<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
TCI Music, Inc.
--------------------
(Name of Issuer)
Series A Convertible Preferred Stock, par value $.01 per share
(Title of Class of Securities)
87229N200
(CUSIP Number)
Thomas K. Pasch, Esq.
Saul, Ewing, Remick & Saul LLP
Centre Square West
1500 Market Street, 38th Floor
Philadelphia, PA 19102-2186
(215) 972-7188
--------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 16, 1997
--------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
- ---------------
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
CUSIP NO. 87229N200 Page 2 of 14
- --------------------------------------------------------------------------------
1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
StarNet, Inc.
- --------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds*
OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
Beneficially Owned By -0-
Each Reporting Person 8. Shared Voting Power
With 447,332
9. Sole Dispositive Power
-0-
10. Shared Dispositive Power
447,332
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
501,290
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* [X]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
28.8%
- --------------------------------------------------------------------------------
14. Type of Reporting Person*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 87229N200 Page 3 of 14
- --------------------------------------------------------------------------------
1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
Lenfest Communications, Inc.
- --------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds*
OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
Beneficially Owned By Each -0-
Reporting Person 8. Shared Voting Power
With 501,290
9. Sole Dispositive Power
-0-
10. Shared Dispositive Power
501,290
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
501,290
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* [X]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
28.8%
- --------------------------------------------------------------------------------
14. Type of Reporting Person*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 87229N200 Page 4 of 14
- --------------------------------------------------------------------------------
1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
H.F. Lenfest
- --------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds*
00
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
United States
- --------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
Beneficially Owned By -0-
Each Reporting Person 8. Shared Voting Power
With 501,290
9. Sole Dispositive Power
-0-
10. Shared Dispositive Power
501,290
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
501,290
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* [X]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
28.8%
- --------------------------------------------------------------------------------
14. Type of Reporting Person*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 87229N200 Page 5 of 14
- --------------------------------------------------------------------------------
1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
StarNet Interactive Entertainment, Inc.
- --------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds*
OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
Beneficially Owned By -0-
Each Reporting Person 8. Shared Voting Power
With 315,484
9. Sole Dispositive Power
-0-
10. Shared Dispositive Power
315,484
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
501,290
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* [X]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
28.8%
- --------------------------------------------------------------------------------
14. Type of Reporting Person*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 87229N200 Page 6 of 14
- --------------------------------------------------------------------------------
1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
Suburban Cable TV Co. Inc.
- --------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds*
OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Pennsylvania
- --------------------------------------------------------------------------------
Number of Shares 7. Sole Voting Power
Beneficially Owned By -0-
Each Reporting Person 8. Shared Voting Power
With 53,958
9. Sole Dispositive Power
-0-
10. Shared Dispositive Power
53,958
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
501,290
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares* [X]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
28.8%
- --------------------------------------------------------------------------------
14. Type of Reporting Person*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 87229N200 Page 7 of 14
This Statement on Schedule 13D (the "Statement") is jointly filed by
Lenfest Communications, Inc. ("LCI"), Suburban Cable TV Co Inc. ("Suburban"),
StarNet, Inc. ("StarNet"), StarNet Interactive Entertainment, Inc. ("StarNet
Int") and H.F. Lenfest ("HFL"; collectively with LCI, Suburban, StarNet and
StarNet Int, the "Reporting Persons") pursuant to the Joint Filing Agreement,
dated December 24, 1997, filed as Exhibit 99.0.1 hereto.
This Statement relates to the TCI Music Series A Convertible Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), of TCI Music, Inc., a
Delaware corporation (the "Company").
This Statement is filed to disclose the acquisition by the Reporting
Persons in the merger of The Box Worldwide, Inc. with and into the Company of
more than 5% of the outstanding Preferred Stock of the Company.
Item 1. Security and Issuer
The title of the class of equity securities to which this Statement relates
is TCI Music Class A Convertible Preferred Stock, par value $0.01 per share.
To the knowledge of the Reporting Persons the names and addresses of the
principal executive officers of the Company are as follows:
Name Title
--------------------- --------------------
David B. Koff President and CEO
Stephen M. Brett Vice President and Secretary
The address of the named executive officers of the Company is 8101 East
Prentice Avenue, Suite 500, Englewood, Colorado 80111.
Item 2. Identity and Background
As a result of the corporate relationship among the Reporting Persons, the
Reporting Persons may be deemed to constitute a "group" for purposes of this
Statement.
LCI is a Delaware corporation with its principal business address and its
principal office address at 5 North Market Street, Suite 1300, Wilmington,
Delaware 19899. LCI is principally engaged in acquiring, developing
and operating cable television systems through its direct and indirect
subsidiaries.
Suburban is a Pennsylvania corporation with its principal business address
and its principal office address c/o The Lenfest Group, 200 Cresson Boulevard,
Oaks, PA 19456. Suburban is a wholly-owned subsidiary of LCI.
<PAGE>
CUSIP NO. 87229N200 Page 8 of 14
Suburban is principally engaged in providing cable television and other cable
related services to its customers.
StarNet is a Delaware corporation with its principal business address and
its principal office address c/o The Lenfest Group, 200 Cresson Boulevard, Oaks,
PA 19456. StarNet is a wholly-owned subsidiary of LCI. StarNet is principally
engaged in offering program promotion for cable television programming products.
StarNet Int is a Delaware corporation with its principal business address
and its principal office address c/o The Lenfest Group, 200 Cresson Boulevard,
Oaks, PA 19456. StarNet Int is a wholly-owned subsidiary of StarNet. StarNet Int
is a passive investment vehicle principally engaged in holding its investment in
the Company.
None of LCI, Suburban, StarNet or StarNet Int has, during the last five
years, been convicted in a criminal proceeding, and none has, during the last
five years, been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction which had the result of making it subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Directors and Executive Officers of the Reporting Persons:
H.F. Lenfest is a director, President and CEO of LCI. His business address
is c/o The Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. Lenfest's
principal occupation is as President and CEO of LCI and its subsidiaries,
including Suburban, StarNet (where he is CEO but not President) and StarNet Int.
H. Chase Lenfest is a director of LCI. His business address is c/o The
Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. His principal occupation
is as Director of Sales, Lenfest Programming Services, Inc., a subsidiary of
LCI.
Brook J. Lenfest is a director of LCI. His business address is c/o The
Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. His principal occupation
is as a Vice President and Director of Operations of StarNet.
<PAGE>
CUSIP NO. 87229N200 Page 9 of 14
John Malone ("Malone") is a director of LCI. His business address is c/o
Tele-Communications, Inc. 5619 DTC Parkway, Englewood, Colorado 80111. Malone's
principal occupation is as Chairman of the Board and CEO of Tele-Communications,
Inc.
Jerome B. Kern ("Kern") is a director of LCI. His business address is 599
Lexington Avenue, New York, NY 10022-6030. Kern's principal occupation is as
Special Counsel to the law firm of Baker & Botts, L.L.P. Kern is also a director
of Tele-Communications, Inc.
Harry F. Brooks ("Brooks") is an Executive Vice President of LCI. His
business address is c/o The Lenfest Group, 200 Cresson Boulevard, Oaks, PA
19456. His principal occupation is as Executive Vice President of LCI and its
subsidiaries, including Suburban, StarNet and StarNet Int.
Samuel W. Morris, Jr. is Vice President-General Counsel and Secretary of
LCI. His business address is c/o The Lenfest Group, 200 Cresson Boulevard, Oaks,
PA 19456. His principal occupation is as a Vice President-General Counsel and
Secretary of LCI and its subsidiaries, including Suburban, StarNet and StarNet
Int.
Donald L. Heller is a Vice President of LCI. His business address is c/o
The Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. His principal
occupation is as a Vice President of LCI.
Maryann V. Bryla is a Vice President of LCI. Her business address is c/o
The Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456.
<PAGE>
CUSIP NO. 87229N200 Page 10 of 14
Her principal occupation is as a Vice President of LCI and as Treasurer of its
subsidiaries, including Suburban, StarNet and StarNet Int.
Jeffrey DiFrancesco is Vice President-Strategic Planning of LCI. His
business address is c/o The Lenfest Group, 200 Cresson Boulevard, Oaks, PA
19456. His principal occupation is as a Vice President-Strategic Planning of LCI
and as a Vice President of Suburban.
Marguerite B. Lenfest is Treasurer of LCI. Her business address is c/o The
Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. Her principal occupation
is as Treasurer of LCI.
Robert M. Lawrence is an Executive Vice President of Suburban. His business
address is c/o The Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. His
principal occupation is as an Executive Vice President of Suburban.
Debra Krzywicki is an Executive Vice President of Suburban. Her business
address is c/o The Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. Her
principal occupation is as an Executive Vice President of Suburban.
William J. Stanfield is the President of StarNet. His business address is
c/o The Lenfest Group, 200 Cresson Boulevard, Oaks, PA 19456. His principal
occupation is as President of StarNet.
Robert F. Bower is the Senior Vice President/Chief Technology Officer of
StarNet. His business address is c/o The Lenfest Group, 200 Cresson Boulevard,
Oaks, PA 19456.
<PAGE>
CUSIP NO. 87229N200 Page 11 of 14
His principal occupation is as Senior Vice President/Chief Technology Officer of
StarNet.
Except as described below, none of the foregoing natural persons has,
during the last five years, been convicted in a criminal proceeding, and has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction which had the result of making him
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws. The information with respect
to Malone and Kern is based upon filings made with the Securities Exchange
Commission, and the Reporting Persons have no actual knowledge which contradicts
such information. On August 15, 1996, Brooks was named in a 22 count indictment
filed in the United States District Court for the Eastern District of
Pennsylvania charging him with making false statements to a federal agency,
together with copyright infringement. On December 10, 1996, Brooks pleaded
guilty to a single misdemeanor charging him with copyright infringement. All
other charges were dismissed. On March 7, 1997, he was placed on probation with
conditions of work release and home confinement and ordered to pay a $25,000
fine.
The Company is an affiliate of Tele-Communications, Inc. ("TCI"), a 50%
stockholder of LCI. Because of contractual arrangements among the stockholders
of LCI which grant to HFL the exclusive right to control a majority of the board
of directors of LCI and the management and business affairs of LCI and its
subsidiaries, the Reporting Persons disclaim any formation of a group with TCI
or any beneficial ownership of shares of equity securities of the Company
beneficially owned by TCI, Malone or Kern. Because of the control rights held by
HFL, he has been included as a Reporting Person. HFL specifically disclaims any
beneficial interest in the Preferred Stock beneficially owned by LCI, Suburban,
StarNet and StarNet Int.
Item 3. Source and Amount of Funds or Other Consideration
On December 16, 1997, The Box Worldwide, Inc. was merged with and into the
Company. As a result, the common stock held by each Reporting Person was
exchanged for shares of Preferred Stock of the Company without any additional
consideration being paid by the Reporting Persons.
Item 4. Purpose of Transaction
The Reporting Persons acquired all of the shares of Preferred Stock
beneficially owned by them in the merger transaction described in Item 3, above.
As a result, the Preferred Stock was acquired as an investment and without the
purpose, intent or effect of changing or influencing the control of the Company.
The Reporting Persons may hold or sell the shares of Preferred Stock
beneficially owned by them, convert any or all of such shares into TCI Music
Class A Common Stock or acquire additional shares of such stock or the TCI Music
Class A Common Stock into which the shares of Preferred Stock are convertible.
The Reporting Persons reserve the right to change their purposes or intentions
at any time and from time to time.
<PAGE>
CUSIP NO. 87229N200 Page 12 of 14
Item 5. Interest in Securities of the Issuer.
The Reporting Persons believe that the aggregate number of shares of
Preferred Stock outstanding as of December 16, 1997, and after giving effect to
the issuance of the shares of Preferred Stock in the merger transaction
described in Item 3, above, is approximately 1,742,500 (as reported by outside
counsel to the Company). The percentage of beneficial ownership of each of the
Reporting Persons included in the responses to Item 13 on the cover page filed
herewith is computed based on such aggregate number of shares.
In addition, the Preferred Stock votes with the TCI Music Class A Common
Stock, which is entitled to one vote per share. The Preferred Stock is entitled
to three votes per share. The Company also has outstanding TCI Music Class B
Common Stock, which is entitled to ten (10) votes per share. As a result, the
shares of Preferred Stock beneficially owned by the Reporting Persons represent
less than one percent (1%) of the total votes which may be cast by all classes
of TCI Music Common Stock.
StarNet Int has Sole Voting Power and Sole Dispositive Power as to no
shares and Shared Voting Power and Shared Dispositive Power as to 315,484
shares; StarNet has Sole Voting Power and Sole Dispositive Power as to no shares
and Shared Voting Power and Shared Dispositive Power as to 447,332 shares;
Suburban has Sole Voting Power and Sole Dispositive Power as to no shares and
Shared Voting Power and Shared Dispositive Power as to 53,958 shares; and each
of Lenfest Communications, Inc. and H.F. Lenfest has Sole Voting Power and Sole
Dispositive Power as to no shares and Shared Voting Power and Shared Dispositive
Power as to 501,290 shares.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
StarNet previously entered into an agreement with Alan McGlade, the former
President of StarNet and the former President of The Box Worldwide, Inc. which
granted Mr. McGlade the option to purchase from StarNet up to 200,000 shares of
the common stock of The Box owned by StarNet. As a result of the merger
transaction described in Item 3, above, StarNet has offered to permit
Mr. McGlade to exercise his option in 14,000 shares of the Preferred Stock. The
option expires on December 31, 1998. Until the option is exercised and record
ownership of the shares is transferred to Mr. McGlade, Mr. McGlade has no voting
or investment power over the shares.
A copy of the Agreement is filed with this Schedule as Exhibit 99.0.2.
Item 7. Material to be filed as Exhibits
Exhibit 99.0.1 Joint Filing Agreement, dated December 24, 1997.
Exhibit 99.0.2 Letter Agreement, dated December 24, 1997.
<PAGE>
CUSIP NO. 87229N200 Page 13 of 14
SCHEDULE 13D
SIGNATURES
The undersigned, after reasonable inquiry and to the best of their
knowledge and belief, certify that the information set forth in this statement
is true, complete, and correct.
LENFEST COMMUNICATIONS, INC., STARNET, INC., a Delaware
a Delaware corporation corporation
By: /s/ H.F. Lenfest
- -------------------------
Name: H.F. Lenfest By: /s/ H.F. Lenfest
As: President -------------------------
Name: H.F. Lenfest
As: President
Dated: December 24, 1997
Dated: December 24, 1997
H. F. Lenfest
STARNET INTERACTIVE
ENTERTAINMENT, INC., a Delaware
corporation
/s/ H.F. Lenfest
- -------------------------
Name: H. F. Lenfest
Dated: December 24, 1997 By: /s/ H.F. Lenfest
--------------------------
Name: H.F. Lenfest
As: President
SUBURBAN CABLE TV CO. INC.
Dated: December 24, 1997
By: /s/ H.F. Lenfest
- -------------------------
Name: H.F. Lenfest
As: President
Dated: December 24, 1997
<PAGE>
CUSIP NO. 87229N200 Page 14 of 14
EXHIBIT INDEX
Exhibit No. Description of Document
Exhibit 99.0.1 Joint Filing Agreement,
dated December 24, 1997.
Exhibit 99.0.2 Letter Agreement, dated
December 24, 1997.
<PAGE>
JOINT FILING AGREEMENT
Pursuant to Rule 13d-1(f) promulgated under the Securities Act of 1934, the
undersigned hereby agree to the joint filing of a Schedule 13D, and all
amendments thereto, relating to the reporting of their ownership of the equity
securities of TCI Music, Inc.
LENFEST COMMUNICATIONS, INC., a STARNET, INC., a Delaware
Delaware corporation corporation
By: /s/ H.F. Lenfest
- --------------------------
Name: H.F. Lenfest By: /s/ H.F. Lenfest
As: President --------------------------
Name: H.F. Lenfest
As: President
Dated: December 24, 1997
Dated: December 24, 1997
H.F. Lenfest
STARNET INTERACTIVE
ENTERTAINMENT, INC., a Delaware
corporation
/s/ H.F. Lenfest
- --------------------------
Name: H. F. Lenfest
Dated: December 24, 1997 By: H.F. Lenfest
-------------------------
Name: H.F. Lenfest
As: President
SUBURBAN CABLE TV CO. INC.
Dated: December 24, 1997
By: /s/ H.F. Lenfest
- --------------------------
Name: H.F. Lenfest
As: President
Dated: December 24, 1997
<PAGE>
[Lenfest Group Letterhead]
December 24, 1997
Mr. Alan McGlade
President and CEO
1221 Collins Avenue
Miami Beach, FL 33139
Re: Letter Agreement dated September 17, 1994 ("Letter Agreement")
--------------------------------------------------------------
Dear Alan:
In light of the Agreement and Plan of Merger dated as of August 12, 1997
among The Box Worldwide, Inc. ("BOX"), TCI Music, Inc. ("TCIM") and TCI Music
Acquisition Sub, Inc., it is appropriate to clarify the impact of the
transactions contemplated by that Agreement on the option for BOX stock granted
under the Letter Agreement between me and StarNet (the "Option") which I have
attached.
Upon the completion of the merger contemplated by the Merger Agreement, the
200,000 shares of common stock which are the subject of the Option to you under
the Letter Agreement (the "Underlying BOX Common"), have been exchanged for
14,000 shares of TCI Music Class A Convertible Preferred Stock (the "TCIM
Preferred"), in accordance with the exchange ratio set out in the Merger
Agreement.
The Option will continue on the same terms as set forth in the Letter
Agreement, provided that (1) the shares subject to the Option shall be 14,000
shares of TCIM Preferred (the "Option Shares") issued in the Merger and (2) the
exercise price per share shall be adjusted accordingly, and shall be equal to
$250,000 divided by 14,000. If the TCIM Option Shares are subsequently converted
into TCI Music Series A Common Stock, the exercise price for the underlying
42,000 shares of TCI Music Series A Common Stock shall be equal to $250,000
divided by 42,000.
If TCIM subdivides the TCIM Preferred into a greater number of shares, or
combines them into a smaller number of shares, or engages in a business
combination or reclassification, re-capitalization or reorganization that
effects the TCIM Preferred such that an adjustment is required in order to
preserve the benefits under the Option, then such adjustments shall be made as
are equitable and appropriate, to any or all of (1) the number and kind of
shares for which the Option is exercisable, and (2) the exercise price for such
shares, as shall be appropriate, to preserve the benefits under the Letter
Agreement.
If the above correctly sets forth our agreement, kindly acknowledge your
agreement by signing and returning the enclosed copy of this letter.
Best regards,
/s/ H.F. Lenfest
----------------------------
H.F. Lenfest
Intending to be legally bound hereby, the undersigned accepts and agrees to the
foregoing modification of the Option.
Alan McGlade
- -----------------------------
Date:____________________
<PAGE>
[Lenfest Group Letterhead]
September 17, 1994
Alan McGlade
116 Harvey Lane
Chadds Ford, PA 19317
Dear Alan:
The following will reflect our understanding:
1. Your position as President of StarNet will end December 31, 1994.
2. You agree to provide whatever counsel is needed without compensation on
StarNet matters in the calendar year 1995.
3. Should you be appointed CEO of VJN, Inc. ("VJN"), you will receive an
option by StarNet to purchase 200,000 shares of VJN stock at an exercise
price of $1.25 per share and you shall have the right to exercise the
option at any time prior to January 1, 1999. The exercise of the option may
be in partial amounts. However, you will be limited to the sale of no more
than 66,666 of the shares in the first year after the grant of the option,
66,666 of the shares in the second year after the grant of the option and
66,668 of the shares in the third year after the grant of the option.
StarNet shall have the right, if it so chooses, to place the 200,000 shares
of VJN stock in escrow to assure that the above limitation on sale is
adhered to. Any shares remaining on January 1, 1999 upon which your option
has not been exercised, will be returned to StarNet or its successor or as
instructed by either.
4. In the event that StarNet decides to sell two thirds or more of its VJN
stock, you shall have the right to piggybank any or all of the option share
without any of the limitations on the sale of stock in paragraph 3.
5. Repayment of the present outstanding loan from our company in the amount of
$100,000 and interest will be waived on January 2, 1995 and such waiver
shall be deemed to be repayment in full of the outstanding loan.
<PAGE>
Alan McGlade
September 17, 1994
Page 2
6. Upon your appointment as CEO of VJN, and in consideration of the other
terms of this letter, you agree to relinquish all carried interest or other
interest of any kind in StarNet and to provide a general release and other
documentation as may be required by our company.
If the above correctly sets forth our understanding, kindly acknowledge your
agreement by signing and returning the enclosed copy of this letter.
Sincerely,
/s/ H.F. (Gerry) Lenfest
-----------------------------
H.F. (Gerry) Lenfest
Accepted this 20th day of September, 1994.
/s/ Alan McGlade
- ------------------------
Alan McGlade
AM:ar
