............................................................................. 22
9.6 Notices.................................................................................................. 22
9.7 Delays or Omissions...................................................................................... 23
9.8 Expenses................................................................................................. 24
9.9 Counterparts............................................................................................. 24
9.10 Severability............................................................................................. 24
9.11 Gender................................................................................................... 24
9.12 No Third Parties Benefitted.............................................................................. 25
9.13 Attorneys' Fees and Expenses............................................................................. 25
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STOCK PURCHASE AND SHAREHOLDERS AGREEMENT
This Agreement is made as of December 18, 1996 between DMX Inc. ("DMX"), a
Delaware corporation, DMX-Europe (UK) Limited, a United Kingdom company ("DMX-
UK"), DMX-Europe N.V., a Netherlands corporation ("DMX-NV") and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, an individual ("PURCHASER"). DMX-UK and DMX-NV will be referred to
collectively as the "COMPANIES" and individually as a "COMPANY", and DMX and
Purchaser will be referred to collectively as the "SHAREHOLDERS" and
individually as a "SHAREHOLDER".
WHEREAS, the Companies are wholly owned direct and indirect subsidiaries of
DMX;
WHEREAS, the Companies are in significant financial difficulty, and without
additional financial support will be placed into insolvency proceedings;
Purchaser has informed the Board of Directors of DMX that in his opinion the
business operations of the Companies are viable and potentially valuable; the
Board of Directors of DMX has determined that DMX will not provide any further
financial support for the Companies;
WHEREAS, Purchaser has offered to use his best efforts to secure other
financing to permit the Companies to continue operations and, if Purchaser is
able to effect an agreement with the creditors and potential equity investors to
reorganize the operations of the Companies (the "REORGANIZATION"), to acquire
certain interests in the Companies;
WHEREAS, in connection with the acquisition by Purchaser of certain
interests in the Companies, the ownership of DMX-NV and DMX-UK will be
restructured to make DMX-NV a subsidiary of DMX-UK, and the capital structure of
DMX-UK will be recapitalized;
WHEREAS, Purchaser will deliver a continuing guaranty pursuant to which
Purchaser will agree to guarantee certain liabilities associated with the
operations of the Companies;
WHEREAS, the Board of Directors of DMX believes it is in the best interest
of DMX's shareholders to enter into this Agreement and to provide Purchaser with
an opportunity to reorganize the operations of the Companies;
WHEREAS, if Purchaser is unable to effect the Reorganization, then DMX will
subscribe for shares of a corporation newly organized by Purchaser to effect the
distribution of the DMX digital audio service in Europe, pursuant to that
certain Subscription and Shareholders Agreement of even date herewith (the
"SUBSCRIPTION AGREEMENT");
NOW THEREFORE, the parties agree as follows:
ARTICLE 1
SALE OF
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STOCK OF THE COMPANIES
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1.1 SALE OF THE PURCHASED SHARES. In consideration of the various
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agreements undertaken pursuant to and subject to the terms and conditions of
this Agreement, DMX will sell to Purchaser, and Purchaser will buy from DMX, at
the Closing, the following interests in the Companies:
(i) 5,000,000 Common Shares (as defined in Section 4.4.1, below);
(ii) a 90 percent interest in that certain note dated May 19, 1993, in
the principal amount of $24,436,000 owed by DMX-NV to DMX under a
promissory note payable by DMX to the order of TCI-Euromusic, Inc.,
which note was acquired by DMX in the merger of TCI-Euromusic, Inc.
with and into DMX, including all unpaid interest accrued thereon (the
entire note shall be referred to as the "NOTE"), together with a
corresponding interest in the rights of DMX pursuant to any
instruments or loan agreements associated with the Note (the
"INSTRUMENTS"); and
(iii) a 90 percent interest in all other outstanding indebtedness, if
any, of DMX-NV or DMX-UK to DMX (the total amount such other
indebtedness of DMX-UK or DMX-NV to DMX shall be referred to as the
"INDEBTEDNESS").
The Common Shares to be transferred to Purchaser pursuant to this Section 1.1
shall be referred to collectively as the "PURCHASED SHARES". The Purchased
Shares and the above described interests in the Note and the Indebtedness to be
transferred to Purchaser shall be referred to collectively as the "PURCHASED
INTERESTS".
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ARTICLE 2
CLOSING DATE; DELIVERY
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2.1 CLOSING DATES. The closing of the purchase and sale of the
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Purchased Interests (the "CLOSING") shall be held at the offices of Irell &
▇▇▇▇▇▇▇ (i) at 11:00 a.m., on or before January 31, 1996; (ii) at such other
time and place upon which the parties shall agree; or (iii) if necessary to the
Reorganization of the Companies, at such earlier time as Purchaser designates by
written notice to the other parties at least 10 business days before the
designated date of the Closing; provided, however, that all parties will use
their reasonable efforts to close as soon as possible after such notice from
Purchaser. The date of the Closing shall be referred to in this Agreement as
the "CLOSING DATE".
2.2 DELIVERY BY DMX. At the Closing, DMX will deliver:
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2.2.1 To Purchaser, documentation evidencing Purchaser's ownership of
the Purchased Shares, which shall be accompanied by such other
documents as are required under applicable law to effect the transfer
of ownership on the shareholders' register;
2.2.2 To DMX-UK, a copy of the Channel Distribution Agreement, in the
form attached as Exhibit 2.2.2 (the "DISTRIBUTION AGREEMENT"),
executed by DMX;
2.2.3 To Purchaser, a duly executed ▇▇▇▇ of sale and assignment,
executed by DMX and transferring to Purchaser, without recourse and
without representation or warranty, the interests described above in
Section 1.1 (ii) and (iii) in the Note, the Instruments, and the
Indebtedness; and
2.2.4 To Purchaser, a certificate acknowledging the termination of
the Subscription Agreement and the release of the parties from their
obligations under the Subscription Agreement, in the form attached as
Exhibit 2.2.4 (the "TERMINATION CERTIFICATE"), executed by DMX.
2.3 DELIVERY BY DMX-UK. At the Closing, DMX-UK shall deliver to DMX:
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2.3.1 A release executed by DMX-UK in form satisfactory to counsel
for DMX, releasing DMX from any and all obligations to DMX-UK or DMX-
NV except those specified in this Agreement and the Distribution
Agreement (the "RELEASE"); and
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2.3.2 A copy of the Distribution Agreement executed by DMX-UK.
2.4 DELIVERY BY DMX-NV. At the Closing, DMX-NV shall deliver to DMX:
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2.4.1 A copy of the Release executed by DMX-NV.
2.5 DELIVERY BY PURCHASER. At the Closing, Purchaser shall deliver to
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DMX:
2.5.1 A copy of the Termination Certificate, executed by Purchaser
and by Xtra Music Limited; and
2.5.2 A Spousal Consent, consenting to the obligations undertaken
pursuant to this Agreement and pursuant to the documents delivered by
Purchaser pursuant to this Agreement.
The Distribution Agreement and the Release are collectively referred to herein
as the "RELATED AGREEMENTS".
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
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3.1 REPRESENTATIONS AND WARRANTIES OF DMX. Except as set forth on the
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attached Exhibit 3.1, DMX represents and warrants to Purchaser as follows:
3.1.1 CORPORATE POWER. At the Closing Date, DMX will have all
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requisite legal and corporate power to execute and deliver this Agreement, to
sell the Purchased Interests, and to carry out and perform its obligations under
the terms of this Agreement.
3.1.2 CAPITALIZATION OF DMX-UK. As of the date of this Agreement,
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the authorized capital stock of DMX-UK consists of 100 (Pound)1 ordinary shares,
of which 100 shares are issued and outstanding and are owned by DMX-NV, and
10,000,000 of $1 preference shares of DMX-UK (the $1 preference shares of DMX-UK
to be referred to herein as "EXISTING PREFERRED STOCK"), of which 10,000,000
shares are issued and outstanding and are owned by DMX. As of the date of this
Agreement, DMX-UK is obligated to issue an additional 3,337,000 shares of
Existing Preferred Stock after increasing its authorized capital (the "UNISSUED
SHARES"). Except as contemplated by this Agreement, DMX is not aware of any
other options, warrants, conversion privileges, contracts, understandings or
other rights outstanding to purchase or otherwise acquire any
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authorized but unissued shares of DMX-UK's capital stock or any other securities
of DMX-UK.
3.1.3 CAPITALIZATION OF DMX-NV. As of the date of this Agreement,
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the authorized capital stock of DMX-NV consists of 100,000 shares of common
stock (the common stock of DMX-NV to be referred to herein as the "NV COMMON
STOCK"), of which 39,216 shares are issued and outstanding. Except as
contemplated by this Agreement, DMX is not aware of any options, warrants,
conversion privileges, contracts, understandings or other rights outstanding to
purchase or otherwise acquire any authorized but unissued shares of DMX-NV's
capital stock or any other securities of DMX-NV.
3.1.4 CAPITALIZATION OF DMX-UK AS OF THE CLOSING DATE. As of the
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Closing Date, the authorized capital stock of DMX-UK shall consist of 20,000,000
Common Shares, of which 5,000,100 shares will be issued and outstanding and
5,000,000 will be owned by DMX, and 100,000 of the Preference Shares, of which
100,000 shares will be issued and outstanding and will be owned by DMX. Except
as contemplated by this Agreement and by any arrangements made by Purchaser in
connection with the Reorganization, DMX is not aware of any other options,
warrants, conversion privileges, contracts, understandings or other rights that
will be outstanding to purchase or otherwise acquire any authorized but unissued
shares of DMX-UK's capital stock or any other securities of DMX-UK.
3.1.5 AUTHORIZATION; VALIDITY. As of the Closing Date, DMX shall
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have taken all corporate actions necessary for the authorization, execution,
delivery and performance of this Agreement by DMX, and the sale and delivery of
the Purchased Interests. This Agreement, when executed and delivered by DMX
(assuming the due execution and delivery by the other parties), shall constitute
the valid and binding obligation of DMX, enforceable according to its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors, rules of law governing specific performance, injunctive
relief or other equitable remedies, and limitations of public policy.
3.1.6 OWNERSHIP. The Purchased Shares will be validly issued,
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fully paid and non-assessable; and except as provided in this Agreement, none of
the shares are subject to any restriction on transfer. DMX will have good and
marketable title, free and clear of any liens, to the Purchased Interests, and
will convey such title to Purchaser with the delivery of the transfer documents
provided for herein.
3.1.7 BROKERS OR FINDERS. DMX has not incurred, and will not
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incur, directly or indirectly, any liability for brokers' or finders' fees,
agents' commissions or any similar charges in connection with this Agreement.
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3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Except as set forth on
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the attached Exhibit 3.2, Purchaser represents and warrants to DMX as follows:
3.2.1 INVESTMENT PURPOSE; EXPERIENCE. The Purchaser is acquiring
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the Purchased Shares for investment for his own account, not as a nominee or
agent, and not with a view to, or for resale in connection with, any
distribution of the Purchased Shares. Purchaser understands that the Purchased
Shares have not been registered under the Securities Act or qualified pursuant
to the California Corporations Code by reason of specific exemptions therefrom
which depend upon, among other things, the bona fide nature of and the accuracy
of Purchaser's representations as expressed in this Agreement. The Purchaser is
experienced in evaluating and investing in companies such as DMX-UK and DMX-NV
and has the financial resources to bear the economic risks associated with his
investment and with the Guaranty.
3.2.2 PURCHASER'S SPECIFIC KNOWLEDGE OF THE COMPANIES. Purchaser
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acknowledges that Purchaser has acted as the Chief Executive Officer of DMX and
has had both the primary responsibility for overseeing DMX's investment in the
Companies and the principal involvement on behalf of DMX in reorganizing the
affairs of the Companies. Purchaser acknowledges that Purchaser and his
representatives have had regular access to the books and records, facilities,
equipment, tax returns, contracts and other assets of the Companies. Purchaser
has detailed knowledge of the business and financial condition, assets, and
liabilities of the Companies. Purchaser agrees that DMX, its Board of
Directors, and its representatives have had no active involvement, except
through the activities of Purchaser, in the day-to-day affairs, business
operations and activities of the Companies. Except as specifically and
expressly provided in this Agreement, Purchaser will acquire the Purchased
Interests without any representation or warranty (including as to
merchantability or fitness for any particular purpose and any other implied
warranty) by DMX, the Board of Directors of DMX, any shareholder of DMX, or any
agent of DMX. Purchaser specifically acknowledges that the Companies are in
financial difficulty and may be insolvent, and that the Companies cannot survive
without a substantial reorganization of their affairs. None of DMX, any member
of the Board of Directors of DMX, any shareholder of DMX, or any agent of DMX
makes any representation concerning any of the following matters:
3.2.2.1 The business, financial condition, or prospects of
DMX-UK or DMX-NV;
3.2.2.2 The accuracy of the financial statements of DMX-UK or
DMX-NV (including but not limited to the effects of a
determination that DMX-UK and DMX-NV cannot be considered as
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going concerns), the accuracy of any other financial information
concerning DMX-UK or DMX-NV that Purchaser had obtained from DMX,
DMX-UK, or DMX-NV, or the possibility of material adverse changes
in the assets, liabilities, business, and financial condition of
DMX-UK and DMX-NV since the date of any such financial statements
or financial information;
3.2.2.3 Any transactions or commitments undertaken by either
DMX-UK or DMX-NV whether or not out of the ordinary course of
business for such Company; or
3.2.2.4 The indebtedness and liabilities of DMX-UK and DMX-NV
(including but not limited to any liability under applicable laws
related to pensions, employee benefits, or employee rights upon
termination of the business of DMX-UK or DMX-NV); the ownership
or right to possession by DMX-UK or DMX-NV of the assets and
properties necessary to the conduct of their business (including
any patents, trademarks, service marks, trade names, copyrights,
proprietary information and other rights material to its business
as now conducted); DMX-UK or DMX-NV's compliance with or
continuing rights under material contracts, leases, commitments
or other instruments; or compliance by DMX-UK or DMX-NV with
applicable law (including any applicable environmental laws).
3.2.3 BROKERS OR FINDERS. The Purchaser has not incurred, and
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will not incur, directly or indirectly, any liability for brokers' or finders'
fees, agents' commissions or any similar charges in connection with this
Agreement.
3.3 SURVIVAL. Except as otherwise expressly provided, the
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representations, warranties, and acknowledgements made by each party pursuant to
this Article 3 shall survive the Closing.
ARTICLE 4
CONDITIONS TO CLOSING; TERMINATION
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4.1 CONDITIONS TO CLOSING OF THE PURCHASER. Purchaser's obligation to
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purchase the Purchased Shares at the Closing and to close under this Agreement
is, at the option of the Purchaser, subject to the fulfillment on or prior to
the Closing Date of each of following conditions:
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4.1.1 SATISFACTORY ARRANGEMENTS WITH CREDITORS. Purchaser shall have
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reached agreement in principle with the creditors of the Companies, and with any
proposed equity investors in DMX-UK or DMX-NV, to effect the Reorganization on
terms and conditions satisfactory to Purchaser, as determined in his sole and
absolute discretion.
4.1.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
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and warranties made in Article 3 of this Agreement by DMX shall be materially
correct when made, and shall be materially correct on the Closing Date with the
same force and effect as if they had been made on the Closing Date.
4.1.3 COVENANTS. All covenants, agreements and conditions
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contained in this Agreement to be performed by DMX on or prior to the Closing
Date shall have been performed or complied with in all material respects.
4.1.4 OPINION OF UK COUNSEL. DMX shall have received an opinion
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of its United Kingdom counsel to the effect that the execution and delivery of
the Distribution Agreement and the Release will not conflict with any obligation
of DMX to the creditors of the Companies, and will terminate any rights of the
Companies under that certain Technology License and Services Agreement dated as
of May 19, 1993, or that certain Trademark Agreement effective as of July 1,
1992.
4.2 CONDITIONS TO CLOSING OF THE DMX. The obligation of DMX to sell the
--------------------------------
Purchased Interests at the Closing and to close under this Agreement is, at the
option of DMX, subject to the fulfillment on or prior to the Closing Date of
each of following conditions:
4.2.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
--------------------------------------
and warranties made by Purchaser in Article 3 shall be materially correct when
made, and shall be materially correct on the Closing Date with the same force
and effect as if they had been made on the Closing Date.
4.2.2 COVENANTS. All covenants, agreements and conditions
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contained in this Agreement to be performed by Purchaser on or prior to the
Closing Date shall have been performed or complied with in all material
respects.
4.2.3 OPINION OF UK COUNSEL. DMX shall have received an opinion
---------------------
of its United Kingdom counsel to the effect that the execution and delivery of
the Distribution Agreement and the Release will not conflict with any obligation
of DMX to the creditors of the Companies, and will terminate any rights of the
Companies under that certain Technology License and Services Agreement dated as
of May 19, 1993, or that certain Trademark Agreement effective as of July 1,
1992.
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4.3 CONDITIONS TO CLOSING RELATED TO SATELLITE CONTRACT. The obligations
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of DMX to sell, and of Purchaser to purchase, the Purchased Interests at the
Closing and to close under this Agreement are subject to the fulfillment on or
prior to the Closing Date of each of following conditions:
4.3.1 UPLINK AND SATELLITE TRANSMISSION CONTRACT. DMX-UK shall
------------------------------------------
have entered into or assumed contractual arrangements with Western Tele-
Communications, Inc. ("WTCI"), pursuant to which WTCI will supply uplink
services and satellite transmission services to transmit the signal for the DMX
music service to the facilities of the Companies in Europe. Such contractual
arrangements shall be referred to as the "SATELLITE CONTRACT".
4.3.2 GUARANTY OF THE SATELLITE CONTRACT. Purchaser and WTCI
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shall have entered into contractual arrangements pursuant to which Purchaser
shall have guaranteed the payment obligations under the Satellite Contract for
the period beginning January 1, 1997, and ending December 31, 1997, (the
"CONTINUING GUARANTY") and pursuant to which such guaranty is secured by the
pledge of certain shares of DMX owned by Purchaser (the "PLEDGE"). The
Continuing Guaranty, the Pledge, and the associated security documents are
collectively referred to herein as the "GUARANTY".
4.3.3 RELEASE OF DMX BY WTCI. WTCI shall have released DMX from
----------------------
the European Transmission Obligations, as defined below, to the extent such
obligations relate to periods after the earlier of December 31, 1996, or the
effective date of the Satellite Contract. "EUROPEAN TRANSMISSION OBLIGATIONS"
shall mean all obligations and liabilities (including Paragraphs 1.7, 1.8, and
1.9 of Exhibit H to the Master Service Agreement) of DMX under the Master
Service Agreement between DMX and WTCI dated March 1, 1994 (the "MASTER SERVICE
AGREEMENT") related to the rights of DMX under the Master Service Agreement to
obtain transmission services (including both satellite and uplink services) to
transmit the DMX digital audio service to Europe, including the European C-Band
Transmission Services as described in Section 3 of Exhibit B to the Master
Service Agreement.
4.4 CONDITIONS TO CLOSING RELATED TO THE RESTRUCTURE OF THE COMPANIES.
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The obligations of DMX to sell, and of Purchaser to purchase, the Purchased
Interests at the Closing and to close under this Agreement are subject to the
fulfillment on or prior to the Closing Date of each of following conditions:
4.4.1 CAPITAL STRUCTURE OF DMX-UK. The constituent documents of
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DMX-UK shall have been amended, the capital structure of DMX-UK recapitalized,
and the Existing Preferred Stock converted, all to the effect that (i) the
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authorized capital stock of DMX-UK shall consist of 20,000,000 (Pound)1 ordinary
shares (the "COMMON SHARES") and 100,000 preference shares (the "PREFERENCE
SHARES"); (ii) the holder of 100,000 Preference Shares have the right to convert
such shares, at the option of the holder, into whatever number of Common Shares
as will constitute 10 percent of the issued and outstanding Common Shares at the
time of the exercise by the holder of such conversion rights; (iii) DMX-UK shall
have the right to force the conversion of the Preference Shares at any time
after the completion of the raising of the Initial Capital, as described in
Section 5.2.5, below; (iv) the Preference Shares shall have the same right to
dividends or distributions by DMX-UK, and the same voting rights, as the number
of Common Shares into which such Preference Shares could be converted at the
time of such dividend, distribution, or vote; and (v) DMX shall hold 5,000,000
Common Shares (including the shares received pursuant to Section 4.4.3, below)
and 100,000 Preference Shares.
4.4.2 TRANSFER OF COMMON SHARES BY DMX-NV. DMX-NV shall have
-----------------------------------
transferred 100 Common Shares to Purchaser in exchange for that amount in cash
as the parties shall determine is equivalent in value to the 100 Common Shares.
4.4.3 TRANSFER OF NV COMMON STOCK. DMX shall have transferred all
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of its shares of NV Common Stock to DMX-UK in exchange for that number of Common
Shares as the parties shall determine is equivalent in value to the transferred
NV Common Stock.
4.4.4 UNISSUED SHARES. All right of DMX to the Unissued Shares
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shall have been extinguished.
4.5 TERMINATION. If the Closing does not occur on or before 5:00 PM
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(Pacific Standard Time) on January 31, 1996, this Agreement may be terminated at
the election of any party to this Agreement unless the Closing was prevented by
the wrongful action of that party.
4.5.1 COORDINATION WITH SUBSCRIPTION AGREEMENT. If the closing
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occurs under the Subscription Agreement, then this Agreement shall terminate at
the time of that closing.
4.5.2 TERMINATION OF SUBSCRIPTION AGREEMENT. If the Closing
-------------------------------------
occurs, then the Subscription Agreement shall terminate at the time of the
Closing.
ARTICLE 5
COVENANTS
---------
5.1 AFFIRMATIVE COVENANTS OF DMX. DMX hereby covenants and agrees as
----------------------------
follows:
-10-
5.1.1 RECAPITALIZATION; AMENDMENT OF CONSTITUENT DOCUMENTS; CERTAIN
-------------------------------------------------------------
TRANSFERS. DMX shall take all actions within its legal authority, and will
---------
cooperate with Purchaser, to effect the changes in the capital structure and
ownership of the Companies described in Sections 4.4.1, 4.4.2, 4.4.3, and 4.4.4.
Prior to the Closing DMX shall not permit DMX-NV or DMX-UK to make any other
amendment to the constituent documents of DMX-UK or DMX-NV without the consent
of Purchaser.
5.1.2 QUALIFICATION UNDER BLUE SKY LAWS. Qualification under
---------------------------------
applicable Blue Sky laws (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the
Purchased Shares pursuant to this Agreement, if required, will be accomplished
in a timely manner prior to or promptly following the Closing. Purchaser will
cooperate in obtaining any such qualification or exemption.
5.1.3 TRANSACTIONS WITH RELATED ENTITIES. Except for transactions
----------------------------------
explicitly contemplated by this Agreement and the Related Agreements, DMX will
not cause either DMX-UK or DMX-NV to enter into any agreement, contract, or
transaction with DMX, any shareholder of DMX, or any entity or individual
affiliated with DMX without the consent of Purchaser. Prior to the Closing DMX
shall not permit either DMX-UK or DMX-NV to enter into any material contracts
without the consent of Purchaser.
5.1.4 ACCESS. From and after the execution of this Agreement, DMX
------
shall afford to Purchaser and Purchaser's representatives reasonable access to
the personnel, properties, books, records, and contracts relating to the
Companies. Purchaser may engage in discussions with the creditors of the
Companies in order to effect an arrangement or compromise of their claims
against the Companies.
5.1.5 AMENDMENT, COMPROMISE, OR FORGIVENESS OF NOTE OR
------------------------------------------------
INDEBTEDNESS. As described above, DMX will retain a 10 percent interest in the
------------
Note, the Instruments, and the Indebtedness. If Purchaser shall amend,
compromise, or forgive the interests that Purchaser acquires in the Note, the
Instruments, or the Indebtedness, and if such amendment, compromise, or
forgiveness (i) occurs concurrently with the Closing, (ii) occurs pursuant to
binding contracts in effect at the time of the Closing, (iii) occurs within six
months of the Closing and is part of the Reorganization, or (iv) occurs as part
of raising the Initial Capital as described in Section 5.2.5, then DMX shall
amend, compromise, or forgive the interests that it has retained in the Note,
the Instruments, and the Indebtedness in the same manner, in a proportionate
amount, and for the same consideration, if any, in a proportionate amount.
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5.2 AFFIRMATIVE COVENANTS OF PURCHASER. Purchaser hereby covenants and
----------------------------------
agrees as follows:
5.2.1 [*]
5.2.2 RECAPITALIZATION; AMENDMENT OF CONSTITUENT DOCUMENTS;
-----------------------------------------------------
CERTAIN TRANSFERS. Purchaser shall take all actions within his legal authority,
-----------------
and will cooperate with DMX, to effect the changes in the capital structure and
ownership of the Companies described in Sections 4.4.1, 4.4.2, 4.4.3, and 4.4.4.
5.2.3 BOARD APPOINTMENT AND NOMINATIONS. For so long as (i) DMX
---------------------------------
holds in excess of 4 percent of the outstanding Common Shares (including the
Common Shares into which the Preference Shares may be converted) and (ii)
Purchaser has the ability to control the actions of DMX-UK, Purchaser shall
cause DMX-UK to include in the slate of nominees recommended by DMX-UK's
management to shareholders for election as directors at each annual meeting of
shareholders of DMX-UK (or any successor company), one nominee designated by
DMX. After voting Purchaser's shares to the extent necessary to elect Purchaser
or his designee as a director of DMX-UK, Purchaser shall vote Purchaser's shares
for such nominee of DMX to the extent that under applicable law and voting
procedures the shares held by DMX would be inadequate to elect such director.
In the event that any such designee of DMX shall cease to serve as a director
for any
---------------
* Indicates that material has been omitted and confidential treatment has
been requested therefore. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
-12-
reason (including removal for cause), Purchaser shall use his best efforts to
fill such vacancy with a designee of DMX.
5.2.4 CONFIDENTIALITY OF INFORMATION PROVIDED BY DMX, DMX-UK, AND
-----------------------------------------------------------
DMX-NV. Purchaser will not use or disclose any non-public information of DMX,
------
DMX-UK, or DMX-NV to any person for any reason or purpose, except that (i) after
the consummation of transactions contemplated by this Agreement, Purchaser may
use or disclose such information related to the Companies, (ii) Purchaser may
disclose information to the extent that disclosure of such information is
reasonably required in discussions with a creditor of DMX-UK or DMX-NV or a
prospective equity investor in DMX-UK or DMX-NV, and Purchaser obtains
commercially reasonable assurances that the creditor or prospective investor
will keep such information confidential, (iii) such information is or becomes
publicly available otherwise than by disclosure in violation of this Section
5.2.4, or (iv) such disclosure is required by law or compelled through judicial
proceedings.
5.2.5 DILUTION PROTECTION OF DMX'S INTEREST IN THE RAISING OF
-------------------------------------------------------
INITIAL CAPITAL. The parties contemplate that the Reorganization of the
---------------
business operations of the Companies will require that DMX-UK raise $15,000,000
US of capital, whether in the form of debt forgiveness, cash contributions,
contribution of services for equity, or contribution of property for equity, in
addition to the contributions and agreements required by this Agreement (the
"Initial Capital"). Purchaser shall arrange for DMX-UK to obtain the Initial
Capital by providing to the contributors of such funds, services, or property,
equity interests in DMX-UK (or a successor company) either through the issuance
of shares by DMX-UK or from the Purchased Interests held by Purchaser after the
Closing; provided, however, that Purchaser shall have no affirmative obligation
to provide the Initial Capital other than through the use of newly issued stock
of DMX-UK and the Purchased Interests. Such arrangements shall not create any
liability of DMX-UK to Purchaser. After DMX-UK has received the Initial
Capital, Purchaser shall have no further obligation under this Section 5.2.5 to
dispose of the Purchased Interests for the benefit of the Companies.
5.2.6 OWNERSHIP OF DMX-NV. For so long as DMX or any transferee
-------------------
of DMX shall have rights pursuant to Article 6 or Article 7, Purchaser shall
cause DMX-UK shall retain ownership of all of the outstanding stock of DMX-NV;
provided, however, that after such time as Purchaser is no longer in control of
DMX-UK, Purchaser shall be obligated under this Section 5.2.6 only to use his
best efforts to cause DMX-UK to maintain such ownership.
-13-
5.3 AFFIRMATIVE COVENANTS OF THE COMPANIES. DMX-UK and DMX-NV hereby
--------------------------------------
covenant and agree as follows:
5.3.1 ACCESS AND MAINTENANCE OF RECORDS. From and after the
---------------------------------
consummation of the transactions contemplated by this Agreement, each of DMX-UK
and DMX-NV shall maintain all of its corporate records and other documents which
are in its possession for a period of at least five years, except that all
documents related to taxes based on or measured by net income shall be preserved
for ten years or any applicable limitation period, including extensions thereof,
whichever is longer. The Companies shall afford to DMX and its counsel,
accountants and other representatives reasonable access upon prior written
notice to all such books, corporate records and other documents, including, at
DMX's expense, copies of relevant documents. In lieu of retaining any such
records, the Companies may at their election deliver any such records to DMX.
5.3.2 *
5.3.3 BOARD APPOINTMENT AND NOMINATIONS. For so long as (i) DMX
---------------------------------
holds in excess of 4 percent of the outstanding Common Shares (including the
Common Shares into which the Preference Shares may be converted), DMX-UK (or any
successor company) shall include in the slate of nominees recommended by DMX-
UK's management to shareholders for election as directors at each annual meeting
of its shareholders, one nominee designated by DMX. In the event that any such
designee of DMX shall cease to serve as a director for any reason (including
removal for cause), DMX-UK or its successor shall use its best efforts to fill
such vacancy with a designee of DMX.
5.3.4 OWNERSHIP OF DMX-NV. For so long as DMX or any transferee
-------------------
of DMX shall have rights pursuant to Article 6 or Article 7, DMX-UK shall
retain ownership of all of the outstanding stock of DMX-NV.
---------------
* Indicates that material has been omitted and confidential treatment has
been requested therefore. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
-14-
ARTICLE 6
PREEMPTIVE RIGHTS
-----------------
6.1 DMX'S PREEMPTIVE RIGHTS. DMX-UK grants to DMX a right of first
-----------------------
refusal to purchase on the same terms and for the same consideration that
percentage defined below of any New Securities (as defined in Section 6.2,
below) which DMX-UK may, from time to time, propose to sell and issue (i) to
Purchaser (other than New Securities issued to Purchaser as compensation for
services that are both rendered more than three months after the Closing and not
rendered in connection with raising the Initial Capital) or any Purchaser
Affiliate (as defined in Section 6.3, below), or (ii) to other purchasers if
Purchaser or any Purchaser Affiliate has preemptive rights that attach to the
sale to such other purchaser. In such circumstances DMX shall have the right to
purchase that percentage of the New Securities equal to the number of shares of
Common Shares then held by DMX (directly or indirectly) (including the number of
shares of Common Shares issuable upon conversion of other securities of DMX-UK,
if any, held by DMX, directly or indirectly, that are convertible into Common
Shares) divided by the total number of shares of Common Shares outstanding
(including the number of shares of Common Shares issuable upon conversion of any
other outstanding securities that are convertible into Common Shares).
6.2 DEFINITION OF NEW SECURITIES. "New Securities" shall mean any
----------------------------
shares of capital stock of DMX-UK including common stock and preferred stock,
whether now authorized or not, and rights, options or warrants to purchase said
shares of common stock or preferred stock, and securities of any type whatsoever
that are, or may become, convertible into said shares of common stock or
preferred stock; provided, however, the term "New Securities" does not include
(i) preferred stock that is not convertible into any other security of DMX-UK
and bears a fixed dividend; (ii) securities offered to the public generally
pursuant to a registration statement or pursuant to Regulation A under the
Securities Act (or comparable provisions of foreign law); or (iii) Common
Shares issued in raising of the Initial Capital and issued prior to the
conversion of the Preference Shares.
6.3 DEFINITION OF PURCHASER AFFILIATE. As used in this Agreement
---------------------------------
(including Exhibit 7.1), the term "PURCHASER AFFILIATE" means Purchaser's
spouse, child, or grandchild; a trust for the benefit of Purchaser or any of
such persons; any corporation or other entity in which Purchaser, together with
any Purchaser Affiliates, owns at least 50 percent of the equity; or any
corporation or other entity that is otherwise controlled by Purchaser.
-15-
6.4 TERMINATION OF PREEMPTIVE RIGHTS. The preemptive rights of DMX
--------------------------------
pursuant to Section 6, 6.1, above, shall terminate if (i) DMX holds less than 1
percent of the outstanding Common Shares (including the number of shares of
Common Shares issuable upon conversion of securities of DMX-UK, if any, held by
DMX, directly or indirectly, that are convertible into Common Shares) and (ii)
no stock of DMX-UK has been issued in violation of any rights of DMX under
Section 6, 6.1, above.
6.5 INCORPORATION IN ARTICLES OF ASSOCIATION. DMX, Purchaser, and
----------------------------------------
the Companies shall take all actions required to incorporate the rights and
obligations described in this Article 6, 6.1 into the Articles of Association of
DMX-UK to the extent necessary to make such rights and obligations enforceable
under the laws of the United Kingdom.
ARTICLE 7
REGISTRATION RIGHTS
-------------------
7.1 REGISTRATION RIGHTS OF DMX. DMX-UK shall provide DMX, and
--------------------------
Purchaser shall cause DMX-UK to provide DMX, with registration rights as
described in Exhibit 7.1; provided, however, that after such time as Purchaser
is no longer in control of DMX-UK, Purchaser shall be obligated under this
Section 7.1 only to use his best efforts to cause DMX-UK to provide such
registration rights.
7.2 REGISTRATION RIGHTS ON FOREIGN EXCHANGES. If DMX-UK registers or
----------------------------------------
lists its stock on an exchange outside the United States, then DMX-UK shall
provide to DMX registration rights equivalent to those described in Exhibit 7.1,
with such changes as are necessary to reflect differences in applicable law and
practices on such exchange.
ARTICLE 8
TAG-ALONG AND DRAG-ALONG RIGHTS
-------------------------------
8.1 DEFINITIONS. As used in this Article 8, the following terms shall
-----------
have the following respective meanings:
8.1.1 PERMITTED TRANSFER. "PERMITTED TRANSFER" shall mean (i) a
------------------
Transfer by a Shareholder to another corporation that is a member of the same
affiliated group (within the meaning of Section 1504 of the Internal Revenue
Code of 1986, as amended) as the transferring Shareholder; (ii) a Transfer by a
Shareholder without consideration to such Shareholder's spouse, child, or
grandchild, or to a trust for the benefit of such Shareholder or any of such
persons; or (iii) a Transfer by a Shareholder to a corporation or other
-16-
entity in which at least 80 percent of the equity interests in that entity are
held by such Shareholder or such Shareholder's spouse, child, or grandchild;
provided, however, that in any such Transfer, the transferee must agree prior to
the Transfer to be bound by the terms of this Article 8.
8.1.2 PERMITTED TRANSFEREE. "PERMITTED TRANSFEREE" shall mean any
--------------------
person or entity to which a Permitted Transfer of Stock is made.
8.1.3 SECURITIES ACT. "SECURITIES ACT" shall mean the Securities Act
--------------
of 1933, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
8.1.4 SELLING SHAREHOLDER. "SELLING SHAREHOLDER" shall mean
-------------------
Purchaser, or any Permitted Transferee to whom Purchaser Transfers Stock.
8.1.5 SHAREHOLDER. "SHAREHOLDER" shall mean DMX, any Permitted
-----------
Transferee to whom DMX makes a Transfer of Stock, Purchaser, or any Permitted
Transferee to whom Purchaser makes a Transfer of Stock.
8.1.6 STOCK. "STOCK" shall mean the Common Shares, the Preference
-----
Shares, or any other stock of DMX-UK.
8.1.7 TAG-ALONG SELLER. "TAG-ALONG SELLER" shall mean DMX or any
----------------
Permitted Transferee to whom DMX makes a Transfer of Stock.
8.1.8 TRANSFER. "TRANSFER" shall mean any sale, transfer,
--------
assignment, or other disposition, whether voluntary or involuntary, whether by
gift, bequest or otherwise, of Stock, and shall specifically include any
Transfer of Stock in a public offering.
8.2 TAG-ALONG RIGHTS.
----------------
8.2.1 RIGHT TO PARTICIPATE IN SALE. If a Selling Shareholder, at any
----------------------------
time or from time to time, enters into an agreement (whether oral or written) to
make a Transfer of any shares of Stock (a "TAG-ALONG SALE"), then each Tag-Along
Seller shall have the right, but not the obligation, to participate in such Tag-
Along Sale by selling up to the number of its shares of Stock (the "TAG-ALONG
ALLOTMENT") equal to the product of (A) the total number of shares of Stock
proposed to be sold by the Selling Shareholder in the Tag-Along Sale times (B) a
fraction, the numerator of which is equal to the number of shares of Stock owned
by such Tag-Along Seller immediately prior to the Tag-Along Sale and the
denominator of which is equal to the sum of the aggregate number of shares of
Stock owned by the Shareholders
-17-
immediately prior to the Tag-Along Sale. Any such sales by the Tag-Along
Sellers shall be on the same terms and conditions as the proposed Tag-Along Sale
by the Selling Shareholder. For purposes of this calculation, shares of
Preference or other securities convertible into Common Shares shall be treated
as the equivalent of the number of Common Shares into which such Preference or
other securities could be converted.
8.2.2 EXCEPTIONS TO TAG-ALONG RIGHTS. The foregoing notwithstanding,
------------------------------
Section 8.2 and Section 8.4 shall not apply to any Transfer of shares of Stock
(i) to a Permitted Transferee, (ii) to a creditor of DMX-NV or DMX-UK in
satisfaction of indebtedness that arose prior to the Closing Date, (iii) that
occurs concurrently with the Closing, (iv) that occurs pursuant to a binding
contract in effect at the time of the Closing, (v) that occurs within 6 months
of the Closing in which the Companies are the principal recipients of the
consideration for such Transfer, (vi) that occurs as part of the Reorganization
or otherwise as part of an arrangement with creditors of the Companies, or (vii)
that occurs as consideration for the contribution of the Initial Capital as
described in Section 5.2.5, above.
8.2.3 PROCEDURES FOR TAG-ALONG SALE. The Selling Shareholder shall
-----------------------------
promptly provide each Tag-Along Seller with written notice (the "SALE NOTICE")
setting forth the terms and conditions of the proposed Transfer. Each Tag-Along
Seller shall provide written notice (the "TAG-ALONG NOTICE") to the Selling
Shareholder and the Company within 15 days after receiving the Sale Notice. The
Tag-Along Notice shall set forth the number of shares of Stock, if any, such
Tag-Along Seller elects to include in the Tag-Along Sale, which shall not exceed
the Tag-Along Allotment of such Tag-Along Seller as calculated pursuant to
Section 8.2.1, above. The Selling Shareholder shall determine the aggregate
number of shares to be sold by each Tag-Along Seller in the Tag-Along Sale in
accordance with the terms hereof, and the Tag-Along Notices given by such Tag-
Along Sellers shall constitute their respective binding agreements to sell such
shares on the terms and conditions applicable to such sale (including the
requirements of this Section 8.2); provided, however, that the Tag-Along Sellers
-------- -------
shall not be obligated to sell such shares in the Tag-Along Sale unless the sale
of the shares of the Selling Shareholders is consummated. If the proposed
purchaser does not purchase the shares of the Tag-Along Sellers as required
under this Section 8.2, then the Selling Shareholder shall sell the entire
amount of the shares specified in the Sale Notice, and shall implement the
proposed Tag-Along Sale by purchasing from the Tag-Along Sellers the number of
shares specified by each Shareholder in its Tag-Along Notice; provided, however,
that the Selling Shareholder shall not be obligated to purchase such shares if
the sale specified in the Sale Notice is not consummated.
-18-
If a Tag-Along Notice is not received by the Selling Shareholder from any
of the Tag-Along Sellers within the 15-day period specified above, the Selling
Shareholder shall have the right to sell or otherwise transfer the Stock to the
proposed purchaser without any participation by such other Shareholders, but
only on the terms and conditions stated in the notice to such Tag-Along Sellers
and only if such sale occurs not later than 90 days following the expiration of
the 15-day period specified above.
8.3 APPLICATION OF TAG-ALONG RIGHTS TO INDIRECT TRANSFER OF STOCK.
-------------------------------------------------------------
If (i) a Selling Shareholder exchanges Stock for an equity interest in any
entity, or (ii) a Selling Shareholder sells Stock to any entity that is owned or
controlled by the Selling Shareholder and the Stock constitutes more that 25
percent of the fair market value of the assets of the entity, then the Tag-Along
Sellers' rights to participate in a Transfer shall attach to any Transfer of the
Selling Shareholder's interest in that entity. If the proposed purchaser
refuses to purchase the Stock of the Shareholders electing to exercise their
Tag-Along Sale rights pursuant to this Section 8.3, then the Selling Shareholder
shall sell the entire amount of the interest specified in the Sale Notice, and
shall implement the proposed Tag-Along Sale by purchasing from the Tag-Along
Sellers the number of shares of Stock specified by each Shareholder in its Tag-
Along Notice; provided, however, that the Selling Shareholder shall not be
obligated to purchase such shares if the sale specified in the Sale Notice is
not consummated.
8.4 DRAG-ALONG RIGHTS.
-----------------
8.4.1 RIGHT TO REQUIRE SALE. If Purchaser and all Purchaser
---------------------
Affiliates agree to sell 100 percent of the Common Shares and other stock of
DMX-UK held by them to a third person who is not affiliated with or related to
Purchaser in any manner that could allow Purchaser or a Purchaser Affiliate to
enjoy an economic benefit attributable to the sale that would not be enjoyed by
DMX (any such party, a "THIRD PARTY", and any such transaction, a "DRAG-ALONG
SALE"), then DMX or any Permitted Transferee of DMX (a "DRAG-ALONG SELLER"),
subject to Sections 8.4.1, 8.4.2, and 8.4.3 shall sell to such Third Party, upon
the demand by Purchaser, 100 percent of Common Shares and Preference held by the
Drag-Along Seller on the date of the Drag-Along Notice (as defined in Section
8.4.2, below), at the same proportionate price and on the same terms and
conditions as Purchaser has agreed with such Third Party; provided, however,
-------- -------
that the terms of such Drag-Along Sale shall provide (i) that the only
representation and warranty or covenant which any Drag-Along Seller shall be
required to make in connection with the Drag-Along Sale is a representation and
warranty with respect to its own ownership of the shares to be sold by it and
its ability to convey title thereto free and clear of liens, encumbrances or
adverse
-19-
claims and (ii) that the liability of any Drag-Along Seller with respect to any
representation and warranty made in connection with the Drag-Along Sale is the
several liability of that Drag-Along Seller (and not joint with any other
person) and that such liability is limited to the amount of proceeds actually
received by that Drag-Along Seller in the Drag-Along Sale. If the Drag-Along
Sale is in the form of a merger transaction, each Drag-Along Seller shall vote
its shares in favor of such merger and shall not exercise any rights of
appraisal or dissent afforded under applicable law.
8.4.2 DRAG-ALONG NOTICE. Prior to making any Drag-Along Sale, if
-----------------
Purchaser elects to exercise the rights afforded under Section 8.4, Purchaser
shall provide each Drag-Along Seller with written notice (the "DRAG-ALONG
NOTICE") not less than twenty (20) days prior to the proposed date of the Drag-
Along Sale (the "DRAG-ALONG SALE DATE"). The Drag-Along Notice shall set forth:
(i) the name and address of the Third Party; (ii) the proposed amount and form
of consideration to be paid per share and the terms and conditions of payment
offered by the Third Party; (iii) the aggregate number of shares held of record
by Purchaser as of the date of the Drag-Along Notice; (iv) the Drag-Along Sale
Date; and (v) confirmation that the proposed Third Party has agreed to purchase
the Drag-Along Seller's Stock in accordance with the terms hereof.
8.4.3 NON-CASH CONSIDERATION. The provisions of Section 8.4 shall
----------------------
not apply unless the only consideration to be received in the Drag-Along Sale
consists of cash and securities for which an active trading market exists (it
being understood that an active trading market shall be conclusively deemed to
exist for a particular security if that security is listed on the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market System, the
NASDAQ Small Cap Market, the UK Stock Exchange, or the Alternative Investment
Market and that the failure of the security to be so listed shall not per se
--- --
determine that an active trading market does not exist).
8.5 TERMINATION OF TAG-ALONG AND DRAG-ALONG RIGHTS. Sections 8.2,
----------------------------------------------
8.3 and 8.4 shall terminate (i) with respect to Stock held by DMX or a Permitted
Transferee of DMX that is transferred to any transferee other than a Permitted
Transferee, when that Stock is so transferred, or (ii) with respect to all the
Stock held by DMX and all Permitted Transferees of DMX, at such time after DMX-
UK's initial registered public offering as all Stock held by DMX and its
Permitted Transferees can be sold within a given three-month period without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144, or another applicable exemption of equivalent effect, supported by a
written opinion of legal counsel for DMX-UK which shall be
-20-
reasonably satisfactory in form and substance to legal counsel for DMX.
ARTICLE 9
MISCELLANEOUS
-------------
9.1 GOVERNING LAW. This Agreement has been negotiated and entered into
-------------
in the State of California and this Agreement shall be governed by and construed
in accordance with the laws of the State of California, without regard to the
choice of laws provisions of California or any other jurisdiction.
9.2 JURISDICTION AND VENUE. The parties irrevocably agree that any
----------------------
legal action or proceedings with respect to this Agreement may be brought in the
courts of the State of California, or in any United States District Court of
California, and, by execution and delivery of this Agreement, each party
irrevocably submits to each such jurisdiction and irrevocably waives any and all
objections which the party may have as to venue in any of the above courts.
9.3 WAIVER OF JURY TRIAL. EACH PARTY HEREBY AGREES TO WAIVE ITS RIGHTS
--------------------
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY DEALINGS AMONG THE PARTIES RELATING TO THE SUBJECT MATTER
OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Each party acknowledges that this waiver is a material
inducement to enter into a business relationship, that each other party has
already relied on this waiver in entering into this Agreement, and will continue
to rely on this waiver in any future dealings. Each party further warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
9.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the right of the Purchaser to purchase the Purchased
Interests shall not be assignable without the
-21-
consent of DMX (which consent shall not be unreasonably withheld) except to an
entity in which Purchaser holds 100 percent of the common equity. Any such
assignment by Purchaser shall not relieve Purchaser of any of Purchaser's
obligations under this Agreement.
9.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Related
---------------------------
Agreements, the Subscription Agreement, and the other documents delivered
pursuant to such agreements constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by each of the parties.
9.6 NOTICES. Any notice, demand or request required hereunder shall be
-------
given in writing (at the addresses set forth below) by any of the following
means: (a) personal service; (b) electronic communication, whether by telex,
telegram or telecopy; or (c) registered or certified, first class mail, return
receipt requested.
(i) If to DMX:
DMX Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
Irell & ▇▇▇▇▇▇▇
1800 Avenue of the Stars
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
and a copy to:
▇.▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
-22-
(ii) If to Purchaser:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Close
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(iii) If to DMX-UK or DMX-NV:
Prior to the Closing, as provided in Subsection (i) of this
Section 9.6.
After the Closing,
DMX-Europe (UK) Limited
3d and 4th Floors
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy as provided in Subsection (ii) of this Section 9.6.
Such addresses may be changed by notice to the other parties given in the
same manner as above provided. Any notice, demand or request sent pursuant to
either subsection (a) or (b) hereof shall be deemed received upon such personal
service or upon dispatch by electronic means, and, if sent pursuant to
subsection (c) shall be deemed received three business days following deposit in
the mail.
9.7 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party, upon any breach or default under this
Agreement, shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise
-23-
afforded to any holder, shall be cumulative and not alternative.
9.8 EXPENSES. Except as expressly provided above, each of the parties
--------
shall bear its own expenses and legal fees incurred on its behalf with respect
to this Agreement and the transactions contemplated hereby.
9.9 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
9.10 SEVERABILITY. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
9.11 GENDER. The use of the neuter gender herein shall be deemed to
------
include the masculine and the feminine gender, if the context so requires.
-24-
9.12 NO THIRD PARTIES BENEFITTED. This Agreement is made and entered
---------------------------
into for the sole protection and benefit of the parties hereto, their successors
and assigns, and no other person or persons shall have any right of action
hereon.
9.13 ATTORNEYS' FEES AND EXPENSES. Each party hereby agrees to be
----------------------------
responsible for and to pay upon demand all costs and expenses, including,
without limitation, attorneys' fees incurred by another party in connection with
any dispute between such parties concerning this Agreement and the transactions
contemplated herein in which the latter party prevails (whether or not suit is
filed).
The foregoing agreement is hereby executed as of the date first above
written.
DMX Inc.,
a Delaware corporation
By /s/ ▇.▇. ▇▇▇▇▇▇
-----------------------------
Its Executive Vice President
-------------------------
DMX-Europe (UK) Limited,
a United Kingdom corporation
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Managing Director
--------------------------
DMX-Europe N.V.,
a Netherlands corporation
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Its Managing Director
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
an individual
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------
-25-
EXHIBIT 2.2.4
TERMINATION CERTIFICATE
DMX Inc. ("DMX"), a Delaware corporation, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, an
individual ("▇▇▇▇▇▇▇▇▇▇"), and Xtra Music, Ltd., a United Kingdom corporation,
agree and acknowledge that:
1. Pursuant to the terms of the Subscription and Shareholders Agreement
dated as of December 18, 1996 (the "SUBSCRIPTION AGREEMENT"), and pursuant
to the terms of the Stock Purchase and Shareholders Agreement dated as of
December 18, 1996, the Subscription Agreement is terminated.
2. Each of DMX, ▇▇▇▇▇▇▇▇▇▇, and Xtra Music, Ltd. mutually release the
other from any obligation or liability under the Subscription Agreement.
DMX Inc.,
a Delaware corporation
By ____________________________
Its ________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
an individual
______________________________
Xtra Music, Ltd.,
a United Kingdom corporation
By ___________________________
Its _______________________
-1-
EXHIBIT 3.1
EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES OF PURCHASER
This page intentionally left blank.
-2-
EXHIBIT 3.2
EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES OF DMX
This page intentionally left blank.
-1-
EXHIBIT 7.1
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Exhibit 7.1, any capitalized
-------------------
term shall have the meaning assigned to such term in the Agreement, and the
following terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
------------
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"HOLDER" shall mean DMX or a transferee of registration rights under
------
Section 1.9.
"REGISTER," "REGISTERED" OR "REGISTRATION" refers to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Securities Act (or any comparable provision of foreign law), and the declaration
or ordering of the effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means the shares of common stock or preference
----------------------
stock of DMX-UK held by DMX after the consummation of the transactions
contemplated in the Agreement, shares issued in respect of such shares of common
stock or preference stock upon any stock split, stock dividend,
recapitalization, conversion, or similar event, which have not been sold to the
public.
"REGISTRATION EXPENSES" shall mean all expenses incurred by DMX-UK in
---------------------
complying with Sections 1.2 and 1.3, below, including without limitation all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for DMX-UK, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of DMX-UK
which shall be paid in any event by DMX-UK).
"PURCHASER AFFILIATE" shall have the meaning described in Section 6.3 of
-------------------
the Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
--------------
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
-1-
"SELLING EXPENSES" shall mean all underwriting discounts and selling
----------------
commissions applicable to the sale and all fees and disbursements of counsel for
any holder.
1.2 REQUESTED REGISTRATION.
----------------------
1.2.1 PARITY WITH PURCHASER. DMX-UK shall provide Holder with the
---------------------
same demand registration rights, if any, that are provided to Purchaser or any
Purchaser Affiliate under any existing contract or any contract entered into in
the future by DMX-UK and Purchaser or any Purchaser Affiliate. DMX-UK shall
provide DMX with notice of any such registration rights.
1.2.2 MODIFICATIONS AS APPLIED TO DMX. If the registration rights
-------------------------------
that are used to define the demand registration rights of Holder call for
calculations or determine rights based on the number of shares of DMX-UK held by
Purchaser or any Purchaser Affiliate or based upon a minimum number of shares
which must be registered, such provision shall apply to Holder with the
following modification. Any such provision shall apply to Holder using as a
standard that number of shares of DMX-UK which bears the same relationship to
the total number of shares of DMX-UK owned by Holder as the number of shares
called for in that provision bears to the total number of shares of DMX-UK owned
by Purchaser or any Purchaser Affiliate.
1.3 DMX-UK REGISTRATION.
-------------------
1.3.1 NOTICE OF REGISTRATION. If, at any time or from time to time,
----------------------
DMX-UK shall determine to register any of its securities, either for its own
account or the account of a holder or holders of DMX-UK's securities, other than
(i) a registration relating solely to employee benefit plans on Form S-1 or S-8
or similar forms which may be promulgated in the future, (ii) a registration on
Form S-4 or similar form which may be promulgated in the future relating solely
to a Securities and Exchange Commission Rule 145 transaction, or (iii) a
registration undertaken pursuant to Section 1.2.1, above, DMX-UK will:
(a) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which DMX-UK intends to attempt to
qualify such securities under the applicable Blue Sky or other state securities
laws); and
(b) include in such registration (and any related qualification under
Blue Sky laws or other compliance), and in any underwriting involved therein,
all Registrable Securities specified in a written request or requests made by
any Holder or Holders within 20 days after receipt by such Holder of such
written notice from DMX-UK.
-2-
1.3.2 UNDERWRITING. If the registration of which DMX-UK gives notice
------------
is for a registered public offering involving an underwriting, DMX-UK shall so
advise the Holders as a part of the written notice given pursuant to Section
1.3.1. In such event the right of any Holder to registration pursuant to Section
1.3 shall be conditioned upon such Holder's agreeing to participate in such
underwriting and in the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with DMX-UK and the
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by DMX-UK or by the other holders
whose securities are being registered. Notwithstanding any other provision of
this Section 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, DMX-UK shall so advise
all Holders and the other holders distributing their securities through such
underwriting. The number of Registrable Securities and other securities that may
be included in the registration and underwriting shall be allocated among all
holders thereof on the following basis: (i) first to the securities to be
registered by DMX-UK for its own account, if any; (ii) second, to holders of
securities other than Purchaser or any Purchaser Affiliate who are exercising
contractual "demand" registration rights; (iii) then to holders of securities
(including Holders, Purchaser, and any Purchaser Affiliate) who are exercising
contractual, "piggyback" registration rights; and (iv) finally to other holders
of securities of DMX-UK. As among those holders of equal priority suffering such
cut-back, the cut-back shall be in proportion, as nearly as practicable, to the
respective amounts of securities entitled to inclusion in such registration held
by such holders at the time of filing the registration statement. If at any time
Purchaser or any Purchaser Affiliate is granted registration rights that would
provide them higher priority or more protection against a cut-back than is
described in the preceding two sentences, then DMX-UK shall afford the same
priority or protection to the Holders. If any Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
DMX-UK and the underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to
Sections 1.3 shall be borne pro rata by those selling securities pursuant to
such registration. All Registration Expenses incurred in connection with
registration, qualification or compliance pursuant to Section 1.2.1 shall be
borne by DMX-UK and the Holders selling securities pursuant to such registration
on the same basis as
-3-
provided in the registration rights afforded to Purchaser or any Purchaser
Affiliate. All Selling Expenses relating to securities registered by the
Holders or other holders shall be borne by the Holders or other holders of such
securities pro rata on the basis of the number of shares so registered.
1.5 REGISTRATION PROCEDURES. In the case of each registration,
-----------------------
qualification or compliance effected by DMX-UK pursuant to this Exhibit 7.1,
DMX-UK will:
(a) Keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof.
(b) Keep such registration, qualification or compliance effective for
a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs.
(c) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request.
(d) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(e) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that DMX-UK shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of material fact or omits to state a
material fact required to be stated therein or
-4-
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(h) At the request of any Holder requesting registration of
Registrable Securities pursuant to this Exhibit 7.1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with an underwritten registration pursuant to this Exhibit 7.1, (i) furnish an
opinion dated such date, of the counsel representing DMX-UK for the purposes of
such registration, addressed to the underwriters and, if such counsel is also
representing the Holders requesting registration of Registrable Securities, to
such Holders, and (ii) use its best efforts to furnish a letter dated such date,
from the independent certified public accountants of DMX-UK, addressed to the
underwriters and to the Holders.
1.6 INDEMNIFICATION.
---------------
1.6.1 INDEMNIFICATION BY DMX-UK. DMX-UK will indemnify and defend
-------------------------
each Holder, each of its officers and directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Exhibit 7.1, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by DMX-UK of any rule or
regulation promulgated under the Securities Act applicable to DMX-UK and
relating to action or inaction required of DMX-UK in connection with any such
registration, qualification or compliance, and will pay to each such Holder,
each of its officers and directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, as incurred, any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that DMX-UK will not be liable
to any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written
-5-
information furnished to DMX-UK by an instrument duly executed by a Holder or
underwriter and stated to be specifically for use therein or any violation by a
Holder or underwriter of any rule of regulation promulgated under the Securities
Act applicable to such Holder or such underwriter in connection with such
registration.
1.6.2 INDEMNIFICATION BY HOLDERS. Each Holder will, if Registrable
--------------------------
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and
defend DMX-UK, each of its directors and officers, each underwriter, if any, of
DMX-UK's securities covered by such a registration statement, each person who
controls DMX-UK or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and partners and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof) including any of the foregoing
incurred in settlement of any litigation commenced or threatened, arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by such Holder of any
rule or regulation promulgated under the Securities Act applicable to such
Holder in connection with such registration, and will pay to DMX-UK, such other
Holders, such directors, officers, partners, persons, underwriters or control
persons, as incurred, any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such expenses, claims, losses, damages or liability arise out of or are
based upon (i) such an untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
DMX-UK by an instrument duly executed by such Holder and stated to be
specifically for use therein, or (ii) any such violation by such Holder of any
rule or regulation promulgated under the Securities Act applicable to such
Holder in connection with such registration; provided, however, that the
obligations of such Holder hereunder shall be limited to an amount equal to the
greater of (x) the proceeds to such Holder of Registrable Securities sold as
contemplated herein, or (y) the out-of-pocket expenses incurred by DMX-UK (not
including defense costs or amounts
-6-
paid to those claiming against DMX-UK) in connection with any such registration
that cannot by completed as a result of the untrue statement or violation of
such Holder that gives rise to the indemnity obligation under this Section.
1.6.3 PROCEDURES. Each party entitled to indemnification under this
----------
Section 1.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.6 unless such failure
resulted in actual detriment to the Indemnifying Party. Notwithstanding the
above, however, if representation of one or more Indemnified Parties by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
conflicting interests between such Indemnified Parties (the "Conflicting
Indemnified Parties") and any other party represented by such counsel in such
proceeding, then such Conflicting Indemnified Parties shall have the right to
retain one separate counsel, chosen by the holders of a majority of the
Registrable Securities included in the registration, at the expense of the
Indemnifying Party. No Indemnifying Party, (i) in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation, or (ii) shall
be liable for amounts paid in any settlement if such settlement is effected
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
1.7 INFORMATION BY HOLDER. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to DMX-UK such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as DMX-UK may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Exhibit
7.1.
1.8 RULE 144 REPORTING. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the
-7-
Restricted Securities to the public without registration, after such time as a
public market exists for the common stock of DMX-UK, DMX-UK agrees to each of
the following:
1.8.1 PUBLIC INFORMATION. DMX-UK will use its best efforts to make
------------------
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act at all times after the effective date of
the first registration under the Securities Act filed by DMX-UK for an offering
of its securities to the general public.
1.8.2 FILINGS. DMX-UK will use its best efforts to file with the
-------
Commission in a timely manner all reports and other documents required of DMX-UK
under the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements).
1.8.3 WRITTEN STATEMENT OF COMPLIANCE. DMX-UK will furnish to a
-------------------------------
Holder forthwith upon request a written statement by DMX-UK as to its compliance
with the reporting requirements of said Rule 144 (at any time after 90 days
after the effective date of the first registration statement filed by DMX-UK for
an offering of its securities to the general public) and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of DMX-UK,
and such other reports and documents of DMX-UK as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Holder to sell any such securities without registration.
1.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause DMX-UK to
-------------------------------
register securities granted under Sections 1.2 and 1.3 may be assigned only to
a transferee or assignee in connection with the transfer or assignment by DMX of
not less than 25 percent of DMX's ownership of the Registrable Securities of
DMX-UK immediately after the Closing or in connection with the transfer or
assignment by the transferee of not less than all of the transferee's ownership
of the Registrable Securities of DMX-UK; provided that DMX-UK shall be entitled
to notice of any such transfer of registration rights within thirty (30) days of
the date such transfer is effected. No transferee, assignee or other person
purporting to exercise rights under this Exhibit 7.1 who is not a signatory to
the Agreement shall be entitled to do so unless and until such person agrees to
be bound by the terms of this Exhibit 7.1.
1.10 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
----------------------------------
pursuant to this Exhibit 7.1 shall terminate as to a Holder at such time after
DMX-UK's initial registered public offering as all Registrable Securities held
by the Holder can be sold within a given three-month period without compliance
with the registration requirements of the
-8-
Securities Act pursuant to Rule 144, supported by a written opinion of legal
counsel for DMX-UK which shall be reasonably satisfactory in form and substance
to legal counsel for such Holder.
1.11 "MARKET STAND OFF" AGREEMENT. Each Holder agrees that it shall not,
----------------------------
to the extent requested by DMX-UK and an underwriter of common or preference
stock (or other securities) of DMX-UK, sell or otherwise transfer or dispose
(other than to donees who agree to be similarly bound) of any Registrable
Securities during the one hundred and twenty (120) day period following the
effective date of a registration statement of DMX-UK filed under the Securities
Act; provided, however, that such agreement shall not apply to Registrable
Securities being registered and sold pursuant to such registration statement. A
Holder's obligations under this Section 1.11 shall terminate at such time as
any other person with registration rights (whether or not pursuant to this
Agreement) or any officer or director of DMX-UK is not bound by a similar
obligation. In order to enforce the foregoing covenant, DMX-UK may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such one hundred and twenty (120) day period.
-9-
EXHIBIT 2.2.2
CHANNEL DISTRIBUTION AGREEMENT
------------------------------
THIS CHANNEL DISTRIBUTION AGREEMENT (the "AGREEMENT") is made this _____
day of ______, 199_, between DMX Inc., ("DMX") a Delaware corporation having its
registered office at 11400 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and DMX-Europe (UK) Limited, a company organized and
existing under the laws of the United Kingdom ("DMX-UK") (collectively
hereinafter referred to as the "PARTIES" and individually as a "PARTY").
WHEREAS DMX distributes various channels of digital audio programming in
the United States and other markets;
WHEREAS DMX has distributed such digital audio programming in Europe
through DMX-Europe N.V. ("DMX-NV") and its subsidiary, DMX-UK (the "COMPANIES")
pursuant to that certain Technology License and Services Agreement dated as of
May 19, 1993, and that certain Trademark Agreement effective as of July 1, 1992
(the "FORMER LICENSES");
WHEREAS, in connection with the Stock Purchase and Shareholders Agreement
dated as of December 18, 1996, (the "STOCK PURCHASE AGREEMENT"), DMX has agreed
to license such digital audio programming to DMX-UK for distribution in Europe
on the terms and conditions set forth herein, and the Former Licenses have been
terminated.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions hereinafter set forth, the Parties agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall unless the context
otherwise requires have the following meanings:
1.1 "AFFILIATE(S)" shall mean, with respect to either party, a company
directly or indirectly controlling, controlled by or under common control with
such Party. A company shall be deemed, for the purposes of this Agreement, to
control a corporation or other entity if such company possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation or other entity, whether through the ownership of
voting securities, by contract or otherwise.
1.2 "CHANNELS" shall mean all channels of audio programming provided by
DMX to its Customers (except for those channels which are subject to an
exclusive license from DMX to any Customer) and all Territory-Specific Channels.
1.3 "COMMERCIAL ESTABLISHMENT" shall mean each and every premise
(including, without limitation, any restaurant, bar or similar social facility,
office, factory, work-place, place of business, school, university or other
educational facility, religious, government or other public facility, military
installation or facility, air, train, bus or other public transportation
facility, park, place frequented by the public, hotel, motel, club or similar
hospitality facility or medical facility), whether or not business is conducted
at such premises, except for premises which are Private Residences, it being
understood that in the case of a shopping center or other multiple-business
facility, each separate business occupying a distinct space within such facility
shall be deemed to constitute a separate Commercial Establishment.
1.4 "CONFIDENTIAL INFORMATION" shall mean financial, marketing,
Subscriber, engineering, satellite, broadcast and other technical or
transmission data, software, computer and systems management, programming,
licensing, and any other information relating to the conduct of the business of
either Party, and not generally available to the public, in any form whatsoever.
1.5 "CONTENT SUPERVISION AUTHORITIES" shall have the meaning described in
Section 2.5, below.
1.6 "CUSTOMERS" shall mean any and all third parties located outside of
the Territory who are authorized by DMX to receive the Channels.
1.7 "DELIVERY SITE" shall mean the site used from time to time by DMX as
its studio to create the signal for the Channels, which site is located as of
the date of this Agreement at Denver, Colorado, U.S.A.
1.8 "DMX MARKS" shall mean the trademarks, service marks, and trade names
and other similar property relating to DMX and/or the Channels that are
specified on Exhibit "A" attached hereto.
1.9 "ENHANCEMENTS" shall mean revisions, modifications or additions to any
or all of the Channels by DMX and made available in the ordinary course by DMX
to its Customers.
1.10 "EXPLOIT" shall mean to sell directly to customers or to license
another to sell to customers, but only if the holder of such license sells to
customers.
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1.11 "FORCE MAJEURE" shall mean any delays, pre-emptions or other
failure to perform when such delays, pre-emptions or failures are due to any
cause beyond the control of the Party whose performance is so affected,
including, without limitation, an act of God, fire, war, strike, riot, labor
dispute, natural disaster, technical failure (including the failure of all or
part of the equipment of others, including the communications satellite on which
the Channels are delivered) or any other reason beyond the control of the Party
whose performance is prevented during the period of such occurrence, including
any legal prohibition, significant, change of law or application of laws
governing performance hereunder, decree, regulation or requirement of any
governmental authority having jurisdiction.
1.12 "INCREMENTAL COSTS" shall have the meaning described in Section 5.1,
below.
1.13 "MAINTENANCE" shall mean the general updating of the formats and
contents of the Channels by DMX and made available in the ordinary course by DMX
to its Customers.
1.14 "DMX-UK SERVICE" shall mean the digital audio service provided to
Subscribers by DMX-UK, its Affiliates, or its licensees.
1.15 "PRIVATE RESIDENCE" shall mean any single dwelling unit or multiple
dwelling unit private residences, including without limitation, apartment and
condominium buildings, residential hotels, residences for military personnel or
separate unit student housing, but not including transient or temporary
residence establishments such as hotels, motels or medical care facilities.
1.16 "PROMOTIONAL MATERIALS" shall mean any marketing, promotional or
advertising materials which incorporate the DMX Marks.
1.17 "SERVICE TECHNOLOGY" shall mean the technology, that (i) is owned by,
acquired by, or licensed to DMX, (ii) DMX has the right to license as provided
herein, and (iii) is necessary for the reception, transmission or distribution
of the Channels, including, without limitation, the addressing system for cable
decoder boxes.
1.18 "SUBSCRIBER" shall mean a paying customer to whom DMX-UK, its
Affiliate, or its licensee provides, for the payment of a prescribed fee, any or
all of the Channels.
1.19 "TECHNICAL ACCESSORIES" shall mean all other portions of the signal
that transmits the Channels that may be created or made usable now or in the
future for purposes other than transmitting the Channels.
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1.20 "TERM" shall mean the term of this Agreement as set out in
Section 11.1, below.
1.21 "TERRITORY" shall mean the territory within the countries listed on
Exhibit "B", attached hereto, as such countries are constituted as of the date
of this Agreement, and such territory shall not be affected by any subsequent
alteration of the boundaries of those countries or the emergence of new
political entities within or including such territory.
1.22 "TERRITORY-SPECIFIC CHANNELS" shall mean any Channels which are
produced by DMX specifically for Use and distribution to Subscribers in the
Territory, or any part thereof.
1.23 "TRADEMARK TERM" shall mean that two-year period beginning on the
Closing Date (as defined in the Stock Purchase Agreement).
1.24 "USE" shall mean to downlink from the Delivery Satellite, receive,
decode, digitize, compress, encode, scramble, edit, substitute programming,
insert advertising in, uplink, and transmit the signal of the Channels to
Subscribers in the Territory, as permitted by the terms of this Agreement.
2. RIGHTS OF DMX-UK WITH RESPECT TO THE CHANNELS
2.1 GRANT OF LICENSE. Subject to the terms of this Agreement, DMX hereby
grants to DMX-UK and DMX-UK hereby accepts, the exclusive, non-transferable,
royalty-free license and right during the Term to market, distribute and license
the Channels to Subscribers and to Use the signal of the Channels, the Service
Technology, and the Technical Accessories in the Territory. This Agreement does
not give DMX-UK any right or license to distribute or to Use the Channels, the
Service Technology, or the Technical Accessories outside of the Territory.
2.2 FAILURE TO EXPLOIT LICENSE. DMX-UK agrees to Exploit the Channels in
substantially all of the Territory; provided, however, that DMX's only remedy
for the failure by DMX-UK to Exploit the Channels shall be to take the actions
described in this Section 2.2. If DMX-UK fails to Exploit the Channels in a
substantial portion of the Territory, and does not cure such failure to Exploit
within ninety (90) days of notice by DMX, then at the conclusion of such ninety
day period the license granted pursuant to Sections 2.1 and 2.4 shall become a
non-exclusive license and DMX shall be relieved of its obligations under Section
2.10, below. If DMX-UK fails to Exploit the Channels in any country that is a
part of the Territory, and does not cure such failure to Exploit within ninety
(90) days of notice by DMX, then at the conclusion of
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such ninety day period the license granted pursuant to Section 2.1 and 2.4 shall
become a non-exclusive license with respect to such country and DMX shall be
relieved of its obligations under Section 2.10, below, with respect to such
country. All or any part of the Territory that becomes non-exclusive pursuant
to this Section 2.2 shall be referred to as a "NON-EXCLUSIVE TERRITORY", and the
date on which that Non-Exclusive Territory becomes non-exclusive pursuant to
this Section 2.2 shall be referred to as the "NON-EXCLUSIVE DATE". If DMX does
not Exploit the Channels within a Non-Exclusive Territory within 180 days of the
Non-Exclusive Date, and if DMX-UK does Exploit the Channels within that Non-
Exclusive Territory within 180 days of the Non-Exclusive Date, then the license
granted pursuant to Sections 2.1 and 2.4 shall again become an exclusive license
for that Non-Exclusive Territory and the rights of DMX-UK under Section 2.10,
below, with respect to that Non-Exclusive Territory shall be restored.
2.3 SUBLICENSE. During the Term DMX-UK shall be entitled to sublicense
third parties to redistribute the Channels in the Territory, provided that such
sublicensing does not entitle such sublicensee to do any act or thing which if
done by DMX-UK would be a breach of the terms of this Agreement.
2.4 TECHNICAL ACCESSORIES. During the Term and subject to the other
restrictions described in this Agreement, DMX-UK shall have the exclusive right
to Use in the Territory any Technical Accessories included within the signal of
the Channels for any lawful purpose, including, but not limited to close
captioning, games, sweepstakes, contests, advertising and promotions. DMX-UK
shall obtain any license or authorization required under applicable law for such
use, and shall not use the Technical Accessories in a jurisdiction in any manner
which is not lawful in that jurisdiction. If DMX-UK determines in its sole
discretion not to use any part of the Technical Accessories, DMX-UK may license
such Technical Accessories to DMX or to another third party for any lawful
purpose.
2.5 CENSORSHIP AND PROGRAM SUBSTITUTION. DMX acknowledges and agrees that
the Channels may be subject to censorship by certain government authorities and
may be edited by them or by DMX-UK according to guidelines and directives
prescribed by such authorities ("CONTENT SUPERVISION AUTHORITIES") prior to
distribution within certain countries in the Territory. DMX-UK shall have the
right to edit programs and, with the prior approval of DMX where reasonably
possible, which approval shall not be unreasonably withheld, substitute programs
solely in order to comply with codes, practices, directives or orders from the
Content Supervision Authorities. To enable DMX-UK to meet with and comply with
any governmental programming standards and practices and other governmental and
regulatory directives, DMX-UK may retransmit
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the Channels with a delay from the time the signal is received. Except as
expressly provided in this Agreement, including this Section 2.5, DMX-UK shall
use the Channels without insertion (whether of advertising or otherwise),
deletion, or editing.
2.6 INSERTION OF LOGO AND ▇▇▇▇ OF DMX-UK. DMX-UK shall have the right to
use its own logo, station identity ▇▇▇▇, trade name, service ▇▇▇▇ or other
identifiers within the Channels as part of its network identity and branding
within the DMX-UK Service.
2.7 INCLUDING CHANNELS IN DMX-UK SERVICE; ADDITION OF CHANNELS. DMX-UK
shall be entitled, in its sole discretion, to include any or all of the Channels
in the DMX-UK Service. DMX-UK shall be entitled, at its sole discretion, to
create and distribute additional channels within the DMX-UK Service and within
the Territory; provided, however, that DMX shall have to right to approve
(acting reasonably) such additional channels that are distributed with the
Channels. DMX-UK may request that DMX create such additional Channels or
Territory-Specific Channels on terms and conditions to be agreed between the
Parties, or DMX-UK may create such channels itself or through the engagement of
third parties. Any such additional channels created by or on behalf of DMX-UK
shall be owned solely by DMX-UK.
2.8 COMMERCIAL ANNOUNCEMENTS. DMX-UK shall be entitled, in its sole
discretion, to include commercial announcements within the Channels distributed
to Commercial Establishments, so long as such commercial announcements relate
specifically to the Commercial Establishment to which such Channels are
distributed. Furthermore, DMX-UK shall be entitled to include in the Channels
the same types of commercial announcements and/or advertisements that DMX
includes in the Channels as provided to its Customers. Except as provided
herein, no commercial announcements will be included in any of the Channels.
2.9 RESTRICTIONS ON USE. In order to ensure the integrity of the Channels
and compliance with the restrictions that may be applicable to the underlying
programming, sound recording, music and statutory use permits, DMX-UK shall not,
and the rights granted herein shall not be interpreted to grant DMX-UK or any
other person any right to:
2.9.1 Record, make or manufacture any recordings or other
reproductions of any Channel for commercial use, other than to effect
distribution as part of the DMX-UK Service; or
2.9.2 Transmit, re-transmit or authorize the transmission or re-
transmission of any Channel outside the Territory.
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DMX-UK shall not distribute the Channels over any medium or in any manner that
does not permit DMX-UK to institute adequate controls to prevent the reception,
transmission or re-transmission of any Channel outside the Territory by any
person. Controls imposed by DMX-UK that are equivalent to the controls imposed
by DMX in the United States on the same medium to prevent unauthorized
transmission or retransmission shall be deemed to be adequate controls for
purposes of the preceding sentence. Notwithstanding anything else contained in
this Agreement, the transmission of the Channels outside the Territory solely
because a portion of the footprint of the satellite used by DMX-UK falls outside
the geographical boundaries of the Territory shall not violate DMX-UK's
obligations under this Agreement if (i) DMX-UK does not otherwise Exploit or Use
the Channels outside the Territory, and (ii) substantially all of the footprint
of the satellite used by DMX-UK falls within the Territory.
2.10 NON-COMPETITION. DMX agrees that during the Term it will not
distribute the Channels or any of them in the Territory via any medium, nor will
DMX authorize any other person to do the same. Notwithstanding the foregoing,
DMX shall be entitled to distribute video channels or music services other than
the Channels in the Territory, so long as the format of such other music
services is not substantially similar to that of the Channels.
2.11 DELETION OF CHANNEL. At any time and from time to time, DMX shall be
entitled, in its sole discretion, to delete one or more Channels from the
Channels offered to its Customers, and upon such deletion such Channel shall
cease to be available to DMX-UK. DMX may not delete a Channel pursuant to this
Section 2.11 unless, at least thirty days before the effective date of such
deletion, DMX provides to DMX-UK (i) notice of the deletion, (ii) one or more
disks inscribed with the music programming for the Channel as of the date of the
notice, and (iii) a copy of the software prepared by DMX to select the music for
such Channel; provided, however, that in order to delete a Channel, DMX shall
not be required to provide any software or other intellectual property that DMX
does not own or otherwise have right to transfer to DMX-UK. The provisions of
Section 6.3 shall apply to the use by DMX-UK of any items provided pursuant to
this Section 2.11.
2.12 ENHANCEMENTS AND MAINTENANCE. DMX shall provide Enhancements and
Maintenance to DMX-UK at the same time as DMX provides Enhancements and
Maintenance to DMX's Customers.
3. DELIVERY AND DISTRIBUTION
3.1 DELIVERY OF THE CHANNELS. DMX shall deliver to DMX-UK at the Delivery
Site digital audio signals of the Channels, to enable DMX-UK to Use the signal
in a manner and quality as contemplated by this Agreement. DMX shall provide
DMX-UK with
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any technical information in its possession that is reasonably requested by DMX-
UK for the purpose of uplinking, downlinking, receiving the Channels in the
Territory, and interfacing the signal of the Channels to the DMX-UK Service.
3.2 SATELLITE AND UPLINK ARRANGEMENTS. DMX-UK shall designate the
satellite to be used to transmit the Channels to Europe (the "DESIGNATED
SATELLITE") and shall arrange to uplink the Channels from the delivery point at
DMX's Denver studio to the Designated Satellite.
3.3 CHANGE IN DESIGNATED SATELLITE. DMX-UK shall provide written notice
to DMX of any planned permanent change in the Designated Satellite not less than
ninety (90) days prior to such change. If a temporary change in the Designated
Satellite is required, DMX and DMX-UK shall each use their reasonable efforts
(including the earliest practicable notice by DMX-UK to DMX of such events) to
avoid any interruption of or disruption in delivery of the Channels to the
Subscribers. DMX-UK shall be responsible for all costs associated with any
permanent or temporary change in the Designated Satellite, including
administrative and technical costs of aligning or setting reception equipment.
4. LICENSE OF TRADEMARKS
4.1 LICENSE TO TRADEMARKS FOR PROMOTIONAL PURPOSES. DMX hereby grants to
DMX-UK for the Trademark Term a non-exclusive, non-transferable, royalty-free
license to use the DMX Marks for the distribution, marketing and promotion of
the Channels to Subscribers and potential Subscribers within the Territory.
4.2 APPROVAL RIGHTS. DMX-UK shall not use the DMX Marks in distribution,
marketing, promotion or advertising without the prior written approval of such
use by DMX. In its sole discretion, DMX shall be entitled to provide DMX-UK
with a copy of its corporate guidelines or style guides for proper usage of the
DMX Marks, which such guidelines shall be followed by DMX-UK. In addition, DMX-
UK agrees to use the DMX Marks on materials of high quality and in a manner
which upholds the image and reputation of DMX.
4.3 PROCEDURE FOR APPROVAL. In the event that DMX-UK proposes to produce
Promotional Materials, DMX-UK shall provide samples of such proposed Promotional
Materials to DMX for its approval. Within ten (10) days of receipt of such
proposed Promotional Materials, DMX shall, in writing, either approve or object
to the use of the DMX Marks on such proposed Promotional Materials, and, in the
event of an objection, DMX shall state its reasons for such objection. In the
event that DMX does not object to the use of the DMX Marks within such ten (10)
day period, such use shall be deemed to be approved
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and the proposed Promotional Materials may be used. Upon request, DMX-UK shall
provide DMX with samples of all approved Promotional Materials as used by DMX-
UK.
4.4 CONSEQUENCES OF TERMINATION. Upon the earlier of the expiration of
the Trademark Term or the termination of this Agreement ("TRADEMARK TERMINATION
DATE"), DMX-UK shall:
(i) immediately discontinue all use of the DMX Marks or marks
confusingly similar thereto; and
(ii) change its corporate name, the corporate name of DMX-Europe (UK)
Limited, and the name of any other Affiliate to a name that does not
include the phrase "DMX", any other DMX ▇▇▇▇, or any ▇▇▇▇ confusingly
similar thereto.
4.5 USE OF "FORMERLY KNOWN AS DMX". For two (2) years after the earlier
of the expiration of the Trademark Term or the date on which DMX-UK stops using
the DMX Marks for the distribution, marketing and promotion of the Channels to
Subscribers and potential Subscribers within the Territory, DMX-UK shall be
entitled to refer to the Channels in its promotional materials as "formerly
known as DMX" or "formerly know as Digital Music Express", and to refer to
itself as "formerly known as DMX-Europe N.V." During the same period DMX-Europe
(UK) Limited may refer to itself as "formerly known as DMX-Europe (UK) Limited."
5. COSTS AND REPORTING REQUIREMENTS
5.1 PAYMENT OF INCREMENTAL COSTS. DMX-UK shall pay to DMX the incremental
costs incurred by DMX for the creation and delivery of the Channels to DMX-UK
("INCREMENTAL COSTS"), including without limitation, the following costs and
charges:
a. All costs of creation and delivery of the Territory-Specific Channels
made at the request of DMX-UK; and
b. All costs of modifications to the Channels, Enhancements, or
Maintenance made at the request of DMX-UK.
On a quarterly basis, DMX shall provide to DMX-UK an invoice which sets forth
the amount and nature of such Incremental Costs, and within thirty (30) days of
receipt of the invoice, DMX-UK shall pay to DMX the amount of Incremental Costs
set forth in such invoice. DMX shall have no obligation to create, deliver, or
effect any Territory-Specific Channels, Enhancements, or Maintenance requested
by DMX-UK.
5.2 INTEREST. In the event that any payments due under Section 5.1 from
DMX-UK are not paid on the due date therefor,
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there shall be added to the amount of such payment interest for the period from
the due date until payment is made, at an interest rate equal to the lesser of
10 percent per annum or the highest legal rate under applicable law.
5.3 WITHHOLDING AND SIMILAR CHARGES. All payments shall be made in U.S.
Dollars and shall be paid in full without set-off or counterclaim and free and
clear of and without any deduction or withholding for or on account of any
taxes, unless required to do so by law. Each party shall make application to
any relevant tax authority for double tax relief in respect of amounts payable
hereunder if the other party so requests in writing. DMX-UK shall be
responsible for collecting and paying any income, franchise, sales, use,
occupational, general service or other taxes, assessments, licenses, or other
charges assessed, levied, imposed or collected by any governmental or political
entity, or any agencies or instrumentalities thereof, with respect to its
receipt or distribution of the channels or any other activity hereunder, except
income taxes payable by DMX. Each party shall provide the other party with any
documentation reasonably requested by the other party to permit the other party
to claim a credit or deduction for foreign taxes paid or born by the other
party.
5.4 COST RECORDS AND AUDITS. DMX shall keep accurate and complete records
and accounts of all Incremental Costs. No more than twice in each one (1) year
period during the Term, and for one (1) year following expiration or termination
of this Agreement, on reasonable notice to DMX during normal business hours,
DMX-UK shall have the right to appoint an internationally recognized accounting
firm to examine and audit such Incremental Cost records. All costs of
conducting such an audit shall be borne by DMX-UK, unless it is determined that
the Incremental Costs paid to DMX for the period to which such audit relates
have been over-reported by DMX by more than five percent (5%), in which case DMX
shall pay the cost of the audit. All information obtained by DMX-UK as a result
of such audit shall be treated as Confidential Information in accordance with
the provisions of Section 7 of this Agreement.
6. OWNERSHIP OF INTELLECTUAL PROPERTY
6.1 OWNERSHIP OF CHANNELS. Except as otherwise provided herein, DMX
retains all rights, title and interest in and to the Channels and all
programming produced for or included in the Channels, including worldwide rights
for use in all media.
6.2 OWNERSHIP OF MARKS. DMX-UK hereby acknowledges the right, title and
interest of DMX and its Affiliates in and to the DMX Marks and the right of DMX
to use and license the use of the DMX Marks. DMX-UK agrees not to claim any
title to the DMX Marks or any right to use the DMX Marks except as
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permitted by this Agreement. At no time shall DMX-UK adopt or use, without the
prior written consent of DMX, any variation of the DMX Marks or any work or ▇▇▇▇
likely to be similar to, or confused with, the DMX Marks. Any and all goodwill
arising from the use by DMX-UK of the DMX Marks shall inure solely to the
benefit of DMX. As may be required by law, DMX-UK will at its expense record
this Agreement and register the DMX Marks with appropriate government
authorities in Territory, and DMX will cooperate in effecting such recordation
and registration. DMX-UK shall not assert any claim to the DMX Marks or such
goodwill, either during or after the Term of this Agreement, and DMX-UK shall
not take any action that could be detrimental to the goodwill associated with
the DMX Marks.
6.3 COPYRIGHT, MUSIC PERFORMANCE, SOUND RECORDING AND REPRODUCTION RIGHTS
AND FEES. DMX-UK shall acquire from the owners, composers, licensees and/or
music or copyright rights societies all of the intellectual property rights
necessary for the distribution of the Channels in the Territory, including
copyrights, synchronization of music contained in the Channels and non-dramatic
performing rights, mechanical, performing and author's rights in each musical
composition and sound recording contained in the Channels. DMX-UK shall also be
responsible for all royalties, fees, and other charges of any kind with respect
to such rights.
7. CONFIDENTIALITY
7.1 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Neither DMX-UK nor DMX
shall disclose to any third party (other than its respective employees or
financial and legal advisers, in their capacity as such) any Confidential
Information concerning the other Party derived in the course of performance
hereunder, including, without limitation, any information relating to
identification of Subscribers or financial material obtained through any audit,
or any of the terms of this Agreement, except:
7.1.1 to the extent necessary to comply with law or the valid order
of a court of competent jurisdiction or a regulatory authority having
jurisdiction, in which event the Party making such disclosure shall so
notify the other Party as promptly as practicable (and, if possible, prior
to making such disclosure) and shall seek confidential treatment of such
information;
7.1.2 as part of its reporting or review procedure to its parent
company, its auditors, its attorneys and potential investors; provided,
however, that such parent company, auditors, attorneys and potential
investors agree to be bound by the provisions of the confidentiality
provisions of this Agreement;
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7.1.3 in order to enforce its rights pursuant to this Agreement;
7.1.4 as part of its obligation to make timely disclosure to public
investors in its securities; or
7.1.5 to the extent necessary to engage third parties to distribute
the Channels or manufacture equipment for distribution of the Channels in
accordance with this Agreement, provided that such third party distributors
or manufacturers agree to comply with the confidentiality provisions of
this Agreement.
8. REPRESENTATIONS AND WARRANTIES
8.1 REPRESENTATIONS OF DMX. DMX hereby represents and warrants to DMX-UK
that:
8.1.1 DMX is a corporation duly organized and validly existing under
the laws of Delaware.
8.1.2 DMX has the power and authority to enter into this Agreement
and to perform fully its obligations hereunder.
8.1.3 DMX is under no contractual or other legal obligation which
shall in any way interfere with its full, prompt and complete performance
hereunder, except to the extent that any continuing rights of the Companies
under the Former Licenses would interfere with the rights granted under
this Agreement.
8.1.4 Within the United States, neither the Channels nor any material
or programming contained therein shall libel, slander of defame any person,
or violate, infringe upon or give rise to or advance any claim with respect
to any contractual right, common law right or any other right of any party
(including, without limitation, any copyright, patent, trademark, literary
or dramatic right, music synchronization or performance right or right of
privacy or publicity) or violate any law.
8.2 REPRESENTATIONS OF DMX-UK. DMX-UK hereby represents and warrants to
DMX that:
8.2.1 DMX-UK is a corporation duly organized and validly existing
under the laws of the United Kingdom.
8.2.2 DMX-UK has the corporate power and authority to enter into this
Agreement and to perform fully its obligations hereunder.
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8.2.3 DMX-UK is under no contractual or other legal obligation which
shall in any way interfere with its full, prompt and complete performance
hereunder.
8.2.4 DMX-UK shall during the Term have valid licenses or other
authorizations granted by the appropriate governmental authorities
throughout the Territory, if required under applicable law, to distribute
the Channels in accordance with this Agreement, and will operate such
systems throughout the Term in accordance with such licenses or
authorization.
9. COMPLIANCE WITH LAWS AND LICENSES
9.1 REGULATORY COMPLIANCE. DMX-UK shall ensure that the content of the
DMX-UK Service complies in all aspects with the regulatory requirements in the
Territory or any part thereof. DMX-UK further undertakes to obtain any
requisite governmental approvals required in the Territory or any part thereof
for the distribution of the DMX-UK Service.
9.2 PIRACY. DMX-UK agrees that it will not authorize parties other than
Subscribers to receive the signal of the Channels, nor will it authorize others
to copy, take or otherwise reproduce any part of the Channels without the prior
written consent of DMX. DMX-UK further agrees to take all reasonable and
practical security measures to prevent the unauthorized or otherwise unlawful
copying, taping or distribution of the Channels by others; provided, however,
security measures that are equivalent to the security measures taken by DMX in
the United States on the same medium to prevent unauthorized or otherwise
unlawful copying, taping or distribution of the Channels by others shall be
deemed to be adequate security measures for purposes of this sentence.
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10. INDEMNIFICATION
10.1 INDEMNIFICATION. Each Party shall indemnify and hold the other Party
harmless from and against any and all claims, liabilities, costs and expenses,
including attorneys fees and costs, arising out of any breach by such Party of
any of its respective representations, warranties or covenants herein contained.
In addition, without limiting the foregoing, DMX-UK shall indemnify and hold DMX
harmless against any and all claims, liabilities, costs and expenses, including
attorneys fees and costs, arising from and in connection with (i) any non-
payment of any amounts payable in respect of copyrights, and music and sound
recording performance and reproduction rights, arising from the distribution of
the Channels in the Territory; (ii) any assertion by any third party that the
distribution, promotion, and other exploitation of the Channels, and any
programming contained therein, violate or infringe upon any rights of such third
party in the Territory, unless such third party is not a creditor (as of the
date of this Agreement), receiver or trustee of the Companies and the claims of
such third party derive from a purported grant of rights by DMX to the third
party that is inconsistent with this Agreement; or (iii) the failure of DMX-UK
to obtain or maintain proper governmental authority to distribute the Channels
in the Territory.
10.2 PROCEDURE FOR INDEMNIFICATION. The Party entitled to indemnification
hereunder (the "INDEMNIFIED PARTY") shall notify the other Party hereto (the
"INDEMNIFYING PARTY") in writing of the claim or action for which such indemnity
applies. The Indemnifying Party shall undertake the defense of any such claim or
action and permit the Indemnified Party to participate therein at the
Indemnified Party's own expense. The settlement of any such claim or action by
an Indemnified Party, without the Indemnifying Party's prior written consent,
shall release the Indemnifying Party from its obligations hereunder with respect
to such claim or action so settled. The Indemnifying Party shall not settle or
otherwise dispose of any claim without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
11. TERM AND TERMINATION
11.1 TERM. Unless terminated earlier pursuant to the provisions of this
Agreement, the Term of this Agreement shall be a period of five (5) years from
the Closing Date (as defined in the Stock Purchase Agreement).
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11.2 TERMINATION FOR BREACH. This Agreement may be terminated by a party
(the "Noticing Party") as follows:
11.2.1 thirty (30) days following written notice by the Noticing
Party to the other Party (the "Noticed Party") of any material inaccuracy
of a representation made by the Noticed Party herein or in the Stock
Purchase Agreement or of a material breach by the Noticed Party of any of
its obligations hereunder or under the Stock Purchase Agreement, if such
misrepresentation or breach is not cured within the thirty (30) day period
following such notice;
11.2.2 immediately upon written notice by the Noticing Party to the
Noticed Party if the Noticed Party has made a voluntary petition for
protection under the bankruptcy laws, or if the Noticed Party has taken any
similar action in consequence of debt;
11.2.3 thirty (30) days following written notice by the Noticing
Party to the Noticed Party if the Noticed Party has been the subject of the
filing of an involuntary petition in bankruptcy, or if any distress or
attachment is levied or any receiver is appointed in respect of the
business or a substantial part of the property or assets of the Noticed
Party, unless such petition, distress, attachment, or receiver is dismissed
within such thirty-day period; or
11.2.4 upon thirty (30) days prior written notice by the Noticing
Party to the Noticed Party if any event of Force Majeure shall continue for
a period of sixty (60) consecutive days.
The exercise of any right to termination under this Section 11.2 is not an
exclusive remedy, and the Noticing Party may in addition exercise any other
remedy available to it in law or equity.
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11.3 EFFECT OF TERMINATION. The expiration or termination of this
Agreement for whatever reason shall not affect any rights of either Party which
may have accrued prior to such expiration or termination. Subject to the
foregoing, neither party shall by reason of the expiration or termination of
this Agreement be liable to the other for compensation or damage on account of
the loss of present or prospective profits on distribution or anticipated
distribution of the Channels, or expenditures, investments or commitments made
in connection therewith. Upon the expiration or termination of this Agreement,
DMX-UK shall promptly pay all outstanding and/or accrued Incremental Costs to
DMX and return to DMX, or otherwise dispose of as DMX may reasonably instruct,
all tapes and materials in relation to the Channels, programming contained
therein, advertisements or Promotional Materials, and other materials, documents
and papers provided to DMX-UK and relating to the Channels which DMX-UK may have
in its possession or under its control.
12. MISCELLANEOUS
12.1 NOTICES. Any notice in connection with this Agreement shall be
in writing and shall be delivered by air courier or by facsimile to the
addresses or facsimile numbers given below. Notice given by air courier shall
be deemed given when recorded on the records of the air courier as received by
the receiving party. Notice given by facsimile shall be deemed given upon
transmission if on a business day and during business hours in the country of
receipt, otherwise notice shall be deemed to have been given at 9:00 a.m. on the
next business day in the country of receipt.
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If to DMX:
DMX Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to DMX-UK:
DMX-Europe (UK) Limited
3d and 4th Floors
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either party may change its address by giving notice to the other in the manner
set forth above.
12.2 GOVERNING LAW; JURISDICTION AND VENUE. This Agreement has been
negotiated and entered into in the State of California and this Agreement shall
be governed by and construed in accordance with the laws of the State of
California, without giving effect to its conflict of laws rules. The Parties
hereby irrevocably agree that any legal action or proceedings with respect to
this Agreement may be brought in the courts of the State of California, or in
any United States District Court of California and by execution and delivery of
this Agreement, each party irrevocably submits to each such jurisdiction and
irrevocably waives any and all objections which it may have as to venue in any
of the above courts.
12.3 WAIVER OF JURY TRIAL. EACH PARTY HEREBY AGREES TO WAIVE ITS RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS AMONG THE PARTIES RELATING TO THE SUBJECT MATTER OF
THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Each Party acknowledges that this waiver is a material
inducement to enter into a business relationship, that each other Party has
already relied on this waiver in entering into this Agreement, and will continue
to rely on this waiver in any future dealings. Each Party further warrants and
represents that it has reviewed this
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waiver with its legal counsel, and that it knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
12.4 ASSIGNMENT. The right and obligations of the Parties may be
assigned in whole or in part, voluntarily or by operation of law, without the
prior written consent of the other Party if such assignment is to an Affiliate
of the assigning Party. Each Party shall notify the other within seven (7) days
of any such assignment. In addition, DMX shall be entitled to assign its rights
and obligations under this Agreement in connection with a merger or acquisition
transaction (in whatever form) between DMX and a subsidiary of Tele-
Communications, Inc. Except as expressly provided, neither Party may assign or
transfer this Agreement to any third party without the consent of the other
Party, which consent shall not be unreasonably withheld.
12.5 NO PARTNERSHIP. Nothing contained herein shall be deemed to
create, and the Parties do not intend to create, any relationship of partners or
joint venturers as between DMX-UK and DMX with respect to this Agreement.
Neither DMX-UK nor DMX shall be, or shall hold itself out to be, the agent of
the other under this Agreement. No Subscriber shall be deemed to have any
privity of contract or direct contractual or other relationship with DMX by
virtue of this Agreement or DMX's delivery of the Channels to DMX-UK hereunder.
12.6 SEVERABILITY. If at any time, any provision of this Agreement
is, or becomes under any law, or is found by a court of competent jurisdiction
to be illegal, void, invalid, prohibited or unenforceable, then such provision
shall be ineffective to the extent of such illegality, voidness, invalidity,
prohibition or unenforceability and the remaining provisions of this Agreement
shall remain in full force and effect. In such event, the Parties shall
thereafter use their respective best endeavors to negotiate and agree upon a
substitute provision which is valid and enforceable and achieves to the greatest
extent the legal and commercial objectives of the prohibited provision.
12.7 CAPTIONS AND HEADINGS. The captions and headings herein are
included for convenience only and shall not be considered a part of or used to
construe this Agreement.
12.8 COSTS OF PREPARATION. Each of the Parties herein undertakes to
bear its own costs in relation to and arising from the preparation and execution
of this Agreement.
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12.9 ATTORNEYS' FEES AND EXPENSES. Each Party hereby agrees to be
responsible for and to pay upon demand all costs and expenses, including,
without limitation, reasonable attorneys' fees incurred by another Party in
connection with any dispute between such parties concerning this Agreement and
the transactions contemplated herein in which the latter Party prevails (whether
or not suit is filed).
12.10 SUCCESSORS AND PERMITTED ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the Parties and their respective
successors, assigns and permitted assignees.
12.11 FORCE MAJEURE. Neither DMX nor DMX-UK shall be liable to the
other for any event of Force Majeure. In the event of any such delay, pre-
emption or failure due to Force Majeure, the Party whose performance is affected
shall promptly notify the other Party of the nature and anticipated length of
continuance of such Force Majeure, and during such period both Parties shall be
excused from performance.
12.12 SURVIVAL. Upon termination of this Agreement for any reason,
Sections 4.4, 6.1, 6.2, 7.1, 10.1, 10.2, 12.1, 12.2, 12.3, 12.9, and 12.12
(including any definitions that are necessary to the operation of such sections)
shall continue to remain in full force and effect.
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12.13 ENTIRE AGREEMENT. This Agreement (together with all Exhibits
attached hereto, which are incorporated herein by this reference) and the Stock
Purchase Agreement (and all documents delivered pursuant thereto) constitute the
whole agreement between the Parties and it is expressly declared that no
variations hereof shall be effective unless made in writing and signed by both
Parties. All prior terms sheets and other correspondence between the parties
shall be deemed to have lapsed upon the signing of this Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
DMX Inc.
By:__________________________
Its__________________________
DMX-Europe (UK) Limited
By:__________________________
Its:_________________________
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EXHIBIT A
TRADEMARKS
----------
. ICT
. International Cablecasting Technologies Inc.
. ICT & Design (former corporate logo)
. DMX DJ
. DMX
. Digital Music Express
. DMX & Design:
[LOGO OF DIGITAL MUSIC EXPRESS]
. DMX World Logo:
[LOGO OF DMX WORLD]
EXHIBIT B
TERRITORY
1. EUROPE: Albania, Andorra, Austria, Belarus, Belgium, Bosnia and Herzegovia,
Bulgaria, Croatia, the Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein,
Lithuania, Luxembourg, Macedonia, Malta, Moldova, Monaco, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Montenegro, Slovakia,
Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, Vatican
City, Yugoslavia, and any political entity whose borders are enclosed entirely
within the countries listed in this paragraph 1.
2. MIDDLE EAST: Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, United Arab Emirates,
Yemen, and any political entity whose borders are enclosed entirely within the
countries listed in this paragraph 2.
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