<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 15, 1999
TCI MUSIC, INC.
-------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-22815 84-1380293
-------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
67 Irving Place North, 4th Floor
New York, NY
------------
(Address of principal executive office)
10003
-----
(Zip Code)
Registrant's telephone number, including area code (212) 387-7700
(Former name or former address, if changed since last report): Not applicable
<PAGE>
ITEM 2: ACQUISITION AND DISPOSITION OF ASSETS
Pursuant to the letter agreement, dated as of May 19, 1999, the terms and
conditions of which had been previously reported in the Report on Form 8-K of
TCI Music, Inc. (the "Prior 8-K"), on July 15, 1999, MTV Networks ("MTVN"), a
division of Viacom International Inc. ("Viacom"), TCI Music, Inc. (the
"Company") and Liberty Media Corporation ("Liberty") entered into an
Organization Agreement and other related organizational and transactional
agreements and other documents pursuant to which the Company and MTVN formed
MTVN Online L.P., a Delaware limited partnership ("Music.co"). Music.co's
business will be to develop, operate, manage, market, distribute and license
text, audio and video music, music-related and music-themed services online and
engage in reasonably related activities, including e-commerce applications and
consumer oriented commercial transactions (the "Business"). Pursuant to the
Organization Agreement, (i) the Company caused its subsidiaries SonicNet, Inc.
and The Box Worldwide Inc. to contribute substantially all of their respective
assets and businesses, and the stock of their respective subsidiaries which
exclusively conduct their respective international businesses, subject to
certain exceptions, to separate limited liability companies, the membership
interests in which were then contributed to Music.co and (ii) MTVN contributed
to Music.co the assets and businesses owned or controlled by it that constituted
all of its current or planned assets and businesses engaged, or to be engaged,
exclusively in the Business, including those assets and businesses used
exclusively in connection with the MTV.com, VH1.com and Imagine Radio
businesses, and all wholly owned international assets and businesses engaged
exclusively in the Business, subject to certain exceptions. For their respective
contributions, the Company received an aggregate 10% limited partnership
interest in Music.co and MTVN received an aggregate 90% general and limited
partnership interest in Music.co.
2
<PAGE>
Under the terms of the Music.co Partnership Agreement, the Company is
entitled to designate one member of the management committee of Music.co and
will have certain approval rights with respect to enumerated actions by
Music.co, subject to certain conditions. MTVN is entitled to appoint a majority
of the members of the management committee of Music.co.
In the Parent Agreement and Guaranty the Company and Liberty have each
agreed not to, and to cause their respective controlled affiliates not to, own,
operate or make an investment in the Business (other than the investment in
Music.co) or in the business of operating any cable or satellite audio/video
television services, digital or analog, that principally or in large part are
devoted to music-related or music-themed programming (the "Television
Business"), in each case subject to certain exceptions, until the first to occur
of (a) three years (in the case of the restrictions relating to the Business) or
five years (in the case of the restrictions relating to the Television Business)
after the Closing and (b) such date as MTVN ceases to own the largest percentage
of the equity in Music.co and to have the right to designate the most members of
the management committee or board of directors of Music.co.
In addition, pursuant to the Parent Agreement and Guaranty MTVN has agreed
that, subject to certain exceptions, if MTVN, directly or through a controlled
affiliate, acquires, makes an investment in or otherwise operates the Business
other than through Music.co at any time during the
3
<PAGE>
five-year period following the Closing, it will provide the Company the right to
purchase a pro-rata interest in such business or assets so long as the Minimum
Percentage Condition (as defined) is satisfied. MTVN has also agreed, for the
same period, not to promote the Business as owned or operated by any of its
affiliates (other than Music.co) on any of its cable television services except
on commercial terms.
Under the Music.co Partnership Agreement and the Parent Agreement and
Guaranty, the parties have also agreed to certain restrictions on their ability
to transfer their respective partnership interests in Music.co, first offer
rights of MTVN with respect to certain proposed transfers by the Company of its
interest; pro rata drag along rights of MTVN and pro rata tag along rights of
the Company with respect to proposed transfers by MTVN of a controlling
interest in Music.co; certain preemptive rights of the Company, and certain
registration rights of the Company. In addition, during a specified period
following the fifth anniversary of the Closing, the Company may require MTVN to
purchase all of its interest in Music.co, and during a specified period
following the sixth anniversary of the Closing, MTVN may require the Company to
sell the Company's interest in Music.co, in each case at a price based on the
public trading price of Music.co's stock if it is then a public company or on
the appraised fair market value of Music.co if it is not then publicly held.
The Organization Agreement, Music.co Partnership Agreement and Parent
Agreement and Guaranty also contain other terms and conditions customary to
transactions of this kind. In connection with the formation of Music.co,
Music.co, MTVN and certain of their respective affiliates entered
4
<PAGE>
into the license agreement, promotion agreement and services agreements
contemplated by the May 19 letter agreement.
A copy of the Organization Agreement is included as Exhibit 2.1, a copy of
the Music.co Partnership Agreement is included as Exhibit 2.2, a copy of the
Parent Agreement and Guaranty is included as Exhibit 2.3, and a copy of the
Company's and Viacom's press release with respect to the formation of the
Partnership is included as Exhibit 99.1 to this Form 8-K. Such documents,
together with the Prior 8-K, are hereby incorporated by reference into this
Item 2, and the foregoing descriptions of such agreements and documents are
qualified in their entirety by reference to such Exhibits and the Prior 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
5
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION.
Proforma financial information is attached to this Form 8-K.
(C) EXHIBITS.
2.1 Organization Agreement dated as of July 15, 1999 among Liberty
Media Corporation, TCI Music, Inc., MTV Networks, a Division of
Viacom International, Inc., MTVN Online Partner I LLC, MTVN
Online Inc., Imagine Radio, Inc., SonicNet, Inc., The Box
Worldwide, Inc., VJN LPTV Corp. and MTVN Online L.P.
2.2 Agreement of Limited Partnership of MTVN Online L.P. dated as of
July 15, 1999 among MTVN Online Partner I LLC, Imagine Radio,
Inc., SonicNet, Inc. and The Box Worldwide, Inc.
2.3 Parent Agreement and Guaranty dated as of July 15, 1999 among TCI
Music, Inc., MTV Networks, a Division of Viacom International,
Inc., Liberty Media Corporation, SonicNet, Inc., The Box
Worldwide, Inc. and MTVN Online L.P.
6
<PAGE>
99.1 Viacom Inc. and TCI Music, Inc. Press Release issued July 15,
1999.
7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
July 30, 1999 TCI MUSIC, INC.
/s/ Ralph J. Sorrentino
By:______________________________
Ralph J. Sorrentino
Executive Vice President and Chief
Financial Officer
8
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited proforma condensed combined financial information has
been prepared to give proforma effect to the investment in Music.co. The
investment in Music.co has been accounted for as a sale between unaffiliated
parties.
The unaudited proforma condensed combined balance sheet as of March 31, 1999 and
the unaudited proforma condensed combined statements of operations for the three
months ended March 31, 1999 and for the year ended December 31, 1998 give
proforma effect to the exchange of SonicNet and The Box, for a 10% ownership
interest in Music.co and the related tax effects of the investment. The
unaudited proforma information gives effect to the transactions as if they had
occurred as of March 31, 1999, for the unaudited condensed combined balance
sheet and as of January 1, 1998 for the unaudited condensed combined statements
of operations.
The unaudited proforma condensed combined balance sheet and condensed combined
statement of operations do not purport to represent what TCI Music's results of
operations would have actually been if the foregoing transaction had, in fact
occurred on January 1, 1998. The unaudited proforma condensed combined balance
sheet and condensed combined statement of operations should be read in
conjunction with the historical audited consolidated financial statements of TCI
Music.
9
<PAGE>
TCI Music, Inc. and Subsidiaries
(a subsidiary of Liberty Media Corporation)
Unaudited Proforma Condensed Combined Balance Sheet
as of March 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Less: Add:
Exchanged Investment in
Historical Assets (a) Music.co (b) Proforma
---------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Assets
Total current assets 26,206 7,021 19,185
Investments in affiliates and -
other cost investments 882 501 150,000 150,381
Property, plant and equipment, net 25,258 10,571 14,687
Intangible assets, net 148,462 47,678 100,784
Other assets 7,808 6,509 1,299
------- ------ ------- -------
Total assets 208,616 72,280 150,000 286,336
======= ====== ======= =======
Liabilities and stockholder's equity
Total current liabilities 19,656 5,021 14,635
Debt, including related party 102,817 102,817
-
Other liabilities 13,378 1,283 96,047 108,142
------- ------ ------- -------
Total liabilities 135,851 6,304 96,047 225,594
Redeemable convertible preferred stock 34,679 34,679
Stockholder's equity 38,086 65,976 53,953 26,063
------- ------ ------- -------
Total liabilities and stockholder's
equity 208,616 72,280 150,000 286,336
======= ====== ======= =======
Weighted average common shares 81,377 81,377
======= =======
Book value per share 0.47 0.32
======= =======
</TABLE>
______________________________________
Exchanged assets
- - ----------------
a Amounts reflect the carrying values of the assets and liabilities of
SonicNet and The Box (contributed by TCI Music to Music.co in exchange for
a 10% ownership interest in Music.co.) as if such assets were
deconsolidated from TCI Music on March 31, 1999.
Investment in Music.co
- - ----------------------
b TCI Music will record its 10% ownership interest in Music.co at the
ascribed fair value of $150 million (such ascribed fair value has been
estimated by management and is subject to final valuation procedures). TCI
Music will account for its investment in Music.co under the cost method.
The contribution of SonicNet and The Box in exchange for the 10% interest
in Music.co will be accounted for as a sale for financial reporting
purposes and accordingly, it is expected that TCI Music will recognize a
gain on the transaction. An illustration of the gain computation, on a
proforma basis at March 31, 1999 is as follows:
<TABLE>
<S> <C>
Ascribed fair value of Music.co investment $150,000
Less: Net assets of SonicNet and The Box 65,976
Less: Make well liability to AT&T (reflected in other liabilities above) 30,000
--------
Pre-tax gain on sale 54,024
Less: Deferred income taxes (reflected in other liabilities above) 21,610
--------
Proforma effect on net income $ 32,414
========
</TABLE>
The proforma gain has not been reflected in the accompanying unaudited
proforma condensed combined statements of operations and comprehensive
earnings due to its nonrecurring nature.
10
<PAGE>
TCI Music, Inc. and Subsidiaries
(a subsidiary of Liberty Media Corporation)
Unaudited Proforma Condensed Combined Statement of Operations
Three Months ended March 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Less:
Exchanged
Historical Assets (1) Proforma
---------- ---------- --------
<S> <C> <C> <C>
Revenue 22,591 6,866 15,725
Operating expenses 20,899 10,508 10,391
Depreciation and amortization 6,837 2,899 3,938
------- ------- -------
Operating income (loss) (5,145) (6,541) 1,396
Interest income (expense) (1,518) 51 (1,569)
Share of losses of affiliates (106) (111) 5
Other, net (51) (37) (14)
------- ------- -------
Income (loss) before income taxes (6,820) (6,638) (182)
Income tax benefit (expense) 441 2,655 (2,214)
------- ------- -------
Net income (loss) from continuing operations (6,379) (3,983) (2,396)
Accretion of redeemable convertible
preferred stock (378) - (378)
------- ------- -------
Net income (loss) attributable to common
stockholder's from continuing operations (6,757) (3,983) (2,774)
======= ======= =======
Weighted average common shares 81,377 81,377
======= =======
Basic and diluted loss to common
stockholders per common share (0.08) (0.03)
======= =======
</TABLE>
__________________________________
Exchanged assets
- - ----------------
1 Amounts reflect historical results from operations of SonicNet and The Box
for the three months ended March 31, 1999. The amounts have been revised to
reflect the results of operations of TCI Music as if the transaction had
occurred on January 1, 1998. The effective tax rate has been assumed to be
40%.
11
<PAGE>
TCI Music, Inc. and Subsidiaries
(a subsidiary of Liberty Media Corporation)
Unaudited Proforma Condensed Combined Statement of Operations
Year ended December 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Less:
Exchanged
Historical Assets (1) Proforma
---------- ---------- --------
<S> <C> <C> <C>
Revenue 84,452 27,899 56,553
Operating expenses 77,822 39,628 38,194
Depreciation and amortization 24,120 9,403 14,717
-------- -------- --------
Operating income (loss) (17,490) (21,132) 3,642
Interest income (expense) (5,370) (5,370)
Share of losses of affiliates (526) (676) 150
Other, net (135) (135)
-------- -------- --------
Income (loss) before income taxes (23,521) (21,808) (1,713)
Income tax benefit (expense) 1,229 8,723 (7,494)
-------- -------- --------
Net income (loss) from continuing operations (22,292) (13,085) (9,207)
Accretion of redeemable convertible
preferred stock (1,354) - (1,354)
-------- -------- --------
Net income (loss) attributable to common
stockholder's from continuing operations (23,646) (13,085) (10,561)
======== ======== ========
Weighted average common shares 81,046 81,046
======== ========
Basic and diluted loss to common
stockholders per common share (0.29) (0.13)
======== ========
</TABLE>
______________________________________________
Exchanged assets
- - ----------------
1 Amounts reflect historical results from operations of SonicNet and The Box
for the year ended December 31, 1998. The amounts have been revised to
reflect the results of operations of TCI Music as if the transaction had
occurred on January 1, 1998. The effective tax rate has been assumed to be
40%.
<PAGE>
EXHIBIT 2.1
CONFORMED COPY
ORGANIZATION AGREEMENT
AMONG
LIBERTY MEDIA CORPORATION,
TCI MUSIC, INC.,
MTV NETWORKS, A DIVISION OF VIACOM INTERNATIONAL INC.,
MTVN ONLINE PARTNER I LLC,
MTVN ONLINE INC.,
IMAGINE RADIO, INC.,
SONICNET, INC.,
THE BOX WORLDWIDE INC.,
VJN LPTV CORP.
AND
MTVN ONLINE L.P.
DATED AS OF JULY 15, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
1.1. Certain Definitions........................................... 2
1.2. Additional Definitions........................................ 9
ARTICLE 2
CLOSING
2.1. Execution and Delivery of Operative Agreements................ 12
2.2. Pre-Closing Capital Contributions and Closing Contributions... 13
2.3. Delivery of Contributions and Partnership Interests........... 13
2.4. Delivery of Satellite Services, Inc. Notice................... 14
2.5 Transfer of Domain Names...................................... 14
2.6. Transfer of VJN LPTV Assets................................... 14
2.7 Transfer of Equity Interests in Box Italy..................... 15
2.8 No Transfers, Etc............................................. 15
ARTICLE 3
COVENANTS
3.1. Employees.................................................... 15
3.2. Rebates of Launch Fees....................................... 18
3.3. Interactive Music Channel.................................... 18
3.4. The Telstra Agreement........................................ 19
3.5. The EMAP Agreements.......................................... 20
3.6. Box Holland.................................................. 20
3.7. Qualifications to Sections 3.4, 3.5 and 3.6.................. 21
i
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
3.8. Cooperation for Financial Reporting......................... 21
3.9. MTVN Efforts................................................ 22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE MTVN ENTITIES
4.1. Due Incorporation; Good Standing............................ 22
4.2. Due Authority; Valid, Binding and Enforceable............... 22
4.3. No Violation of Laws or Agreements.......................... 22
4.4. Financial Statements........................................ 23
4.5. Contracts................................................... 23
4.6. No Changes.................................................. 24
4.7. No Brokerage................................................ 24
4.8. Absence of Litigation....................................... 25
4.9. No Real Property; Totality and Condition of Assets.......... 25
4.10. Compliance with Laws; Permits............................... 25
4.11. Contribution of Assets; Operation of Business............... 26
4.12. Absence of Liabilities...................................... 26
4.13. Employee Benefits........................................... 27
4.14. Employees................................................... 28
4.15. Intellectual Property....................................... 28
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LIBERTY
5.1. Due Incorporation; Good Standing............................ 29
5.2. Due Authority; Valid, Binding and Enforceable............... 29
ii
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
5.3. No Violation of Laws or Agreements........................... 29
5.4. No Solicitation.............................................. 30
5.5. AT&T/Liberty Agreement....................................... 30
ARTICLE 6
REPRESENTATIONS AND WARRANTIES BY TCI MUSIC, SONICNET AND BOX
6.1. Due Incorporation; Good Standing............................. 30
6.2. Due Authority; Valid, Binding and Enforceable................ 30
6.3. No Violation of Laws or Agreements........................... 31
6.4. Subsidiaries................................................. 31
6.5. Financial Statements......................................... 32
6.6. Contracts.................................................... 32
6.7. No Changes................................................... 33
6.8. No Brokerage................................................. 33
6.9. Absence of Litigation........................................ 33
6.10. Real Property; Totality and Conditions of Assets............. 34
6.11. Environmental................................................ 35
6.12. Contribution of Assets; Operation of Business................ 36
6.13. Compliance with Laws; Permits................................ 36
6.14. Taxes........................................................ 37
6.15. Intellectual Property........................................ 38
6.16 [Intentionally Left Blank]................................... 39
6.17. Absence of Liabilities....................................... 39
6.18. Employee Benefits............................................ 39
iii
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
6.19. Certain Restrictive Provisions............................... 41
6.20. Employees.................................................... 41
6.21. Agreements................................................... 42
6.22. Year 2000 Compliance......................................... 42
ARTICLE 7
SURVIVAL; INDEMNIFICATION
7.1. Survival..................................................... 43
7.2. Indemnification by Viacom, Imagine and VLLC.................. 43
7.3. Indemnification by TCI Music, SonicNet and Box............... 44
7.4. Indemnification by Liberty................................... 46
7.5. Indemnification by the Partnership........................... 46
7.6. Tipping Amount; Limitation on Indemnification................ 47
7.7. Exclusive Remedy............................................. 47
7.8. Indemnification Procedures................................... 47
7.9. Subrogation.................................................. 48
ARTICLE 8
MISCELLANEOUS
8.1. Table of Contents; Headings.................................. 48
8.2. Governing Law................................................ 48
8.3. Severability................................................. 49
8.4. Amendments................................................... 49
8.5. Counterparts................................................. 49
8.6. Entire Agreement............................................. 49
8.7. No Presumption............................................... 49
iv
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
8.8. Binding on Viacom............................................ 49
8.9. Parties in Interest; Limitation on Rights of Others.......... 49
8.10. Waivers; Remedies............................................ 50
8.11. Further Assurances........................................... 50
8.12. Public Announcements......................................... 50
8.13. Costs and Expenses........................................... 50
8.14. Notices...................................................... 50
8.15. Jurisdiction; Consent to Service of Process.................. 52
8.16 Exceptions to Representations and Warranties................. 52
8.17 Obligations of TCI Music and Liberty......................... 53
v
<PAGE>
ORGANIZATION AGREEMENT
----------------------
ORGANIZATION AGREEMENT, dated as of July 15, 1999, among Liberty Media
Corporation, a Delaware corporation ("Liberty"), TCI Music, Inc., a Delaware
corporation ("TCI Music "), MTV Networks ("MTVN"), a division of Viacom
International Inc., a Delaware corporation ("Viacom" ), MTVN Online Partner I
LLC, a Delaware limited liability company ("VLLC"), Imagine Radio, Inc., a
California corporation ("Imagine"), MTVN Online Inc., a Delaware corporation
("MTVN Online"), SonicNet, Inc., a Delaware corporation ("SonicNet"), The Box
Worldwide Inc., a Florida corporation ("Box"), VJN LPTV Corp., a Delaware
corporation ("VJN LPTV"), and MTVN Online L.P., a Delaware limited partnership.
VLLC, Imagine, SonicNet and Box desire to jointly own and operate the
Business (as such term is defined in the Partnership Agreement).
Contemporaneously herewith, VLLC, Imagine, SonicNet and Box are
entering into an Agreement of Limited Partnership dated as of the date hereof
(as such Agreement of Limited Partnership may from time to time be amended,
modified or supplemented in accordance with its terms, the "Partnership
Agreement"), pursuant to which VLLC, Imagine, SonicNet and Box will form MTVN
Online L.P. (as such entity may exist in partnership form or in a reorganized,
corporate or other form, the "Partnership").
In connection with the formation of the Partnership and the operation
of the Business, the parties hereto desire that (a) SonicNet shall transfer to
SonicNet LLC, a Delaware limited liability company whose sole member is SonicNet
("SonicNet LLC"), pursuant to the SonicNet LLC Contribution Agreement (as
defined below), the SonicNet LLC Assets and the SonicNet LLC Liabilities (each
as defined below), (b) Box shall transfer to The Box Worldwide LLC, a Delaware
limited liability company whose sole member is Box ("Box LLC"), pursuant to the
Box LLC Contribution Agreement (as defined below), the Box LLC Assets and the
Box LLC Liabilities (each as defined below), (c) MTVN shall transfer to VLLC,
pursuant to the MTVN-VLLC Contribution Agreement (as defined below), the MTVN-
VLLC Assets and the MTVN-VLLC Liabilities (each as defined below), (d) MTVN
Online shall transfer to VLLC, pursuant to the MTVN Online Contribution
Agreement (as defined below), the MTVN Online Assets and the MTVN Online
Liabilities (each as defined below), (e) Box shall transfer to MTVN, pursuant to
the Box-MTVN Assignment Agreement (as defined below), the Box Employment
Contracts (as defined below), (f) SonicNet LLC and Box LLC shall accept the
SonicNet LLC Assets and the Box LLC Assets, respectively, and assume the
SonicNet Liabilities and, the Box Liabilities, respectively, (g) VLLC shall
accept the MTVN Online Assets and the MTVN-VLLC Assets and assume the MTVN
Online Liabilities and the MTVN-VLLC Liabilities and (h) MTVN shall accept and
assume the Box Employment Contracts.
In connection with the formation of the Partnership and the operation
of the Business, (a) SonicNet shall contribute to the Partnership, pursuant to
the SonicNet Contribution Agreement (as defined below), all of the membership
interests in SonicNet LLC (the "SonicNet Membership Interests"), in exchange for
which SonicNet shall receive a 8.75% interest in the Partnership as a Limited
Partner (as defined in the Partnership Agreement), (b) Box shall
<PAGE>
2
contribute to the Partnership, pursuant to the Box Contribution Agreement (as
defined below), all of the membership interests in Box LLC (the "Box Membership
Interests"), in exchange for which Box shall receive a 1.25% interest in the
Partnership as a Limited Partner, (c) VLLC shall contribute to the Partnership,
pursuant to the VLLC Contribution Agreement (as defined below), the VLLC Assets
and the VLLC Liabilities, in exchange for which VLLC shall receive a 1% interest
in the Partnership as the General Partner (as defined in the Partnership
Agreement) and a 69% interest in the Partnership as a Limited Partner, (d)
Imagine shall contribute to the Partnership, pursuant to the Imagine
Contribution Agreement (as defined below), the Imagine Assets and the Imagine
Liabilities ( each as defined below), in exchange for which Imagine shall
receive a 20% interest in the Partnership as a Limited Partner, and (e) the
Partnership shall accept the SonicNet Membership Interests, the Box Membership
Interests, the VLLC Assets and the Imagine Assets and assume the VLLC
Liabilities and the Imagine Liabilities.
The parties desire to set forth herein the terms and conditions of the
foregoing.
NOW, THEREFORE, in consideration of the premises and other covenants
and conditions contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
----------------------------
1.1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the meanings specified below:
"Additional Contributions" means Capital Contributions (as defined in
------------------------
the Partnership Agreement) made pursuant to Section 3.03(a), (b) or (c) of the
Partnership Agreement.
"Affiliate", when used with respect to a specified Person, means any
---------
other Person that directly, indirectly or through one or more intermediaries
Controls, is Controlled by or is under Common Control with, such Person.
Notwithstanding the foregoing, (i) neither the Partnership nor any Person
Controlled by the Partnership shall be deemed an "Affiliate" of any Partner or
of any Affiliate of a Partner, (ii) no Partner or any Affiliate thereof shall be
deemed to be an "Affiliate" of any other Partner or any Affiliate thereof solely
by virtue of its Partnership Interest (as defined in the Partnership Agreement),
(iii) no Person other than Viacom Inc. and its Controlled Affiliates shall be
deemed to be an Affiliate of Viacom Inc. or any Controlled Affiliate of Viacom
Inc., (iv) no Person other than TCI Music and its Controlled Affiliates shall be
deemed to be an Affiliate of TCI Music or any Controlled Affiliate of TCI Music
and (v) no Person other than Controlled Affiliates of Liberty (other than TCI
Music and its Controlled Affiliates) shall be deemed to be an Affiliate of
Liberty.
"Agreement" means this Organization Agreement, including all Schedules
---------
and Exhibits hereto, as the same may be amended or modified from time to time.
<PAGE>
3
"AT&T/Liberty Agreement" means the agreement dated March 9, 1999
----------------------
between Liberty and AT&T Corp. ("AT&T") pursuant to which, among other things,
Liberty has certain rights with respect to certain bandwidth on the AT&T cable
systems (the "AT&T Systems") for interactive television programming (the "Access
Provisions").
"Box-MTVN Assignment Agreement" means the Box-MTVN Assignment
-----------------------------
Agreement dated as of the date hereof between Box and MTVN.
"Box Contribution Agreement" means the Box Contribution, Assignment
--------------------------
and Assumption Agreement dated as of the date hereof between Box and the
Partnership.
"Box Holland License Agreement" means the License Agreement dated as
-----------------------------
of the date hereof between Box LLC and Box.
"Box LLC Assets" means the Box LLC Assets as defined in the Box-LLC
--------------
Contribution Agreement.
"Box-LLC Contribution Agreement" means the Box-LLC Contribution,
------------------------------
Assignment and Assumption Agreement dated as of the date hereof between Box and
Box LLC.
"Box LLC Liabilities" means the Box LLC Liabilities as defined in the
-------------------
Box-LLC Contribution Agreement.
"Box Service" means the programming service currently marketed by Box.
-----------
"Business Day" has the meaning set forth in the Partnership Agreement.
------------
"Closing Capital Contribution" means with respect to each of Tune and
----------------------------
MTVNS and their respective Affiliates, an amount in cash such that, after taking
into account such amount and the parties' Pre-Closing Capital Contributions
(which shall be deemed to have been contributed as Capital Contributions to the
Partnership), the parties' respective total Capital Contributions to the
Partnership, prior to giving effect to any of the contributions to be made to
the Partnership pursuant to the applicable Contribution Agreements, reflect
their respective percentage Partnership Interests.
"Contracts" means, with respect to any Person, all contracts,
---------
commitments, agreements and arrangements to which such Person is a party or by
which it is bound.
"Contribution Agreements" means, collectively, the Box-LLC
-----------------------
Contribution Agreement, the SonicNet-LLC Contribution Agreement, the MTVN-VLLC
Contribution Agreement, the Box Contribution Agreement, the Imagine Contribution
Agreement, the SonicNet Contribution Agreement and the VLLC Contribution
Agreement.
"Control" has the meaning set forth in the Partnership Agreement.
-------
A "Controlled Affiliate" has the meaning set forth in the Partnership
--------------------
Agreement.
<PAGE>
4
"Database Agreement" has the meaning set forth in the Partnership
------------------
Agreement.
"ERISA Affiliate" means with respect to any specified Person, any
---------------
other Person which is treated as a single employer with such specified Person
under Section 414(b), (c), (m) or (o) of the Code.
"Excluded Tune Assets" shall mean, collectively, (i) the Agreement
--------------------
dated on or about July 1997 (the "Telstra Agreement") between SonicNet and
Telstra-Multimedia Pty ACN ("Telstra") and any rights to use the Trademarks in
the Territory (as such terms are defined therein) thereunder, (ii) all equity
interests in VJN LPTV and The Box Worldwide-Europe, B.V. ("Box Europe") and all
assets of Box Europe immediately prior to the Closing, including its equity
interest in, Video Jukebox Network Europe, Ltd., The Box Music Network S.L., The
Box Italy, S.R.L. ("Box Italy") and The Box Holland, B.V. ("Box Holland", and
collectively with the other subsidiaries whose equity interests are referred to
in this clause (ii), the "Excluded Subsidiaries"), and all agreements and
undertakings relating to Box Holland (including without limitation the Joint
Venture Agreement dated as of December 14, 1995 by and among The Box Worldwide-
Europe B.V., Quote Beheer BV and Box Holland (the "Box Holland Joint Venture
Agreement") and all agreements annexed thereto or referenced therein, including,
without limitation, the Initial Licensing Agreement between Video Jukebox
Network, Inc. ("VJN") (now known as Box), and Box Holland and the Second License
Agreement between Box and Box Holland (collectively with the Box Holland Joint
Venture Agreement, the "Box Excluded Agreements"), (iii) the IP Rights Agreement
(the "IP Rights Agreement") dated October 30, 1996 by and among VJN, Video
Jukebox Network International Limited and EMAP plc ("EMAP"), (iv) the Share
Purchase Agreement dated October 30, 1996 by and between VJN and EMAP (the
"Share Purchase Agreement," and collectively with the IP Rights Agreement, the
"EMAP Excluded Agreements") and (v) all equipment and transmitter sites used
exclusively in the Stations' operations.
"GAAP" has the meaning set forth in the Partnership Agreement.
----
"Governmental Entity" means any nation or government, and state or
-------------------
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Imagine Assets" means the Imagine Assets as defined in the Imagine
--------------
Contribution Agreement.
"Imagine Contribution Agreement" means the Imagine Contribution,
------------------------------
Assignment and Assumption Agreement dated as of the date hereof, between Imagine
and the Partnership.
"Imagine Liabilities" means the Imagine Liabilities as defined in the
-------------------
Imagine Contribution Agreement.
"Intellectual Property" means, with respect to any Person, (i) all
---------------------
patents, copyrights, trademarks, service marks, trade identification, trade
dress, trade names, copyrights, trade secrets, know-how, proprietary
information, mask work rights, database rights, publicity
<PAGE>
5
rights, privacy rights, and other rights of a similar nature for which legal
protection, statutory, common law, or otherwise may be obtained, in the United
States and/or any other country or jurisdiction; (ii) all pending applications
to register or otherwise obtain legal protection for any of the foregoing; (iii)
all rights to make application in the future to register or otherwise obtain
legal protection for any of the foregoing; (iv) all rights or priority under
national laws and international conventions with respect to any of the
foregoing; (v) all continuations, continuations-in-part, divisions, renewals,
extensions, patents of addition, reexaminations, or reissues of any of the
foregoing and all related applications therefor; (vi) all goodwill associated
with any of said trademarks, service marks, trade identification, trade dress
and trade names; and (vii) all rights to sue with respect to past and future
infringements of any of the foregoing, which are owned, used or held for use by
such Person.
"knowledge" means, (i) with respect to TCI Music or MTVN (or Viacom),
---------
the actual knowledge of any executive officer or director of TCI Music or
Viacom, respectively, and (ii) with respect to the other Tune Entities or the
other MTVN Entities, the actual knowledge of any officer or director of such
other Tune Entity or other MTVN Entity, as applicable.
"Laws" means all statutes, codes, ordinances, decrees, rules,
----
regulations, orders, judgments, decrees, or general principles of common and
civil law and equity, in any case binding on or directly affecting the Person
referred to in the context in which such word is used.
"License" means any option, license, or agreement of any kind relating
-------
to the exercise, use, non-use, registration, enforcement, non-enforcement or
remuneration for any Intellectual Property right.
"Lien" means any lien, charge, claim, pledge, security interest or
----
other encumbrance of any kind, except as may exist under federal or state
securities laws or except as created by or resulting from this Agreement.
"LMA Agreement" means the Local Marketing Arrangement dated as of the
-------------
date hereof between Box LLC and VJN LPTV.
"Loss" means any losses, costs, expenses, damages, Taxes, penalties,
----
fines, charges, demands, liabilities, obligations and claims of any kind
(including interest, penalties and reasonable attorneys' and consultants' fees,
expenses and disbursements).
"MTVN Assigned Contracts" means, collectively, the Contracts to be
-----------------------
assigned to the Partnership by Imagine and VLLC, respectively, pursuant to the
Imagine Contribution Agreement and the VLLC Contribution Agreement.
"MTVN Benefit Plan" means (i) any "employee benefit plan" within the
-----------------
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), (ii) any other employee benefit plan, arrangement or
policy, including without limitation, any stock option, stock purchase, stock
award, stock appreciation, phantom stock, deferred compensation, pension,
retirement, savings, profit sharing, incentive, bonus, health, life insurance,
cafeteria, flexible spending, dependent care, fringe benefit, vacation pay,
holiday pay,
<PAGE>
6
disability, sick pay, workers compensation, unemployment, severance, employee
loan or educational assistance plan, arrangement or policy, and (iii) any
employment, indemnification, consulting, severance or change-in-control
agreement, in each case, which is sponsored or maintained by any of the MTVN
Entities or any of their Affiliates, or to which any of the MTVN Entities or any
of their Affiliates contributes or is required to contribute, on behalf of
current or former employees, consultants or directors of the MTVN Entities or
their beneficiaries or dependents, whether or not written and whether or not
created or maintained within or without the United States.
"MTVN Contribution" means, collectively, the Imagine Assets and the
-----------------
VLLC Assets.
"MTVN Entities" means, collectively, MTVN, MTVN Online, Imagine and
-------------
VLLC.
"MTVN Online Assets" means the MTVN Online Assets as defined in the
------------------
MTVN Online Contribution Agreement.
"MTVN Online Contribution Agreement" means the MTVN Online
----------------------------------
Contribution, Assignment and Assumption Agreement dated as of the date hereof
between MTVN Online and VLLC.
"MTVN Online Liabilities" means the MTVN Online Liabilities as defined
-----------------------
in the MTVN Online Contribution Agreement.
"MTVN-VLLC Assets" means the MTVN-VLLC Assets as defined in the MTVN-
----------------
VLLC Contribution Agreement.
"MTVN-VLLC Contribution Agreement" means the MTVN-VLLC Contribution,
--------------------------------
Assignment and Assumption Agreement dated as of the date hereof between MTVN and
VLLC.
"MTVN-VLLC Liabilities" means the MTVN-VLLC Liabilities as defined in
---------------------
the MTVN-VLLC Contribution Agreement.
"Material Adverse Change Exclusions" means, with respect to the Tune
----------------------------------
Entities (A) any loss of subscribers or advertising, provided that TCI Music and
the other Tune Entities have acted in good faith, (B) changes that occur as a
result of the transactions contemplated by the MOU and the transactions
contemplated hereby (including, without limitation, terminations of affiliation
or other agreements as a result of change in control or no assignment
provisions), (C) failure to launch the Box Service in additional systems as a
result of MTVN's failure to consent to the payment of launch fees, (D) changes
that occur as a result of the failure of Box or SonicNet to take any action
which requires MTVN's consent pursuant to the MOU where such consent is not
granted, and (E) changes, if any, disclosed to MTVN prior to May 19, 1999 in an
e-mail sent by Nicholas Butterworth or in a teleconference with Alan McGlade
initiated by Tune and Liberty with MTVN, in each case on May 18, 1999 for such
purpose.
<PAGE>
7
"MOU" means the Letter Agreement dated May 19, 1999 among Viacom,
---
Liberty and TCI Music.
"No Basket Representations" means, with respect to the MTVN Entities,
-------------------------
the representations and warranties contained in Sections 4.7, 4.11(a), 4.11(b),
4.11(c) and 4.11(e) with respect to the Tune Entities, the representations and
warranties contained in Sections 6.8, 6.10(g), 6.12(a), 6.12(b), 6.14, 6.20 and
6.21.
"Outstanding License" means, with respect to any Person, any material
-------------------
License by or to such Person or to which such Person is otherwise a party, or by
which such Person or any of its Intellectual Property is subject or bound.
"Parent Agreement" means the Parent Agreement and Guaranty dated as of
----------------
the date hereof among TCI Music, MTVN, Box, SonicNet, Liberty and the
Partnership.
"Partner" has the meaning set forth in the Partnership Agreement.
-------
"Partnership Interest" has the meaning set forth in the Partnership
--------------------
Agreement.
"Permits" means permits, approvals, orders, consents, licenses,
-------
certificates, franchises and exemptions from, and filings and registrations
with, Governmental Entities.
"Person" has the meaning set forth in the Partnership Agreement.
------
"Pre-Closing Capital Contribution" means with respect to each of MTVN
--------------------------------
and its Affiliates and TCI Music and its Affiliates, amounts provided by MTVN
and TCI Music (and their respective Affiliates), respectively, from May 19, 1999
to the date hereof in accordance with the MOU, to fund its respective assets and
businesses to be contributed to the Partnership with sufficient capital to fund
operations.
"Programming License Agreement" has the meaning set forth in the
-----------------------------
Partnership Agreement.
"Promotion Agreement" has the meaning set forth in the Partnership
-------------------
Agreement.
"Related Party Agreements" has the meaning set forth in the
------------------------
Partnership Agreement.
"Services Agreement" has the meaning set forth in the Partnership
------------------
Agreement.
"SonicNet Contribution Agreement" means the SonicNet Contribution,
-------------------------------
Assignment and Assumption Agreement dated as of the date hereof between SonicNet
and the Partnership.
"SonicNet LLC Assets" means the SonicNet LLC Assets as defined in the
-------------------
SonicNet-LLC Contribution Agreement.
<PAGE>
8
"SonicNet LLC Liabilities" means the SonicNet LLC Liabilities as
------------------------
defined in the SonicNet-LLC Contribution Agreement.
"SonicNet-LLC Contribution Agreement" means the SonicNet-LLC
-----------------------------------
Contribution, Assignment and Assumption Agreement dated as of the date hereof
between SonicNet and SonicNet LLC.
"Station" means the low power broadcast television stations listed on
-------
Schedule 2.6 hereof.
"subsidiary" means, with respect to any Person, (i) any corporation,
----------
association, limited liability company or other business entity of which more
than 50% of the total voting power of securities thereof with the rights to vote
to elect a majority of the directors, managers, trustees or similar officials is
at the time owned or controlled, directly or indirectly, by such Person or one
or more of the other subsidiaries of that Person or a combination thereof and
(ii) any partnership in which such Person or any of its subsidiaries is a
general partner and owns 10% or more of the equity interests therein.
"Taxes" means any and all federal, state, local and foreign taxes,
-----
fees, levies, duties, tariffs, imposts, and other charges of any kind whatsoever
imposed by a Governmental Entity, including, without limitation, income,
payroll, withholding, excise, sales, use, lease, privilege, personal and other
property, use and occupancy, business and occupation, mercantile, real estate,
gross receipts, license, employment, severance, stamp, premium, windfall
profits, social security (or similar unemployment), disability, transfer,
registration, value added, alternative or add-on minimum, estimated, or capital
stock and franchise and other tax of any kind whatsoever, including any
interest, penalty or addition thereto, or additional amounts imposed with
respect thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
----------
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Technology Sharing and License Agreement" has the meaning set forth
----------------------------------------
in the Partnership Agreement.
"Trademark License Agreement" means the Trademark License Agreement
---------------------------
dated as of the date hereof between MTVN and VLLC.
"Tune Assigned Contracts" means, collectively, the Contracts to be
-----------------------
assigned by SonicNet and Box to SonicNet LLC and Box LLC, respectively, pursuant
to the SonicNet-LLC Contribution Agreement and the Box-LLC Contribution
Agreement, respectively, and the Contracts to which any Tune Subsidiary is a
party.
"Tune Benefit Plan" means (i) any "employee benefit plan" within the
-----------------
meaning of Section 3(3) of the ERISA, (ii) any other employee benefit plan,
arrangement or policy, including without limitation, any stock option, stock
purchase, stock award, stock appreciation,
<PAGE>
9
phantom stock, deferred compensation, pension, retirement, savings, profit
sharing, incentive, bonus, health, life insurance, cafeteria, flexible spending,
dependent care, fringe benefit, vacation pay, holiday pay, disability, sick pay,
workers compensation, unemployment, severance, employee loan or educational
assistance plan, arrangement or policy, and (iii) any employment,
indemnification, consulting, severance or change-in-control agreement, in each
case, which is sponsored or maintained by any of the Tune Entities or any of
their Affiliates, or to which any of the Tune Entities or any of their
Affiliates contributes or is required to contribute, on behalf of current or
former employees, consultants or directors of any of the Tune Entities or their
beneficiaries or dependents, whether or not written and whether or not created
or maintained within or without the United States.
"Tune Contribution" means the SonicNet LLC Assets, the Box LLC Assets,
-----------------
the SonicNet Membership Interests, the Box Membership Interests and the business
and assets of the Tune Subsidiaries.
"Tune Entities" means, collectively, TCI Music, SonicNet, Box, VJN
-------------
LPTV, SonicNet LLC, Box LLC and the Tune Subsidiaries.
"Tune Subsidiary" or "Tune Subsidiaries" means one or more
--------------- -----------------
subsidiaries of SonicNet and Box (other than the Excluded Subsidiaries)
immediately prior to the Closing (including Box LLC and SonicNet LLC), all of
the capital stock or other equity interest of which (other than Box LLC and
SonicNet LLC) shall be contributed to SonicNet LLC or Box LLC, as the case may
be, pursuant to the SonicNet-LLC Contribution Agreement or the Box-LLC
Contribution Agreement, respectively.
"Viacom" has the meaning set forth in the Partnership Agreement.
------
"Viacom Inc." has the meaning set forth in the Partnership Agreement.
-----------
"VLLC Assets" means the VLLC Assets as defined in the VLLC
-----------
Contribution Agreement.
"VLLC Contribution Agreement" means the VLLC Contribution, Assignment
---------------------------
and Assumption Agreement dated as of the date hereof between VLLC and the
Partnership.
"VLLC Liabilities" means the VLLC Liabilities as defined in the VLLC
----------------
Contribution Agreement.
1.2. Additional Definitions.
----------------------
The following additional terms have the meaning ascribed thereto in
the Section or Schedule indicated below next to such term:
<PAGE>
10
Defined Term Section Defined In
- - ------------ ------------------
"Assigned MTVN Employment Contract" 4.13(e)
"Assigned Tune Employment Contract" 6.18(e)
"AT&T" Definition of AT&T/Liberty Agreement
"AT&T Systems" Definition of AT&T/Liberty Agreement
"Access Provisions" Definition of AT&T/Liberty Agreement
"Box" Preamble
"Box Employment Contracts" 3.1(d)
"Box Europe" Definition of Excluded Tune Assets
"Box Excluded Agreements" Definition of Excluded Tune Assets
"Box Holland" Definition of Excluded Tune Assets
"Box Holland Joint Venture Agreement" Definition of Excluded Tune Assets
"Box Italy" Definition of Excluded Tune Assets
"Box LLC" Recitals
"Box Membership Interests" Recitals
"Box-MTVN Employees" 3.1(b)
"Business" Recitals
"Closing" 2.1
"COBRA" 3.1(o)
"Code" 4.13(b)
"Domain Name" 2.5
"EMAP" Definition of Excluded Tune Assets
"EMAP Excluded Agreements" Definition of Excluded Tune Assets
"ERISA" Definition of MTVN Benefit Plan
"Excluded Subsidiaries" Definition of Excluded Tune Assets
"FCC" 6.13(c)
"FCC Licenses" 6.13(c)
"Hazardous Substances" 6.11
"IP Rights Agreement" Definition of Excluded Tune Assets
"Imagine" Preamble
"Indemnified Party" 7.8
"Interactive Music Channel" 3.3
"Liberty" Preamble
"LMA Ruling" 2.6
"MTVN" Preamble
"MTVN Contribution IP" 4.15(a)
"MTVN Financial Statements" 4.4
"MTVN Indemnified Parties" 7.3
"MTVN Online" Recitals
"MTVN Online Interim Balance Sheet" 4.4
"MTVN-Partnership Employees" 3.1(j)
"MTVN Permits" 4.10(b)
"Operative Agreements" 2.1
"Other Party" 7.8(b)
<PAGE>
11
Defined Term Section Defined In
- - ------------ ------------------
"PBGC" 4.13(b)
"Partnership" Recitals
"Partnership Agreement" Recitals
"Partnership Indemnified Parties" 7.2
"Real Property" 6.10(b)
"Rebates" 3.2
"Restrictive Provisions" 6.19
"SSI" 2.4
"Share Purchase Agreement" Definition of Excluded Tune Assets
"SonicNet" Preamble
"SonicNet LLC" Recitals
"SonicNet-LLC Employees" 3.1(a)
"SonicNet Membership Interests" Recitals
"SonicNet Trademarks" 3.4(b)
"TCI Music" Preamble
"Telstra" Definition of Excluded Tune Assets
"Telstra Agreement" Definition of Excluded Tune Assets
"Telstra SonicNet Sites" 3.4(a)
"Tipping Amount" 7.6
"Tune Budget" 6.7
"Tune Financial Statements" 6.5
"Tune Indemnified Parties" 7.2
"Tune Interim Balance Sheet" 6.5
"Tune Permits" 6.13(b)
"Tune Scheduled Intellectual Property" 6.15(b)
"Tune Subsidiary Benefit Plan" 6.18(f)
"VJN" Definition of Excluded Tune Assets
"VJN LPTV" Preamble
"Viacom" Preamble
"VLLC" Preamble
"Year 2000 Compliant" 6.22
ARTICLE 2
CLOSING
-------
2.1. Execution and Delivery of Operative Agreements. Upon the
----------------------------------------------
execution and delivery of this Agreement (the "Closing"), each of the parties
hereto shall contemporaneously execute and deliver the following applicable
agreements to which it is indicated to be a party (the "Operative Agreements"):
(a) the Partnership Agreement, in the form of Exhibit A attached
hereto;
<PAGE>
12
(b) the Box-MTVN Assignment Agreement, in the form of Exhibit B
attached hereto;
(c) the Box-LLC Contribution Agreement, in the form of Exhibit C
attached hereto;
(d) the SonicNet-LLC Contribution Agreement, in the form of Exhibit D
attached hereto;
(e) the MTVN-VLLC Contribution Agreement, in the form of Exhibit E
attached hereto;
(f) the Box Contribution Agreement, in the form of Exhibit F attached
hereto;
(g) the SonicNet Contribution Agreement, in the form of Exhibit G
attached hereto;
(h) the VLLC Contribution Agreement, in the form of Exhibit H attached
hereto;
(i) the Imagine Contribution Agreement, in the form of Exhibit I
attached hereto;
(j) the MTVN Online Contribution Agreement, in the form of Exhibit J
attached hereto;
(k) the Parent Agreement, in the form of Exhibit K attached hereto;
(l) the Trademark License Agreement, in the form of Exhibit L attached
hereto;
(m) the Promotion Agreement, in the form of Exhibit M attached hereto;
(n) the Services Agreement, in the form of Exhibit N attached hereto;
(o) the Programming License Agreement, in the form of Exhibit O
attached hereto;
(p) the Box Holland License Agreement, in the form of Exhibit P
attached hereto;
(q) the Box Holland Promissory Note, in the form of Exhibit Q attached
hereto;
(r) the Technology Sharing and License Agreement, in the form of
Exhibit R hereto;
<PAGE>
13
(s) the LMA Agreement, in the form of Exhibit S attached hereto and
(t) assignments of lease for each real property lease assigned
pursuant to any of the Contribution Agreements, in the form of Exhibit T
attached thereto.
2.2. Pre-Closing Capital Contributions and Closing Contributions.
-----------------------------------------------------------
Each of MTVN and TCI Music has preliminarily determined in accordance with the
provisions of the MOU the amount of its respective Pre-Closing Capital
Contributions. The estimated amount of MTVN's Pre-Closing Capital Contributions
is, $3,136,460 (of which $2,439,469 is attributable to VLLC and $696,991 is
attributable to Imagine). The estimated amount of TCI Music's Pre-Closing
Capital Contributions is $5,548,000 (of which $3,360,000 is attributable to Box
and $2,188,000 is attributable to SonicNet) all of which amounts are subject to
adjustment by agreement of TCI Music and MTVN within three Business Days after
receipt by MTVN or TCI Music of the other's calculation thereof with reasonable
back-up materials attached. MTVN shall make a Closing Capital Contribution
within three Business Days after MTVN receives such calculation of TCI Music's
Pre-Closing Capital Contribution, which Closing Capital Contribution shall be
calculated on the basis of the formula therefor set forth in the MOU and shall
be deemed to have been made on the Closing Date.
2.3. Delivery of Contributions and Partnership Interests.
---------------------------------------------------
(a) (i) Each of SonicNet and Box shall contribute and assign to
SonicNet LLC and Box LLC, respectively, pursuant to their respective
Contribution Agreements, the SonicNet LLC Assets and the Box LLC Assets and
SonicNet LLC and Box LLC shall accept the SonicNet LLC Assets and the Box LLC
Assets, respectively, and assume the SonicNet-LLC Liabilities and the Box-LLC
Liabilities, respectively, (ii) MTVN and MTVN Online shall contribute and assign
to VLLC, pursuant to their respective Contribution Agreements, the MTVN-VLLC
Assets and the MTVN Online Assets, and VLLC shall accept the MTVN-VLLC Assets
and the MTVN Online Assets and assume the MTVN-VLLC Liabilities and the MTVN
Online Liabilities, and (iii) Box shall assign to MTVN, pursuant to the Box-MTVN
Assignment Agreement, and MTVN shall assume, the Box Employment Contracts.
(b) At the Closing, (i) each of Box, SonicNet, Imagine and VLLC shall
contribute and assign to the Partnership, pursuant to their respective
Contribution Agreements, the Box Membership Interests, the SonicNet Membership
Interests, the Imagine Assets and the VLLC Assets, (ii) the Partnership shall
accept the SonicNet Membership Interests, the Box Membership Interests and the
VLLC Assets and the Imagine Assets and assume the Imagine Liabilities and VLLC
Liabilities, all as more particularly described in the applicable Contribution
Agreements; provided, however, that except as expressly set forth herein, the
-------- -------
Partnership shall not assume any liabilities hereunder except those expressly
assumed under the Contribution Agreements to which it is a party, and (iii) the
Partnership shall issue to SonicNet a 8.75% interest in the Partnership as a
Limited Partner, to Box a 1.25% interest in the Partnership as a Limited
Partner, to VLLC a 1% interest in the Partnership as the General Partner and a
69% interest in the Partnership as a Limited Partner and to Imagine a 20%
interest in the Partnership as a Limited Partner.
<PAGE>
14
2.4. Delivery of Satellite Services, Inc. Notice. Contemporaneously
-------------------------------------------
with the Closing, Liberty and MTVN shall deliver, or cause to be delivered,
written notice to Satellite Services, Inc. ("SSI") notifying SSI that the
Closing has occurred thereby.
2.5 Transfer of Domain Names. At the Closing, with respect to each
------------------------
of the domain names set forth on Schedule 2.5 hereto (each a "Domain Name"),
MTVN shall cause the Controlled Affiliate set forth on Schedule 2.5 opposite a
Domain Name to transfer to the Partnership all of such Controlled Affiliate's
right, title and interest in, to and under such Domain Name.
2.6. Transfer of VJN LPTV Assets.
---------------------------
(a) Upon receipt of approval by the FCC for the transfer of the FCC
licenses of VJN LPTV with respect to 75% of the Stations from VJN LPTV to Box
LLC, Box shall promptly cause VJN LPTV to be merged into Box or liquidated and
distributed to Box, and Box shall therefor promptly transfer to Box LLC, for no
consideration, the FCC licenses for such Stations and all assets related
thereto, and thereafter, from time to time, as approved by the FCC for the
transfer of the FCC licenses with respect to any other Stations is received, Box
shall promptly transfer to Box LLC the FCC licenses for such Stations and all
assets related to each such Station. All such transfers shall be made pursuant
to an instrument of conveyance in form and substance reasonably satisfactory to
Box LLC. Each such instrument of conveyance shall contain representations and
warranties and indemnities from the Tune Entities relating to such FCC licenses
and such assets to the same extent as the representations and warranties and
indemnities contained herein. During the period commencing on the date of this
Agreement and terminating as to each Station on the earlier of (x) the transfer
of the applicable FCC licenses and assets with respect to such Station to Box
LLC or (y) the termination of the LMA Agreement with respect to such Station,
Box LLC shall reimburse VJN LPTV or Box, as applicable, for its reasonable
expenses incurred in the ordinary course of business in operating such Station.
(b) In the event the FCC has denied the applications for transfer of
any license(s) for any of the Stations to Box LLC, or in the event an LMA
Ruling, as defined in the LMA Agreement, as to any Station is received, Box
shall pay to Box LLC $25,000 for each Station which the FCC has denied the
license transfer application or required termination of the LMA Agreement with
respect to. Such payments shall be made by wire transfer of immediately
available funds.
2.7 Transfer of Equity Interests in Box Italy. Box shall use its
-----------------------------------------
reasonable best efforts to obtain all required approvals to transfer, and to
transfer, as promptly as practicable after the Closing, a portion of the equity
interests in Box Italy to Box LLC and a portion of such interests to either the
Partnership or a subsidiary of Box LLC, in such proportions as the Partnership
shall determine, in each case for no consideration and pursuant to an instrument
of conveyance in form and substance reasonably satisfactory to Box LLC and Box,
containing representations, warranties and indemnities from the Tune Entities
relating to such equity interests and to the assets of Box Italy to the same
extent as the representations, warranties contained herein which relate to the
Tune Subsidiaries and their assets. Upon the transfer of such
<PAGE>
15
equity interests in Box Italy to Box LLC and to the Partnership or a subsidiary
of Box LLC, TCI Music shall be deemed to have made a Required Capital
Contribution to the Partnership on behalf of SonicNet and Box in an amount equal
to the amount contributed by TCI Music or its subsidiaries to Box Italy to fund
its assets and businesses with sufficient capital to fund operations in
accordance with the Tune Budget from May 19, 1999 to the date of such transfer
and MTVN shall within five Business Days thereafter, make a Capital Contribution
to the Partnership on behalf of VLLC and Imagine, without the need for any
notice or Capital Call, in an amount equal to nine times the amount deemed to
have been contributed by TCI Music above, which Capital Contribution shall also
be deemed to be a Required Capital Contribution.
2.8 No Transfers, Etc. Box shall not, and shall not permit any of
------------------
its subsidiaries to, transfer or grant any Liens on any of the stock or other
equity of Box Italy or any of the assets of Box Italy or VJN LPTV, except to the
extent provided for in the liquidation of VJN LPTV or merger of VJN LPTV and Box
referred to in Section 2.6. Box shall cause Box Italy and VJN LPTV to conduct
their operations in the ordinary course (including in accordance with the LMA in
the case of VJN LPTV and including the continuation of the funding of operations
of Box Italy in accordance with the MOU) and to not pay any dividends pending
the contribution of the equity interests in Box Italy and the assets of VJN LPTV
as described in Sections 2.6 and 2.7.
ARTICLE 3
COVENANTS
---------
3.1. Employees.
---------
(a) Schedule 3.1(a) attached hereto sets forth those employees of
SonicNet who will become employees of SonicNet LLC upon consummation of the
Closing (the "SonicNet LLC Employees"). The Partnership shall cause SonicNet
LLC to treat the SonicNet LLC Employees in a fair and equitable manner,
consistent with other employees of the Partnership (including any previously
employed by MTVN).
(b) Schedule 3.1(b) attached hereto sets forth those employees of Box
and its subsidiaries who will become employees of MTVN upon consummation of the
Closing (the "Box-MTVN Employees"). MTVN shall treat the Box-MTVN Employees in
a fair and equitable manner, consistent with other similarly situated employees
of MTVN.
(c) TCI Music, SonicNet and Box shall be responsible for any
liability or obligation arising under any Tune Benefit Plan or as a result of
the employment or termination of employment of employees or former employees of
Box, SonicNet, Box LLC, SonicNet LLC, Box Italy or the Tune Subsidiaries, or the
provision of services or termination of provision of services by directors,
consultants, agents or independent contractors of Box, SonicNet, Box LLC,
SonicNet LLC, Box Italy or the Tune Subsidiaries (including, without limitation,
salaries, bonuses, payroll taxes, severance obligations, contributions to and
benefits under the Tune Benefit Plans and all other employment or service
related claims); provided, however, that none of TCI Music, Liberty, SonicNet or
-------- -------
Box shall assume or otherwise be responsible for (i) any
<PAGE>
16
liability or obligation arising after the date hereof under the Assigned Tune
Employment Contracts; (ii) any liability or obligation arising after the date
hereof under any Tune Subsidiary Benefit Plan with respect to any SonicNet LLC
Employee or Box-MTVN Employee; or (iii) any liability or obligation with respect
to the employment or termination of employment of any SonicNet LLC Employee or
Box-MTVN Employee arising after the date hereof.
(d) With respect to the Box-MTVN Employees, MTVN shall assume the
obligations arising after the date hereof under the employment contracts listed
on Schedule 3.1(d) (the "Box Employment Contracts").
(e) Neither the Partnership nor any of its subsidiaries nor MTVN
shall assume any liability or obligation under any employee benefit plan, policy
or arrangement or any employment agreement of TCI Music, Liberty, Box, SonicNet
or any of their Affiliates, except for (i) liabilities or obligations arising
after the date hereof under the Assigned Tune Employment Contracts or (ii) with
respect to any SonicNet LLC Employee or Box-MTVN Employee, liabilities or
obligations arising after the date hereof under any Tune Subsidiary Benefit
Plan.
(f) Box-MTVN and SonicNet LLC Employees shall be permitted to elect
to roll over, in cash and notes representing participant loans, any distribution
received from a tax-qualified 401(k) savings plan maintained by a Tune Entity to
a tax-qualified 401(k) savings plan established or maintained by any MTVN Entity
or the Partnership for the benefit of Box-MTVN or SonicNet LLC Employees, as the
case may be, to the extent permitted by the Code.
(g) With respect to any director, employee, consultant, agent or
independent contractor of any Tune Subsidiary or Box Italy who is not a SonicNet
LLC Employee or a Box-MTVN Employee, and whose employment or services cannot be
completely terminated prior to the consummation of the Closing due to any
applicable Laws, the Partnership or MTVN, as applicable, shall assist in the
termination of such director, employee, consultant, agent or independent
contractor, consistent with such Laws. TCI Music, SonicNet and Box shall be
responsible for all liabilities in connection with the employment or termination
of employment of any such employee or the provision of services or termination
of provision of services by any such director, consultant, agent or independent
contractor, including without limitation salaries, bonuses, payroll taxes,
severance obligations, contributions to and benefits under the Tune Benefit
Plans and all other employment or service related claims, with respect to all
periods whether before or after the Closing, as well as all reasonable legal
fees and expenses of MTVN or the Partnership and its Controlled Affiliates
arising from or incurred on account of any such termination.
(h) Until the second anniversary of the date hereof, neither Liberty,
TCI Music nor any of their Controlled Affiliates will hire any of the Box-MTVN
Employees or any of the employees of the Partnership or its subsidiaries without
the prior consent of MTVN.
(i) Neither Liberty, TCI Music nor any of their Controlled Affiliates
will solicit for employment any of the Box-MTVN Employees or any employee of the
Partnership or any of its subsidiaries for so long as TCI Music or any of its
Affiliates owns an equity interest in the Partnership. The preceding sentence
shall not apply with respect to Nicholas Butterworth to
<PAGE>
17
the extent provided by the letter agreement dated May 19, 1999 among Liberty,
TCI Music and Viacom.
(j) Schedule 3.1(j) attached hereto sets forth a list of those
employees of any MTVN Entity who will become employees of the Partnership upon
the consummation of the Closing ("MTVN-Partnership Employees").
(k) Nothing in this Agreement shall limit the right of the
Partnership to hire additional employees after the Closing.
(l) MTVN shall (i) permit each Box-MTVN Employee and his or her
dependents to participate in its employee benefit plans to the same extent as
MTVN's other similarly situated employees and their dependents; (ii) give each
Box-MTVN Employee credit for his or her past service with SonicNet or Box (and
any predecessor employer thereto) for purposes of eligibility to participate and
vesting (but not benefit accrual) under its employee benefit plans; and (iii)
not subject any Box-MTVN Employee to any limitations on benefits for pre-
existing conditions under its group health and disability plans.
(m) The Partnership shall (i) permit each SonicNet LLC Employee and
his or her dependents to participate in its employee benefit plans to the same
extent as the Partnership's other similarly situated employees and their
dependents; (ii) give each SonicNet LLC Employee credit for his or her past
service with SonicNet or Box (and any predecessor employer thereto) for purposes
of eligibility to participate and vesting (but not benefit accrual) under its
employee benefit plans; and (iii) not subject any SonicNet LLC Employee to any
limitations on benefits for pre-existing conditions under its group health and
disability plans.
(n) TCI Music, SonicNet and Box shall be responsible for any claims
for group health benefits incurred prior to the Closing by SonicNet LLC
Employees or Box-MTVN Employees or their dependents; MTVN shall be responsible
for any claims for group health benefits incurred prior to the Closing by MTVN-
Partnership Employees or their dependents; the Partnership shall be responsible
for any claims for group health benefits incurred on or after the Closing by
SonicNet LLC Employees or MTVN-Partnership Employees or their dependents; and
MTVN shall be responsible for any claims for group health benefits incurred on
or after the Closing by Box-MTVN Employees or their dependents. For purposes of
this paragraph (n), a health care claim shall be deemed to be incurred when the
services giving rise to the claim are performed and not when the employee is
billed for such services or submits a claim for benefits.
(o) TCI Music, SonicNet and Box shall be responsible for providing
any continuation of group health coverage to SonicNet LLC Employees or Box-MTVN
Employees or their dependents required by Section 4980B of the Code or Sections
601-608 of ERISA ("COBRA") with respect to any "qualifying event," as defined in
Section 4980B of the Code, which occurs on or prior to the Closing (including as
a result of the transactions contemplated by this Agreement) and MTVN shall be
responsible for providing any continuation of group health coverage to MTVN-
Partnership Employees or their dependents required by COBRA with respect to a
qualifying event which occurs on or prior to the Closing (including as a result
of the transactions contemplated by this Agreement).
<PAGE>
18
(p) TCI Music, SonicNet and Box shall be responsible for providing
any short-term disability benefits payable to any SonicNet LLC Employee or Box-
MTVN Employee with respect to any period prior to the Closing and for providing
any long-term disability benefits payable to any SonicNet LLC Employee or Box-
MTVN Employee who is on short-term disability as of the Closing; MTVN shall be
responsible for providing any short-term disability benefits payable to any
MTVN-Partnership Employee with respect to any period prior to the Closing and
for providing any long-term disability benefits payable to any MTVN-Partnership
Employee who is on a short-term disability as of the Closing; the Partnership
shall be responsible for providing any short-term disability benefits payable to
any SonicNet LLC Employee or MTVN-Partnership Employee with respect to any
period after the Closing; and MTVN shall be responsible for providing any short-
term disability benefits payable to any Box-MTVN Employee with respect to any
period after the Closing.
(q) Sections 3.1 (l) through (p) shall not apply to employees of Box
Italy or the Tune Subsidiaries other than SonicNet LLC or Box LLC.
(r) In the event that the Partnership or any of its Affiliates
terminates any employee of The Box Argentina S.A., it shall do so in accordance
with any procedures required by local Laws.
3.2. Rebates of Launch Fees. TCI Music will use its commercially
----------------------
reasonable efforts to obtain rebates of all launch fees paid to any cable system
to which it or its subsidiaries may be entitled under the applicable affiliation
agreements relating to Box or its subsidiaries ("Rebates") . TCI Music will
promptly pay over to the Partnership any Rebates that it or any of its
subsidiaries receive as a result of such efforts or otherwise.
3.3. Interactive Music Channel. In the event that Liberty assigns its
-------------------------
rights under the Access Provisions to TCI Music in connection with certain
recently-announced proposed transactions between Liberty and TCI Music, then to
the extent that AT&T provides or otherwise enables the functionalities necessary
to provide interactive television applications over the AT&T Systems, and TCI
Music decides to provide an interactive music and music related transaction
channel (an "Interactive Music Channel"), TCI Music agrees to offer to the
Partnership the opportunity to enter into a joint venture with TCI Music to
provide such channel, the terms and conditions of such joint venture to be
subject to the terms of the Access Provisions, as they may be amended, and upon
the formation of such joint venture, the Partnership agrees to offer (which
offer shall remain outstanding for 30 days) to license to such joint venture the
rights to the database being licensed pursuant to the Database License Agreement
on terms no less favorable than those of the Database License Agreement.
Formation of such a joint venture will also be subject to TCI Music and the
Partnership's formulation of a mutually acceptable business plan and to the
execution and delivery of reasonably acceptable definitive documentation
regarding the joint venture. In the event the Partnership and TCI Music do not
enter into such joint venture, neither such Person will have any further
obligation under this Section 3.3, but such failure shall not affect any of TCI
Music's obligations under Section 4.2 of the Parent Agreement. In the event
that Liberty does not assign its rights under the Access Provisions as they may
be amended to TCI Music, Liberty will not be obligated by the terms of this
Section
<PAGE>
19
3.3. This Section 3.3 is not intended to obviate any of the obligations of
Liberty, TCI Music or their Controlled Affiliates under the provisions of
Section 4.2 of the Parent Agreement.
3.4. The Telstra Agreement.
---------------------
(a) During the term (including any renewal term) of the Telstra
Agreement and for six months after termination thereof, the Partnership shall,
and shall cause its Controlled Affiliates to (and, with respect to clause (i)
below, each of the Partners will, and will cause its Affiliates to):
(i) comply with the provisions of Section 10 (Confidentiality)
of the Telstra Agreement;
(ii) designate and maintain one or more SonicNet Sites, as
defined in the Telstra Agreement, including a World Wide Web site branded
"Addicted to Noise" (the "Telstra SonicNet Sites"), similar in nature to the
currently existing SonicNet Sites with links to the TMPL Site (as defined in the
Telstra Agreement) site and an exclusive feed with respect to the content
developed for the Telstra SonicNet Sites for the TMPL Site similar to the feed
currently provided by the SonicNet Sites;
(iii) grant to SonicNet for it to grant to TMPL (as defined in
the Telstra Agreement) the exclusive license in respect of such Telstra SonicNet
Sites and Software (as defined in the Telstra Agreement) contemplated by Section
3.1 of the Telstra Agreement, and provide to SonicNet such services, products,
notices and other items that SonicNet may require in order to comply with all of
SonicNet's covenants and obligations set forth in the Telstra Agreement, and
otherwise cooperate with and assist SonicNet in complying, in a timely manner,
with its covenants and obligations under the Telstra Agreement, including,
without limitation, its obligations under Section 6 thereof; and
(iv) refrain from taking any action following the Closing, and
during the term or any renewal by TMPL of the Telstra Agreement, that would
result in or cause a breach by SonicNet of its warranties to TMPL contained in
Section 9.1 of the Telstra Agreement.
(b) SonicNet shall not renew the Telstra Agreement, shall not
transfer any Trademarks (as defined in the Telstra Agreement), which Trademarks
are set forth on Schedule 3.4(b) hereto ("SonicNet Trademarks"), to anyone
(other than TMPL or their successors or assigns, except as consideration or
partial consideration for an early termination of the Telstra Agreement) and
shall not create, incur, permit to exist or have outstanding any Lien on any of
the SonicNet Trademarks. In the event that the Telstra Agreement is terminated
prior to its scheduled expiration, not renewed by Telstra, or if renewed by
Telstra then after the expiration of the renewal term, all of SonicNet's rights
in and to the SonicNet Trademarks in the Territory (as defined in the Telstra
Agreement) , whether registered or unregistered, including the good will
associated therewith, shall, within 10 days after the expiration of the last of
SonicNet's obligations under the Telstra Agreement (including the conclusion of
any period following such termination during which SonicNet's activities in the
Territory are restricted or limited by the Telstra Agreement, be conveyed to
SonicNet LLC, free and clear of all Liens, and SonicNet will
<PAGE>
20
make representations and warranties to SonicNet LLC comparable to those set
forth herein regarding the SonicNet LLC Assets which constitute Intellectual
Property, pursuant to an instrument of conveyance in form and substance
reasonably satisfactory to SonicNet LLC and SonicNet, and thereafter shall be
owned exclusively by SonicNet LLC.
(c) Upon a breach of the Telstra Agreement by any party thereto other
than SonicNet (which breach gives SonicNet the right to terminate the Telstra
Agreement), SonicNet shall immediately, to the extent provided for in the
Telstra Agreement, terminate such Agreement.
3.5. The EMAP Agreements. With respect to the IP Rights Agreement and
-------------------
the Share Purchase Agreement (capitalized terms used in this Section 3.5 and not
otherwise defined in this Section 3.5 or in this Agreement shall have the
meanings assigned to such terms in the EMAP Agreements):
(a) The Partnership shall, and shall cause its Controlled Affiliates
(all at the sole expense of Box) to provide to Box such Business Information
related to Box and access to Books and Records and title deeds of VJN Video
Jukebox Network International Limited in the possession or under the control of
or available to the Partnership as Box may be obligated to provide to Purchaser
pursuant to Section 10 and 11 of the IP Rights Agreement.
(b) The Partnership shall, and shall cause the Partners and their
Affiliates (all at the sole expense of Box) to cooperate with Box as is
necessary to permit Box to comply with all of the covenants and obligations of
VJN pursuant to the IP Rights Agreement, with the same force and effect as if
made by the Partnership, the Partners or such Affiliate, except the covenant of
VJN in Section 6.4 of the IP Rights Agreement.
3.6. Box Holland.
-----------
(a) The Partnership shall, from time to time prior to the first
anniversary of the Closing, advance, pursuant to the Box Holland Promissory Note
attached as Exhibit Q hereto, to Box or its applicable subsidiary such amounts
as Box or such subsidiary may request to fund its share of the Box Holland net
cash requirements to the extent required to fund the operating costs and capital
expenditures of Box Holland in accordance with the projected Business Plan for
Box Holland (1998-2001) as previously furnished to MTVN, but in no event more
than $1.3 million in the aggregate; provided, however, that prior to any such
-------- -------
advance, Box certifies that the conditions to such advance have been satisfied.
If the interest in Box Holland of Box's applicable subsidiary is sold or
otherwise disposed of, Box will repay such advances out of, but only to the
extent of, the cash proceeds actually received by it or its Affiliates from such
sale, and otherwise shall have no obligation or liability with respect to such
advances. To the extent such cash proceeds are sufficient therefor, the amount
to be repaid will include simple interest of 6% per annum.
(b) The Partnership shall, and shall cause its applicable Controlled
Affiliates to, license to Box pursuant to the Box Holland License Agreement
those Intellectual Property rights that they have which are necessary for Box to
comply with its existing licensing
<PAGE>
21
obligations to Box Holland as and to the extent described in the Box Holland
License Agreement.
3.7. Qualifications to Sections 3.4, 3.5 and 3.6.
-------------------------------------------
(a) Notwithstanding the provisions of Section 3.4, 3.5 and 3.6,
except as set forth in Section 3.6(a) above, the obligations with respect to the
arrangements contemplated in such Sections shall arise only if and to the extent
necessary to enable Box or SonicNet or their respective subsidiaries to meet
their obligations under, and so as not to breach or be in breach of, the Telstra
Agreement, the EMAP Agreements or the applicable Box Excluded Agreement, as the
case may be.
(b) TCI Music will, and will cause Box and SonicNet to, use
commercially reasonable efforts to negotiate with the other parties to the
Telstra Agreement and the EMAP Agreements for appropriate amendments to or
terminations of such agreement that would limit or eliminate the obligations of
Box and SonicNet and their applicable subsidiaries thereunder, provided that
none of TCI Music, Box nor SonicNet shall be obligated to make any material
expenditure in order to accomplish the same.
3.8. Cooperation for Financial Reporting. The Tune Entities shall
-----------------------------------
cooperate with the Partnership, or any successor, and shall provide the
Partnership, or any successor, access to all relevant financial information, to
the extent reasonably appropriate for the Partnership to be able to prepare such
audited financial statements for prior periods for the business conducted by it,
as may be reasonably necessary or appropriate for the Partnership, or any
successor, to make a public offering of its securities and to comply with all
financial reporting requirements of applicable law. Box shall provide the
Partnership with copies of all of its historical audited financial statements
and shall cause its auditors to cooperate with the Partnership in connection
with any required reissuance of any opinion thereon or certification thereof.
The Partnership will reimburse the Tune Entities for all reasonable out-of-
pocket expenses incurred by them in connection with the performance of their
obligations under this Section 3.8.
3.9. MTVN Efforts. MTVN shall use its reasonable best efforts
------------
(without any obligation to pay money in connection therewith) to cause SonicNet
LLC and Box LLC to perform their obligations under Sections 3.4, 3.5 and 3.6 of
this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
----------------------------------
THE MTVN ENTITIES
-----------------
Subject to Section 8.16, the MTVN Entities hereby jointly and
severally represent and warrant to Liberty, TCI Music and the Partnership as
follows:
4.1. Due Incorporation; Good Standing.
--------------------------------
(a) Each of MTVN and Imagine is a corporation duly incorporated,
validly existing and in good standing as a corporation under the laws of the
State of Delaware and has
<PAGE>
22
the requisite corporate power and authority to own, lease and operate its assets
and its businesses as currently conducted insofar as they relate to the MTVN
Contribution.
(b) VLLC is a limited liability company duly formed, validly existing
and in good standing as a limited liability company under the laws of the State
of Delaware and has the requisite limited liability company power and authority
to own, lease and operate its assets and its businesses as currently being
conducted.
4.2. Due Authority; Valid, Binding and Enforceable.
---------------------------------------------
(a) Each of the MTVN Entities has the requisite corporate (or in the
case of VLLC, limited liability company) power and authority to enter into and
perform this Agreement and the Operative Agreements to which it is a party; the
execution, delivery and performance by each of the MTVN Entities of this
Agreement and of the Operative Agreements to which it is a party have been duly
authorized by all required corporate (or in the case of VLLC, limited liability
company), action on its part and, if required, by its stockholder (or in the
case of VLLC, its sole member), and this Agreement and the Operative Agreements
to which each of the MTVN Entities is a party have been duly executed and
delivered by it.
(b) This Agreement and the Operative Agreements to which each of the
MTVN Entities is a party are legal, valid and binding obligations of each such
MTVN Entity, enforceable against it in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) to the extent that equitable remedies, such as injunctive relief or
specific performance, are within the discretion of courts of competent
jurisdiction.
4.3. No Violation of Laws or Agreements. The execution, delivery,
----------------------------------
and performance by each of the MTVN Entities of this Agreement and the Operative
Agreements to which each is a party and the consummation by each of the MTVN
Entities of the transactions contemplated hereby and thereby do not and will not
(a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation, by-laws, certificate of formation or operating
agreement (or similar organizational documents with different names) of the
applicable MTVN Entity, or (b) except as set forth on Schedule 4.3(b), violate,
conflict with, result in a breach of, or constitute a default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default) under, require any consent under, or notice to, or filings with or
result in or permit the termination, amendment, modification, acceleration,
suspension, revocation or cancellation of, or result in the creation or
imposition of any Lien of any nature whatsoever upon any of the Imagine Assets,
the VLLC Assets or the Domain Names or give to others any interests or rights
therein under (i) any MTVN Permit, any MTVN Benefit Plan, any Outstanding
License of an MTVN Entity or any Contract to which any of the MTVN Entities is a
party, or by which any of the Imagine Assets, the VLLC Assets or the Domain
Names may be bound or affected, or (ii) any judgment, injunction, writ, award,
decree, restriction, ruling, or order of any court, arbitrator or other
Governmental Entity or any applicable constitution, or Law, to which any of the
MTVN Entities is subject or which is applicable to any of the Imagine Assets,
the VLLC Assets or the Domain Names, except in any case under this clause (b) as
<PAGE>
23
would not, individually or in the aggregate, have a material adverse effect on
(y) the Imagine Assets, the VLLC Assets or the Domain Names, taken as a whole,
or (z) the ability of any of the MTVN Entities to perform their obligations
under this Agreement and the Operative Agreements to which they are a party.
4.4. Financial Statements. True, correct and complete copies of (i)
--------------------
the unaudited balance sheet of Imagine as of December 31, 1998 and the related
statement of income for the twelve-month period then ended are attached hereto
as Part A of Schedule 4.4(a), (ii) the unaudited balance sheet of the MTVN
Online Business consisting of MTV.com, VH1.com and Buggles, as of December 31,
1998 and the related statements of income for the twelve-month period then ended
are attached hereto as Part B of Schedule 4.4(a) and (iii) the unaudited balance
sheet of the MTVN Online Business consisting of MTV.com, VH1.com and Buggles, as
of March 31, 1999 and the related statements of income for the three months then
ended are attached hereto as Part C of Schedule 4.4(a) (the "MTVN Online Interim
Balance Sheet") (all such financial statements are referred to herein
collectively as the "MTVN Financial Statements"). The MTVN Financial Statements
were prepared in accordance with the books and records of Imagine and the MTVN
Online Business, as applicable, and except as set forth on Schedule 4.4(b)
fairly present in all material respects the financial condition and results of
operations (MTVN Online Business only) of Imagine and the MTVN Online Business
as of the dates and for the periods indicated, in each case in conformity with
GAAP, consistently applied, throughout the periods specified, except as
expressly set forth therein and except that the MTVN Financial Statements omit
footnotes and the MTVN Online Interim Balance Sheet is subject to normal year-
end adjustments which are not, in the aggregate, material.
4.5. Contracts. Schedule 4.5(a) sets forth a list of all written, and
---------
a description of all oral, Contracts to which (x) Imagine is a party (other than
the Imagine Excluded Contracts, as defined in the Imagine Contribution
Agreement)or (y) VLLC is (or after the contribution to VLLC of the VLLC Assets
will be) a party (all of which Contracts will be contributed to the Partnership
pursuant to the Imagine Contribution Agreement or the VLLC Contribution
Agreement) , except for any such Contract providing for payments to or by
Imagine or VLLC, as the case may be, over the remaining term of such Contracts
of no more than $5,000 individually or $50,000 in the aggregate for all such
non-scheduled Contracts. Except as disclosed on Schedule 4.5(b), after giving
effect to the contribution to VLLC of the VLLC Assets (i) all such Contracts are
valid and binding on, and enforceable against, Imagine or VLLC, as the case may
be, in accordance with their terms, except as such enforceability may be limited
by applicable laws relating to bankruptcy, insolvency, fraudulent conveyance,
reorganization or affecting creditors' rights generally and except to the extent
that injunctive or other equitable relief is within the discretion of a court
and each of such Contracts is, to the knowledge of Imagine or VLLC, as the case
may be, valid and binding on, and enforceable against the other parties thereto,
except as such enforceability may be limited by applicable laws relating to
bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court, (ii) none of MTVN,
Imagine, VLLC, or, to the knowledge of Imagine and VLLC, any other party to any
such Contract is in breach thereof or default thereunder, and (iii) there does
not exist under any provision of any such Contract, to the knowledge of Imagine
and VLLC, any event that, with
<PAGE>
24
the giving of notice or the lapse of time or both, would constitute such a
breach or default, except with respect to the foregoing clauses (i)-(iii) for
all such failures to be valid, binding and enforceable and such breaches,
defaults, events and disputes which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Imagine Assets
and the VLLC Assets, taken as a whole; provided, however, that any qualification
-------- -------
in this Section 4.5 as to knowledge shall not apply to the extent any other
party to a Contract is MTVN or a Controlled Affiliate of MTVN.
4.6. No Changes. Except as set forth on Schedule 4.6, since May 19,
----------
1999, each of the MTVN Entities has conducted its respective business (insofar
as it relates to the MTVN Contribution) in a manner which it reasonably believed
would further the Business of the Partnership and which would not interfere with
or frustrate the transactions contemplated by this Agreement and otherwise only
in the ordinary course of business consistent with past practices, and since
December 31, 1998, there has not been: (i) any material adverse change in the
businesses constituting the MTVN Contribution, except for material adverse
changes that may have resulted from the public announcement of the execution of
the MOU, or (ii) any termination of any Contract to which any of Imagine, MTVN
(insofar as it relates to the MTVN Contribution) or VLLC is a party (other than
Imagine Excluded Contracts and Contracts which expire in accordance with their
terms and Contracts to which MTVN and its Controlled Affiliates are the only
parties, except for any such termination which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Imagine Assets and the VLLC Assets, taken as a whole.
4.7. No Brokerage. There is no investment banker, broker, finder or
------------
other similar intermediary which has been retained by any MTVN Entity or is
authorized to act on behalf of any MTVN Entity or any Affiliates thereof or any
of their officers and directors who might be entitled to any fee or commission
from Liberty, any of the Tune Entities or any Affiliates thereof, the
Partnership or any of its subsidiaries upon consummation of the transactions
contemplated by this Agreement or the Operative Agreements.
4.8. Absence of Litigation. Except as set forth on Schedule 4.8,
---------------------
there is no action, suit, investigation, claim, arbitration or litigation
pending or, to the knowledge of any MTVN Entity, threatened against any MTVN
Entity or their business and operations insofar as it relates to the Imagine
Assets or the VLLC Assets, at law or in equity, before or by any arbitrator or
Governmental Entity, except for any such actions, suits, investigations, claims,
arbitrations or litigations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Imagine Assets
and the VLLC Assets, taken as a whole. No MTVN Entity is currently operating
under or subject to any order, award, judgment, writ, decree, determination or
injunction, in any such case specific to the use by any MTVN Entity of the
Imagine Assets or the VLLC Assets, of any arbitrator or Governmental Entity.
<PAGE>
25
4.9. No Real Property; Totality and Condition of Assets.
--------------------------------------------------
(a) Neither Imagine (solely with respect to the Imagine Assets) nor
VLLC, after giving effect to the contribution to VLLC of the VLLC Assets, owns,
leases or has any interest in any real property which are exclusive to its
businesses.
(b) Each of Imagine and VLLC, after giving effect to the
contribution to VLLC of the VLLC Assets, is the sole owner of and has good title
to or a valid leasehold interest in the Imagine Assets and the VLLC Assets,
respectively, free and clear of any Liens, except for and subject only to Liens
listed in Schedule 4.9(b) and those which would not, individually or in the
aggregate be expected to have a material adverse effect on the Imagine Assets
and the VLCC Assets, taken as a whole. The Imagine Assets and the VLLC Assets
are in all material respects in good operating condition and repair in
accordance with normal and customary industry practices for items of comparable
age and use, reasonable wear and tear excepted.
4.10. Compliance with Laws; Permits.
-----------------------------
(a) Each of the MTVN Entities is in compliance, in all material
respects, with all Laws applicable to its use and operation of the Imagine
Assets, the VLLC Asset and the Domain Names.
(b) Each of the MTVN Entities has obtained and holds all Permits
(collectively, the "MTVN Permits") necessary in order to use and operate the
Imagine Assets, the VLLC Assets as currently used and operated, none of which
has been modified or rescinded and all of which were validly issued and are in
full force and effect. No event has occurred and is continuing that permits, or
after notice or lapse of time or both would permit, any modification or
termination of any MTVN Permit. Each of the MTVN Entities has all rights
necessary and the ability required, if any, to transfer the MTVN Permits as
contemplated by this Agreement and the Operative Agreements.
(c) The Domain Names are owned by the MTVN Entities or their
nominees free and clear of all liens.
4.11. Contribution of Assets; Operation of Business.
---------------------------------------------
(a) The MTVN Contribution and the Domain Names consist of all of
the assets and businesses (other than the assets and businesses expressly
excluded therefrom under the Contribution Agreements) owned or controlled by the
MTVN Entities that constitute MTVN's current (or, as of May 19, 1999, planned)
assets and businesses engaged (or to be engaged) in each case exclusively in the
Business, including all assets and businesses used or to be used as of May 19,
1999, in each case, exclusively in connection with the MTV.com, VH1.com and
Imagine Radio businesses and all directly or indirectly wholly-owned
international businesses engaged or to be engaged as of May 19, 1999, in each
case, exclusively in the Business.
<PAGE>
26
(b) MTVN and Imagine have operated the MTVN Contribution since May
19, 1999 in a manner which they reasonably believe will further the Business of
the Partnership and which will not interfere with or frustrate the transactions
contemplated hereby.
(c) Since May 19, 1999, MTVN has funded and has caused its
subsidiaries to fund the MTVN Contribution with sufficient capital to fund
operations. For purposes of this Section 4.11, such fundings include MTVN's
overhead charged and allocated in the same manner as it will be charged and
allocated to the Partnership after the Closing.
(d) Each of the Controlled Affiliates set forth on Schedule 2.5 has
good title to the Domain Name set forth on Schedule 2.5 opposite such Controlled
Affiliate's name, free and clear of any Liens.
(e) The terms and conditions of each of the Trademark License
Agreement, the Programming License Agreement and the Technology Sharing and
License Agreement (each taken as a whole) are no less favorable to the
Partnership than the terms and conditions of similar types of such agreements
between and among Viacom and its non wholly-owned Controlled Affiliates.
4.12. Absence of Liabilities. There are no liabilities or
----------------------
obligations relating to the MTVN Contribution or the Domain Names other than (i)
the VLLC Liabilities and the Imagine Liabilities being assumed by the
Partnership pursuant to the VLLC and Imagine Contribution Agreements (which,
with respect to periods prior to the Closing, are limited to certain accounts
payable, accrued expenses, prepayments and similar working capital items
reflected in the balance sheet attached as Exhibit A to Schedule 4.12 or of the
same types as such items reflected on such balance sheet which were incurred
since the date thereof in the ordinary course of business and consistent with
past practice and are not in excess of historical amounts for comparable periods
(provided, however, that such liabilities and obligations shall not include
liabilities or obligations relating to any MTVN Benefit Plan) and which, with
respect to periods after the Closing, are limited to liabilities or obligations
arising after, and with respect to the period following, the Closing under the
MTVN Assigned Contracts, other than liabilities under such MTVN Assigned
Contracts which are not being assumed by the Partnership) and (ii) certain
liabilities of VLLC under the Technology License Agreement, the Trademark
License Agreement, the Programming License Agreement and the Promotion
Agreement, which liabilities are not included in the VLLC Liabilities and are
not being assumed by the Partnership.
4.13. Employee Benefits.
-----------------
(a) Set forth on Schedule 4.13(a) hereto is a complete and correct
list of any MTVN Benefit Plan which covers any MTVN-Partnership Employee. None
of the MTVN Entities nor any of their Affiliates has communicated to present or
former employees of any MTVN Entity or adopted or authorized any additional
material MTVN Benefit Plan or any material change in or termination of any
existing MTVN Benefit Plan.
(b) With respect to any "defined benefit plan", within the meaning
of Section 3(35) of ERISA, maintained or contributed to by any MTVN Entity or
any of their
<PAGE>
27
ERISA Affiliates within the last six years: (i) no liability to the Pension
Benefit Guaranty Corporation ("PBGC") has been incurred (other than for premiums
not yet due); (ii) no notice of intent to terminate any such plan has been filed
with the PBGC or distributed to participants and no amendment terminating any
such plan has been adopted which could result in any liability to the MTVN
Entities, the Partnership or the Tune Entities; (iii) no proceedings to
terminate any such plan have been instituted by the PBGC and no event or
condition has occurred which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
such plan; (iv) no "accumulated funding deficiency," within the meaning of
Section 302 of ERISA or Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code"), whether or not waived, has been incurred; and (v) no Lien
has arisen under ERISA or the Code, or is likely to arise, on the assets of any
MTVN Entity.
(c) No MTVN Entity has incurred any liability with respect to any
"multiemployer plan," within the meaning of Section 3(37) of ERISA to which any
MTVN Entity or any of their ERISA Affiliates has contributed or been required to
contribute, other than for contributions not yet due.
(d) No MTVN Entity has any liability, contingent or otherwise,
under Section 4069 or 4212 of ERISA.
(e) With respect to any employment contract which will be
contributed to the Partnership pursuant to the VLLC Contribution Agreement (an
"Assigned MTVN Employment Contract"):
(i) None of the MTVN Entities, nor, to the knowledge of any
of the MTVN Entities, any other party to any Assigned MTVN Employment Contract
is in breach thereof or default thereunder (or would, with the giving of notice
or lapse of time or both, be in breach or default);
(ii) There does not exist under any provision of any such
Assigned MTVN Employment Contract, to the knowledge of the MTVN Entities, any
event that, with the giving of notice or the lapse of time or both, would
constitute such a breach or default;
(iii) Neither the execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement, will (A)
increase the amount of any payments or benefits otherwise payable under any
Assigned MTVN Employment Contract, (B) result in the acceleration of the time of
payment, exercisability, funding or vesting of any such payments or benefits, or
(C) result in any payment (whether severance pay or otherwise) becoming due
under any Assigned MTVN Employment Contract; and
(iv) No payment or series of payments that would constitute a
"parachute payment" (within the meaning of Section 280G of the Code) has been
made or will be made under any Assigned MTVN Employment Contract in connection
with the execution of this Agreement or as a result of the consummation of the
transactions contemplated hereby.
<PAGE>
28
4.14. Employees. Except as set forth on Schedule 4.14 attached
---------
hereto, no employees of any MTVN Entity are represented by a labor union or
other labor organization.
4.15. Intellectual Property.
---------------------
(a) MTVN has sufficient title and ownership of, and rights to use,
the Intellectual Property included in the MTVN Contribution (other than any
right, title or interest of VLLC under the Trademark License Agreement, the
Partnership Agreement, the Technology Sharing and License Agreement and the
Programming License Agreement) (the "MTVN Contribution IP") in order to
contribute the same as contemplated under this Agreement without any conflict
with or infringement of the rights of others, and such rights will not be
adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(b) Schedule 4.15(b) contains a true, accurate and complete list as
of the date hereof of all Intellectual Property (if any) that constitutes
patents, patent applications, trademark and service marks and corresponding
registrations and applications for registration thereof, and registered
copyrights and corresponding registrations and applications for registration
thereof, as well as Domain Names, included in the MTVN Contribution IP.
(c) Schedule 4.15(c) further sets forth a true, accurate and
complete list as of the date hereof of all Outstanding Licenses of MTVN or its
Affiliates included in the MTVN Contribution IP.
(d) Except as set forth in Schedule 4.15(c), the MTVN Entities have
sole and exclusive beneficial and record ownership, legal title and the right to
use the MTVN Contributed IP, free and clear of Liens and any rights or claims of
present or former employees, consultants, officers and directors of the any of
the MTVN Entities.
(e) The MTVN Entities have not, in connection with the MTVN
Contribution, interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property of third parties, and are not
presently so interfering, infringing, misappropriating or in conflict therewith,
nor have any of them received any communications alleging that it has infringed
or violated any of the Intellectual Property of any other Person, and (without
limiting any of the other representations and warranties herein), to the
knowledge of the MTVN Entities and any of their respective officers, there is
not any basis for the making of any such allegation.
(f) There is not pending, nor to the MTVN Entities' knowledge, has
there been threatened, any action or proceeding to contest, oppose, cancel or
otherwise challenge the validity, ownership or enforceability of any of the MTVN
Contribution IP.
<PAGE>
29
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LIBERTY
-----------------------------------------
Liberty hereby represents and warrants to the MTVN Entities and the
Partnership, as follows:
5.1. Due Incorporation; Good Standing. Liberty is a corporation duly
--------------------------------
incorporated, validly existing and in good standing as a corporation under the
laws of the State of Delaware and has the requisite corporate power and
authority to own, lease and operate its assets and businesses as currently being
conducted, except in any such case as would not have a material adverse effect
on its ability to perform its obligations hereunder and in the Parent Agreement.
5.2. Due Authority; Valid, Binding and Enforceable.
---------------------------------------------
(a) Liberty has the requisite corporate power and authority to enter
into and perform this Agreement and the Parent Agreement; the execution,
delivery and performance by it of this Agreement and of the Parent Agreement
have been duly authorized by all required corporate action on its part and, if
required, by its stockholders, and this Agreement and the Parent Agreement have
been duly executed and delivered by it.
(b) This Agreement and the Parent Agreement are legal, valid and
binding obligations of Liberty, enforceable against it in accordance with their
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and (ii) to the extent that equitable remedies, such
as injunctive relief or specific performance, are within the discretion of
courts of competent jurisdiction.
5.3. No Violation of Laws or Agreements. The execution, delivery, and
----------------------------------
performance by Liberty of this Agreement and the Parent Agreements and the
consummation by it of the transactions contemplated hereby and thereby with
respect to Liberty do not and will not, (a) violate, conflict with or result in
the breach of any provision of its certificate of incorporation, or by-laws, or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would, with the passage of time or the giving of notice or both,
constitute a default) under, require any consent under, or notice to, or filings
with or result in or permit the termination, amendment, modification,
acceleration, suspension, revocation or cancellation of, or result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
SonicNet LLC Assets, the Box LLC Assets, the SonicNet Membership Interests, the
Box Membership Interests or the assets of the Tune Subsidiaries or give to
others any interests or rights therein under (i) any license, plan, Permit or
Contract to which it is a party or (ii) any judgment, injunction, writ, award,
decree, restriction, ruling, or order of any court, arbitrator or Governmental
Entity or any applicable constitution, or Law, to which it is subject with such
exceptions as, individually and in the aggregate, would not have a material
adverse effect on its ability to perform its obligations under this Agreement
and the Parent Agreement.
<PAGE>
30
5.4. No Solicitation. Since May 19, 1999, Liberty has not hired any
---------------
Person that is an employee of SonicNet or Box or the Tune Subsidiaries. Since
May 19, 1999, Liberty has not hired any Person who would otherwise become an
employee of the Partnership or any of its subsidiaries.
5.5. AT&T/Liberty Agreement. The copy of the AT&T/Liberty Agreement
----------------------
attached hereto as Schedule 5.5 is a true and correct copy of such Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES BY TCI MUSIC, SONICNET AND BOX
-------------------------------------------------------------
Subject to Section 8.16, TCI Music, SonicNet and Box hereby jointly
and severally represent and warrant to the MTVN Entities and the Partnership, as
follows:
6.1. Due Incorporation; Good Standing.
--------------------------------
(a) Each of TCI Music, SonicNet, Box, the other Tune Entities and the
Tune Subsidiaries is a corporation (or other entity) duly incorporated (or
organized), validly existing and in good standing as a corporation (or such
other entity) under the laws of the state of its incorporation or formation and
each of SonicNet, Box, the other Tune Entities and the Tune Subsidiaries has
previously delivered to MTVN complete and correct copies of its certificate of
incorporation and all amendments thereto to the date hereof and its by-laws, as
currently in effect (or similar organizational documents with different names).
(b) Each of SonicNet LLC and Box LLC is a limited liability company
duly formed, validly existing and in good standing as a limited liability
company under the laws of the State of Delaware, has the requisite limited
liability company power and authority to own, lease and operate its assets and
its businesses as currently being conducted and has previously delivered to MTVN
complete and correct copies of its certificate of formation and all amendments
thereto to the date hereof and its operating agreement, as currently in effect.
6.2. Due Authority; Valid, Binding and Enforceable.
---------------------------------------------
(a) Each of the Tune Entities has the requisite corporate (or in the
case of SonicNet LLC and Box LLC, limited liability company) power and authority
to enter into and perform this Agreement and the Operative Agreements to which
it is a party; the execution, delivery and performance by each of the Tune
Entities of this Agreement and of the Operative Agreements to which it is a
party have been duly authorized by all required corporate (or in the case of
SonicNet LLC and Box LLC, limited liability company) action on its part and by
its stockholders (or in the case of each of SonicNet LLC and Box LLC, its sole
member), and this Agreement and the Operative Agreements to which each of the
Tune Entities is a party have been duly executed and delivered by it.
<PAGE>
31
(b) This Agreement and the Operative Agreements to which each of the
Tune Entities is a party are legal, valid and binding obligations of such Tune
Entity, enforceable against it in accordance with their respective terms, except
(i) as such enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and (ii)
to the extent that equitable remedies, such as injunctive relief or specific
performance, are within the discretion of courts of competent jurisdiction.
6.3. No Violation of Laws or Agreements. The execution, delivery, and
----------------------------------
performance by each of the Tune Entities of this Agreement and the Operative
Agreements to which each is a party and the consummation by each of the Tune
Entities of the transactions contemplated hereby and thereby do not and will not
(a) violate, conflict with or result in the breach of any provision of the
certificate of incorporation, by-laws, certificate of formation or operating
agreement (or similar organizational documents with different names) of the
applicable Tune Entity or (b) except as set forth on Schedule 6.3(b), violate,
conflict with, result in a breach of, or constitute a default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default) under, require any consent under, or notice to, or filings with or
result in or permit the termination, amendment, modification, acceleration,
suspension, revocation or cancellation of, or result in the creation or
imposition of any Lien of any nature whatsoever upon any of the SonicNet LLC
Assets, the Box LLC Assets, the SonicNet Membership Interests, the Box
Membership Interests, SonicNet LLC, Box LLC or any assets of any Tune Subsidiary
or give to others any interests or rights therein under (i) any Tune Permit, any
Tune Benefit Plan, any Outstanding License of a Tune Entity or any Contract to
which any of the Tune Entities is a party, or by which any of the SonicNet LLC
Assets, the Box LLC Assets, the SonicNet Membership Interests, the Box
Membership Interests, SonicNet LLC, Box LLC or any assets of any Tune Subsidiary
may be bound or affected or (ii) any judgment, injunction, writ, award, decree,
restriction, ruling, or order of any court, arbitrator or other Governmental
Entity or any applicable constitution, or Law, to which any of the Tune Entities
is subject or which is applicable to any of the SonicNet LLC Assets, the Box LLC
Assets, the SonicNet Membership Interests, the Box Membership Interests,
SonicNet LLC, Box LLC or any assets of any Tune Subsidiary, except in any case
under this clause (b) as would not, individually or in the aggregate, have a
material adverse effect on (y) the SonicNet LLC Assets, the Box LLC Assets and
the assets of the Tune Subsidiaries, taken as a whole, or SonicNet LLC and Box
LLC, taken as a whole, or (z) the ability of the Tune Entities to perform their
obligations under this Agreement and the Operative Agreements to which they are
a party.
6.4. Subsidiaries. Except for the Excluded Subsidiaries set forth on
------------
Schedule 6.4(a), the only subsidiaries of SonicNet LLC, Box LLC, SonicNet or
Box, as the case may be, are the entities set forth on Schedule 6.4(b). Set
forth next to the name of each such Tune Subsidiary identified on Schedule
6.4(b) is the jurisdiction of incorporation (or other formation) for such Tune
Subsidiary. Except as set forth on Schedule 6.4(b), SonicNet and/or Box
directly or indirectly beneficially own 100% of the outstanding shares of
capital stock or other equity interests of each Tune Subsidiary, free and clear
of all Liens, and all of such shares of capital stock or other equity interests
are duly authorized and validly issued, fully paid and nonassessable and were
not issued in violation of, or subject to, any preemptive or similar rights.
There are no outstanding (x) securities convertible into or exchangeable for any
capital stock of
<PAGE>
32
any of the Tune Subsidiaries, (y) options, warrants or other rights to purchase
or subscribe for the capital stock of any of the Tune Subsidiaries or securities
convertible into or exchangeable for the capital stock of any of the Tune
Subsidiaries or (z) contracts, commitments, agreements, understandings,
arrangements, calls or claims of any kind relating to the issuance of any
capital stock of any of the Tune Subsidiaries, any such convertible or
exchangeable securities or any such options, warrants or rights. Except as set
forth in Schedule 6.4(c), neither SonicNet nor Box directly or indirectly owns
any capital stock or other equity interest in any Person other than the Tune
Subsidiaries (excluding the Excluded Subsidiaries).
6.5. Financial Statements. True, correct and complete copies of the
--------------------
unaudited balance sheet of each of SonicNet and its Tune Subsidiaries and Box
and its Tune Subsidiaries as of December 31, 1998 and the related statements of
income for the twelve-month period then ended are attached hereto as Part A of
Schedule 6.5, and true, correct and complete copies of the unaudited balance
sheet of each of SonicNet and its Tune Subsidiaries and Box and its Tune
Subsidiaries (the "Tune Interim Balance Sheet") at June 30, 1999 and the related
statements of income for the six months then ended are attached hereto as Part B
of Schedule 6.5 (all such financial statements are referred to herein
collectively as the "Tune Financial Statements"). The Tune Financial Statements
were prepared in accordance with the books and records of each of the applicable
Tune Entities and fairly present in all material respects the financial
condition and results of operations of SonicNet and its Tune Subsidiaries and
Box and its Tune Subsidiaries as of the dates and for the periods indicated, in
each case in conformity with GAAP, consistently applied, throughout the periods
specified, except as expressly set forth therein and except that the Tune
Financial Statements may omit footnotes and the Tune Interim Balance Sheet is
subject to normal year-end adjustments which are not, in the aggregate,
material.
6.6. Contracts. Schedule 6.6 sets forth a list of all written, and a
---------
description of all oral, Contracts to which either of SonicNet or Box is a
party, which Contracts will be contributed to SonicNet LLC or Box LLC, as the
case may be, pursuant to the SonicNet-LLC Contribution Agreement or the Box-LLC
Contribution Agreement, as the case may be, or to which any Tune Subsidiary is a
party, in each case other than any Contract which is an Excluded Tune Asset and
except for any such Contract providing for payments to or by any of the Tune
Entities, as the case may be, over the remaining term of such Contracts of no
more than $15,000 individually or $200,000 in the aggregate for all such non-
scheduled Contracts. Except as disclosed on Schedule 6.6, after giving effect
to the contribution to SonicNet LLC and Box LLC, respectively, of the SonicNet
LLC Assets and the Box LLC Assets, (i) all such Contracts are valid and binding
on, and enforceable against, Box LLC, SonicNet LLC or the applicable Tune
Subsidiary, as the case may be, in accordance with their terms, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court and, to the knowledge of the Tune Entities, as
the case may be, all such Contracts are valid and binding on, and enforceable
against the other parties thereto, subject to the terms thereof, except as such
enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance, reorganization or affecting creditors' rights
generally and except to the extent that injunctive or other equitable relief is
within the discretion of a court, (ii) none of the Tune Entities, nor, to the
<PAGE>
33
knowledge of any of the Tune Entities, any other party to any such Contract is
in breach thereof or default thereunder and (iii) there does not exist under any
provision of any such contract, to the knowledge of the Tune Entities, any event
that, with the giving of notice or the lapse of time or both, would constitute
such a breach or default, except with respect to the foregoing clauses (i)-(iii)
for all such failures to be valid, binding and enforceable and such breaches,
defaults, events and disputes which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the SonicNet LLC
Assets, the Box LLC Assets and the assets of the Tune Subsidiaries, taken as a
whole, or SonicNet LLC and Box LLC, taken as a whole. True and complete copies
of all written, and accurate summaries of all oral, Contracts set forth on
Schedule 6.6 have been made available to MTVN.
6.7. No Changes. Except as set forth on Schedule 6.7(a), (A) since
----------
March 31, 1999, each of SonicNet, Box and the Tune Subsidiaries has conducted
its respective business only in the ordinary course of business consistent with
past practice, the MOU and the budget attached hereto as Schedule 6.7(b) (the
"Tune Budget"), and (B) since December 31, 1998 there has not been: (i) any
material adverse change in the financial condition, results of operations or
business of SonicNet, Box or the Tune Subsidiaries, except for (x) material
adverse changes that may have resulted from the public announcement of the
execution of the MOU or (y) Material Adverse Change Exclusions, (ii) any
termination of any Contract (which, solely for purposes of this Section 6.7,
shall mean Contracts identified as if the Closing had occurred on May 19, 1999)
to which any of SonicNet, Box, SonicNet LLC, Box LLC or the other Tune
Subsidiaries is a party (other than Contracts which expire in accordance with
their terms) or (iii) any dividend or other distribution to TCI Music of any
assets of SonicNet or Box, other than any Excluded Tune Asset or Excluded
Subsidiary.
6.8. No Brokerage. There is no investment banker, broker, finder or
------------
other similar intermediary which has been retained by any of the Tune Entities
or is authorized to act on behalf of any of the Tune Entities or any Affiliates
thereof or any of their respective officers and directors who might be entitled
to any fee or commission from any of the MTVN Entities or any Affiliates
thereof, the Partnership or any of its subsidiaries upon consummation of the
transactions contemplated by this Agreement or the Operative Agreements.
6.9. Absence of Litigation. Except as set forth in Schedule 6.9,
---------------------
there is no action, suit, investigation, claim, arbitration or litigation
pending or, to the knowledge of any of the Tune Entities, threatened against any
of the Tune Entities or their business and operations insofar as it relates to
the SonicNet LLC Assets, the Box LLC Assets, the SonicNet Membership Interests,
the Box Membership Interests, Box LLC, SonicNet LLC or the assets of any Tune
Subsidiary, at law or in equity, before or by any arbitrator or Governmental
Entity, except for any such actions, suits, investigations, claims, arbitrations
or litigations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the SonicNet LLC Assets, the Box
LLC Assets and the assets of the Tune Subsidiaries, taken as a whole, or
SonicNet LLC and Box LLC, taken as a whole. None of the Tune Entities is
currently operating under or subject to any order, award, judgment, writ,
decree, determination or injunction, in any such case specific to the use by any
Tune Entity of the SonicNet LLC Assets, the Box LLC Assets, the SonicNet
Membership Interests, the Box Membership Interests or the
<PAGE>
34
assets of any Tune Subsidiary, of any arbitrator or Governmental Entity (other
than the FCC Licenses and other Permits listed on Schedule 6.13(c)).
6.10. Real Property; Totality and Conditions of Assets.
------------------------------------------------
(a) There is no real property owned by the Tune Entities and
included in the SonicNet LLC Assets and the Box LLC Assets.
(b) Schedule 6.10(b) contains a true and complete list of all
written, and a description of all oral licenses or leases of real property by
the Tune Entities which are included in the SonicNet LLC Assets and the Box LLC
Assets (collectively, the "Real Property").
(c) The Real Property (including all buildings and structures) is
(i) in all material respects adequate for the uses for which it is used by the
Tune Entities, (ii) in compliance with all material restrictions of record and
other recorded Liens, (iii) not the subject of any pending condemnation, eminent
domain or inverse condemnation, and (iv) not the subject of any contract or
other restrictions of any nature whatsoever (recorded or, to the knowledge of
the Tune Entities, unrecorded) other than the leases and licenses pertaining
thereto, as set forth in Schedule 6.10(b), that prevents or limits any Tune
Entities' right to transfer its interest in any such Real Property.
(d) SonicNet LLC, Box LLC and the other Tune Subsidiaries, as
applicable, after giving effect to the transactions contemplated in the Box-LLC
and SonicNet-LLC Contribution Agreements, (i) have good leasehold interests in
the Real Property, free and clear of all Liens other than interests of the
lessors therein, except as disclosed on Schedule 6.10(d), (ii) enjoy peaceful
and quiet possession of each Real Property occupied by it, and (iii) have full
legal and practical access to each Real Property that it occupies, in each case
other than where the failure to have such rights, title or interest would have a
material adverse effect on such Real Property.
(e) All leases, licenses or similar agreements relating to any use
or operation by any Tune Entity of any Real Property are identified or described
on Schedule 6.10(b) hereto; true and complete copies or written descriptions
thereof have been made available to MTVN; each Tune Entity which is a party to
any thereof is in compliance in all material respects with the terms thereof;
and all such leases, licenses or similar agreements are in full force and
effect, and no Tune Entity is aware of a default or prospective default
thereunder by any other party thereto, nor has any of them received notice
asserting the existence of any such default; and there are no facts known to any
Tune Entity that would prevent any Real Property from being occupied after the
Closing in substantially the same manner as before, in each case except as set
forth in Schedule 6.10(b).
(f) SonicNet LLC and Box LLC, after giving effect to the contribution
thereto of the SonicNet LLC and Box LLC Assets, and the Tune Subsidiaries are
the sole owners of and have good title to or a valid leasehold interest in the
SonicNet LLC Assets, the Box LLC Assets and the assets of the Tune Subsidiaries,
respectively (other than Real Property), respectively, free and clear of any
Liens, except for and subject only to Liens listed on Schedule 6.6 and those
<PAGE>
35
which would not, individually or in the aggregate, be expected to have a
material adverse effect on the SonicNet LLC Assets, the Box LLC Assets and the
assets of the Tune Subsidiaries, taken as a whole, or SonicNet LLC and Box LLC,
taken as a whole. SonicNet and Box are the sole owners of the SonicNet
Membership Interests and the Box Membership Interests, respectively, free and
clear of all Liens. The SonicNet LLC Assets, the Box LLC Assets and the assets
of the Tune Subsidiaries are in all material respects in good operating
condition and repair in accordance with normal and customary industry practices
for items of comparable age and use, reasonable wear and tear excepted.
(g) Box Europe has no material assets other than its equity
interests in Video Jukebox Network Europe, Ltd., the Box Music Network S.L., Box
Italy and Box Holland.
6.11. Environmental. Except in accordance with applicable Law, none
-------------
of the Tune Entities has generated, stored, transported, or disposed of any
Hazardous Substances at any real property owned, leased, occupied, or otherwise
held by any Tune Entity (or in which it previously had an interest) and which
are included in the Tune Contribution. There have been no releases of Hazardous
Substances in violation of any applicable Law on any real property owned,
leased, occupied or otherwise held by any of SonicNet, Box or any Tune
Subsidiary (including any Real Property in which any of SonicNet, Box or any
Tune Subsidiary previously had an interest) and which are included in the Tune
Contribution which could have a material adverse effect on the SonicNet LLC
Assets, the Box LLC Assets and the assets of the Tune Subsidiaries, taken as a
whole. To the knowledge of the Tune Entities, there are no underground storage
tanks or, except in accordance with applicable Law, asbestos-containing
materials, at or on any real property owned, leased, occupied, or otherwise held
by any Tune Entity (including any real property in which any of SonicNet, Box or
any Tune Subsidiary previously had an interest) and relating to the SonicNet LLC
Assets, the Box LLC Assets, the SonicNet Membership Interests, the Box
Membership Interests, SonicNet LLC, Box LLC or the other Tune Subsidiaries. No
Tune Entity has received any notice, request for information, order, claim, or
demand from any Governmental Entity with respect to the generation, storage,
release, or removal of any Hazardous Substance or asbestos.
For purposes of this Agreement, "Hazardous Substances" means any
toxic, caustic, or otherwise dangerous substance regulated under federal, state
or local environmental statutes, rules, ordinances, or orders, including, but
not limited to (i) "hazardous substance" as defined in 42 U.S.C. (S) 9601, (ii)
petroleum products, derivatives, byproducts and other hydrocarbons, and (iii)
asbestos or asbestos containing materials.
6.12. Contribution of Assets; Operation of Business.
---------------------------------------------
(a) Except as set forth on Schedule 6.12(a) and except for the
Excluded Tune Assets, the SonicNet LLC Assets and the Box LLC Assets include all
assets owned, used or held for use by SonicNet or Box or their Affiliates which
relate to, or are reasonably necessary for use in connection with their
business, including all of the capital stock of the direct and indirect
subsidiaries of SonicNet and Box which exclusively conduct the international
businesses of SonicNet and Box.
<PAGE>
36
(b) Since May 19, 1999, Tune has and has caused its subsidiaries to
fund the assets and businesses included in the Tune Contribution with sufficient
capital to fund operations in accordance with the Tune Budget. For purposes of
this Section 6.12, such fundings include Tune's overhead charged and allocated
in the same manner as historically charged and allocated to Box and SonicNet and
as reflected in the Tune Budget.
(c) Schedule 6.12(c) sets forth each tangible asset included in the
Tune Contribution with a book value as of June 30, 1999 greater than $1,000.
6.13. Compliance with Laws; Permits.
-----------------------------
(a) Each of the Tune Entities is in compliance in all material
respects with all Laws applicable to its use of the SonicNet LLC Assets and the
Box LLC Assets, as well as all Laws applicable to the SonicNet Membership
Interests, the Box Membership Interests, SonicNet LLC or Box LLC or the other
Tune Subsidiaries.
(b) Each of the Tune Entities has obtained and holds all Permits
(collectively, the "Tune Permits") necessary in order to use and operate the
SonicNet LLC Assets and the Box LLC Assets and the assets of the Tune
Subsidiaries, as currently used and operated, none of which has been modified or
rescinded and all of which were validly issued and are in full force and effect
except such as would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the SonicNet LLC Assets and the
Box LLC Assets and the assets of the Tune Subsidiaries, taken as a whole, or
SonicNet LLC and Box LLC, taken as a whole. No event is known by any Tune
Entity to have occurred and be continuing that permits, or after notice or lapse
of time or both would permit, any modification or termination of any material
Tune Permit.
(c) Schedule 6.13(c) sets forth a true and complete list of all
Tune Permits (the "FCC Licenses") held by any of the Tune Entities issued by the
Federal Communications Commission (the "FCC") and relating to the SonicNet LLC
Assets, the Box LLC Assets, the SonicNet Membership Interests, the Box
Membership Interests, SonicNet LLC, Box LLC and the assets of the Tune
Subsidiaries and of all other material Permits held by the Tune Entities and
relating to the SonicNet LLC Assets, the Box LLC Assets, the SonicNet Membership
Interests, the Box Membership Interests, SonicNet LLC, Box LLC and the assets of
the Tune Subsidiaries.
(d) The FCC Licenses identified on Schedule 6.13(c) are held by the
Person identified on Schedule 6.13(c) as the licensee of such FCC License.
Schedule 6.13(c) also sets forth the expiration date of each FCC License. The
FCC Licenses are validly issued and in full force and effect. Except as
disclosed on Schedule 6.13(d), (i) no licenses, permits or authorizations (other
than such as are not material) of any Governmental Entity other than the FCC are
required for the operation of the Stations in the manner as currently conducted,
and (ii) such FCC Licenses constitute all of the licenses and authorizations
required under the Communications Act for, and/or used in the operation of, the
Stations as currently operated. Except as disclosed on Schedule 6.13(d), there
is not pending or, to the knowledge of any of the Tune Entities, threatened any
action, suit, investigation, claim, arbitration or litigation by or before the
FCC to revoke, restrict, cancel, rescind, modify or deny renewal of any of the
FCC
<PAGE>
37
Licenses, and there is not issued, outstanding, pending or, to the knowledge of
any of the Tune Entities, threatened by or before the FCC any order to show
cause, notice of violation, notice of apparent liability, notice of forfeiture
or complaint against any of the Tune Entities relative to the FCC. Each of the
applicable Tune Entities is operating in compliance with the terms of the
applicable FCC Licenses, the Communications Act, and the current rules,
regulations, and published policies of the FCC. Complete and correct copies of
the FCC Licenses have been made available to MTVN.
6.14. Taxes. Except as disclosed on Schedule 6.14:
-----
(a) Each of SonicNet LLC, Box LLC and the other Tune Subsidiaries
has timely filed all Tax Returns required to be filed by it. All such Tax
Returns are true, correct and complete.
(b) Each of SonicNet LLC, Box LLC and the other Tune Subsidiaries
has paid all Taxes required to be paid by it other than those which are subject
to a good faith dispute and are not material.
(c) There is no audit, litigation or other proceeding or proposed
or outstanding assessment or deficiency with respect to Taxes pending or, to the
knowledge of any of the Tune Entities, or threatened with respect to any of
SonicNet LLC, Box LLC and the other Tune Subsidiaries.
(d) Each of SonicNet LLC, Box LLC and the other Tune Subsidiaries
has complied with all legal requirements regarding information reporting and
withholding and payment over of Taxes with respect to payments made to third
parties.
(e) None of SonicNet LLC, Box LLC and the other Tune Subsidiaries
is subject to any closing agreement or similar agreement with respect to Taxes.
(f) Each of SonicNet LLC and Box LLC has a single owner and is, and
at all times has been, treated for federal, and, to the extent permitted by
applicable Law, state and local, tax purposes, as disregarded as an entity
separate from its owner.
(g) The classification of each of the Tune Subsidiaries for U.S.
federal income tax purposes (e.g., as a corporation, partnership or disregarded
entity) is set forth in Schedule 6.14(g).
6.15. Intellectual Property.
---------------------
(a) The Tune Entities (other than TCI Music) have sufficient title
and ownership of, and rights to use, Intellectual Property, including the
Intellectual Property that is the subject matter of Schedule 6.9 (whether by
ownership or License, and whether or not listed in Schedule 6.15 referred to
below), included in the SonicNet LLC Assets or the Box LLC Assets or owned, used
or held for use by any of the Tune Subsidiaries, necessary to conduct their
respective businesses as now conducted and as currently proposed to be conducted
without any
<PAGE>
38
conflict with or infringement of the rights of others, and such rights will not
be adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(b) Schedule 6.15(b) contains a true, accurate and complete list as
of the date hereof of all Intellectual Property that constitutes patents, patent
applications, trademark and service marks and corresponding registrations and
applications for registration thereof, and registered copyrights and
corresponding registrations and applications for registration thereof, as well
as internet domain names, included in the SonicNet LLC or Box LLC Assets or in
which any of the Tune Subsidiaries has any right, title or interest (the "Tune
Scheduled Intellectual Property").
(c) Schedule 6.15(c) further sets forth a true, accurate and
complete list as of the date hereof of all Outstanding Licenses of the Tune
Entities (other than TCI Music), identifying the other parties thereto and the
subject matter and date thereof.
(d) Except as set forth in Schedule 6.15(c), the Tune Entities
(other than TCI Music) have sole and exclusive beneficial and record ownership,
legal title and the right to use of all of their respective Intellectual
Property (whether or not listed in Schedule 6.15(b)), free and clear of Liens
and any rights or claims of present or former employees, consultants, officers
and directors of any of the Tune Entities or any other Persons, and there are no
Outstanding Licenses.
(e) Except as set forth in Schedule 6.15(c), the Tune Entities have
not interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property of third parties, nor have any of them
received any communications alleging that it has violated or is violating any of
the Intellectual Property of any other Person, and (without limiting any of the
other representations and warranties herein), to the knowledge of the Tune
Entities, there is not any basis for the making of any such allegation.
(f) Except as set forth in Schedule 6.15(c), there is not pending,
nor to the Tune Entities' knowledge has there been threatened, any action or
proceeding to contest, oppose, cancel or otherwise challenge the validity,
ownership or enforceability of any of the Intellectual Property of the Tune
Entities included in the Tune Contribution.
(g) To the knowledge of the Tune Entities, none of its employees or
consultants is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interests of such Tune
Entity, or with each such consultant's performance of its contractual
obligations or other presently contemplated duties to the such Tune Entity.
6.16 [Intentionally Left Blank]
6.17. Absence of Liabilities. There are no liabilities or
----------------------
obligations relating to the Box Membership Interests and the SonicNet Membership
Interests other than the Box Assumed Liabilities and the SonicNet Assumed
Liabilities, and SonicNet LLC, Box LLC and the
<PAGE>
39
Tune Subsidiaries have no liabilities or obligations (i) relating to periods
prior to the Closing other than with respect to certain accounts payable,
accrued expenses, prepayments and similar working capital items reflected in the
balance sheet attached as Exhibit A to Schedule 6.17 or of the same types as
such items reflected on the balance sheet which were incurred since the date
thereof in the ordinary course of business and consistent with past practice and
are not in excess of historical amounts for comparable periods (provided,
however, that such liabilities and obligations shall not include liabilities or
obligations relating to any Tune Benefit Plan) or (ii) with respect to periods
after the Closing, other than liabilities or obligations arising after, and with
respect to the period following, the Closing under the Tune Assigned Contracts.
6.18. Employee Benefits.
-----------------
(a) Set forth on Schedule 6.18 hereto is a complete and correct
list of any Tune Benefit Plan which covers any SonicNet LLC Employee or Box-MTVN
Employee. Except as set forth in Schedule 6.18(a), none of SonicNet, Box,
SonicNet LLC, Box LLC, the Tune Subsidiaries or any of their Affiliates has
communicated to present or former employees of SonicNet, Box, SonicNet LLC, Box
LLC or the Tune Subsidiaries or adopted or authorized any additional material
Tune Benefit Plan or any material change in or termination of any existing Tune
Benefit Plan.
(b) With respect to any "defined benefit plan", within the meaning
of Section 3(35) of ERISA, maintained or contributed to by SonicNet, Box,
SonicNet LLC, Box LLC, any of the Tune Subsidiaries or any of their ERISA
Affiliates within the last six years: (i) no liability to the PBGC has been
incurred (other than for premiums not yet due); (ii) no notice of intent to
terminate any such plan has been filed with the PBGC or distributed to
participants and no amendment terminating any such plan has been adopted which
could result in any liability to the Tune Entities, the Partnership or the MTVN
Entities; (iii) no proceedings to terminate any such plan have been instituted
by the PBGC and no event or condition has occurred which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such plan; (iv) no "accumulated funding
deficiency," within the meaning of Section 302 of ERISA or Section 412 of the
Code, whether or not waived, has been incurred; and (v) no Lien has arisen under
ERISA or the Code, or is likely to arise, on the assets of SonicNet, Box,
SonicNet LLC, Box LLC or any of the Tune Subsidiaries.
(c) Neither SonicNet, Box, SonicNet LLC, Box LLC or any of the Tune
Subsidiaries has incurred any liability with respect to any "multiemployer
plan," within the meaning of Section 3(37) of ERISA to which any Tune Entity or
any of its ERISA Affiliates has contributed or been required to contribute,
other than for contributions not yet due.
(d) Neither SonicNet, Box, SonicNet LLC, Box LLC or any of the Tune
Subsidiaries has any liability, contingent or otherwise, under Section 4069 or
4212 of ERISA.
(e) With respect to any Box Employment Contract or any employment
contract which will be contributed to SonicNet LLC pursuant to the SonicNet-LLC
Contribution Agreement (an "Assigned Tune Employment Contract"):
<PAGE>
40
(i) None of the Tune Entities, nor, to the knowledge of any of the
Tune Entities, any other party to any Assigned Tune Employment Contract is in
breach thereof or default thereunder (or would, with the giving of notice or
lapse of time or both, be in breach or default);
(ii) There does not exist under any provision of any such Assigned
Tune Employment Contract, to the knowledge of the Tune Entities, any event that,
with the giving of notice or the lapse of time or both, would constitute such a
breach or default ;
(iii) Neither the execution of this Agreement nor the consummation of
the transactions contemplated by this Agreement, will (A) increase the amount of
any payments or benefits otherwise payable under any Assigned Tune Employment
Contract, (B) result in the acceleration of the time of payment, exercisability,
funding or vesting of any such payments or benefits, or (C) result in any
payment (whether severance pay or otherwise) becoming due under any Assigned
Tune Employment Contract;
(iv) No payment or series of payments that would constitute a
"parachute payment" (within the meaning of Section 280G of the Code) has been
made or will be made under any Assigned Tune Employment Contract in connection
with the execution of this Agreement or as a result of the consummation of the
transactions contemplated hereby; and
(v) True and complete copies of any Assigned Tune Employment
Contract have been provided to MTVN.
(f) With respect to any Tune Benefit Plan which covers only employees of
Box Italy or any Tune Subsidiary other than SonicNet LLC or Box LLC ("Tune
Subsidiary Benefit Plan"):
(i) All contributions and premium payments required to have been
paid under or with respect to any Tune Subsidiary Benefit Plan have been timely
paid or accrued;
(ii) Each Tune Subsidiary Benefit Plan is and has been operated and
administered in all material respects in accordance with its terms, the terms of
any applicable collective bargaining agreement, and all applicable Laws;
(iii) There are no actions, suits, or claims (other than routine
claims for benefits in the ordinary course) with respect to any Tune Subsidiary
Benefit Plan pending which could give rise to a material liability to the
Partnership or its subsidiaries, or to the knowledge of any of the Tune Entities
threatened, and none of the Tune Entities has any knowledge of any facts which
could give rise to any such actions, suits or claims (other than routine claims
for benefits in the ordinary course);
(iv) No Tune Subsidiary Benefit Plan is currently under governmental
investigation or audit and, to the knowledge of the Tune Entities no such
investigation or audit is contemplated or under consideration;
<PAGE>
41
(v) Except as provided in Schedule 6.18(f)(v), neither the
execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement, will (i) increase the amount of benefits
otherwise payable under any Tune Subsidiary Benefit Plan, (ii) result in the
acceleration of the time of payment, exercisability, funding or vesting of any
such benefits, or (iii) result in any payment (whether severance pay or
otherwise) becoming due to, or with respect to, any current or former employee
or director of SonicNet, Box, SonicNet LLC, Box LLC or any of the Tune
Subsidiaries; and
(vi) No payment or series of payments that would constitute a
"parachute payment" (within the meaning of Section 280G of the Code) has been
made or will be made by SonicNet, Box, SonicNet LLC, Box LLC or any of the Tune
Subsidiaries, directly or indirectly, to any employee in connection with the
execution of this Agreement or as a result of the consummation of the
transactions contemplated hereby.
(g) Neither the employees of Box Italy nor the employees of any Tune
Subsidiary other than SonicNet LLC or Box LLC are covered by any employee
benefit plan other than a Tune Subsidiary Benefit Plan.
6.19. Certain Restrictive Provisions. Neither the Partnership nor
------------------------------
any of its subsidiaries shall be subject to any non-competition provision,
exclusivity provision, output or requirement contract or right of first refusal
or other similar contractual restrictions on its ability to conduct its business
(collectively, the "Restrictive Provisions") by virtue of the Partnership's
assumption either directly or through a subsidiary of any contract or other
arrangement of SonicNet or Box or any of their subsidiaries or as a result of
the Partnership being a successor to either SonicNet or Box, other than such
Restrictive Provisions as would apply solely to the SonicNet Contribution or the
Box Contribution, as the case may be, and other than those set forth in the
contracts and arrangements disclosed on Schedule 6.19 hereto.
6.20. Employees.
---------
(a) Except as set forth on Schedule 6.20(a) attached hereto, no
employees of Box, SonicNet, Box LLC, SonicNet LLC, Box Italy or the other Tune
Subsidiaries are represented by a labor union or other labor organization.
Within the last three years, there have been no strikes, work stoppages or other
material labor disputes involving employees of Box, SonicNet, Box LLC, SonicNet
LLC, Box Italy or any other Tune Subsidiary.
(b) During the period from May 19, 1999 to the Closing, neither TCI
Music nor any of its Controlled Affiliates (other than Box, SonicNet or its
subsidiaries) has hired any person that was an employee of SonicNet or Box or
their subsidiaries at any time during such period.
(c) Since May 19, 1999, neither TCI Music nor any of its Controlled
Affiliates has hired any person who would otherwise become an employee of the
Partnership or any of its subsidiaries upon consummation of the Closing.
<PAGE>
42
6.21. Agreements. From May 19, 1999 to the date hereof, except as
----------
set forth on Schedule 6.21 and except as MTVN has consented to in writing
(including by e-mail):
(a) neither SonicNet, Box nor any of their subsidiaries has entered
into or renewed any affiliation agreement or amended any of the terms of any
existing affiliation agreement which is part of the Tune Contribution.
(b) neither Box nor any of its subsidiaries has exercised its
option under any existing affiliation agreement to roll out the Box Service onto
any cable or other system, and
(c) neither Box, SonicNet nor any of their subsidiaries has entered
into, renewed or amended any agreement involving any significant expenditure or
obligation which the Partnership or any of its subsidiaries would be obligated
to pay or bear after the date hereof other than as provided in the Tune Budget.
6.22. Year 2000 Compliance.
--------------------
(a) The Tune Entities (which, for purposes of this Section 6.22,
shall not include TCI Music) believe that their products and their suppliers and
vendors will be Year 2000 Compliant before October 1, 1999, assuming that the
Partnership, after the Closing, will pursue the plans developed for the assets
and businesses included in the Tune Contribution.
(b) The Tune Entities (i) are developing a detailed plan and
timeline for becoming Year 2000 Compliant on a timely basis, and (ii) are
implementing that plan in accordance with that timetable in all material
respects. The Tune Entities reasonably anticipate that they will be Year 2000
Compliant on a timely basis, assuming that the Partnership, after the Closing,
will pursue the plans developed for the assets and businesses included in the
Tune Contribution..
(c) As used herein, the term "Year 2000 Compliant" means, with
respect to an entity, that all software in goods produced or sold by, or
utilized by and material to the business operations or financial condition of,
such entity are able to interpret and manipulate data on and involving all
calendar dates correctly and without causing any abnormal ending scenario,
including in relation to dates in and after the Year 2000.
ARTICLE 7
SURVIVAL; INDEMNIFICATION
-------------------------
7.1. Survival. All representations, warranties, covenants and
--------
agreements contained in this Agreement or in any schedule, exhibit, certificate,
agreement, document or statement delivered pursuant hereto shall survive
indefinitely after (and not be affected in any respect by) the Closing and any
investigation conducted by any party hereto; provided, however, that the
-------- -------
representations and warranties set forth in Articles 4, 5 and 6, the schedules
related thereto and in any certificate delivered in connection herewith with
respect to any of those representations and warranties will terminate and expire
on the second anniversary of the Closing
<PAGE>
43
Date except as follows: (a) the representations and warranties which relate
expressly or by necessary implication to Taxes, ERISA or other employment or
labor matters (as modified by the schedules related thereto) will survive until
the expiration of the applicable statutes of limitations (including all periods
of extension and tolling); (b) the representations and warranties which relate
expressly or by necessary implication to the environment or environmental Laws
(as modified by the schedules related thereto) will survive for a period of five
years from the Closing Date; and (c) the representations and warranties set
forth in Sections 4.1, 4.2, 5.1, 5.2, 6.1, 6.2, and 6.10 and (f) (first sentence
(only as it relates to the equity interests in the Tune Subsidiaries) and second
sentence only) (as modified by the schedules related thereto) will survive
indefinitely. After a representation and warranty has terminated and expired, no
indemnification will or may be sought pursuant to this Article 7 on the basis of
a breach or inaccuracy of that representation and warranty by any Person who
would have been entitled pursuant to this Article 7 to indemnification on the
basis of a breach or inaccuracy of that representation and warranty prior to its
termination and expiration; provided that in the case of each representation and
warranty that will terminate and expire as provided in this Section 7.1, no
claim presented in writing for indemnification pursuant to this Article 7 on the
basis of a breach or inaccuracy of that representation and warranty prior to its
termination and expiration will be affected in any way by that termination and
expiration.
7.2. Indemnification by Viacom, Imagine and VLLC. The MTVN Entities
-------------------------------------------
shall jointly and severally indemnify and hold Liberty, TCI Music, Box,
SonicNet, and their shareholders, employees, officers, directors and agents
(collectively, the "Tune Indemnified Parties") and the Partnership, the General
Partner, and their respective employees, officers, directors and agents
(collectively, the "Partnership Indemnified Parties"), without duplication,
harmless from and against, and agree promptly to defend any such Indemnified
Party from and reimburse any such Indemnified Party for, any and all Losses
which any such Indemnified Party may suffer or incur, or become subject to,
arising out of or resulting from, without duplication:
(a) any breach or inaccuracy as of the date of this Agreement of any
of the representations and warranties made by the MTVN Entities in or pursuant
to this Agreement or the Contribution Agreements or in any instrument or
certificate delivered by any of the MTVN Entities in accordance herewith (it
being understood and agreed that, notwithstanding anything to the contrary
contained in this Agreement, except to the extent provided in Section 8.16, to
determine if there had been an inaccuracy or breach of a representation or
warranty of any of the MTVN Entities and the Losses arising from such inaccuracy
or breach for purposes of this indemnity, such representation and warranty shall
be read as if it were not qualified by materiality, including, without
limitation, qualifications indicating accuracy in all material respects, or
accuracy except to the extent the inaccuracy will not have a material adverse
effect); provided, the MTVN Entities shall not be required to indemnify the Tune
--------
Indemnified Parties or the Partnership Indemnified Parties under this Section
7.2(a) for any Losses arising out of a breach of any of the representations or
warranties contained herein insofar as they relate to (x) the failure to
disclose the need for any consents required in connection with nonassignment or
change of control provisions in connection with the transactions contemplated
hereby or (y) any termination or breach or other effect of the failure to obtain
a waiver or consent in connection with the transactions contemplated hereby; and
provided further that the indemnification under
<PAGE>
44
this clause (a), insofar as it relates to any assets or businesses contributed
or to be contributed to the Partnership or to any liabilities or obligations
assumed or to be assumed by the Partnership pursuant to the applicable
Contribution Agreements, shall be for the benefit only of the Partnership
Indemnified Parties and not the Tune Indemnified Parties.
(b) any failure by any of the MTVN Entities to carry out, perform,
satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations under this Agreement and the
Contribution Agreements to which any MTVN Entity is a party; and
(c) any liability or obligation of any MTVN Entity which is not
included in the VLLC Liabilities or the Imagine Liabilities; provided, however,
-------- -------
that the indemnification under this clause (c) shall be for the benefit only of
the Partnership Indemnified Parties and not the Tune Indemnified Parties.
7.3. Indemnification by TCI Music, SonicNet and Box. TCI Music,
----------------------------------------------
SonicNet and Box shall jointly and severally indemnify and hold the MTVN
Entities and their shareholders, employees, officers, directors and agents
(collectively, the "MTVN Indemnified Parties") and the Partnership Indemnified
Parties, without duplication, harmless from and against, and agree promptly to
defend any such Indemnified Party from and reimburse any such Indemnified Party
for, any and all Losses which any such Indemnified Party may suffer or incur, or
become subject to, arising out of or resulting from, without duplication:
(a) any breach or inaccuracy as of the date of this Agreement of
any of the representations and warranties made by TCI Music, SonicNet or Box in
or pursuant to this Agreement or the Contribution Agreements or in any
instrument or certificate delivered by any of TCI Music, SonicNet or Box in
accordance herewith (it being understood and agreed that, notwithstanding
anything to the contrary contained in this Agreement, except to the extent
provided in Section 8.16, to determine if there had been an inaccuracy or breach
of a representation or warranty of any of TCI Music, SonicNet or Box and the
Losses arising from such inaccuracy or breach for purposes of this indemnity,
such representation and warranty shall be read as if it were not qualified by
materiality, including, without limitation, qualifications indicating accuracy
in all material respects, or accuracy except to the extent the inaccuracy will
not have a material adverse effect); provided, TCI Music, SonicNet and Box shall
--------
not be required to indemnify the MTVN Indemnified Parties or the Partnership
Indemnified Parties under this Section 7.3(a) for any Losses arising out of a
breach of any of the representations or warranties set forth herein insofar as
they relate to (x) the failure to disclose the need for any consents required in
connection with nonassignment or change of control provisions in connection with
the transactions contemplated hereby or (y) any breach or termination or other
effect of the failure to obtain a waiver or consent in connection with the
transactions contemplated hereby; and provided further that the indemnification
under this clause (a), insofar as it relates to any assets or businesses
contributed or to be contributed to the Partnership or to any liabilities or
obligations assumed or to be assumed by the Partnership pursuant to the
applicable Contribution Agreements, shall be for the benefit only of the
Partnership Indemnified Parties and not the MTVN Indemnified Parties.
<PAGE>
45
(b) any failure by any of TCI Music, SonicNet, Box, SonicNet LLC or
Box LLC to carry out, perform, satisfy and discharge any of their respective
covenants, agreements, undertakings, liabilities or obligations under this
Agreement and the Contribution Agreements to which TCI Music, SonicNet, Box,
SonicNet LLC or Box LLC, as the case may be, is a party;
(c) any liability or obligation of TCI Music, SonicNet, Box,
SonicNet LLC, Box LLC and any Tune Subsidiary other than the Box Assumed
Liabilities and the SonicNet Assumed Liabilities and liabilities or obligations
of the Tune Subsidiaries (x) for periods prior to the Closing with respect to
certain accounts payable, accrued expenses, prepayments and similar working
capital items disclosed in the balance sheet attached as Exhibit A to Schedule
6.17 or of the same types as such items reflected on the balance sheet which
were incurred since the date thereof in the ordinary course of business and
consistent with past practice and are not in excess of historical amounts for
comparable periods (but not including liabilities or obligations relating to any
Tune Benefit Plan) and (y) for periods from and after the Closing arising under
the Tune Assigned Contracts; provided, however, that the indemnification under
-------- -------
this clause (c) shall be for the benefit only of the Partnership Indemnified
Parties and not the MTVN Indemnified Parties; and provided further that nothing
-------- -------
contained in the foregoing shall limit the liabilities and obligations of the
Partnership pursuant to Sections 3.4, 3.5 and 3.6 of this Agreement.
(d) any Taxes imposed on any of the Tune Entities attributable to
any taxable period or portion thereof ending on or prior to the Closing; and
(e) any liability or obligation arising under any Tune Benefit Plan
or as a result of the employment or termination of employment of employees or
former employees of Box, SonicNet, Box LLC, SonicNet LLC, Box Italy or the other
Tune Subsidiaries, or the provision of services or termination of provision of
services by directors, consultants, agents or independent contractors of Box,
SonicNet, Box LLC, SonicNet LLC, Box Italy or the other Tune Subsidiaries
(including, without limitation, salaries, bonuses, payroll taxes, severance
obligations, contributions to and benefits under the Tune Benefit Plans and all
other employment or service related claims), excluding (i) any liability or
obligation arising after the Closing under the Assigned Tune Employment
Contracts; (ii) any liability or obligation arising after the Closing under any
Tune Subsidiary Benefit Plan with respect to any SonicNet LLC Employee or Box-
MTVN Employee; or (iii) any liability or obligation with respect to the
employment or termination of employment of any SonicNet LLC Employee or Box-MTVN
Employee arising after the Closing.
7.4. Indemnification by Liberty. Liberty shall indemnify and hold
--------------------------
the MTVN Indemnified Parties and the Partnership Indemnified Parties, without
duplication, harmless from and against, and agree promptly to defend any such
Indemnified Party from and reimburse any such Indemnified Party for, any and all
Losses which any such Indemnified Party may suffer or incur, or become subject
to, arising out of or resulting from, without duplication:
(a) any breach or inaccuracy as of the date of this Agreement of
any of the representations and warranties made by it in or pursuant to this
Agreement or in any instrument or certificate delivered by it in accordance
herewith (it being understood and agreed that,
<PAGE>
46
notwithstanding anything to the contrary contained in this Agreement, to
determine if there had been an inaccuracy or breach of a representation or
warranty of Liberty and the Losses arising from such inaccuracy or breach, for
purposes of this indemnity, such representation and warranty shall be read as if
it were not qualified by materiality, including, without limitation,
qualifications indicating accuracy in all material respects, or accuracy except
to the extent the inaccuracy will not have a material adverse effect);
(b) any failure by Liberty to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or the Parent Agreement.
7.5. Indemnification by the Partnership. The Partnership shall
----------------------------------
indemnify and hold the MTVN Indemnified Parties and the Tune Indemnified Parties
harmless from and against, and agree promptly to defend any such Indemnified
Party from and reimburse any such Indemnified Party for, any and all Losses
which any such Indemnified Party may suffer or incur, or become subject to
(including, with respect to TCI Music, any Losses suffered or incurred by any
affiliated entity under the Irrevocable Standby Letter of Credit dated January
13, 1999 in the amount of $459,000 issued by Bank of America NT & SA for the
benefit of TM Park Avenue Associates), arising out of or resulting from, without
duplication, (a) any failure by the Partnership to carry out, perform, satisfy
and discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement and the Contribution Agreements to which it is
a party, (b) the VLLC Liabilities and the Imagine Liabilities, (c) the Box LLC
Liabilities and the SonicNet LLC Liabilities, (d) any liabilities which arise
out of a breach or violation of any non-assignment or change of control
provision insofar as such breach or violation resulted from or arose out of
(including as a result of a claim of anticipatory breach of contract) the
consummation of the transactions contemplated hereby, including any failure to
obtain any consent or waiver, and (e) all other liabilities assumed by the
Partnership (but only to the extent so assumed) under any Contribution
Agreements or under any other Contract entered into by or assigned or
contributed to, or to be assigned or contributed to, the Partnership in
connection herewith; provided, however, that the Partnership shall not be
-------- -------
obligated to indemnify any indemnified party with respect to any obligations
that relate to pre-Closing periods (other than those relating to certain
accounts payable, accrued expenses, prepayments and similar working capital
items identified on the balance sheets attached to Schedule 4.12 or 6.17 hereto
or of the same types as such items reflected on the balance sheet which were
incurred since the date thereof in the ordinary course of business and
consistent with past practice and are not in excess of historical amounts for
comparable periods) or arise out of a breach or violation prior to the Closing
of any provision (other than a non-assignment or change in control provision
insofar as it relates to the consummation of the transactions contemplated
hereby, for which the Partnership shall provide indemnity under clause (d)
above) of any Contract assigned or contributed to the Partnership in connection
herewith.
7.6. Tipping Amount; Limitation on Indemnification. Notwithstanding
---------------------------------------------
any other provision in this Agreement to the contrary, the MTVN Entities shall
not be obligated to pay any claims for indemnification under Section 7.2(a), TCI
Music, SonicNet and Box shall not be obligated to pay any claims for
indemnification under Section 7.3(a) and Liberty shall not be
<PAGE>
47
obligated to pay any claims for indemnification under Section 7.4(a) (other
than, in each case, any such claim based on a No Basket Representation), unless,
in each case, the total Losses giving rise to such claims under Section 7.2(a),
7.3(a) or 7.4(a), as applicable, exceed $3,000,000 (the "Tipping Amount");
provided that if, in any such case, the aggregate amount of such Losses exceeds
the Tipping Amount, then the applicable indemnifying party shall be obligated to
pay the full amount of such Losses, including the Tipping Amount, except for a
deductible amount of $1,500,000. Notwithstanding anything to the contrary in
this Agreement, no group of indemnifying parties' cumulative indemnity
obligations under any of Sections 7.2(a), 7.3(a) or 7.4(a), excluding
indemnification claims for Losses arising out of any inaccuracy or breach of the
No Basket Representations, shall exceed $150,000,000, it being understood that
an obligation for indemnity under Section 7.2(a), 7.3(a) or 7.4(a), on the one
hand, and any other paragraph of Section 7.2, 7.3 or 7.4, on the other hand,
shall be deemed to be an obligation under Section 7.2(a), 7.3(a) or 7.4(a) for
purposes of the foregoing $150,000,000 limitation, but not for purposes of the
Tipping Amount.
7.7. Exclusive Remedy. The rights and remedies of the parties hereto
----------------
under this Article 7 are exclusive and in lieu of any and all other rights and
remedies which the parties hereto may have against the other under this
Agreement or any Contribution Agreement, with respect to (x) the breach or
inaccuracy of any representation or warranty made (or deemed made) by a party
hereto in or pursuant to this Agreement or any Contribution Agreement or (y) any
breach of, or failure to perform or comply with, any covenant or agreement set
forth in this Agreement or in any Contribution Agreement or in any certificate
delivered by it in accordance herewith or therewith; provided, however, that
-------- -------
this sentence shall not limit the rights of the parties hereto to seek specific
performance of any provision of this Agreement or any Contribution Agreement.
7.8. Indemnification Procedures. Any Party asserting a right to
--------------------------
indemnification under Section 7.2, 7.3, 7.4 or 7.5 shall so notify in writing
--------------------- ---
the applicable Person or Persons required hereunder to provide indemnification
pursuant to this Article 7. The indemnified party's failure to so notify the
---------
indemnifying party of any such matter shall not release the indemnifying party,
in whole or in part, from its obligations to indemnify under this Article 7,
---------
except to the extent the indemnified party's failure to so notify actually
prejudices the indemnifying party's ability to defend such action. If the facts
giving rise to such indemnification shall involve any actual or threatened claim
or demand by or against a third party, the indemnifying party shall be entitled
to control the defense or prosecution of such claim or demand in the name of the
indemnified party, with counsel satisfactory to the indemnified party, if (x) it
notifies the indemnified party in writing of its intention to do so within 20
days of its receipt of such notice, without prejudice, however, to the right of
the indemnified party to participate therein through counsel of its own
choosing, which participation shall be at the indemnified party's expense unless
(i) the indemnified party shall have been advised by its counsel that use of the
same counsel to represent both the indemnifying party and the indemnified party
would present a conflict of interest (which shall be deemed to include any case
where there may be a legal defense or claim available to the indemnified party
which is different from or additional to those available to the indemnifying
party) or (ii) the indemnifying party shall fail to defend or prosecute in good
faith such claim or demand within a reasonable time, in
<PAGE>
48
which case the reasonable fees of counsel for the indemnified party shall be for
the account of indemnifying party and the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party,
and (y) it agrees to accept full responsibility indemnify and hold harmless the
indemnified party in accordance herewith in respect of the claim or demand.
Whether or not the indemnifying party chooses to defend or prosecute such claim,
the Partnership and the parties hereto shall cooperate in the prosecution or
defense of such claim and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may reasonably be requested in connection therewith. The indemnifying party
shall not settle or permit the settlement of any such third party claim or
action in which any relief other than the payment of money damages is sought
against the indemnified party without the prior written consent of the
indemnified party. The indemnified party shall not settle or permit the
settlement of any claim or action for which it is entitled to indemnification
without the prior written consent of the indemnifying party, unless the
indemnifying party shall have failed to assume the defense thereof after the
notice referred to in the first sentence of this Section 7.8, and in the manner
-----------
provided above.
7.9. Subrogation. In the event of any indemnification made pursuant
-----------
to a third party claim, the indemnifying party shall be subrogated to the extent
of such payment to all of the rights of recovery of the indemnified party, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the indemnifying party effectively to bring suit to enforce such rights.
ARTICLE 8
MISCELLANEOUS
-------------
8.1. Table of Contents; Headings. The table of contents and headings
---------------------------
of the Articles, Sections and other subdivisions of this Agreement are for
convenience of reference only and shall not modify, define or limit any of the
terms or provisions of this Agreement.
8.2. Governing Law. This Agreement and the rights and obligations of
-------------
the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed under and in accordance with the laws of the State of
New York, excluding the choice of law rules thereof.
8.3. Severability. If any provision of this Agreement shall be held
------------
to be illegal, invalid or unenforceable, that provision will be enforced to the
maximum extent permissible so as to effect the intent of the parties and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If necessary to effect the intent of
the parties, the parties will negotiate in good faith to amend this Agreement to
replace the unenforceable language with enforceable language which as closely as
possible reflects such intent.
8.4. Amendments. This Agreement may be modified or amended only by a
----------
written amendment signed by each party hereto.
<PAGE>
49
8.5. Counterparts. This Agreement may be executed in one or more
-------------
counterparts (and all signatures need not be on any one such counterpart), with
all such counterparts together constituting one and the same instrument.
8.6. Entire Agreement. This Agreement contains the entire agreement
----------------
of the parties with respect to the subject matter hereof and supersedes any and
all prior agreement and understandings, whether written or oral, with respect to
the subject matter hereof, including the MOU.
8.7. No Presumption. This Agreement shall be construed without
--------------
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
8.8. Binding on Viacom. The parties acknowledge that MTVN is a
-----------------
division of Viacom and that, consequently, Viacom is obligated to perform the
obligations to be paid or performed by MTVN hereunder. Insofar as this
Agreement refers to MTVN in the context of an operating business, it shall refer
only to the operating unit or units of Viacom that on a day-to-day basis operate
the business of MTV: Music Television or VH1 Music First. In addition, the
parties agree that the representations and warranties set forth in Sections
4.1(a), 4.2(a), 4.2(b), 4.3 and 4.7, insofar as they purport to relate to MTVN,
relate to Viacom.
8.9. Parties in Interest; Limitation on Rights of Others. Any MTVN
---------------------------------------------------
Entity may assign its rights and obligations under this Agreement to one or more
Affiliates of MTVN which is directly or indirectly wholly-owned (and including
for this purpose Imagine) by Viacom, Inc.; provided that, in connection with any
--------
such assignment, the applicable MTVN Entity executes and delivers to TCI Music
an instrument, in form and substance reasonably satisfactory to TCI Music, by
which such MTVN Entity guarantees the performance of any such assignee's
obligations hereunder. TCI Music may assign any or all of its rights and
obligations under this Agreement to any of its wholly-owned subsidiaries;
provided that, in connection with any such assignment, TCI Music executes and
- - --------
delivers to MTVN an instrument, in form and substance reasonably satisfactory to
MTVN, by which TCI Music guarantees the performance of any such assignee's
obligations hereunder. No party to this Agreement may assign any of its rights
or obligations under this Agreement except as specifically provided in this
Section 8.9. The terms of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Any assignment of rights hereunder in violation hereof shall be null
and void ab initio. Nothing in this Agreement, whether express or implied,
-- ------
shall be construed to give any Person (other than the parties hereto and their
successors and permitted assigns) any legal or equitable right, remedy or claim
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any third party except the provisions of Article 7
shall be enforceable by all Indemnified Parties.
8.10. Waivers; Remedies. The observance of any term of this
-----------------
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if
<PAGE>
50
in a writing signed by the party or parties against which such waiver is to be
asserted and only in the specific instance and for the specific purpose for
which given. Except as otherwise provided herein, no failure or delay of any
party in exercising any power or right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power.
8.11. Further Assurances. Upon reasonable request from time to time,
------------------
each of MTVN and TCI Music and their respective Controlled Affiliates shall
execute and deliver all documents and instruments and do all other acts that may
be reasonably necessary or desirable to carry out the intent and purposes of
this Agreement and give effect to the exercise by a party of its rights
hereunder.
8.12. Public Announcements. No party shall make or shall permit any
--------------------
of its Affiliates to make any public announcement about the transactions
contemplated by this Agreement without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
Notwithstanding any other provision contained herein, any party or Affiliate of
such party may at any time make announcements which are required by applicable
law or the rules of any national stock exchange or stock association so long as
the party or Affiliate so required to make the announcement, promptly upon
learning of such requirement, notifies the other parties of such requirement and
discusses with the other parties in good faith the exact wording of any such
announcement.
8.13. Costs and Expenses. Each party shall be solely responsible for
------------------
the payment of its own costs and expenses incurred in connection with the
negotiation and closing of the transactions contemplated hereby. Filing fees,
and sales and transfer taxes in connection with the consummation of the
transactions contemplated hereby will be borne by the Partnership.
8.14. Notices. Except as expressly provided herein, notices and
-------
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed (certified or registered
mail, postage prepaid, return receipt requested) or sent by facsimile copier of
the sending party, as follows:
If to Viacom, MTVN, Imagine, MTVN Online or VLLC:
MTV Networks
1515 Broadway
New York, New York 10036
Fax No.: (212) 846-1839
Attention: General Counsel
with a copy to:
Viacom International Inc.
1515 Broadway
New York, New York 10036
<PAGE>
51
Fax No.: (212) 258-6069
Attention: General Counsel
If to the Partnership:
MTVN Online L.P.
1515 Broadway
New York, New York 10036
Fax No.: (212) 846-1735
Attention: Mr. Fred Seibert
with a copy to:
Viacom International Inc.
1515 Broadway
New York, New York 10036
Fax No.: (212) 258-6069
Attention: General Counsel
If to Tune, Box, SonicNet, Box USA or VJN LPTV:
TCI Music, Inc.
67 Irving Place North, 4th Floor
New York, New York 10003
Fax No.: (212) 387-8171
Attention: Mr. Lee Masters
If to Liberty:
Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Fax No.: 720-875-5448
Attention: Mr. David Koff
or to such other address or attention of such other Person as any party shall
advise the other parties in writing. All notices and other communications given
to a party in accordance with the provisions of this Agreement shall be deemed
to have been given (i) three Business Days after the same are sent by certified
or registered mail, postage prepaid, return receipt requested, (ii) when
delivered by hand or transmitted by fax confirmation unless delivered on a day
which is not a Business Day in which case such notice shall be deemed to have
been given on the next succeeding Business Day or (iii) one Business Day after
the same are sent by a reliable overnight courier service, with acknowledgment
of receipt.
<PAGE>
52
8.15. Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each party hereby irrevocably and unconditionally submits, for
itself and its property, to the exclusive jurisdiction of any New York State
court sitting in the County of New York or any federal court of the United
States of America sitting in the Southern District of New York, and any
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to this Agreement or any Contribution Agreement, or for
recognition or enforcement of any judgment relating hereto. Each party hereby
irrevocably and unconditionally agrees that any suit, action or proceeding
against it by any other party to this Agreement with respect to this Agreement
or any Contribution Agreement shall be instituted only in any New York State
court sitting in the County of New York or any federal court sitting in the
Southern District of New York, as the party instituting such suit, action or
proceeding may elect in its sole discretion. Each party also hereby irrevocably
and unconditionally agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Each party hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any Contribution
Agreement in any New York State court sitting in the County of New York or any
federal court sitting in the Southern District of New York, and any appellate
court from any such court. Each party hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such suit, action or proceeding in any such court and further waives the
right to object, with respect to such suit, action or proceeding, that such
court does not have jurisdiction over such party. Each party hereby irrevocably
waives the right to a jury trial in any suit, action or proceeding arising out
of or related to this Agreement or any Contribution Agreement.
(c) Each party hereby irrevocably and unconditionally consents to
service of process in the manner provided for the giving of notices pursuant to
this Agreement or any Contribution Agreement. Nothing in this Agreement or any
Contribution Agreement shall affect the right of either party to serve process
in any other manner permitted by law.
8.16 Exceptions to Representations and Warranties. Notwithstanding
--------------------------------------------
anything herein to the contrary, (i) all representations set forth in Article 4
hereof shall be deemed to contain an exception for any nonassignment provisions
(including the effect of any failure to obtain a waiver or consent) triggered in
connection with the transactions contemplated hereby, and (ii) all
representations set forth in Article 6 hereof shall be deemed to contain
exceptions (x) with respect to the effect of any nonassignment or change of
control provisions (including the effect of any failure to obtain a waiver or
consent) triggered in connection with the transactions contemplated hereby and
(y) for the effect of the transactions contemplated by the MOU (including,
without limitation, terminations of affiliation agreement as a result of change
in control or nonassignment provisions), failure to launch the Box Service in
additional systems as a result of MTVN's failure to consent to the payment of
launch fees or failure of Box or
<PAGE>
53
SonicNet to take any action which requires MTVN's consent pursuant to the MOU
where such consent is not granted.
8.17 Obligations of TCI Music and Liberty. The obligations of TCI
------------------------------------
Music and Liberty hereunder are several and not joint.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed by its respective officers thereunto duly authorized on the date
first above written.
LIBERTY MEDIA CORPORATION
By: /s/ David Koff
-----------------------------
Name: David Koff
Title: Sr. Vice President
TCI MUSIC, INC.
By: /s/ David Koff
----------------------------
Name: David Koff
Title: Vice President
VIACOM INTERNATIONAL INC.
By: /s/ Michael D. Fricklas
----------------------------
Name: Michael D. Fricklas
Title: Sr. Vice President and
General Counsel
MTVN ONLINE PARTNER I LLC
By: /s/ David W. Sussman
-----------------------------
Name: David W. Sussman
Title: Sr. Vice President,
General Counsel and
Assistant Secretary
IMAGINE RADIO, INC.
By: /s/ David W. Sussman
-----------------------------
Name: David W. Sussman
Title: Sr. Vice President,
General Counsel and
Assistant Secretary
<PAGE>
MTVN ONLINE INC.
By: /s/ David W. Sussman
-------------------------------
Name: David W. Sussman
Title: Sr. Vice President,
General Counsel and
Assistant Secretary
SONICNET, INC.
By: /s/ David Koff
-------------------------------
Name: David Koff
Title: Vice President
THE BOX WORLDWIDE, INC.
By: /s/ David Koff
-------------------------------
Name: David Koff
Title: Vice President
VJN LPTV CORP.
By: /s/ David Koff
-------------------------------
Name: David Koff
Title: Vice President
MTVN ONLINE L.P.
By: MTVN ONLINE PARTNER I LLC,
its General Partner
By: /s/ David W. Sussman
--------------------------------
Name: David W. Sussman
Title: Sr. Vice President,
General Counsel and
Assistant Secretary
<PAGE>
EXHIBIT 2.2
CONFORMED COPY
===============================================================================
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
MTVN ONLINE L.P.
DATED AS OF JULY 15, 1999
AMONG
MTVN ONLINE PARTNER I LLC,
IMAGINE RADIO, INC.,
SONICNET, INC.
AND
THE BOX WORLDWIDE, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS AND CONSTRUCTION
Section 1.01. Certain Definitions....................................... 1
Section 1.02. Additional Definitions.................................... 11
Section 1.03. Terms Generally........................................... 13
ARTICLE II FORMATION, NAME AND TERM OF PARTNERSHIP
Section 2.01. Formation of the Partnership.............................. 13
Section 2.02. Name of Partnership....................................... 13
Section 2.03. Term of Partnership....................................... 14
Section 2.04. Principal Office.......................................... 14
Section 2.05. Residences................................................ 14
Section 2.06. Delaware Office; Agent for Service of Process............. 14
Section 2.07. Purpose................................................... 14
Section 2.08. Property Ownership........................................ 15
ARTICLE III PARTNERSHIP CAPITAL
Section 3.01. Percentage Interests...................................... 15
Section 3.02. Contribution of Partnership Assets........................ 16
Section 3.03. Additional Capital Contributions.......................... 16
Section 3.04. Partnership Funds......................................... 17
Section 3.05. Partner Loans; Other Borrowings........................... 17
ARTICLE IV DISTRIBUTIONS
ARTICLE V CAPITAL ACCOUNTS; TAX ALLOCATIONS
Section 5.01. Capital Accounts.......................................... 18
Section 5.02. Capital Account Allocations............................... 19
Section 5.03. Allocations for Federal Income Tax Purposes............... 21
Section 5.04. Prorated Allocations...................................... 21
Section 5.05. Taxation.................................................. 21
Section 5.06. Fiscal Year............................................... 21
Section 5.07. Interest.................................................. 22
ARTICLE VI MANAGEMENT OF THE PARTNERSHIP
Section 6.01. Management Committee...................................... 22
Section 6.02. Meetings of the Management Committee...................... 23
Section 6.03. Officers of the Partnership............................... 23
Section 6.04. Budget and Business Plan.................................. 24
Section 6.05. Actions Requiring Approval by a Majority of the
Management Committee.................................... 26
Section 6.06. Actions Requiring Approval by a Majority of the Management
Committee Including the Representative of Tune.......... 27
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
Page
----
Section 6.07. Limitation of Agency...................................... 27
Section 6.08. Liability of Partners and Representatives................. 28
Section 6.09. Indemnification........................................... 28
Section 6.10. Right of Partners Against Partnership and General
Partner in Certain Events............................... 29
Section 6.11. Temporary Right to Direct Management Committee............ 29
ARTICLE VII BOOKS, RECORDS, REPORTS AND ACCOUNTINGS
Section 7.01. Books and Records......................................... 30
Section 7.02. Financial Statements...................................... 30
Section 7.03. Tax Returns and Information............................... 31
ARTICLE VIII DISPOSITIONS, ADMISSIONS, WITHDRAWALS
Section 8.01. Prohibition on Dispositions of Partnership Interests;
Withdrawals; Admissions................................. 32
Section 8.02. Dispositions of Partnership Interests to a Permitted
Transferee.............................................. 32
Section 8.03. Dispositions After the Restricted Period.................. 32
Section 8.04. Right of First Offer...................................... 33
Section 8.05. Tag Along; Drag Along..................................... 33
Section 8.06. Additional Provisions Relating to Disposition............. 35
Section 8.07. Distributions After Disposition........................... 38
ARTICLE IX EVENTS OF DEFAULT; CONSEQUENCES AND REMEDIES
Section 9.01. Events of Default......................................... 38
Section 9.02. General Consequences; Remedies of Non-Defaulting Partner.. 39
ARTICLE X TERMINATION AND LIQUIDATION OF THE PARTNERSHIP
Section 10.01. Events of Termination..................................... 39
Section 10.02. Winding-Up................................................ 40
ARTICLE XI RELATED PARTY TRANSACTIONS
Section 11.01. Related Party Transactions Generally...................... 41
Section 11.02. Related Party Transactions in Excess of $1,000,000........ 42
Section 11.03. Basis of Evaluation....................................... 43
Section 11.04. No Breach................................................. 43
ARTICLE XII CERTAIN PROVISIONS RELATING TO INTERESTS
Section 12.01. Adjustment of Tune's Percentage Interest.................. 43
Section 12.02. Preemptive Rights......................................... 44
Section 12.03. Put and Call.............................................. 45
ARTICLE XIII REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE PARTNERS
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
(Continued)
Page
----
ARTICLE XIV [Intentionally Left Blank]
ARTICLE XV MISCELLANEOUS
Section 15.01. Notices................................................... 48
Section 15.02. Table of Contents; Headings............................... 49
Section 15.03. Governing Law............................................. 49
Section 15.04. Severability.............................................. 49
Section 15.05. Amendments................................................ 50
Section 15.06. Counterparts.............................................. 50
Section 15.07. Entire Agreement.......................................... 50
Section 15.08. Parties in Interest; Limitation on Rights of Others....... 50
Section 15.09. Waivers; Remedies......................................... 50
Section 15.10. Further Assurances........................................ 50
Section 15.11. Jurisdiction; Consent to Service of Process............... 51
Section 15.12. Reliance on Officer's Certificate......................... 51
Section 15.13. Public Announcements...................................... 51
Section 15.14. Confidential and Proprietary Information.................. 52
Section 15.15. No Presumption............................................ 53
Section 15.16. Freedom of Action......................................... 53
-iii-
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP, dated as of July 15, 1999 among MTVN
ONLINE PARTNER I LLC, a Delaware limited liability company ("VLLC"), IMAGINE
RADIO, INC., a California corporation ("Imagine", and together with VLLC,
"MTVNS"), SONICNET, INC., a Delaware corporation ("SonicNet"), and THE BOX
WORLDWIDE, INC., a Florida corporation ("Box", and together with SonicNet,
"Tune").
The parties desire to form a Delaware limited partnership to be named "MTVN
Online, L.P." (the "Partnership") for the purpose of (a) developing, operating,
managing, marketing, promoting, distributing and licensing text, audio and/or
video music, music-related and/or music-themed services online and (b) engaging
in activities reasonably related thereto, including e-commerce applications and
consumer oriented commercial transactions related thereto.
The parties desire to set forth herein the terms and conditions of the
foregoing.
In consideration of the premises and other covenants and conditions
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
----------------------------
Section 1.01. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the meanings specified below:
"Accountants" means PricewaterhouseCoopers LLP or such other firm of
-----------
nationally recognized independent certified public accountants that, as of any
time, have been appointed by the Management Committee as the accountants for the
Partnership.
"Act" means the Delaware Revised Uniform Limited Partnership Act.
---
"Additional Agreements" means the Related Party Agreements, the
---------------------
Organization Agreement, the Contribution Agreements and the Parent Agreement and
Guaranty.
"Adjusted Capital Account" of a Partner, as of the end of any fiscal year
------------------------
of the Partnership, shall mean the Capital Account maintained for such Partner,
as of the end of such fiscal year, (a) increased by any amounts that such
Partner is treated as obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Regulations
Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of
all losses and deductions that, as of the end of such fiscal year, are
reasonably expected to be allocated to such Partner in subsequent years under
Sections 704(e)(2) and 706(d) of the Code and Regulations Section 1.751-
1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of
such fiscal year, are reasonably expected to be made to such Partner in
subsequent years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Partner's Capital Account
that are reasonably expected to occur during (or prior to) the year in which
such distributions are reasonably expected to be made (other than increases as a
result of a minimum gain chargeback pursuant to Section 5.02(b) or (c)). The
--------------- ---
foregoing
<PAGE>
definition of Adjusted Capital Account is intended to comply with the provisions
of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Affiliate", when used with respect to a specified Person, means any other
---------
Person that directly, indirectly or through one or more intermediaries Controls,
is Controlled by or is under common Control with, such Person. Notwithstanding
the foregoing, (i) neither the Partnership nor any Person Controlled by the
Partnership shall be deemed to be an "Affiliate" of any Partner or of any
Affiliate of any Partner, (ii) no Partner or any Affiliate thereof shall be
deemed to be an "Affiliate" of any other Partner or any Affiliate thereof solely
by virtue of its Partnership Interest, (iii) no Person other than Viacom Inc.
and its Controlled Affiliates shall be deemed to be an "Affiliate" of MTVNS,
Viacom Inc. or any Controlled Affiliate of Viacom Inc. and (iv) no Person other
than TCI Music and its Controlled Affiliates shall be deemed to be an Affiliate
of Tune, TCI Music or any Controlled Affiliate of TCI Music.
"Agreed Value" shall be (i) with respect to all property other than cash
------------
transferred to the Partnership as a Capital Contribution, the Fair Market Value
of the property on the date that it is contributed to the Partnership as agreed
upon by the Partners (it being understood that the Agreed Value of the assets
transferred pursuant to Section 3.02 and the assets to be transferred pursuant
------------
to Section 2.6 and 2.7 of the Organization Agreement is set forth in Schedule 1
hereto), (ii) with respect to all property distributed by the Partnership to a
Partner, the Fair Market Value of the property on the date of distribution as
reasonably determined in good faith by the Chief Executive Officer, subject to
review hereunder as a Related Party Transaction, if applicable, and (iii) with
respect to any revaluation of Partnership property pursuant to Section 5.01(b),
---------------
the Fair Market Value of such Partnership property at the time of the event
requiring such revaluation as reasonably determined in good faith by the Chief
Executive Officer.
"Agreement" means this Agreement of Limited Partnership, including all
---------
Schedules and Exhibits hereto, as the same may be amended or modified from time
to time.
The "Bankruptcy" of any Partner shall be deemed to have occurred upon the
----------
happening of any of the following: (i) the filing of an application by such
Person for, or a consent to, the appointment of a trustee of its assets; (ii)
the filing by such Person of a voluntary petition in bankruptcy or seeking
relief under Title 11 of the United States Code, or the filing of a pleading in
any court of record admitting in writing its inability to pay its debts as they
come due; (iii) the filing by a third party of an involuntary petition in
bankruptcy or seeking relief under Title 11 of the United States Code, which
petition is not dismissed within 60 days of the filing thereof; (iv) the making
by such Person of a general assignment for the benefit of creditors; (v) the
filing by such Person of an answer admitting the material allegations of, or
consenting to, or defaulting in answering, a bankruptcy petition filed against
it in any bankruptcy proceeding or a petition seeking relief under Title 11 of
the United States Code; or (vi) the entry of an order, judgment or decree by any
court of competent jurisdiction adjudicating such Person a bankrupt or for
relief in respect of such Person or appointing a trustee of its assets, and such
order, judgment or decree continues unstayed and in effect for any period of 60
consecutive days.
"Box License Agreement" means an agreement containing, among other things,
---------------------
the economic terms set forth in the Term Sheet attached to the letter agreement
dated as of May 19, 1999 among Viacom, Liberty and TCI Music under the heading
"Box License Agreement".
-2-
<PAGE>
"Budget" means, for Fiscal Year 1999, the Initial Budget, and for each
------
subsequent Fiscal Year, the budget, prepared by the Chief Executive Officer and
approved by the Management Committee for such Fiscal Year in accordance with
Section 6.04(b), except as otherwise provided in Section 6.04(c).
---------------
"Business Day" means any day (other than a day which is a Saturday, Sunday
------------
or legal holiday in the State of New York) on which banks are open for business
in the City of New York.
"Business Plan" means, for Fiscal Year 1999, the Initial Business Plan, and
-------------
for each subsequent Fiscal Year, the business plan, prepared by the Chief
Executive Officer and approved by the Management Committee for such Fiscal Year
in accordance with Section 6.04(b), except as otherwise provided in Section
--------------- -------
6.04(d).
- - -------
"Capital Call" means a request for additional Capital Contributions given
------------
by the Chief Executive Officer to the Partners setting forth in reasonable
detail the purposes for which such capital is required, the amount of the
additional Capital Contribution requested to be made by each Partner, whether
the additional Capital Contribution is a Required Contribution or a Non-Required
Contribution (together with the calculations showing how such determination was
made), the Payment Date and the account of the Partnership to which payment is
to be made.
"Capital Contributions" means the Pre-Closing Capital Contributions, the
---------------------
Closing Capital Contributions and contributions made by each Partner to the
capital of the Partnership pursuant to Article III; provided, however, that no
----------- -------- -------
amount of capital which, in accordance with Section 3.03(c) or otherwise,
---------------
constitutes a Partner Loan shall constitute a Capital Contribution.
"Chief Executive Officer" means the chief executive officer of the
-----------------------
Partnership.
"Closing" means the closing of the transactions contemplated by the
-------
Organization Agreement on the Closing Date.
"Closing Date" has the meaning set forth in the Organization Agreement.
------------
"Code" means the Internal Revenue Code of 1986.
----
"Consumer Price Index" means the Consumer Price Index "All Urban Consumers:
--------------------
U.S. city average, all items" (1982-1984 = 100) published by the Bureau of Labor
Statistics of the United States Department of Labor, or any equivalent successor
or substitute index published by the Bureau of Labor Statistics or a successor
or substitute governmental agency.
"Contribution Agreements" means, collectively, the Contribution, Assignment
-----------------------
and Assumption Agreement dated as of the date hereof between VLLC and the
Partnership, the Contribution, Assignment and Assumption Agreement dated as of
the date hereof between Imagine and the Partnership, the Contribution,
Assignment and Assumption Agreement dated as of the date hereof between SonicNet
and the Partnership and the Contribution, Assignment and Assumption Agreement
dated as of the date hereof between Box and the Partnership.
-3-
<PAGE>
"Control" (including its correlative meanings, "controlled by" and "under
------- ------------- -----
common control with") as to any Person means the possession, directly or
- - -------------------
indirectly, of the affirmative power to direct or cause the direction of the
management and policies of such Person (whether through ownership of securities,
partnership interests or other ownership interests, by contract, by membership
or involvement in the board of directors, management committee or other
management structure of such Person, or otherwise).
"Controlled Affiliate" means, when used with respect to a specified Person,
--------------------
any Affiliate as to which such Person possesses, directly or indirectly, the
affirmative power to direct or cause the direction of the management and
policies of such Affiliate (whether through ownership of securities, partnership
interests or other ownership interests, by contract, by membership or
involvement in the board of directors, management committee or other management
structure of such affiliate, or otherwise).
"Database Agreement" means the Database and Software License Agreement
------------------
dated as of the date hereof, between MTVN and the Partnership.
"Dispose" (including its correlative meanings, "Disposed of", "Disposition"
------- ----------- -----------
and "Disposed"), with respect to any Partnership Interest, means to directly or
--------
indirectly Transfer, pledge, hypothecate or otherwise dispose of such
Partnership Interest or any interest therein, except that such term shall not
include any pledge or hypothecation of, or granting of a security interest in, a
Partnership Interest to secure indebtedness for money borrowed so long as the
applicable pledgee has taken no action to foreclose on such pledge,
hypothecation or security interest and so long as the Partner retains full
voting rights, subject to no proxy or voting agreement, with respect to such
Partnership Interest; provided, however, that (i) a change of control of TCI
-------- -------
Music, Liberty, MTVN, Viacom or Viacom Inc. (ii) any issuance of capital stock
or other equity securities of TCI Music, Liberty, MTVN, Viacom or Viacom Inc.
(iii) a contribution of the assets or business of Liberty to Liberty Management
Group LLC, pursuant to a Contribution Agreement dated March 9, 1999, among
Liberty, AT&T and certain other persons, (iv) a spinoff, split off, redemption,
distribution or other transaction which results in any of TCI Music, Liberty,
Viacom Inc., Viacom or MTVN (or any successor of any of such Persons) ceasing to
be a Subsidiary or division of its current parent entity or (v) a sale of all or
substantially all of the assets of TCI Music, Liberty, Viacom, MTVN or Viacom
Inc. shall not constitute a Disposition of a Partnership Interest.
"Excluded Tune Assets" has the meaning set forth in the Organization
--------------------
Agreement.
"Fair Market Value" means, with respect to any securities or other
-----------------
property, the price at which a willing seller would sell and a willing buyer
would buy such property having full knowledge of the facts, in an arm's-length
auction transaction without time constraints, and without being under any
compulsion to buy or sell. Fair Market Value, in the case of the Partnership,
shall be determined on a going concern or liquidation basis, whichever yields
the highest value. In determining the Fair Market Value of any Partnership
Interest, there shall be no discount due to lack of liquidity of such
Partnership Interest because of the absence of a significant public market or
due to the minority ownership position in the Partnership represented by such
Partnership Interest, nor any premium due to the majority or control ownership
position in the Partnership represented by such Partnership Interest.
-4-
<PAGE>
"GAAP" means United States generally accepted accounting principles as in
----
effect from time to time.
"General Partner" means VLLC (with respect to its interest as a General
---------------
Partner) or any of its Permitted Transferees who has been admitted as a
successor or additional General Partner in accordance with the provisions of
this Agreement and any other Person who becomes a General Partner in accordance
with the provisions of this Agreement.
"Governmental Entity" means any nation or government, and state or other
-------------------
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Income" with respect to the Partnership means all revenues attributable to
------
the Business.
"Initial Budget" means the Budget for the 1999 Fiscal Year attached hereto
--------------
as Schedule 3.
"Initial Business Plan" means the Business Plan for the 1999 Fiscal Year
---------------------
attached hereto as Schedule 4.
"IPO" has the meaning set forth in the Parent Agreement and Guaranty.
---
"Liberty" means Liberty Media Corporation, a Delaware corporation and any
-------
entity into which it may be merged or with which it may be consolidated or to
which it may transfer all or substantially all of its assets, including in
connection with a redemption of the AT&T Liberty Media Group Common Stock in
exchange for capital stock in a subsidiary of AT&T in accordance with AT&T's
Certificate of Incorporation, as amended (the "AT&T Charter"), or as a result of
the transactions contemplated by the Contribution Agreement, dated March 9,
1999, among Liberty Group, LLC, Liberty and certain of their respective
Affiliates.
"LIBOR" means the rate per annum equal to (i) the arithmetic average
-----
(rounded upwards or downwards, if necessary, to the nearest 1/16th of one
percent with the midpoint being rounded upwards) of the offered rates for U.S.
dollar deposits for a period of three months which appear on the LIBO page of
the Reuters Monetary Money Rates Service (or such other page as may replace that
page on that service for the purpose of displaying rates comparable to those
displayed on the LIBO page) at approximately 11:00 A.M. (London Time) on the
date of determination or (ii) or if no such offered rates appear on the LIBO
Page (or such other page as may replace that page on that service for the
purpose of displaying rates comparable to those displayed on the LIBO page), the
offered rate for U.S. dollar deposits for a period of three months which appears
on the display page currently designated as page 3750 of the Dow Jones Telerate
Service (or such other page as may replace that page on that service for the
purpose of displaying rates comparable to those displayed on page 3750) as of
11:00 A.M. (London Time) on the date of determination.
"License Agreement" means the Trademark License Agreement dated as of the
-----------------
date hereof between MTVN and VLLC.
-5-
<PAGE>
"Limited Partner" means VLLC (with respect to its interest as a Limited
---------------
Partner), Imagine, SonicNet or Box or their respective Permitted Transferees who
has been admitted as a successor or additional Limited Partner in accordance
with the provisions of this Agreement and any other Person who becomes a Limited
Partner in accordance with the provisions of this Agreement.
"LMA" means the Local Marketing Arrangement dated as of the date hereof,
---
between VJN LPTV Corp. and Box LLC.
"MTVN" means MTV Networks, a division of Viacom.
----
"Material Deviations" means unbudgeted items which for any Budget are
-------------------
singly or in the aggregate more than $1.0 million.
"Maximum Capital Contribution Obligation" means (a) with respect to MTVNS,
---------------------------------------
the excess of (x) $90 million over (y) the aggregate amount of the Pre-Closing
Capital Contributions and Closing Capital Contribution, if any, made by MTVNS,
and (b) with respect to Tune, the excess of (w) $10 million over (z) the
aggregate amount of the Pre-Closing Capital Contributions and Closing
Contribution, if any, made by Tune.
"Net Income" or "Net Loss" of the Partnership for any Fiscal Year shall
---------- --------
mean the taxable Income or tax loss of the Partnership for federal income tax
purposes for such year, determined in accordance with Code Section 703(a) (for
this purpose, all items required to be separately stated pursuant to Section
703(a)(1) shall be includable in taxable income and tax loss) increased by the
amount of any tax-exempt income of the Partnership during such year and
decreased by the amount of any Section 705(a)(2)(B) expenditures or treated as
such pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) (any such
-
expenditures, "Section 705(a)(2)(B) Expenditures") of the Partnership during
such Fiscal Year; provided, however, that (A) the depreciation (or amortization)
-------- -------
for such Fiscal Year with respect to any Section 704(c) Property shall be
calculated in accordance with Regulations Section 1.704-3(d), (B) for purposes
of calculating the gain or loss arising from any sale or other disposition of
any Section 704(c) Property, the basis of such Section 704(c) Property shall be
deemed to be its fair market value on the date of its contribution (or
revaluation) less the accumulated depreciation or amortization (calculated in
accordance with clause (A) above) arising after that date with respect to such
Section 704(c) Property, and (C) an amount of gain or loss that would have been
recognized by the Partnership if property distributed by the Partnership to a
Partner had instead been sold in a taxable disposition for its Agreed Value at
the time of distribution shall be taken into account.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
----------------------
Section 1.704-2(b)(1). The amount of Nonrecourse Deductions shall be determined
in accordance with Regulations Section 1.704-2(c).
"Nonrecourse Liability" shall have the meaning set forth in Regulations
---------------------
Section 1.704-2(b)(3) (and Regulations Section 1.752-1(a)(2)).
"Non-Required Contribution" means, with respect to any Partner, a Capital
-------------------------
Contribution requested from such Partner by the Partnership pursuant to a
Capital Call issued after the Closing
-6-
<PAGE>
in accordance with the provisions of Section 3.03, which, if made, would, when
aggregated with (i) the Pre-Closing Contributions and Closing Contribution, if
any, made by such Partner's Stockholder Group and (ii) all Capital Contributions
made by such Partner's Stockholder Group after the date of this Agreement and
prior to such Capital Call, exceed the Maximum Capital Contribution Obligation
of Tune, if such Partner is a member of the Tune Stockholder Group, or MTVNS, if
such Partner is a member of the MTVN Stockholder Group.
"Offering Expiration Date" means the date two years from the Closing Date,
------------------------
as such date may be extended for up to 60 days upon the written advice of a
nationally recognized investment banking firm then engaged to underwrite the
sale of shares in the IPO.
"Organization Agreement" means the Organization Agreement dated as of the
----------------------
date hereof among Liberty, TCI Music, MTVN, VLLC, MTV Europe, a general
partnership, MTVN Online Inc., a Delaware corporation, Imagine, SonicNet, Box
and the Partnership.
"Parent" means (i) with respect to Tune, TCI Music, and (ii) with respect
------
to MTVNS, MTVN or Viacom, Inc.
"Parent Agreement and Guaranty" means the Parent Agreement and Guaranty
-----------------------------
dated as of the date hereof among TCI Music, MTVN, Liberty, SonicNet, Box and
the Partnership.
"Partner" means a General Partner or Limited Partner.
-------
"Partner Nonrecourse Debt" shall have the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set forth in
-------------------------------------
Regulations Section 1.704-2(i)(2). The amount of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section 1.704-
2(i)(3).
"Partner Nonrecourse Deductions" shall have the meaning set forth in
------------------------------
Regulations Section 1.704-2(i)(1). The amount of Partner Nonrecourse Deductions
shall be determined in accordance with Regulations Section 1.704-2(i)(2).
"Partnership Costs" means all costs necessary or appropriate for the
-----------------
Partnership to incur, including (i) all costs of operating and administering the
Partnership and (ii) all other costs reflected in each Budget and/or Business
Plan or otherwise associated with any agreement, obligation or other matter
either approved by the Management Committee or which does not require the
approval of the Management Committee.
"Partnership Interest" means, as to each Partner, all of the interest of
--------------------
such Partner in the Partnership, including such Partner's (i) right to a
distributive share of the Income, gain, losses and deductions of the Partnership
in accordance herewith, (ii) right to a distributive share of Partnership
assets, (iii) obligations as a Partner, and (iv) rights with respect to the
management of the business and affairs of the Partnership, as provided herein or
by law.
-7-
<PAGE>
"Partnership Minimum Gain" with respect to the Partnership shall have the
------------------------
meaning set forth in Regulations Section 1.704-2(b)(2). The amount of
Partnership Minimum Gain shall be determined in accordance with Regulations
Section 1.704-2(d).
"Payment Date" means, with respect to any Capital Call, the date on which
------------
the Capital Contributions requested by such Capital Call are to be made, which
date shall not be less than 15 days nor more than 45 days after the date of such
Capital Call.
"Permitted Transferee" of any Partner means, with respect to such Partner,
--------------------
any member of such Partner's Stockholder Group; provided that Imagine shall not
be a Permitted Transferee with respect to MTVNS or any other member of the MTVN
Stockholders Group unless and until Viacom or a wholly owned Subsidiary of
Viacom owns 100% of the outstanding equity interests of Imagine.
"Person" means any individual, firm, corporation, general or limited
------
partnership, joint venture, limited liability company, trust, association,
division, unincorporated entity of any kind or Governmental Entity.
"Pre-Closing and Closing Capital Contributions" shall have the meanings set
---------------------------------------------
forth in the Organization Agreement.
"Prime Rate" means the rate of interest publicly announced from time to
----------
time by CitiBank, N.A. as its prime rate in effect at its principal office in
the City of New York.
"Programming License Agreement" means the Programming License Agreement
-----------------------------
dated as of the date hereof between MTVN and VLLC.
"Promotion Agreement" means the Promotion Agreement dated as of the date
-------------------
hereof between MTVN and VLLC.
"Regulation(s)" means United States Treasury Regulations issued under the
-------------
Code.
"Related Party Agreements" mean the Services Agreement, the License
------------------------
Agreement, the Technology Sharing and License Agreement, the Box License
Agreement, the Programming License Agreement, the Database Agreement and the
Promotion Agreement, as any such agreement may be amended from time to time in
accordance with or not in violation of this Agreement.
"Related Party Transaction" means any transaction between the Partnership
-------------------------
or any of its Controlled Affiliates, on the one hand, and Viacom Inc. or any of
its Controlled Affiliates, on the other hand, including the provision of
advertising sales and the issuance of any equity interests in the Partnership to
any employees of Viacom or of any Affiliates of Viacom or the determination by
the Chief Executive Officer of the Partnership of the Fair Market Value of any
property distributed by the Partnership to a Partner; provided, however, that
-------- -------
for purposes of this Agreement, (i) any transactions pursuant to and in
accordance with a Related Party Agreement shall not be considered to be Related
Party Transactions (except that this exception shall not apply to any amendment
to any such Related Party Agreement which was required to be
-8-
<PAGE>
approved pursuant to Section 6.06 but was not so approved); and (ii) the
------------
issuance of Partnership Interests or options to purchase Partnership Interests
to employees of Viacom Inc. or any of its Controlled Affiliates, which, in the
aggregate, do not exceed 10% of the outstanding Partnership Interests, shall not
constitute a Related Party Transaction unless such Partnership Interests are
issued to any such employee in lieu of regular compensation, it being understood
that the issuance of any such Partnership Interests in lieu of regular
compensation shall be a Related Party Transaction.
"Reorganization" has the meaning set forth in the Parent Agreement and
--------------
Guaranty.
"Representative" means any representative of a Partner on the Management
--------------
Committee.
"Required Contribution" means, with respect to each Partner, a Capital
---------------------
Contribution requested from such Partner by the Partnership pursuant to a
Capital Call issued after the Closing in accordance with the provisions of
Section 3.03, to the extent such Capital Contribution, when aggregated with all
- - ------------
Capital Contributions made by such Partner's Stockholder Group after the date of
the Closing and prior to such Capital Call, but excluding the Capital
Contribution made pursuant to Section 3.02, the transfers required pursuant to
------------
Sections 2.6 and 2.7 of the Organization Agreement, and the Pre-Closing and
Closing Capital Contribution, would not exceed the Maximum Capital Contribution
Obligation of Tune, if such Partner is a member of the Tune Stockholder Group,
or MTVN, if such Partner is a member of the MTVN Stockholder Group.
"Restricted Period" shall mean that period commencing on the Closing and
-----------------
ending on the first to occur of (x) the third anniversary of the Closing or (y)
the initial closing of the IPO.
"Section 704(c) Property" means any property contributed to the Partnership
-----------------------
by a Partner that has an adjusted tax basis for federal income tax purposes to
the contributing Partner on the date of its contribution that differs from its
fair market value on such date and any Partnership property that is revalued
pursuant to Section 5.01(b).
---------------
"Services Agreement" means the Mutual Services Agreement dated as of the
------------------
date hereof between Viacom and the Partnership.
"Shares" has the meaning set forth in the Parent Agreement and Guaranty.
------
"Stockholder Group" shall mean, with respect to Tune, Liberty and its
-----------------
wholly-owned Subsidiaries and TCI Music and its wholly-owned Subsidiaries
(provided that for this purpose Liberty Media Group LLC shall be deemed a wholly
owned subsidiary of Liberty), and with respect to MTVNS, Viacom Inc. and its
wholly-owned Subsidiaries (including, for purposes of this definition, Imagine
for so long as its performance hereunder is guaranteed by MTVN pursuant to the
Parent Agreement and Guaranty or otherwise, provided that Imagine shall not be
deemed a member of the MTVN Stockholder Group for purposes of making Transfers
of Partnership Interests to it unless and until Viacom or a wholly-owned
Subsidiary of Viacom owns 100% of the outstanding equity interests of Imagine),
in each case so long as such member of a Stockholder Group remains a wholly-
owned direct or indirect Subsidiary (including, for purposes of this definition,
Imagine) of TCI Music, Liberty or Viacom Inc., as applicable.
-9-
<PAGE>
"Subsidiary" of any Person means a corporation, company or other entity (i)
----------
more than fifty percent (50%) of whose outstanding shares or securities are, now
or hereafter, owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person, and the shares or securities so owned entitle such
Person and/or Subsidiaries to elect at least a majority of the members of the
board of directors or other managing authority of such corporation, company or
other entity or (ii) which does not have outstanding shares or securities, as
may be the case in a partnership, limited liability company, joint venture or
unincorporated association, but more than fifty percent (50%) of whose ownership
interest is, now or hereafter, owned or controlled, directly or indirectly
through one or more Subsidiaries, by such Person, and the ownership interest so
owned entitles such Person and/or Subsidiaries to make the decisions for such
corporation, company or other entity; provided, in each case, that such
corporation, or company or other entity shall be deemed to be a Subsidiary only
so long as such ownership or control exists.
"Target Value" means the sum of (x) $175 million and (y) the amount of any
------------
Non-Required Contributions made by Tune in excess of $5 million of Non-Required
Contributions; provided, however, that the Target Value shall not exceed $185
-------- -------
million.
"TCI Music" means TCI Music, Inc., a Delaware corporation, and any entity
---------
into which it may be merged or with which it may be consolidated or to which it
may transfer all or substantially all of its assets.
"Technology Sharing and License Agreement" means the Technology Sharing and
----------------------------------------
License Agreement dated as of the date hereof between MTVN and VLLC.
"Transfer" means to sell, exchange, assign or transfer.
--------
"Tune Partnership Interest Value" means the amount determined pursuant to
-------------------------------
the following procedure, which determination shall be final and binding on the
parties hereto. Upon receipt by MTVNS of the written notice from (i) Tune
provided for in Section 12.01 or (ii) Tune or a Subject Transferee provided for
-------------
in Section 12.03(a), or receipt by Tune or a Subject Transferee of the written
----------------
notice from MTVNS under Section 12.03(b), MTVNS and Tune and/or any Subject
----------------
Transferee shall attempt to mutually agree on the Fair Market Value of the Tune
Partnership Interest as of the applicable date. If such Persons are unable to
reach agreement within 60 days after the date of such notice, each of Tune (and
any such Subject Transferee), on the one hand, and MTVNS, on the other hand,
shall, within 30 days thereafter, retain an investment bank to determine the
Fair Market Value of the Tune Partnership Interest held by Tune and/or any
Subject Transferee as of the applicable date. If any such Person fails to
retain an investment bank within such 30-day period, the investment bank
retained shall be the sole investment bank to make such determination. Each
investment bank (or, in the event any Person fails to retain one, the sole
investment bank) shall submit its estimation as of the applicable date of the
Fair Market Value within 45 days from the date of its selection. If the
determination of such Fair Market Value by the investment banks differ by less
than 10% of the average of the two determinations, the Fair Market Value shall
be the average of the two determinations. If such determinations vary by more
than 10% of the average of such two determinations, the two investment banks
shall promptly designate a third investment bank which shall be unaffiliated
with any of the first two investment banks and shall not have had any
significant affiliation with,
-10-
<PAGE>
or engagement for, any of the Partners (or any such Subject Transferee) or any
Affiliate of any of the Partners (or any such Subject Transferee) during the two
years prior to its selection. The third investment bank shall select one of the
two determinations as the Fair Market Value as of the applicable date of the
Tune Partnership Interest within 30 days from the date of its selection. In
determining the Tune Partnership Interest Value, the investment bank or banks
shall be instructed to assume the continuation of the Promotion Agreement in
accordance with its then current terms.
"Viacom" means Viacom International, Inc., a Delaware corporation and any
------
entity into which it may be merged or with which it may be consolidated or to
which it may transfer all or substantially all its assets.
"Viacom Inc." means Viacom Inc., a Delaware corporation and any entity into
-----------
which it may be merged or with which it may be consolidated or to which it may
transfer all or substantially all its assets.
Section 1.02. Additional Definitions.
----------------------
The following additional terms have the meaning ascribed thereto in the
Section or Schedule indicated below next to such term:
Defined Term Section Defined In
------------ ------------------
Acceptance Period 12.02
Agents 15.14
Appraiser 11.02
Appraiser Dispute Notice 11.02
Appraiser Notifying Party 11.02
Appraiser Receiving Party 11.02
Appraiser's Findings 11.02
Audit Costs 11.01
Auditor 11.01
Auditor's Findings 11.01
Box Preamble
Budget 6.04
Business 2.07
Business Plan 6.04
Call Closing Date 12.03
Call Notice 12.03
Call Purchase Price 12.03
Capital Account 5.01
Certificate 2.01
Committee Decision 6.05
Confidential Information 15.14
Damages 9.02
Defaulting Partner 9.01
Discount Amount 8.05
-11-
<PAGE>
Defined Term Section Defined In
------------ ------------------
Dispute Notice 11.01
Drag Along Notice 8.05
Drag Along Transfer Fraction 8.05
Electing Partners 12.02
Event of Default 9.01
Event of Termination 10.01
Excess Interests 12.02
Extraordinary Decision 6.06
Fiscal Year 5.06
Imagine Preamble
Issuance Notice 12.02
Management Committee 6.01
MTVN Stockholder Group 1.01
MTVNS Preamble
MTVNS Partnership Interest 3.01
Negotiation Period 8.04
Non-Defaulting Partner 9.02
Notifying Party 11.01
Offered Interests 12.02
Officers 6.03
Other Partner 8.05
Partner Loan 3.05
Partnership Preamble
Percentage Interest 3.01
Premium Amount 8.05
Proposed Budget 6.04
Proposed Business Plan 6.04
Proprietary Information 15.14
Put/Call Closing 12.03
Put Closing Date 12.03
Put Interest 12.03
Put Notice 12.03
Put Purchase Price 12.03
Receiving Party 11.01
Related Party Transaction Notice 11.02
SonicNet Preamble
Subject Transaction 11.01
Subject Transferee 12.03
Tag Along Notice 8.05
Tag Along Transfer Fraction 8.05
Tax Matters Partner 7.03
Transferring Partner 8.05
Tune Preamble
Tune Minimum Condition 6.01
-12-
<PAGE>
Defined Term Section Defined In
------------ ------------------
Tune Notice 12.01
Tune Partnership Interest 3.01
Tune Stockholder Group 1.01
VLLC Preamble
Section 1.03. Terms Generally. The definitions in Sections 1.01 and
--------------- -------------
1.02 shall apply equally to both the singular and plural forms of the terms
- - ----
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The words "herein", "hereof" and "hereunder" and words of similar
import refer to this Agreement (including the Exhibits and Schedules) in its
entirety and not to any part hereof unless the context shall otherwise require.
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Unless the context
shall otherwise require, any references to any agreement or other instrument or
statute or regulation are to it as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor provisions). Any
reference in this Agreement to a "day" or number of "days" (without the explicit
qualification of "Business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a Business Day,
then such action or notice shall be deferred until, or may be taken or given on,
the next Business Day.
ARTICLE II
FORMATION, NAME AND TERM OF PARTNERSHIP
---------------------------------------
Section 2.01. Formation of the Partnership. The Partners agree that the
----------------------------
Partnership shall be a limited partnership pursuant to the Act, for the purposes
and upon the terms and conditions set forth in this Agreement. The General
Partner shall file and record a Certificate of Limited Partnership of the
Partnership (the "Certificate") in the office of the Secretary of State of the
State of Delaware and provide a copy as filed to each of the Partners. The
General Partner shall also file and record all other such certificates and
documents including amendments to the Certificate, as may be required or
appropriate to comply with all requirements for the formation and operation of
the Partnership as a limited partnership, the ownership of property and the
conduct of business under the laws of the State of Delaware and of any other
jurisdictions in which the Partnership may own property or conduct business.
The General Partner shall provide the Partners with certified copies of each
such document as filed and recorded.
Section 2.02. Name of Partnership. The name of the Partnership shall be
-------------------
"MTVN Online, L.P." The business of the Partnership shall be the Business,
which may be conducted under such other name and/or names and variations thereof
as the Management Committee may from time to time select. Except as set forth
in any of the Additional Agreements, the name and any trade or service names,
marks, emblems or logos used by the Partnership shall be the exclusive property
of the Partnership, and no Partner shall have the right
-13-
<PAGE>
to use, and each Partner agrees not to use, any of said names, marks, emblems or
logos other than on behalf of the Partnership unless otherwise agreed to in
writing among the Partners. Nothing in this Section 2.02 or elsewhere in this
-----------
Agreement is intended to, nor shall it, grant to the Partnership any right to
use any trade name, trademark, service mark, design or logo proprietary to any
Partner or any Affiliate of a Partner or otherwise to infringe upon the
intellectual property rights of a Partner or any Affiliate of a Partner. The
parties acknowledge that certain provisions of the Additional Agreements grant
certain intellectual property rights of certain of the Partners and/or their
Affiliates to the Partnership.
Section 2.03. Term of Partnership. The term of the Partnership shall
-------------------
commence upon the filing of the Certificate in the office of the Secretary of
State of the State of Delaware and shall continue unless terminated in
accordance with the terms of this Agreement.
Section 2.04. Principal Office. The principal executive office of the
----------------
Partnership shall be located at 1515 Broadway, New York, New York or such other
place as the Management Committee shall designate, provided that such principal
executive office shall be located in New York City.
Section 2.05. Residences. The place of residence of each Partner is its
----------
address set forth in Section 15.01.
-------------
Section 2.06. Delaware Office; Agent for Service of Process. The
---------------------------------------------
address of the Partnership's registered office in the State of Delaware is in
care of The Prentice-Hall Corporation System, Inc., 1013 Centre Road,
Wilmington, Newcastle County, Delaware 19805, and the name of the registered
agent for service of process of the Partnership is The Prentice-Hall Corporation
System, Inc. The Management Committee may from time to time appoint a new
registered agent for the Partnership.
Section 2.07. Purpose. Subject to, and upon the terms and conditions
-------
of, this Agreement, the purposes and business of the Partnership (the
"Business"), directly or through subsidiaries, will be to (a) develop, operate,
manage, market, promote, distribute and license text, audio and/or video music,
music-related and/or music-themed services online and (b) engage in activities
reasonably related thereto, including e-commerce applications and consumer
oriented commercial transactions related thereto. Services that are intended
principally to be delivered to internet browsers or software with browser
functionality, even if such browsers or browser functionality are operating
through a set-top box or a television set and/or are used to deliver video clips
or video programs, shall be included in the Business. The terms "browsers" and
"browser functionality" for purposes of the foregoing shall refer to software
consisting of or containing a graphical user interface which provides the
capability for the user to exercise substantial control over the selection,
timing, sequence and configuration of content being viewed, when such software
is used to view content that has been specifically adapted to be subject to such
user controls, and is not primarily intended to be viewed in a linear,
sequential manner. Notwithstanding anything to the contrary contained herein,
businesses that are substantially similar to the businesses traditionally
conducted by television, cable and satellite television program services, and
businesses presently described as "near video on demand" and "video on demand"
shall not be considered to be within the Business. The Partnership shall have
all the powers now or hereafter conferred by the laws of the State of Delaware
on limited
-14-
<PAGE>
partnerships formed under the Act and, subject to the limitations of this
Agreement, may do any and all lawful acts or things that are necessary,
appropriate, incidental or convenient for the furtherance and accomplishment of
the purposes and businesses of the Partnership. Notwithstanding the foregoing,
the Partnership may, in addition to the Business, acquire and take any action it
deems appropriate with respect to any assets relating to the programming service
owned by Box or Box LLC and any FCC Licenses relating thereto.
Section 2.08. Property Ownership. Subject to Section 2.02 and except as
------------------ ------------
otherwise expressly provided herein, all assets and property, whether real,
personal or mixed, tangible or intangible, including contractual rights, owned
or possessed by the Partnership shall be held or possessed in the name of the
Partnership; all such assets, property and rights shall be deemed to be owned or
possessed by the Partnership as an entity, and none of the Partners individually
shall have any separate ownership in such assets, property or rights. Each
Partner's Partnership Interest is personal property for all purposes.
ARTICLE III
PARTNERSHIP CAPITAL
-------------------
Section 3.01. Percentage Interests.
--------------------
(a) The "Percentage Interest" of each Partner as of any date
shall be equal to the percentage obtained by dividing (i) the aggregate amount
of all Capital Contributions made by such Partner in cash and the Agreed Value
of all Capital Contributions made by such Partner other than in cash as of such
date by (ii) the aggregate amount of all Capital Contributions made by all the
Partners in cash and the Agreed Value of all Capital Contributions made by all
the Partners other than in cash as of such date. The Percentage Interest of a
Stockholder Group shall be the percentage equal to the sum of the Percentage
Interests of all the Partners in such Stockholder Group. The initial Percentage
Interest of each Partner as of the date of this Agreement is as follows:
VLLC ........................................................ 1%
interest as the General Partner
........................................................ 69%
interest as a Limited Partner
Imagine ..................................................... 20%
interest as a Limited Partner
SonicNet .................................................... 8.75%
interest as a Limited Partner
Box ......................................................... 1.25%
interest as a Limited Partner
(b) For purposes of this Agreement, (i) VLLC is treated as
though it holds a single Partnership Interest, even though it holds a portion of
its Partnership Interest as a General Partner, (ii) the combined Partnership
Interest of VLLC and Imagine and their Permitted Transferees may be referred to
as the "MTVNS Partnership Interest" and (iii) the combined Partnership Interest
of SonicNet and Box and their Permitted Transferees may be referred to as
-15-
<PAGE>
the "Tune Partnership Interest." Whenever this Agreement requires that notice be
given to, or any rights be given to, Tune or MTVNS, they shall be given to both
SonicNet and Box and their Permitted Transferees or to both VLLC and Imagine and
their Permitted Transferees, respectively. Whenever this Agreement permits
rights to be exercised by Tune, on the one hand, or MTVNS, on the other hand,
SonicNet or Box (or both) and their Permitted Transferees, on the one hand, or
VLLC or Imagine (or both) and their Permitted Transferees, on the other hand,
may exercise such rights, respectively. Notwithstanding anything in this
Agreement to the contrary, the Partners intend that MTVNS shall hold one
ninetieth (1/90) of its Partnership Interest as a General Partner and eighty-
nine ninetieths (89/90) of its Partnership Interest as a Limited Partner.
Accordingly, the amount of any Capital Contributions made by MTVNS pursuant to
Article III and any allocations and distributions to MTVNS pursuant to Article
- - ----------- -------
IV or Article V shall, except as otherwise provided therein, be allocated one
- - -- ---------
ninetieth (1/90) to the Partnership Interest held by MTVNS as a General Partner
and eighty-nine ninetieths (89/90) to the Partnership Interest held by MTVNS as
a Limited Partner. In the event that the Partnership Interest of a Partner is
otherwise increased or decreased pursuant to this Agreement, the amount of the
increase or decrease, as the case may be, shall be allocated in accordance with
the intent of this paragraph.
Section 3.02. Contribution of Partnership Assets. On the Closing Date,
----------------------------------
each Partner shall transfer to the Partnership those assets specified in the
Contribution Agreement to which such Partner is a party, and the Agreed Value of
such assets shall be as set forth on Schedule 1; such assets shall be
----------
transferred to the Partnership in accordance with the applicable Contribution
Agreement. As a result of such transfer, the Capital Accounts of each Partner
will be credited with an amount equal to the Agreed Value of the assets
contributed by such Partner. Prior to the Closing Date, each Partner has made
Pre-Closing Capital Contributions in an amount equal to the amount set forth
opposite such Partner's name in Schedule 1, and the Capital Accounts will be
----------
credited with the amounts of such Capital Contributions. At the Closing each
Partner shall make a Closing Capital Contribution in the amount set forth
opposite its name on Schedule 1, and the Capital Accounts will be credited with
----------
the amounts of such Capital Contributions.
Section 3.03. Additional Capital Contributions.
--------------------------------
(a) Each Budget shall set forth any Capital Contributions
which are expected to be necessary to fund Partnership Costs during the Fiscal
Year covered by such Budget, which Capital Contributions shall be designated as
Required Contributions and/or Non-Required Contributions, depending upon whether
such Partner has made Capital Contributions in excess of its Maximum Capital
Contribution Obligations. All Capital Contributions shall be deemed to be
Required Capital Contributions until such time as the applicable Partner has
contributed an amount in cash or property (excluding its Pre-Closing Capital
Contribution, Closing Capital Contribution, and contributions under the
applicable Contribution Agreement) having an Agreed Value equal to its Maximum
Capital Contribution Obligation, and thereafter all such Capital Contributions
with respect to such Partner will be Non-Required Capital Contributions. Each
Partner shall make all such Capital Contributions within 30 days of the date
provided for in the Budget, so long as a Capital Call is given therefor, except
that either Partner may elect not to make all or any portion of a Non-Required
Contribution. All such Capital Contributions shall be made pro-rata in
accordance with the Partners' Percentage Interests,
-16-
<PAGE>
except to the extent a Partner elects not to make all or any portion of a Non-
Required Contribution.
(b) Subject to the limitations of this Agreement, if the Management
Committee determines that additional Capital Contributions are necessary from
time to time to fund Partnership Costs in excess of that provided for in any
then relevant Budget or pursuant to any prior Capital Call, the Management
Committee shall cause the Chief Executive Officer to deliver a Capital Call to
each Partner. Subject to the election of any Partner not to make all or any
portion of a Non-Required Contribution, the Partners shall make all additional
Capital Contributions pro rata in proportion to their Percentage Interests on
the Payment Date specified in the Capital Call requesting such additional
Capital Contributions; provided, however, that no Partner shall be required to
-------- -------
make an additional Capital Contribution in an amount in excess of the amount
which, when taken together with the aggregate amount of all previous Capital
Contributions (excluding, without duplication, those made pursuant to Section
-------
3.02 and the Pre-Closing and Closing Capital Contribution) made by such Partner,
- - ----
exceeds such Partner's Maximum Capital Contribution Obligation.
(c) In the event that Tune elects not to make any portion of a
Capital Contribution or fails to do so on or before the relevant Payment Date,
MTVNS and/or any other Person(s) designated by MTVNS may make such portion of
Capital Contribution (or any portion thereof) and, thereafter the Percentage
Interests of each Partner shall be adjusted so that they are in proportion to
the relative cumulative Capital Contributions by each Partner; provided,
--------
however, that no such additional Non-Required Capital Contribution shall be made
- - -------
if such additional Non-Required Capital Contribution and the related adjustment
to the Percentage Interests would, on a pro forma basis, cause the Percentage
Interest for the Tune Partnership Interest to be less than the lesser of (i) 5%
and (ii) the percentage equal to one-half of the excess of (x) ten percent over
(y) the Percentage Interest of any portion of the Tune Partnership Interest
Transferred to a Person other than a Permitted Transferee. In the event the
circumstances described in the proviso of the preceding sentence apply, MTVNS
and/or any other Person(s) designated by MTVNS may loan the Partnership the
amount of such Capital Contribution (or portion thereof), in which event such
loan(s) shall be subject to Section 3.05.
------------
Section 3.04. Partnership Funds. The funds of the Partnership shall be
-----------------
deposited in such bank accounts or invested in such investments as shall be
designated by the Management Committee. Partnership funds shall not be
commingled with those of any other Person without the consent of the Management
Committee. The Partnership shall not lend or advance funds to, or guarantee any
obligation of, a Partner or any Affiliate thereof without the prior written
consent of the Management Committee.
Section 3.05. Partner Loans; Other Borrowings. Subject to any
-------------------------------
applicable approval required by Article VI, in order to satisfy the
----------
Partnership's financial needs, the Partnership may, if so determined by the
Management Committee, (i) borrow from banks, lending institutions or other
unrelated third parties, and may pledge Partnership properties or the production
of income therefrom to secure and provide for the repayment of such loans and
(ii) borrow funds from any Partner or an Affiliate of a Partner on an unsecured
basis and on market terms. Loans made by a Partner or an Affiliate of a Partner
(a "Partner Loan") shall be
-17-
<PAGE>
evidenced by a promissory note of the Partnership on the terms and in the form
approved by the lending Partner and the Management Committee. Unless a Partner
declines to make such loan, Partner Loans shall be made pro rata in accordance
with the respective Percentage Interests of the Partners (or in such other
proportion as the Partners may agree). Partner Loans shall be repaid to the
Partners at such times as the Partnership has sufficient funds to permit such
repayment without jeopardizing the Partnership's ability to meet its other
obligations on a timely basis. Nothing contained in this Agreement or in any
promissory note issued by the Partnership hereunder shall require the
Partnership or any Partner to pay interest or any amount as a penalty at a rate
exceeding the maximum amount of interest permitted to be collected from time to
time under applicable usury laws. If the amount of interest or of such penalty
payable by the Partnership or any Partner on any date would exceed the maximum
permissible amount, it shall be automatically reduced to such amount, and
interest or the amount of the penalty for any subsequent period, to the extent
less than that permitted by applicable usury laws, shall, to that extent, be
increased by the amount of such reduction.
ARTICLE IV
DISTRIBUTIONS
-------------
No Partner shall have the right to withdraw any amount from its Capital
Account, or to receive any distribution other than in accordance with this
Article IV, without the approval of the Management Committee. No Partner shall
- - ----------
have the right to demand or, except as otherwise provided in Section 10.02 or
-------------
Section 12.01, receive a distribution of property other than cash from the
- - -------------
Partnership. The Management Committee, in its sole discretion, shall determine
the timing and amounts of any cash distributions, provided, however, that
-------- -------
distributions shall not be made to the extent that they would result in any
Partner having a negative Adjusted Capital Account balance. The Partnership
shall pay in full all Partner Loans (in accordance with the order of payment
contemplated by Section 10.02(c)(iii)) prior to making any cash distributions to
---------------------
the Partners. Except as otherwise contemplated by Section 10.02 or Section
------------- -------
12.01, distributions to the Partners shall be made pro rata in accordance with
- - -----
each Partner's Percentage Interests.
ARTICLE V
CAPITAL ACCOUNTS; TAX ALLOCATIONS
---------------------------------
Section 5.01. Capital Accounts.
----------------
(a) There shall be established for each Partner on the books
of the Partnership a capital account (a "Capital Account"). The Capital Account
of each Partner shall be credited with (i) the amount of any Capital
Contributions of cash (including Pre-Closing Capital Contributions and Closing
Capital Contributions) made by such Partner to the Partnership, (ii) the Agreed
Value of any Capital Contributions made in property other than cash (net of any
liabilities secured by such property that the Partnership is considered to
assume or take subject to under Section 752 of the Code) and (iii) the amount of
any Net Income or items thereof allocated to such Partner pursuant to Section
-------
5.02. The Capital Account of each Partner shall be decreased by (i) the amount
- - ----
of any Net Losses or items thereof allocated to such Partner pursuant to Section
-------
5.02 and (ii) the amount of cash and the Agreed Value of any property (net of
- - ----
-18-
<PAGE>
any liabilities secured by such property that such Partner is considered to
assume or take subject to under Section 752 of the Code) distributed to such
Partner. The Capital Account of a Partner also shall be adjusted appropriately
to reflect any other adjustments required pursuant to Regulations Sections 1.
704-1(b) and 1.704-2.
(b) Upon the occurrence of any event specified in Regulations
Section 1.704-1(b)(2)(iv)(f), the Chief Executive Officer may cause the Capital
Accounts of the Partners to be adjusted to reflect the Agreed Value of the
Partnership's property at such time as provided in such Regulation.
Section 5.02. Capital Account Allocations.
---------------------------
(a) Allocations of Net Income, Net Loss, Business Sale Gain and
-----------------------------------------------------------
Business Sale Loss. Except as otherwise provided in Sections 5.02(b), (c), (d),
- - ------------------ ---------------------------
(e), (f), (g) and (h), the Net Income or Net Loss, as applicable, of the
- - ---------------------
Partnership for each Fiscal Year shall be allocated to the Partners pro rata in
accordance with their respective Percentage Interests.
(b) Minimum Gain Chargeback. Notwithstanding any other provision
-----------------------
of this Agreement, if for any Fiscal Year there is a net decrease in Partnership
Minimum Gain, each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, for succeeding years) in an
amount equal to such Partner's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g), except as
otherwise provided in Regulations Sections 1.704-2(f)(2), 1.704-2(f)(3), 1.704-
(2)(f)(4), and 1.704-2(f)(5). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(f)(6). This Section
-------
5.02(b) is intended to comply with the minimum gain chargeback requirement of
- - -------
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
(c) Partner Minimum Gain Chargeback. Notwithstanding any other
-------------------------------
provision of this Agreement, if during a Fiscal Year there is a net decrease in
Partner Nonrecourse Debt Minimum Gain, each Partner who has a share of that
Partner Nonrecourse Debt Minimum Gain (determined in accordance with Regulations
Section 1.704-2(i)(5)) as of the beginning of such year shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
for succeeding years) in an amount equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain, determined in accordance with
Regulations Section 1.704-2(i)(4) (and taking into account the exceptions
provided therein). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4). This Section 5.02(c) is
---------------
intended to comply with the minimum gain chargeback requirement in Regulations
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(d) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any Fiscal Year or other period shall be specially allocated to
the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-
-19-
<PAGE>
2(i). If more than one Partner bears the economic risk of loss with respect to
the Partner Nonrecourse Debt, then the Partner Nonrecourse Deductions
attributable to that Partner Nonrecourse Debt shall be allocated among the
Partners based upon the ratio in which they bear the economic risk of loss.
(e) Qualified Income Offset. In the event that any Partner
-----------------------
unexpectedly receives any adjustments, allocations or distributions described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specifically
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Regulations promulgated under Section 704(b) of the
Code, the deficit balance, if any, in its Adjusted Capital Account created by
such adjustments, allocations or distributions as quickly as possible. This
provision is intended to be a "qualified income offset" described in Regulations
Section 1.704-1(b)(2)(ii)(d) and is to be interpreted in a manner consistent
therewith.
(f) Offsetting Allocations. In the event that any item of Partnership
----------------------
income, gain, loss, deduction or Section 705(a)(2)(B) Expenditure is allocated
pursuant to Section 5.02(b), (c), (d) or (e), subsequent items of Partnership
--------------------------------
income, gain, loss, deduction or Section 705(a)(2)(B) Expenditure (as determined
for purposes of computing Net Income or Net Loss) shall, to the extent
consistent with Sections 5.02(b), (c), (d) and (e), be allocated among the
----------------------------------
Partners so as to eliminate as quickly as possible on a proportionate basis,
with respect to each Partner, any disparity between (i) the sum of (x) such
Partner's Capital Account balance and (y) such Partner's share of Partnership
Minimum Gain and Partner Nonrecourse Debt Minimum Gain determined in accordance
with Regulations Section 1.704-2(g) and (i)(5) and (ii) the Capital Account
which such Partner would have had if all Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain had been realized and all allocations of Net
Income and Net Loss had been made pursuant to Section 5.02(a) (without giving
---------------
effect to the reference therein to Section 5.02 (b), (c), (d), (e) and (f)).
---------------------------------------
(g) Reallocations. Notwithstanding the foregoing provisions, to the
-------------
extent that any item of income, gain, deduction, or loss of any Partner (or any
Affiliate thereof) is required to be reallocated to the Partnership pursuant to
Code Section 482 or otherwise, or any item of income, gain, deduction or loss is
imputed to the Partnership as a result of a transaction between the Partnership
and any Partner (or any Affiliate thereof), such item shall be allocated in its
entirety to such Partner.
(h) IPO. Notwithstanding the foregoing provisions, in the event that
---
the Partnership is liquidated in conjunction with an IPO as described in Section
1.2 of the Parent Agreement and Guaranty and the number of Shares to be
distributed to the Tune Partners is increased pursuant to Section 1.2 of the
Parent Agreement and Guaranty, Net Income and Net Loss for the Fiscal Year in
which the liquidation occurs shall be allocated in such a manner that the
Capital Account balances of the Partners immediately prior to the distribution
of Shares in such liquidation (but after taking into account distribution of any
other assets and recognition of gain or loss with respect to the Shares pursuant
to clause (C) of the proviso in the definition of Net Income or Net Loss) shall
be in proportion to the number of Shares to be distributed to the Partners
pursuant to Section 1.2 of the Parent Agreement and Guaranty.
-20-
<PAGE>
Section 5.03. Allocations for Federal Income Tax Purposes. The
-------------------------------------------
Partnership's ordinary income and losses, capital gains and losses and other tax
items as determined for federal income tax purposes shall be allocated to the
Partners in the same manner as the corresponding "book" items are allocated
pursuant to Section 5.02. Notwithstanding the foregoing sentence, federal
------------
income tax items relating to Section 704(c) Property shall be allocated among
the Partners in accordance with Section 704(c) of the Code or Regulations
Section 1.704-1(b)(2)(iv)(f), as applicable, using the remedial method of
regulations Section 1.704-3(d) to take into account the difference between the
fair market value and the tax basis of such Section 704(c) Property as of the
date of its contribution to the Partnership or revaluation pursuant to Section
-------
5.01(b). Credits shall be allocated in accordance with the allocation of the
- - -------
deduction for the Partnership expenditure which gave rise to the credit. Items
described in this Section 5.03 shall neither be credited nor charged to the
------------
Capital Accounts of the Partners.
Section 5.04. Prorated Allocations. In the event of a Transfer of any
--------------------
Partnership Interest, regardless of whether the transferee is already a Partner
or becomes an additional, substitute or successor Partner, all items of income,
gain, loss and deduction attributable to such Partnership Interest for the
Fiscal Year in which the Transfer occurs shall be allocated between the
transferor and the transferee on the basis of the ownership of such Partnership
Interest during such Fiscal Year. Subject to Section 706 of the Code, such
allocation shall be made either by prorating items of income, gain, loss and
deduction for such year based upon the number of days that such Partnership
Interest was owned by the transferor and the transferee, respectively, or in
accordance with a closing of the books on an interim basis on the date on which
the Transfer occurred, as determined by the Management Committee.
Section 5.05. Taxation.
--------
(a) The Partners intend that the Partnership shall be treated
as a "partnership" for federal, state and local income and franchise tax
purposes, and each Partner agrees to take all actions reasonably necessary to
achieve such intent.
(b) In the event of a Transfer of all or part of a Partner's
Partnership Interest, the Chief Executive Officer shall at the request of the
transferee cause the Partnership to elect, pursuant to Section 754 of the Code,
to adjust the basis of the Partnership's property; provided, however, that the
-------- -------
tax items attributable to any such basis adjustment shall be allocated solely to
such transferee and such transferee shall reimburse the Partnership promptly for
all costs associated with such basis adjustment, including bookkeeping,
appraisal and other similar costs.
(c) Except as otherwise expressly provided herein, all other
elections required or permitted to be made by the Partnership under the Code (or
applicable state or local tax law) shall be made in such manner as may be
determined by the Chief Executive Officer to be in the best interests of the
Partners as a group.
Section 5.06. Fiscal Year. The fiscal year of the Partnership ("Fiscal
-----------
Year") for tax and accounting purposes shall end on the last day of December of
each year.
-21-
<PAGE>
Section 5.07. Interest. No Partner shall be entitled to interest on its
--------
Capital Contributions or on the positive balance in its Capital Account and no
such interest shall be accrued or paid.
ARTICLE VI
MANAGEMENT OF THE PARTNERSHIP
-----------------------------
Section 6.01. Management Committee.
--------------------
(a) There is hereby established a Management Committee for the
Partnership (the "Management Committee"). Prior to the initial closing of the
IPO, the Management Committee shall consist of nine Representatives, (i) with
one Representative designated by Tune so long as (x) the Percentage Interest of
the Tune Partnership Interest (including Partnership Interests held by the Tune
Stockholder Group) is at least 5% (excluding any Partnership Interests issued or
granted (including Partnership Interests issued upon exercise of any option,
warrant or other right to acquire Partnership Interests) in any transaction or
transactions with respect to which Tune has no preemptive rights pursuant to
Section 12.02 hereof), (y) neither Tune, TCI Music nor any of their Controlled
- - -------------
Affiliates is in material default under this Agreement or any of the Additional
Agreements to which it is a party and (z) none of the Tune Stockholder Group has
Transferred any portion of its Partnership Interest to any Person that is not a
Permitted Transferee (the satisfaction of the foregoing clauses (x), (y) and
(z), the "Tune Minimum Condition"), and (ii) with the remaining Representatives
designated by MTVNS. One Representative designated by MTVNS shall be chairperson
of the Management Committee. The Persons selected to be the initial
Representatives of each Partner, effective as of the date hereof are listed on
Schedule 2 hereto. The Representatives of each Partner shall at all times be
- - ----------
executive officers or other full-time employees of either such Partner or an
Affiliate of such Partner. Each Representative shall have one vote on all
matters, which vote may be cast in person or by proxy.
(b) Any Partner may, at any time, by written notice to the other
Partner, remove any or all of its Representatives, with or without cause, and
appoint substitute Representative(s) to serve in their stead. Each Partner shall
be entitled to name an alternate Representative to serve in the place of any
Representative appointed by such Partner should any such Representative not be
able to attend a meeting or meetings. Each Partner shall bear the costs incurred
by each Representative or alternate designated by it to serve on the Management
Committee, and no Representative or alternate shall be entitled to compensation
from the Partnership for serving in such capacity.
(c) In the event any Representative dies or is unwilling or unable to
serve as such or is removed from office by the Partner that designated him or
her, such Partner shall promptly designate a successor to such Representative.
Such successor shall be appointed as soon as possible, but in no event later
than 30 days after the day such vacancy first occurs.
(d) The written notice of a Partner's appointment of a Representative
or alternate shall in each case set forth such Representative's or alternate's
business and residence addresses and business telephone number. Each Partner
shall promptly give written
-22-
<PAGE>
notice to the other Partner of any change in the business or residence address
or business telephone number of any of its Representatives.
(e) Each Partner shall cause its Representative(s) on the Management
Committee to comply with the terms of this Agreement. In the absence of prior
written notice to the contrary, any action taken by a Representative shall, so
far as the other Partner is concerned, be deemed to have been duly authorized by
the Partner that appointed such Representative.
Section 6.02. Meetings of the Management Committee.
------------------------------------
(a) The initial meeting of the Management Committee shall take place
on such date and at such time and place as the Partners agree. The Management
Committee shall hold a regular meeting in the fourth quarter of each year to
approve the Proposed Budgets and Proposed Business Plans and otherwise at the
call of the Chief Executive Officer or any Representative. The Management
Committee may meet by means of telephone, conference telephone or similar
communications equipment. Unless a longer notice period is established by the
Management Committee, at least seven Business Days prior notice of any regular
meeting and at least three Business Days' prior notice of a special meeting
shall be given. Any Representative of a Partner may waive notice to such Partner
of any meeting in writing before, at or after such meeting. The attendance of
any Representative of a Partner at a meeting shall constitute a waiver by such
Partner of notice of such meeting, except when such Representative attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting was not properly called. Except as otherwise determined by
the Management Committee, all regular meetings of the Management Committee shall
be held at the principal office of the Partnership.
(b) At any meeting of the Management Committee, the presence or
participation of at least one Representative for each Partner, in person or by
proxy, shall constitute a quorum for the taking of any action, provided that (i)
--------
all Partners have received prior written notice of such meeting or have waived
such notice as provided in Section 6.02(a); and (ii) no Representative can
---------------
refrain from attending a meeting of the Management Committee in order to deny
the establishment of a quorum. All actions required or permitted to be taken by
the Management Committee may be taken, in lieu of a meeting, by written consent
(which may be executed in counterparts) of the Representatives of the Partners;
copies of all written consents shall be provided to all Representatives. All
actions to be taken by the Management Committee shall be by the votes (or
written consent) required in Section 6.05 or 6.06. Each Representative entitled
--------------------
to vote at a meeting of the Management Committee may authorize another Person to
act for him by proxy, provided that such proxy must be signed by the
--------
Representative and shall be revocable by such Representative at any time prior
to such meeting. Minutes of each meeting of the Management Committee shall be
prepared and circulated to the Representatives. Written consents to any action
taken by the Management Committee shall be filed with the minutes.
Section 6.03. Officers of the Partnership. The Partnership shall have
---------------------------
such officers (the "Officers") as the Management Committee may determine from
time to time, it being agreed by the Partners that MTVNS will appoint the Chief
Executive Officer, subject to consultation with Tune so long as Tune is entitled
to designate a Representative on the Management Committee pursuant to Section
-------
6.01. The initial Chief Executive Officer shall be
- - ----
-23-
<PAGE>
Fred Seibert. The Chief Executive Officer shall be responsible for and exercise
control over the Partnership, except for those matters referred to as Committee
Decisions or Extraordinary Decisions. Except as provided above or as otherwise
determined by the Management Committee, the Chief Executive Officer shall (x)
have such powers as are usually exercised by a comparably designated officer of
a Delaware corporation and (y) have the power to bind the Partnership through
the exercise of such powers to the extent consistent with the terms of this
Agreement. The Chief Executive Officer (or his or her designee) shall attend the
meetings of the Management Committee unless otherwise requested by the
Management Committee and shall provide such reports with respect to the business
of the Partnership as may be requested by the Management Committee. The Chief
Executive Officer may be removed with or without cause, subject, however, to
obligations under any employment agreement with the Chief Executive Officer, by
vote of a majority of the Management Committee.
Section 6.04. Budget and Business Plan.
------------------------
(a) The Initial Budget and Initial Business Plan are attached hereto
as Schedules 3 and 4, respectively. The Initial Budget includes an income
-----------------
statement prepared on an accrual basis which shall generally detail the revenues
and expenses projected for the Partnership's Business through the end of 1999
and a cash flow statement which shall generally detail the receipts and
disbursements projected for the Partnership's business through the end of 1999
and the amount of any corresponding cash deficiency or surplus, together with
any contemplated additional Capital Contributions or contemplated borrowings of
the Partnership.
(b) The Chief Executive Officer shall submit annually to the
Management Committee no later than November 1, commencing November 1, 1999 (i) a
proposed Budget (each a "Proposed Budget"), which shall include any anticipated
Capital Calls for the forthcoming Fiscal Year in substantially the same detail
as the Initial Budget and (ii) a proposed Business Plan (a "Proposed Business
Plan") for the Fiscal Year covered by the Proposed Budget or a longer period.
Such Proposed Budget shall be prepared on a basis consistent with the Initial
Budget and, when available, the Partnership's audited financial statements. If
any Proposed Budget, Proposed Business Plan, Initial Budget or Initial Business
Plan, as the case may be, is approved by the Management Committee, then such
Proposed Budget, Proposed Business Plan, Initial Budget or Initial Business
Plan, as the case may be, shall be considered approved and shall constitute the
"Budget" or the "Business Plan," as the case may be, for all purposes of this
Agreement and shall supersede any previously approved Budget or Business Plan,
as the case may be. If a Proposed Budget, Proposed Business Plan, Initial Budget
or Initial Business Plan, as the case may be, is not approved by the Management
Committee within 21 days of its receipt thereof, then the Partners shall cause
their Representatives on the Management Committee to cooperate in good faith and
confer with the Chief Executive Officer for the purpose of attempting to arrive
at a Budget or Business Plan, as the case may be, that can secure the approval
of the Management Committee.
(c) If, notwithstanding the foregoing procedures, on January 1 of any
Fiscal Year no Proposed Budget has been approved by the Management Committee for
such Fiscal Year, then the Budget for the prior Fiscal Year, adjusted (without
duplication) to reflect (a) increases in the Consumer Price Index during the
prior year and (b) increases or decreases
-24-
<PAGE>
resulting from the following events, shall govern until such time as the
Management Committee approves a new Proposed Budget:
(i) the operation of escalation, de-escalation or other
provisions in contracts in effect at the time of approval of the prior
Fiscal Year's Budget solely as a result of the passage of time or the
occurrence of events beyond the control of the Partnership to the extent
such contracts are still in effect and have not been terminated;
(ii) elections made in any prior Fiscal Year under contracts
contemplated by the Budget for such prior Fiscal Year regardless of which
party to such contracts makes such election;
(iii) increases or decreases in expenses annualized effect of
employee additions or reductions during the prior Fiscal Year contemplated
by the Budget for such prior Fiscal Year;
(iv) interest expense attributable to any loans made to the
Partnership (including Partner Loans);
(v) increases in overhead expenses in an amount equal to the
total of overhead expenses reflected in the Budget for the prior Fiscal
Year multiplied by the increase in the Consumer Price Index for the prior
year, but in no event more than 5%;
(vi) the anticipated incurrence of costs during such Fiscal
Year for any legal, accounting and other professional fees or disbursements
in connection with events or changes not contemplated at the time of
preparation of the Budget for the prior Fiscal Year;
(vii) the continuation of the effects of a decision made by
the Management Committee or the Partners in the prior Fiscal Year with
respect to any of the matters referred to in Section 6.05 or 6.06 that are
------------ ----
not reflected in the Budget for the prior Fiscal Year; provided, however,
-------- -------
that no matter for which approval pursuant to Section 6.06 was required and
------------
obtained in one Fiscal Year shall be extended to the next Fiscal Year,
except to the extent such matter was not fully executed during the first
Fiscal Year, unless such matter is specifically approved pursuant to
Section 6.06 for the year in question; and
(viii) decreases in expense attributable to non-recurring
items reflected in the prior Fiscal Year's Budget.
Except as otherwise provided herein, any Budget established pursuant to
this Section 6.04(c) shall be deemed to have been approved by the Management
---------------
Committee.
(d) If a Business Plan is submitted for approval pursuant to this
Section 6.04 and is not approved by the Management Committee, the Business Plan
- - ------------
most
-25-
<PAGE>
recently approved by the Management Committee pursuant to Section 6.04(b) shall
---------------
remain in effect as the Business Plan; provided, that, if a Proposed Budget is
--------
approved pursuant to Section 6.04(b) (as opposed to a Budget that is deemed
---------------
approved pursuant to Section 6.04(c)), the Business Plan then in effect
----------------
(including the aggregate amount of additional Capital Contributions contemplated
for the applicable Fiscal Year) shall be deemed to be amended so that the Fiscal
Year therein corresponding to the Fiscal Year for which such Budget has been
approved shall be consistent with such Budget.
Section 6.05. Actions Requiring Approval by a Majority of the Management
----------------------------------------------------------
Committee. Subject to Section 6.06, except to the extent expressly provided for
- - --------- ------------
in the then-applicable Budget (which Budget shall not be a Budget which has been
deemed approved pursuant to Section 6.04(c)), the Partnership may not take any
---------------
action with respect to any of the following matters (each, a "Committee
Decision") without the prior approval by a majority of the Management Committee:
(i) the consent or implementation of any amendment to this
Agreement or the Certificate of Limited Partnership which is not required
to be approved as specified in Section 6.06(i);
---------------
(ii) the acquisition of any assets by the Partnership in any
single transaction or series of related transactions for consideration, in
cash or otherwise, of a fair value of $500,000 or more;
(iii) the adoption or amendment of any plan to compensate any
employees with any form of equity interests in the Partnership or the
granting to employees of any options therefor;
(iv) the making of distributions to the Partners;
(v) the making of any Capital Calls, including any Capital
Call expressly provided for in the then-applicable Budget;
(vi) subject to Sections 6.04(c) and (d), the approval and
---------------- ---
adoption of a Budget, and Material Deviations therefrom, and approval and
adoption of a Business Plan, and any material modifications thereto;
(vii) the incurrence of any indebtedness for borrowed money
with an aggregate principal amount outstanding at any one time in excess of
$250,000 (or such greater or lesser amount as may from time to time be
approved by a majority of the Management Committee pursuant to this Section
-------
6.05), other than Partner Loans, provided that all Partners are offered the
----
opportunity to participate (pro rata based on their respective Percentage
Interests) in making such Partner Loans and the total principal amount of
all such Partner Loans outstanding does not at any time exceed $1 million
(or such greater or lesser amount as may from time to time be approved by a
majority of the Management Committee pursuant to this Section 6.05);
------------
(viii) any change in the Accountants for the Partnership;
-26-
<PAGE>
(ix) the appointment or termination of the Chief Executive
Officer or the determination of the compensation of the Chief Executive
Officer;
(x) the making of any change in the size, composition or
organization of the Management Committee; provided, that the Tune
Stockholder Group shall always have at least one Representative on the
Management Committee to the extent provided in Section 6.01(a); or
---------------
(xi) the making of any offering or sale of securities of or
interests in the Partnership.
Section 6.06. Actions Requiring Approval by a Majority of the Management
----------------------------------------------------------
Committee Including the Representative of Tune. So long as Tune is entitled to
- - ----------------------------------------------
designate a Representative on the Management Committee pursuant to Section
-------
6.01(a), the Partnership may not take any action with respect to any of the
- - -------
following matters (each, an "Extraordinary Decision") without the prior approval
of a majority of the Management Committee, which majority shall include the
Representative of Tune:
(i) the consent to or implementation of any amendment to this
Agreement in such a way as may adversely affect the rights of Tune and
Affiliates who are Partners hereunder; provided, however, that without
-------- -------
limiting the foregoing or any other provision of this Agreement, the
issuance of Partnership Interests or options to purchase Partnership
Interests and the amendment of this Agreement to admit new Limited Partners
shall not be deemed to adversely affect the rights of Tune and any
Permitted Transferee which becomes a Partner;
--------------------------------------------
(ii) the entry into any business other than the Business;
(iii) the liquidation, dissolution or winding up the
Partnership except as otherwise provided in Article X; provided, however,
--------- -------- -------
that Tune shall cause its Representative not to unreasonably withhold
approval thereof;
(iv) the entry into any material amendment to any of the
Related Party Agreements;
(v) the issuance or sale to MTVNS or any of its Affiliates of
any equity interest in the Partnership other than for cash; or
(vi) the admission, during the Restricted Period, of a new,
additional or substitute general partner that is not an Affiliate of Viacom
Inc., but only in the event that such new, additional or substitute general
partner would have a right to designate more Representatives to the
Management Committee than MTVNS or, through contractual or other
arrangements, assert greater control over the Partnership than MTVN.
Section 6.07. Limitation of Agency. No Partner shall have any authority
--------------------
to act for or to assume any obligation or responsibility on behalf of the
Partnership except (i) as approved by the Management Committee, (ii) as approved
by written agreement between the
-27-
<PAGE>
Partners, or (iii) as provided herein. No Partner shall have any authority to
act for or assume any obligation or responsibility on behalf of another Partner
except as approved in writing by such other Partner. In addition to the other
remedies specified herein, each Partner agrees to indemnify and hold the
Partnership and the other Partner or any Affiliate thereof or any partner,
shareholder, director, officer, employee or agent of any of the foregoing
harmless from and against any claim, demand, loss, damage, liability or expense
(including reasonable attorneys' fees and disbursements and amounts paid in
settlement, but excluding any indirect, special or consequential damages)
incurred by or against such other Partner or the Partnership and arising out of
or resulting from any action taken by the indemnifying Partner in violation of
this Section 6.07.
------------
Section 6.08. Liability of Partners and Representatives. Without
-----------------------------------------
limiting the duty of the General Partner under Delaware law to act in good
faith, except as set forth in Section 6.10, no Partner, former Partner or
------------
Representative or former Representative, no Affiliate of any thereof, nor any
partner, shareholder, director, officer, employee or agent of any of the
foregoing, shall be liable, in damages or otherwise, to the Partnership or any
Partner for any act or failure to act in such Person's capacity as a Partner or
Representative or otherwise on behalf of the Partnership unless such act or
omission constituted fraudulent or willful misconduct, was performed or omitted
in bad faith or constituted gross negligence or in violation of this Agreement.
Each Partner, former Partner and Representative or former Representative, each
Affiliate of any thereof, and each partner, shareholder, director, officer,
employee and agent of any of the foregoing, shall be indemnified and held
harmless by the Partnership from and against any liability for damages and
expenses, including reasonable attorneys' fees and disbursements and amounts
paid in settlement, resulting from any threatened, pending or completed action,
suit or proceeding relating to or arising out of such Person's acts or omissions
in such Person's capacity as a Partner or Representative or (except as provided
in Section 6.07) otherwise involving such Person's activities on behalf of the
------------
Partnership, except to the extent that such damages or expenses result from the
bad faith, gross negligence, fraud or willful misconduct of such indemnified
Person or a violation by such Person of this Agreement or an agreement between
such Person and the Partnership. Any indemnity by the Partnership under this
Section 6.08 shall be provided out of and to the extent of Partnership assets
- - ------------
only. Notwithstanding anything to the contrary set forth in this Agreement,
except as otherwise expressly required by law, a Limited Partner, in its
capacity as such, shall have no liability in excess of (i) the amount of its
Capital Contribution, (ii) its share of any undistributed profits and assets of
the Partnership and (iii) the amount of any distributions wrongfully distributed
to it.
Section 6.09. Indemnification. Any Person asserting a right to
---------------
indemnification under Section 6.07 or 6.08 shall so notify the Partnership or
------------ ----
the other Partners, as the case may be, in writing. The indemnified Person's
failure to so notify the indemnifying Person of any such matter shall not
release the indemnifying Person, in whole or in part, from its obligations to
indemnify under this Section 6.09, except to the extent the indemnified Person's
------------
failure to so notify actually prejudices the indemnifying Person's ability to
defend such action. If the facts giving rise to such indemnification shall
involve any actual or threatened claim or demand by or against a third party,
the indemnifying Person shall be entitled to control the defense or prosecution
of such claim or demand in the name of the indemnified Person, with counsel
satisfactory to the indemnified Person, if it notifies the indemnified Person in
writing of its
-28-
<PAGE>
intention to do so within 20 days of its receipt of such notice, without
prejudice, however, to the right of the indemnified Person to participate
therein through counsel of its own choosing, which participation shall be at the
indemnified Person's expense unless (i) the indemnified Person shall have been
advised by its counsel that use of the same counsel to represent both the
indemnifying Person and the indemnified Person would present a conflict of
interest (which shall be deemed to include any case where there may be a legal
defense or claim available to the indemnified Person which is different from or
additional to those available to the indemnifying Person), or (ii) the
indemnifying Person shall fail vigorously to defend or prosecute such claim or
demand within a reasonable time, in which case the reasonable fees of counsel
for the indemnified Person shall be for the account of the indemnifying Person
and the indemnifying Person shall not have the right to direct the defense of
such action on behalf of the indemnified Person. Whether or not the indemnifying
Person chooses to defend or prosecute such claim, the Partnership and the
parties hereto shall cooperate in the prosecution or defense of such claim and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may
reasonably be requested in connection therewith. The indemnifying Person shall
not settle or permit the settlement of any such third party claim or action in
which any relief other than the payment of money damages is sought against the
indemnified Person without the prior written consent of the indemnified Person
which consent shall not be unreasonably withheld. The indemnified Person shall
not settle or permit the settlement of any claim or action for which it is
entitled to indemnification without the prior written consent of the
indemnifying Person, unless the indemnifying Person shall have failed to assume
the defense thereof after the notice referred to in the first sentence of this
Section 6.09, and in the manner provided above.
- - ------------
Section 6.10. Right of Partners Against Partnership and General Partner
---------------------------------------------------------
in Certain Events. Notwithstanding anything herein to the contrary, so long as
- - -----------------
the Tune Minimum Condition is met and MTVNS owns a majority of the Partnership
Interests, in the event that the Partnership defaults under any of the
Programming License Agreement, the Trademark License Agreement or the Technology
Sharing and License Agreement, and, as a result of any such breach, MTVN or any
Controlled Affiliate seeks to terminate any such agreement pursuant to its
rights as Licensor thereunder, Tune shall have the right to bring and maintain
an action against the Partnership and/or the General Partner with respect to
such breach and, if applicable, a related breach of the duty of good faith; in
the event of any liability of the Partnership or the General Partner in any such
action, the General Partner shall not be entitled to any indemnification
hereunder from the Partnership. Tune shall be entitled to be reimbursed its
costs and reasonable expenses in bringing and maintaining such action without
regard to the outcome of such action.
Section 6.11. Temporary Right to Direct Management Committee. In the
----------------------------------------------
event of any breach by the Partnership of any of the Programming License
Agreement, the Trademark License Agreement or the Technology Sharing and License
Agreement in the circumstances set forth in Section 6.10 and the Partnership's
failure to cure such breach during the initial applicable cure period, then MTVN
shall take such actions, for a period of 30 days following the expiration of
such initial cure period, as may be reasonably requested by Tune to cause such
breach to be cured, including directing the Management Committee to take action,
subject to its fiduciary duties, to cause the Partnership to cure such breach as
requested by Tune.
-29-
<PAGE>
ARTICLE VII
BOOKS, RECORDS, REPORTS AND ACCOUNTINGS
---------------------------------------
Section 7.01. Books and Records. The Chief Executive Officer shall keep
-----------------
or cause to be kept current and complete books of account and records which
shall fully and accurately reflect all transactions of the Partnership and other
matters and include all documents and other materials with respect to the
Partnership's business as are usually entered and maintained by Persons engaged
in similar businesses. The books of the Partnership shall be kept on an accrual
basis of accounting and in accordance with GAAP consistently applied, and shall
be audited annually by the Accountants at the Partnership's cost. The books of
the Partnership shall at all times be maintained at the principal executive
office of the Partnership. Each Partner and its duly authorized representatives
shall have the right, during normal business hours and at such Partner's sole
cost and expense, to examine and audit the Partnership's books, records and
documents, to copy any of such books, records and documents and to inspect the
properties and operations of the Partnership, for any lawful purpose related to
the affairs of the Partnership or the investment in the Partnership by such
Partner. The Partnership's books of account, records and documents shall be
filed and preserved for such period as may be required by law or reasonably
requested by either Partner.
Section 7.02. Financial Statements. The Chief Executive Officer shall
--------------------
cause to be delivered to each Partner the financial statements listed in clauses
(i) and (ii) below, prepared, in each case, in accordance with GAAP consistently
applied (and, if required by any Partner for purposes of reporting under the
Securities and Exchange Act of 1934, Regulation S-X), and such other reports as
any Partner may reasonably request from time to time. Such financial statements
shall be accompanied by an analysis, in reasonable detail, of the variance
between the financial condition and result of operations reported therein and
the corresponding amounts for the applicable period or periods in the Business
Plan. The quarterly financial statements referred to in clause (ii) below may
be subject to normal year-end audit adjustments.
(i) As soon as practicable following the end of each Fiscal Year
(and in any event not later than 75 days after the end of such Fiscal
Year), a balance sheet of the Partnership as of the end of such Fiscal Year
and the related statements of operations, Partners' capital (deficiency)
and cash flows for such Fiscal Year, together with appropriate notes to
such financial statements and supporting schedules, all of which shall be
audited and certified by the Accountants, and in each case to the extent
the Partnership was in existence, setting forth in comparative form the
corresponding figures for the immediately preceding Fiscal Year (in the
case of the balance sheet) and the two immediately preceding Fiscal Years
(in the case of the statements).
(ii) As soon as practicable following the end of each fiscal
quarter (and in any event not later than 30 days after the end of such
fiscal quarter), a balance sheet of the Partnership as of the end of such
fiscal quarter and the related statements of operations, Partners' capital
(deficiency) and cash flows for such fiscal quarter and for the Fiscal Year
to date, in each case to the extent the Partnership was in existence,
setting forth in comparative form the corresponding figures for the prior
year's
-30-
<PAGE>
fiscal quarter and interim period corresponding to the fiscal quarter and
interim period just completed.
Section 7.03. Tax Returns and Information.
---------------------------
(a) The General Partner shall act as the "tax matters partner"
of the Partnership within the meaning of Section 6231(a)(7) of the Code (and in
any similar capacity under applicable state or local law) (the "TAX MATTERS
PARTNER"). The Tax Matters Partner shall take reasonable action to cause each
other Partner to be treated as a "notice partner" within the meaning of Section
6231(a)(8) of the Code. All reasonable expenses incurred by the General Partner
while acting in its capacity as Tax Matters Partner (pursuant to the Agreement
or applicable law) shall be paid or reimbursed by the Partnership. Each Partner
shall have the right to participate in (i) any administrative proceeding
relating to the determination of Partnership items at the Partnership level and
(ii) any discussions with the Internal Revenue Service relating to the
allocations pursuant to Section 5.03 or Section 5.04. The Tax Matters Partner
------------ ------------
shall from time to time upon request of any other Partner confer, and cause the
Partnership's tax attorneys and accountants to confer, with such other Partner
and its attorneys and accountants on any matters relating to a Partnership tax
return or any tax election.
(b) The Tax Matters Partner shall cause all federal, state,
local and other tax returns and reports (including amended returns) required to
be filed by the Partnership to be prepared and timely filed with the appropriate
authorities and shall cause all income or franchise tax returns or reports
required to be filed by the Partnership to be sent to each Partner for review at
least 15 Business Days prior to filing. All such income or franchise tax returns
of the Partnership shall be prepared by MTVN pursuant to the Services Agreement
unless the Management Committee otherwise determines.
(c) The Tax Matters Partner shall cause to be provided to each
Partner as soon as possible after the close of each Fiscal Year (and, in any
event, no later than March 15 of each year), a schedule setting forth an
estimate of such Partner's distributive share of the Partnership's income, gain,
loss, deduction and credit as determined for federal income tax purposes and any
other information relating to the Partnership that is reasonably required by
such Partner to prepare its own federal, state, local and other tax returns. At
any time after such schedule and information have been provided, upon at least
two Business Days' notice from a Partner, the Partnership shall also provide
each Partner with a reasonable opportunity during ordinary business hours to
review and make copies of all work papers related to such schedule and
information or to any return provided under Section 7.03(b). The Tax Matters
---------------
Partner will provide or cause to be provided to each Partner, concurrently with
the returns provided under Section 7.03(b), a schedule explaining any variances
---------------
between the schedule and information provided under this Section 7.03(c) and the
---------------
information included in the returns provided under Section 7.03(b). The Tax
---------------
Matters Partner shall also cause to be provided to each Partner, at the time
that the quarterly financial statements are required to be delivered pursuant to
Section 7.02(ii), an estimate of each Partner's share of all items of income,
- - ----------------
gain, loss, deduction and credit of the Partnership for the fiscal quarter just
completed and for the Fiscal Year to date for federal income tax purposes.
-31-
<PAGE>
ARTICLE VIII
DISPOSITIONS, ADMISSIONS, WITHDRAWALS
-------------------------------------
Section 8.01. Prohibition on Dispositions of Partnership Interests;
-----------------------------------------------------
Withdrawals; Admissions. Except for Dispositions made pursuant to and in
- - -----------------------
compliance with the terms and conditions of this Article VIII or with the prior
------------
written consent of the other Partner, no Partner shall Dispose of all or any
part of its Partnership Interest. A purported Disposition of all or any part of
a Partnership Interest in violation of this Agreement shall be void and of no
force or effect. After any Dispositions of a Partnership Interest permitted by
this Agreement, the transferred Partnership Interest shall continue to be
subject to all the provisions of this Agreement, including the provisions of
this Article VIII, except that no transferee of the Tune Partnership Interest
------------
(other than a Permitted Transferee which is a member of the Tune Stockholder
Group) shall be entitled to any rights under Section 12.01. (In the event of
-------------
any Disposition of all or any portion of the Tune Partnership Interest after the
Offering Expiration Date, the Tune Stockholder Group shall be entitled to all
distributions, if any, to be made under Section 12.01.) No Partner shall
---------------
withdraw from the Partnership, except with the prior written consent of the
other Partners. Unless otherwise expressly agreed by the other Partners, the
withdrawal of a Partner, whether or not permitted, shall not relieve the
withdrawn Partner of its obligations under Section 6.09, Section 12.03 or
------------ -------------
Section 15.14 and shall not relieve such Partner or any of its Affiliates of its
- - -------------
obligations under, or result in a termination of or otherwise affect, any
Additional Agreement or any agreement between the Partnership and such Partner
or Affiliate then in effect, except to the extent provided therein. Upon
completion of any Disposition made pursuant to this Article VIII, the transferee
------------
of the Partnership Interest (if not already a Partner) shall be admitted as a
Partner without any further action upon compliance with the provisions of
Section 8.06.
- - ------------
Section 8.02. Dispositions of Partnership Interests to a Permitted
----------------------------------------------------
Transferee. A Partner may Dispose of all or any portion of its Partnership
- - ----------
Interest to a Permitted Transferee of such Partner without the consent of the
other Partners, provided that, unless otherwise agreed by the nontransferring
Partners, such Disposition (whether considered alone or taken together with
prior Dispositions) would not cause the Partnership to lose its status as a
Partnership for federal income tax purposes and would not result in the
violation of any applicable law.
Section 8.03. Dispositions After the Restricted Period. At any time
----------------------------------------
after the end of the Restricted Period, (i) MTVNS and any Permitted Transferee
of MTVNS may Dispose of any or all of its Partnership Interest without
restriction hereby, except as provided in Section 8.06(a), but only so long as
---------------
it complies with Section 8.05(a) to the extent applicable and (ii) Tune and any
---------------
Permitted Transferee of Tune may Dispose of any or all of its Partnership
Interest without restriction hereby, except as provided in Section 8.06(a), but
---------------
only so long as it complies with Section 8.04; provided, however, that,
------------ -------- -------
notwithstanding anything to the contrary contained herein, any successor to Tune
or MTVNS or any Permitted Transferee of Tune or MTVNS shall be subject to the
provisions of this Agreement, including, without limitation, Sections 8.05 and
-----------------
8.06.
- - ----
-32-
<PAGE>
Section 8.04. Right of First Offer.
--------------------
In the event that Tune or any Permitted Transferee of Tune desires to
Dispose of any or all of the Tune Partnership Interest at any time or from time
to time after the end of the Restricted Period to a Person other than a
Permitted Transferee, it shall notify MTVNS in writing of such desire at least
30 days prior to making any such Disposition. MTVNS or its designee may, at any
time during such 30-day period prior to any such desired Disposition make an
offer to purchase such portion of the Tune Partnership Interest that Tune or its
Permitted Transferee has indicated it desires to Dispose of, which offer, if
accepted, shall constitute a valid and binding agreement subject to the
applicable provisions of Section 8.06. Tune or any Permitted Transferee of Tune
shall, if requested by MTVNS, negotiate in good faith for a 30-day period
following the delivery of such notice by MTVNS or its designee (the "Negotiation
Period") to reach an agreement for the sale of the Tune Partnership Interest to
MTVNS. If no such agreement is reached, MTVNS may confirm its prior offer or
make a new offer to Tune regarding the purchase of such portion of the Tune
Partnership Interest, which reconfirmed or new offer, if made, shall, if
accepted, constitute a valid and binding agreement subject to the applicable
provisions of Section 8.06. If Tune or its Permitted Transferee elects to
accept such offer, it shall do so on the terms and subject to the conditions
specified in such offer (but MTVNS or its designee shall be obligated to pay
interest on the purchase price for any period from 90 days after acceptance of
such offer until the consummation thereof at an annual rate equal to LIBOR plus
1% unless the delay in such consummation is primarily attributable to any act or
failure to take a required action on the part of Tune or such Permitted
Transferee); if it elects not to accept such offer or if MTVNS fails to make any
such offer, Tune or its Permitted Transferee may, for a period of 180 days (or
270 days, if pursuant to a binding agreement entered into within 100 days) after
the earlier of (i) the receipt of the last bona fide offer from MTVNS or its
designee or (ii) the expiration of the Negotiation Period or the 30 day prior
notice period, if MTVNS does not request it to negotiate, Dispose of or agree to
Dispose of any or all of its Partnership Interest to any Person other than MTVNS
or its designee (x) if no such offer was made by MTVNS or its designee, at any
price or on any terms or conditions subject to compliance with the applicable
provisions of this Agreement, or (y) if any such offer was made, on terms
(including price (evaluated on an after-tax basis)) and other terms and
conditions, taken as a whole, which are no more favorable to the transferee than
those set forth in the last bona fide offer made by MTVNS or its designee.
Section 8.05. Tag Along; Drag Along.
---------------------
(a) If at any time after the end of the Restricted Period and
prior to the sixth anniversary thereof, MTVNS and/or its Permitted Transferee(s)
(the "Transferring Partner") receives a bona fide third party offer (other than
in connection with a Disposition to a Permitted Transferee) to purchase or
otherwise acquire, in a single transaction or series of related transactions, an
aggregate amount of Partnership Interests such that the prospective
transferee(s) (together with their Affiliates) would beneficially own more than
50% of the total Capital Accounts of the Partners which such Transferring
Partner desires to accept, then such Transferring Partner shall offer to Tune
and/or its Permitted Transferee(s) (the "Other Partner(s)") the right to
participate in the proposed sale by written notice (the "Tag Along Notice")
delivered within 10 days after its tentative decision to accept such offer and
specifying
-33-
<PAGE>
in reasonable detail the identity of the prospective transferee(s) and the terms
and conditions of such transaction(s). The Other Partner(s) may elect to
participate in the contemplated transaction(s) by delivering written notice to
the Transferring Partner within 15 days after delivery of the Tag Along Notice.
Each Other Partner shall be entitled to transfer the same fraction of its
interest in the Partnership as is transferred by the Transferring Partner (the
"Tag Along Transfer Fraction") and to receive an amount therefor which shall be
equal to (x) the product of (i) the Tag Along Transfer Fraction and (ii) such
Other Partner's Capital Account, plus (y) the "Premium Amount," if any, and
minus (z) the "Discount Amount," if any. The Premium Amount shall be equal to
the product of (i) (a) the excess, if any, of the purchase price for the
Transferred Interest over the Capital Account attributable to such Transferred
Interest divided by (b) the Percentage Interest in the Partnership represented
by such Transferred Interest, and (ii) the Percentage Interest in the
Partnership represented by the fraction of the Other Partner's interest in the
Partnership that is to be transferred pursuant to this Section. The Discount
Amount shall be equal to the product of (i)(a) the excess, if any, of the
Capital Account attributable to such Transferred Interest over the purchase
price for the Transferred Interest divided by (b) the Percentage Interest in the
Partnership represented by such Transferred Interest, and (ii) the Percentage
Interest in the Partnership represented by the fraction of the Other Partner's
interest in the Partnership that is to be transferred pursuant to this Section.
For this purpose, "Transferred Interest" means the interest in the Partnership
to be sold by the Transferring Partner. If the Disposition of the Transferring
Partner's Partnership Interest is pursuant to a series of related transactions,
then the purchase price for the interest of the Other Partner(s) shall be
determined as above by using the weighted average of the amounts offered to the
Transferring Partner. Each Transferring Partner shall use reasonable efforts to
obtain the agreement of the prospective transferee(s) to the participation of
the Other Partner(s) in any such contemplated transaction(s), and no
Transferring Partner shall transfer any of its Partnership Interests to any
prospective transferee if such prospective transferee(s) declines to allow the
participation of the Other Partner(s).
(b) If at any time after the end of the Restricted Period and
prior to the sixth anniversary thereof, the Transferring Partner receives a bona
fide third party offer to purchase or otherwise acquire, in a single transaction
or series of transactions, an aggregate amount of Partnership Interests such
that the prospective transferee(s) (together with their Affiliates) would
beneficially own more than 50% of the total Capital Accounts of the Partners and
otherwise control the Partnership through control of a majority of the
Representatives which such Transferring Partner desires to accept, then the
Transferring Partner shall provide each of the Other Partner(s) with notice of
such offer, and, if the Transferring Partner so elects, notice that the
Transferring Partner requires the Other Partner(s) to participate in such sale
with respect to the same percentage of its or their Partnership Interests as are
proposed to be sold by the Transferring Partner (the "Drag Along Notice")
delivered within 10 days after its tentative decision to accept such offer and
specifying in reasonable detail the identity of the prospective transferee(s)
and the terms and conditions of such transaction(s). The Other Partner(s) will
thereafter be required to include its or their Partnership Interests in such
sale and to use its or their reasonable efforts to cooperate in such sale. If
the Transferring Partner elects to exercise its rights under this Section
-------
8.05(b), it may require each Other Partner to transfer up to the same fraction
- - -------
of its or their interest in the Partnership as is transferred by the
Transferring Partner in such transaction or series of related transactions (the
"Drag Along Transfer Fraction"), and to
-34-
<PAGE>
receive an amount therefor which shall be equal to (x) the product of (i) the
Drag Along Transfer Fraction and (ii) such Other Partner's Capital Account, plus
(y) the Premium Amount, if any, and minus (z) the Discount Amount, if any. The
Premium Amount shall be equal to the product of (i) (a) the excess, if any, of
the purchase price for the Transferred Interest over the Capital Account
attributable to such Transferred Interest divided by (b) the Percentage Interest
in the Partnership represented by such Transferred Interest, and (ii) the
Percentage Interest in the Partnership represented by the fraction of the Other
Partner's interest in the Partnership that is to be transferred pursuant to this
Section. The Discount Amount shall be equal to the product of (i)(a) the excess,
if any, of the Capital Account attributable to such Transferred Interest over
the purchase price for the Transferred Interest divided by (b) the Percentage
Interest in the Partnership represented by such Transferred Interest, and (ii)
the Percentage Interest in the Partnership represented by the fraction of the
Other Partner's interest in the Partnership that is to be transferred pursuant
to this Section. For this purpose, "Transferred Interest" means the interest in
the Partnership to be sold by the Transferring Partner. If the Disposition of
the Transferring Partner's interest in the Partnership is pursuant to a series
of related transactions, then the purchase price for the interest of the Other
Partner(s) shall be determined as above by using the weighted average of the
amounts offered to the Transferring Partner. Notwithstanding the foregoing,
MTVNS shall have no rights to require Tune to participate in a sale pursuant to
this Section 8.05(b) if MTVNS Disposes of less than all of its Partnership
---------------
Interest in a transaction or series of transactions that will result in, by
agreement or arrangement with the applicable transferee of such Partnership
Interest, Viacom Inc. and its Affiliates holding a 50% or greater interest in
the Partnership or otherwise controlling the Partnership, either directly or
through the acquisition or ownership of a direct or indirect interest in the
transferee of such Partnership Interest, within twelve months of such
Disposition.
(c) In connection within any purchase and sale of an Other
Partner's Partnership Interest pursuant to Section 8.05(a) or 8.05(b), such
--------------- -------
Other Partner shall become a party to any agreement with the purchaser but shall
not be required to make any representation and warranty other than
representations and warranties that (i) upon payment of the applicable purchase
price therefor, the applicable purchaser shall own such Partnership Interest
free and clear of any Liens other than any Liens created by this Agreement, any
Additional Agreement, MTVNS or such purchaser, (ii) such Other Partner has the
necessary corporate, partnership or limited liability company (as applicable)
power and authority to Dispose of such Partnership Interest and (iii) such
Disposition has been duly and validly authorized by all necessary corporate,
partnership or limited liability company (as applicable) action on the part of
such Other Partner and is not in violation of any laws, agreements or decrees
applicable to such Other Partner. The rights set forth in Sections 8.05(a) and
----------------
8.05(b) shall survive any purported exercise of such rights with respect to any
- - ------
proposed acquisition in the event such proposed acquisition is not consummated.
Section 8.06. Additional Provisions Relating to Disposition.
---------------------------------------------
(a) In the case of any Disposition of a Partnership Interest
under this Article VIII:
------------
-35-
<PAGE>
(i) any and all filing and recording fees, fees of counsel and
accountants and other costs and expenses reasonably incurred by the
Partnership as a result of such Disposition shall be paid by the transferee
of a Partnership Interest;
(ii) the transferee of a Partnership Interest shall, by written
instrument in form and substance reasonably satisfactory to the
nontransferring Partners (and, in the case of clause (C) below, the
transferor Partner), (A) make representations and warranties to the
nontransferring Partners equivalent to those set forth in Article XIII, (B)
accept and adopt the terms and provisions of this Agreement and, in the
event of a Disposition of any portion of the Tune Partnership Interest, the
Parent Agreement and (C) assume the obligations of the transferor Partner
under this Agreement with respect to the transferred Partnership Interest,
whereupon the transferor Partner shall be released from all such
obligations and unless expressly assumed by the transferee with the consent
of the Management Committee, except for (x) those obligations or
liabilities of the transferor Partner arising out of a breach of this
Agreement prior to the date of such Disposition or pursuant to Section
-------
6.09, Section 8.06(b), Section 12.03, and Section 15.14 and (y) those
---- --------------- ------------- -------------
obligations or liabilities of the transferor Partner based on events
occurring, arising or maturing prior to the date of Disposition (other
than, in the case of a Disposition or Transfer of a Partnership Interest by
one Partner to another Partner or its designee, any such obligation or
liability referred to in this clause (y) that is taken into account in the
determination of the purchase price for the transferor Partner's
Partnership Interest);
(iii) if required by the Management Committee, the transferee
shall deliver to the Management Committee evidence of the authority of such
Person to become a Partner and to be bound by all of the terms and
conditions of this Agreement and the transferee and transferor shall each
execute and deliver such other instruments and such opinions of counsel as
the Management Committee reasonably deem necessary or appropriate to
effect, and as a condition to, such Disposition, including amendments to
the Certificate or any instrument filed with the State of Delaware or any
other state or governmental agency;
(iv) no Disposition shall result in termination of, relieve the
Partnership, the transferor Partner or any of its Affiliates from or
otherwise affect any of the obligations or liabilities of the Partnership,
the transferor Partner or any of its Affiliates under, any agreement
between the transferor Partner or such Affiliate and the Partnership
(including any Additional Agreement), except to the extent otherwise
provided therein or otherwise agreed by the Management Committee;
(v) if required by the Management Committee, the transferee
shall deliver to the Partnership an opinion, satisfactory in form and
substance to the nontransferring Partners, of counsel reasonably
satisfactory to the Management Committee to the effect that the Disposition
of the Partnership Interest would not cause the Partnership to lose its
status as a Partnership for federal income tax purposes; and
-36-
<PAGE>
(vi) the Disposition of a Partnership Interest shall comply
with all applicable state and federal securities laws and regulations and
all other applicable laws.
(b) Any such Disposition of a Partner's Partnership Interest to
another Partner (or such Partner's designee) in accordance with this Article
VIII or Article XII shall be consummated as soon as practicable. If any
Disposition of a Partner's Partnership Interest in accordance with this Article
-------
VIII or Article XII requires the consent, approval, waiver, or authorization of
- - ---- -----------
any Governmental Entity, or the filing with any Governmental Entity and the
expiration of any waiting period, as a condition to the valid Disposition of
such Partner's Partnership Interest to the proposed transferee thereof, then
each of the time periods provided in this Article VIII or Article XII, as
------------ -----------
applicable, shall be suspended for the period of time during which any such
consent, approval, waiver, or authorization is being diligently pursued or until
any such waiting period expires; provided, however, that in no event shall the
-------- -------
suspension of any time period pursuant to this Section 8.06 exist for more than
------------
180 days. Subject to Section 8.06(c), each of the Partners agrees to use its
---------------
diligent efforts to obtain, or to assist the affected Partner or Partnership in
obtaining, any such consent, approval, waiver, or authorization and shall
cooperate and use its diligent efforts to respond as promptly as practicable to
all inquiries received by it, by the affected Partner or by the Partnership from
any Governmental Entity for initial or additional information or documentation
in connection therewith. In the event any such consent, approval, waiver or
authorization is not obtained or the expiration of any such waiting period does
not occur within such 180-day period, then if the proposed Disposition is to
MTVNS or its designee pursuant to Section 12.03 or Section 8.04, MTVNS shall,
------------- ------------
within 20 days of the earlier of the expiration of such 180 day period or such
date as it becomes probable that such consent or approval will not be received,
designate another Person to purchase the Partnership Interests proposed to be
acquired (which Person MTVNS shall in good faith believe would be an acceptable
purchaser of such Partnership Interest for purposes of obtaining such consent,
approval or expiration) at the same purchase price required to be paid for such
Partnership Interest, or at a lower price, in which case MTVNS shall pay to Tune
and/or its Permitted Transferees, as applicable, the excess of the specified
purchase price over such lower price. Such sale to such a designee shall be
consummated as soon as practicable, but in no case more than 90 days following
the appointment of such alternate purchaser.
(c) Notwithstanding any provisions hereof to the contrary, nothing
contained in this Agreement shall obligate any of the Partners or any of their
respective Affiliates to take any action to consummate the Disposition of a
Partnership Interest and the other transactions contemplated hereby, the
consummation of which is dependent or conditioned on the receipt of any
governmental or regulatory approval or consent, in the event that the approval
or consent so received specifically includes conditions or restrictions in
addition to those imposed by laws and regulations of general applicability as in
effect from time to time (including conditions in addition to those imposed by
existing laws and regulations which require the prior approval of any
Governmental Entity to the taking of any action or the consummation of any
transaction), the direct or indirect effect of which is or would be, to
restrict, limit or otherwise subject to penalty any of the Partners or their
respective Affiliates in the ownership of their respective assets or the conduct
of their respective businesses. For purposes of the foregoing, a condition,
restriction or limitation arising out of any such approval or consent shall be
deemed to
-37-
<PAGE>
be a restriction or limitation on any such Person (regardless of whether such
Person is a party to or otherwise legally obligated by such consent or approval)
to the extent that the taking of an action or the consummation of a transaction
by such Person would result in any such Person or its Affiliates being in breach
or violation of such consent or approval or otherwise causing such consent or
approval to terminate or expire.
Section 8.07. Distributions After Disposition. Distributions made on or
-------------------------------
after the effective date of the Disposition of a Partnership Interest shall be
made to the transferee, regardless of when such distributions accrued on the
books of the Partnership, except as otherwise provided with respect to Section
-------
12.01.
- - -----
ARTICLE IX
EVENTS OF DEFAULT; CONSEQUENCES AND REMEDIES
--------------------------------------------
Section 9.01. Events of Default. An "Event of Default" shall be
-----------------
considered to have occurred with respect to a Partner (the "Defaulting Partner")
if:
(i) Such Partner Disposes of all or any part of its
Partnership Interest, or suffers such Disposition to occur, except as
permitted by this Agreement; provided, however, that, so long as no
-------- -------
foreclosure action has commenced with respect to such Partnership Interest,
no Event of Default shall be considered to have occurred for 30 days
following the involuntary encumbrance of all or any part of such
Partnership Interest if during such 30-day period such Partner acts
diligently to, and does, remove any such encumbrance, including effecting
the posting of a bond to prevent foreclosure where necessary;
(ii) any Partner fails to make all or any portion of any
Required Contribution when due and such failure continues for more than
five days following notice thereof from the Chief Executive Officer or
MTVNS;
(iii) Such Partner or any Affiliate of such Partner willfully
fails to perform or violates any other material term or condition of this
Agreement (except to the extent any such failure to perform or violation
results from or arises out of a good faith dispute with respect to this
Agreement) and such failure or violation continues for 30 days after
written notice thereof has been given by the other Partner (or if such
failure or violation is not a failure to pay money and is of such a nature
that it cannot reasonably be cured within such 30-day period, but it is
curable and such Partner in good faith begins efforts to cure it within
such 30-day period and continues diligently to do so, such reasonable
additional period thereafter to effect the cure (but no more than an
additional 30 days)); or
(iv) Such Partner otherwise causes the dissolution of the
Partnership in contravention of the terms of this Agreement (other than
solely by virtue of the Bankruptcy of such Partner).
-38-
<PAGE>
Section 9.02. General Consequences; Remedies of Non-Defaulting Partner.
--------------------------------------------------------
(a) Upon the occurrence and during the continuance of an Event
of Default, (i) the Defaulting Partner shall have no right to designate any
Representatives pursuant to Section 6.01 and (ii) any appointment of any
------------
Representatives previously designated by the Defaulting Partner to the
Management Committee shall be void and of no effect until such time as such
Event of Default is cured in full or waived by each Non-Defaulting Partner (as
defined below), and no other Event of Default with respect to such Defaulting
Partner has occurred and is continuing. In all other respects a Defaulting
Partner shall continue to have all of the rights and obligations of a Non-
Defaulting Partner under this Agreement and applicable law. Commencing on the
date that any Partner loses its right to designate Representatives pursuant to
this Section 9.02 until the earlier of the date that such Partner (i) regains
------------
the right to designate Representatives under this Agreement or (ii) Disposes of
all of its Partnership Interest in accordance with this Agreement, such Partner
shall be permitted to send one representative to act as an observer to each
meeting of the Management Committee. Such observer shall not be permitted to
vote or participate in such meeting and may be asked to leave the meeting at any
point during which the Management Committee is discussing matters relating to
such Partner. In such event the quorum requirements for the Management
Committee shall be appropriately revised to the extent necessary to carry on the
business of the Partnership.
(b) Upon the occurrence and during the continuance of an Event
of Default, with respect to a Defaulting Partner, the other Partner (assuming no
Events of Default are continuing with respect to it) (the "Non-Defaulting
Partner"), in addition to any other rights it may have hereunder or under any
applicable law, may elect to seek to enjoin such default or to obtain specific
performance of a Defaulting Partner's obligations or Damages (as defined below)
in respect of such Event of Default. The foregoing remedies shall not be deemed
mutually exclusive, and selection or resort to any thereof shall not preclude
selection or resort to the others. The resort to any remedy pursuant to this
ection 9.02(b) shall not for any purpose be deemed to be a waiver of any other
- - --------------
remedy available hereunder or under applicable law and the failure to elect a
remedy within the time period provided in the preceding paragraph shall not be
presumed to be a waiver of such Event of Default.
(c) Unless an Event of Default or resort to such remedy has
been waived as set forth in the immediately preceding paragraph, the Partnership
or the Non-Defaulting Partner shall be entitled to recover from the Defaulting
Partner in an appropriate proceeding any and all damages, losses and expenses
(including reasonable attorneys' fees and disbursements) (collectively,
"DAMAGES") suffered or incurred by the Partnership or the Non-Defaulting Partner
as a result of such Event of Default.
ARTICLE X
TERMINATION AND LIQUIDATION OF THE PARTNERSHIP
----------------------------------------------
Section 10.01. Events of Termination. The Partnership shall be
---------------------
dissolved and its affairs wound up pursuant to Section 10.02 upon the first to
-------------
occur of any of the following (each, an "Event Of Termination"):
-39-
<PAGE>
(i) the unanimous written consent of the Partners to
dissolution; or
(ii) the transfer of all the assets of the Partnership
pursuant to the Reorganization or otherwise; or
(iii) the Bankruptcy of a Partner, unless the Management
Committee, by the unanimous vote of the Representatives of the Partners
other than the Bankrupt Partner, has determined to continue the Partnership
with the successor of such Partner admitted as a new Partner.
Section 10.02. Winding-Up. Upon the occurrence of an Event of
----------
Termination, the Partnership affairs shall be wound up as follows:
(a) The Management Committee shall cause to be prepared a
statement of the assets and liabilities of the Partnership as of the date of
dissolution.
(b) Except in connection with the Reorganization, the assets
and properties of the Partnership shall be liquidated as promptly as possible,
and receivables collected, all in an orderly and business-like manner so as not
to involve undue sacrifice. Notwithstanding the foregoing, the Management
Committee may determine not to sell, or authorize the sale of, all or any
portion of the assets and properties of the Partnership, in which event such
assets and properties shall be distributed in kind pursuant to Section 10.02(c).
----------------
(c) The proceeds of liquidation under Section 10.02(b) and
----------------
all other assets and properties of the Partnership shall be applied and
distributed as follows in the following order of priority:
(i) to the payment of the debts and liabilities of the
Partnership (except for Partner Loans and any other amounts which may be
owed to any Partner) and the expenses of liquidation;
(ii) to establish any reserves as the Management Committee,
in accordance with sound business judgment, deems reasonably necessary for
any contingent or unforeseen liabilities or obligations of the Partnership,
which reserves may be paid over by the Management Committee to an escrow
agent selected by it to be held by such agent for the purpose of (x)
distributing such reserves in payment of the aforementioned contingencies
and (y) upon the expiration of such period as the Management Committee may
deem advisable, distributing the balance thereof in the manner provided in
this Section 10.02(c );
----------------
(iii) to the payment of all other amounts owed to any Partner
other than in respect of the Capital Accounts and other than Partner Loans
and then to pay first the accrued and unpaid interest on and then the
unpaid principal amount of the Partner Loans on a pro rata basis to each
Partner and its Affiliates (considered as a group) in proportion to the
respective amounts owed to each Partner and its Affiliates (considered as a
group);
-40-
<PAGE>
(iv) to the Partners in amounts proportional to the
total amount in each Partner's Capital Account (as adjusted in accordance
with Section 5.01) to reflect allocations of Net Income and Net Loss
------------
(including any items thereof resulting from distributions of assets in
kind). Any distribution pursuant to this Section 10.02(c)(iv) shall be made
-------------------
prior to the later of (A) the end of the Partnership taxable year in which
the liquidation of the Partnership occurs or (B) 90 days after the date of
such liquidation. Distributions pursuant to this Section 10.02(c)(iv) may
--------------------
be distributed to a trust established for the benefit of the Partners for
the purposes of liquidating Partnership assets, collecting amounts owed to
the Partnership and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of any Partner arising out of or in
connection with the Partnership. The assets of any such trust shall be
distributed to the Partners from time to time, in the reasonable discretion
of the Management Committee, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to this Agreement.
(d) Except with respect to the Reorganization, nothing
contained in this Section 10.02 shall be construed to limit the Management
-------------
Committee's discretion to attempt to sell the Partnership's business and assets
as a going concern following the occurrence of an Event of Termination, provided
that the proceeds of such sale shall be applied and distributed as provided in
Section 10.02(c), and provided, further, that if such a sale cannot be effected
- - --------------- -------- -------
within six months after the occurrence of an Event of Termination (or such
longer or shorter period as the Partners may agree) then the Management
Committee shall promptly proceed to wind-up the affairs of the Partnership as
provided above in this Section 10.02.
-------------
ARTICLE XI
RELATED PARTY TRANSACTIONS
--------------------------
Section 11.01. Related Party Transactions Generally.
------------------------------------
(a) Prior to consummation of the IPO, any Related Party
Transaction(s) shall be undertaken and conducted on an arm's length basis and on
terms, in the aggregate, no less favorable to the Partnership than could be
obtained from an unaffiliated third party. Tune shall have the right,
exercisable no more than once during a twelve-month period, to designate a
Person who is not an Affiliate of any Partner (the "Auditor"), subject to the
approval of MTVNS, which approval shall not be unreasonably withheld, to audit
any Related Party Transaction(s) conducted during the period since any previous
such audit. If the Auditor determines that (i) the Related Party Transactions
undertaken or conducted during such period were, in the aggregate, not on arm's
length terms and on terms which were less favorable to the Partnership than
those that could be obtained from an unaffiliated third party and (ii) the
difference between (x) the economic value of each such Related Party Transaction
and (y) the economic value of such transaction had it been entered into on an
arm's length basis with an unaffiliated third party, in the aggregate, exceeds
the greater of (1) 10% of the aggregate economic value of each Related Party
Transaction whose economic value exceeds that of the economic value of such
transaction had it been entered into with an unaffiliated third party (each such
Related Party Transaction, a "Subject Transaction") and (2) $1,000,000, then the
terms of each such Subject Transaction shall be modified such that, for all
future periods covered by such
-41-
<PAGE>
transaction, such Related Party Transaction will be on terms no less favorable
than those which could be obtained from an unaffiliated third party and the
Affiliates of MTVNS which were parties to such Related Party Transaction shall
reimburse the Partnership retroactively to the time such Subject Transaction(s)
was implemented for the full economic value by which such Related Party
Transaction exceeded the value of an arm's-length transaction with an
unaffiliated third party, in each case as determined by the Auditor ("Auditor's
Findings") and MTVNS shall pay the costs and expenses associated with such audit
(the "Audit Costs"). If the Auditor determines that no such payment or
modification is required, Tune shall pay for such Audit Costs.
(b) If any Partner disagrees with the Auditor's Findings,
such Partner (the "Notifying Party") shall deliver a written notice thereof (the
"Dispute Notice") to the other Partners (the "Receiving Party") within 30 days
after receipt of the Auditor's Findings. If no Dispute Notice is received within
such 30-day period, the Auditor's Findings shall be final and binding on the
Partners and the Partnership. Upon receipt by the Receiving Party of the Dispute
Notice, MTVNS and Tune shall negotiate in good faith to resolve any disagreement
with respect to the Auditor's Findings. If MTVNS and Tune are unable to agree
with respect to the Auditor's Findings within 30 days after receipt by the
Receiving Party of the Dispute Notice, MTVNS and Tune shall promptly submit
their dispute to an arbitrator with no material relationship to MTVNS or Tune or
their respective Affiliates, selected by the Notifying Party and reasonably
satisfactory to the Receiving Party, for a binding resolution. The cost of the
arbitration will be borne as determined by the arbitrator.
Section 11.02. Related Party Transactions in Excess of $1,000,000.
--------------------------------------------------
(a) Prior to consummation of the IPO, in the event that the
Partnership or any Controlled Affiliate thereof proposes to engage in a Related
Party Transaction(s) which involves in the aggregate amounts (or has economic
value) (in any one transaction or in a series of related transactions) in excess
of $1,000,000, the Partnership shall, prior to entering into or engaging in such
Related Party Transaction, deliver written notice to Tune of its intent to enter
into such Related Party Transaction, which notice will contain an accurate and
complete description of such Related Party Transaction (a "Related Party
Transaction Notice"). Within ten days after its receipt of such notice, Tune may
either (x) approve such transaction in writing by notice to the Partnership
(with such approval deemed granted in the event Tune fails to raise an objection
to such Related Party Transaction within 10 days following receipt of such
notice of the Related Party Transaction) or (y) object in writing to such
Related Party Transaction. If Tune so approves (or such approval is deemed
granted), then the Partnership may engage in such Related Party Transaction on
the terms set forth in its notice to Tune. If Tune so objects, it shall
thereafter promptly designate a Person who is not an Affiliate of any Partner
(the "Appraiser"), subject to the approval of MTVNS, which approval shall not be
unreasonably withheld, to review the financial terms of such proposed Related
Party Transaction(s). If the Appraiser determines (the "Appraiser's Findings")
that the difference between (x) the economic value of such proposed Related
Party Transaction and (y) the economic value of such transaction if entered into
on an arm's length basis with an unaffiliated third party, equals or exceeds 10%
of the net present value (using a 10% discount rate) of the economic value of
such proposed Related Party Transaction, then the Partnership and the other
party to such Related Party Transaction shall elect either not to engage in the
proposed Related Party Transaction(s) or to modify its financial terms
-42-
<PAGE>
such that, for all future periods covered by such transaction, such Related
Party Transaction will be on terms no less favorable than those which could be
obtained from an unaffiliated third party. The cost and expenses associated with
such Appraisal shall be borne by Tune unless the Partnership determines not to
enter into the transaction or the transaction requires adjustment as specified
above, in which case such costs and expenses shall be borne by MTVNS.
(b) If any Partner disagrees with the Appraiser's Findings,
such Partner (the "Appraiser Notifying Party") shall deliver a written notice
thereof ("Appraiser Dispute Notice") to the other Partners (the "Appraiser
Receiving Party") within 30 days after receipt of the Appraiser's Findings. If
no Appraiser Dispute Notice is received within such 30-day period, the
Appraiser's Findings shall be final and binding on the Partners and the
Partnership. Upon receipt by the Appraiser Receiving Party of the Appraiser
Dispute Notice, MTVN and Tune shall negotiate in good faith to resolve any
disagreement with respect to the Appraiser's Findings. If MTVN and Tune are
unable to agree with respect to the Appraiser's Findings within 30 days after
receipt by the Appraiser Receiving Party of the Appraiser Dispute Notice, MTVN
and Tune shall promptly submit their dispute to an arbitrator with no material
relationship to MTVN or Tune or their respective Affiliates selected by the
Appraiser Notifying Party and reasonably satisfactory to the Appraiser Receiving
Party for a binding resolution. The cost of the arbitration will be borne as
determined by the arbitrator.
Section 11.03. Basis of Evaluation. In evaluating the economic value
-------------------
of a Related Party Transaction as compared to a transaction with an unaffiliated
third party, the Auditor or Appraiser, as the case may be, shall determine the
economic value of a transaction with an unaffiliated third party based upon a
transaction with respect to the same or a reasonably similar service or product
(regardless of whether such service or product is unique, it being understood,
however, that the Auditor or Appraiser is entitled to assign a premium to the
unique aspects of a product or service), to be provided by Persons which are
similarly situated or comparable to the Persons which are to be parties to the
Related Party Transaction.
Section 11.04. No Breach. If the terms of any Related Party
---------
Transaction are modified as provided in this Article XI and any obligations
----------
arising from such modification are satisfied, no party to such Related Party
Transaction shall be in breach of any obligation hereunder solely by reason of
having entered into such Related Party Transaction on the original terms.
ARTICLE XII
CERTAIN PROVISIONS RELATING TO INTERESTS
----------------------------------------
Section 12.01. Adjustment of Tune's Percentage Interest. If, by the
----------------------------------------
Offering Expiration Date, the IPO has not been consummated, Tune may, by written
notice to the Partnership (the "Tune Notice"), within the six-month period
commencing on the Offering Expiration Date, require that the Tune Partnership
Interest Value as of the Offering Expiration Date be determined. If the Tune
Partnership Interest Value as of the Offering Expiration Date is determined to
be less than the Target Value and provided that neither TCI Music nor Tune nor
any of their Controlled Affiliates is in material default of its obligations
under this Agreement or the Additional Agreements, then the Partnership, without
any additional consideration (other
-43-
<PAGE>
than any nominal consideration required by law) from Tune, shall (subject to the
last sentence of this Section 12.01) increase (in the same proportions) Tune's
-------------
Percentage Interest and Capital Account balance (and correspondingly reduce
MTVN's Percentage Interest and Capital Account balance) so the Tune Partnership
Interest Value (based on Tune's Percentage Interest as increased pursuant to
this Section 12.01) as of the Offering Expiration Date shall be equal to the
-------------
Target Value (as reduced proportionally to reflect any Disposition of any
portion of the Tune Partnership Interest prior to the Offering Expiration Date);
provided, however, that such Percentage Interest shall in no event exceed 15%
- - -------- -------
(or such lesser percentage which equals 150% of Tune's Percentage Interest on
the Offering Expiration Date); and provided, further, however, that Tune may
-------- ------- --------
elect to defer receipt and the effectiveness of such increase until the first to
occur of (x) the IPO, (y) such date as Tune shall request such increase or (z)
the first anniversary of the Offering Expiration Date.
Section 12.02. Preemptive Rights. MTVNS and Tune, so long as Tune is
-----------------
permitted to designate one Representative to the Management Committee pursuant
to Sections 6.01(a), shall have certain preemptive rights as follows:
----------------
(a) If the Partnership wishes to issue any Partnership
Interests or rights to acquire such Partnership Interests (in either case, the
"Offered Interests") after the date hereof to any Person, the Partnership shall
give each Partner at least 15 days prior written notice of any proposed
issuance, which notice shall disclose in reasonable detail the proposed terms
and conditions of such issuance (the "Issuance Notice"). Upon receipt of the
Issuance Notice, each Partner shall have the right to elect to purchase, at the
same price and on the terms stated in the Issuance Notice, a percentage of
Offered Interests equal to the product of (x) such Partner's Percentage
Interest, multiplied by (y) the total Percentage Interest represented by all of
the Offered Interests to be issued. Those Partners electing to purchase Offered
Interests shall be referred to as "Electing Partners". Such election is to be
made by each Partner by delivering written notice to the Partnership and the
other Partners within 15 days after receipt by such Partner of the Issuance
Notice (the "Acceptance Period"). The delivery of such notice by an Electing
Partner shall constitute a binding offer by such Electing Partner to purchase
that portion of the Offered Interest specified in such notice on the terms set
forth in the Issuance Notice, which offer shall be irrevocable for a period of
90 days following its delivery to the Partnership. The Partnership shall be
required to accept any such offer from an Electing Partner and issue such
Partnership Interests to it so long as such Electing Partner has offered to
purchase its proportionate share of the Offered Interests as provided above.
(b) If Tune and its Permitted Transferees have not elected to
purchase their percentage of the Offered Interests, MTVNS and its Permitted
Transferees shall have the right to elect to purchase such percentage of the
Offered Interests (the "Excess Interests"), by giving written notice of such
election to the Partnership within 10 days after the Acceptance Period, so long
as all of the Excess Interests are to be purchased by the Electing Partners.
(c) If Tune does not elect to purchase its share of the
Offered Interests pursuant to Section 12.02(a), then Tune and its Permitted
----------------
Transfereesshall have no right to purchase any Offered Interests pursuant to
this Section 12.02, and/or if MTVNS fails to purchase its Offered Interests (or
-------------
all Offered Interests, if Tune is not an Electing Partner) the Partnership
-44-
<PAGE>
may, at its election, during a period of 90 days following the expiration of the
Acceptance Period, sell and issue such Offered Interests not elected to be
purchased to such other Person at a price and upon terms no more favorable to
such Person than those stated in the Issuance Notice; provided that as a
condition to such sale, such Person acquiring the Offered Interests becomes a
party to this Agreement and the ultimate parent entity of such Person becomes a
party to the Parent Agreement and Guaranty on such terms as the Management
Committee shall reasonably approve. In the event the Partnership has not so sold
the Offered Interests within such 90-day period, the Partnership shall not
thereafter issue or sell any of such Offered Interests or any other additional
Partnership Interests without first offering such securities to each Partner in
the manner provided in this Section 12.02.
-------------
(d) If Tune and its Permitted Transferees and/or MTVNS and
its Permitted Transferees give the Partnership notice, pursuant to the
provisions of this Section 12.02, that Tune and its Permitted Transferees and/or
-------------
MTVNS and its Permitted Transferees (as the case may be) desire to purchase all
of the Offered Interests as to which they have the right to purchase pursuant to
this Section 12.02, such sale shall be consummated within ten days after the
-------------
Acceptance Period. In the event that any proposed issuance is for a
consideration other than cash, the Partners will be entitled to pay cash for
each share or other unit, in lieu of such other consideration, in the amount
determined in good faith by the Management Committee in accordance with Section
-------
6.06 (to the extent a purchaser is an Affiliate of Viacom) to constitute the
- - ----
Fair Market Value of such consideration other than cash to be paid per share or
other unit or, to the extent Tune and the Partnership so agree, to deliver
property or securities having an Agreed Value equal to such Fair Market Value.
(e) The preemptive rights contained in this Section 12.02
-------------
shall not apply to (i) the grant or sale of Partnership Interests or rights to
acquire Partnership Interests to officers, directors, consultants,
Representatives or employees of the Partnership or its Controlled Affiliates
approved after the date hereof by the Management Committee in accordance with
Sections 6.05 and 6.06 or to the sale or issuance of Partnership Interests to
- - ------------ ----
directors, employees or consultants of MTVN or Viacom pursuant to an employee,
consultant or director option plan in compliance with this Agreement or (ii) the
issuance of Partnership Interests to the public in the IPO or thereafter;
provided, however, that after the IPO Tune shall have preemptive rights with
- - -------- -------
respect to any offering of Partnership Interests or rights to acquire
Partnership Interests made to MTVN or its Affiliates.
Section 12.03. Put and Call.
------------
(a) At any time during the 60-day period commencing on the
fifth anniversary of the Closing Date, each Subject Transferee may, by written
notice to MTVNS (the "Put Notice"), require MTVNS to purchase all, but not less
than all, of the Tune Partnership Interest held by such Subject Transferee. Any
such purchase or sale shall be effected, for cash, on the date which is the
120th day following the fifth anniversary of this Agreement, or (if not a
Business Day) the next following Business Day (the "Put Closing Date") and at a
price equal to the product of (x) the Tune Partnership Interest Value with
respect to the aggregate amount of the Tune Partnership Interests covered by the
Put Notices (the "Put Interest") as of the fifth anniversary of the date hereof
and (y) a fraction, the numerator of which is the Percentage
-45-
<PAGE>
Interest of the Put Interest on the Put Closing Date and the denominator of
which is the Percentage Interest of the Put Interest on such fifth anniversary
(excluding, in each case, any changes in such Percentage Interest resulting
other than from a Disposition of any portion of the Put Interest during such
period) (the "Put Purchase Price"). The Put Purchase Price will be allocated
proportionately among all Subject Transferees electing to exercise the Put and
selling their Tune Partnership Interests to MTVNS. The Put Purchase Price shall
bear interest at an annual rate of LIBOR plus 1% for any period from the date
which is 90 days after the date of the Put Notice until the Put Closing Date
unless the delay in such consummation is primarily attributable to any act or
failure to take a required action on the part of Tune or such subject
Transferee. A "Subject Transferee" shall mean each of (i) Tune or its Permitted
Transferees or (ii) a transferee of any or all of the Tune Partnership Interest
which acquired such Tune Partnership Interest in accordance with the terms of
this Agreement; provided, that no transferee acquiring any or all of the Tune
--------
Partnership Interest in a public market transaction (so long as such sale to
such transferee in such public market transaction was made in accordance with
this Agreement) shall be a Subject Transferee; provided, further, that a Subject
-------- -------
Transferee holding Tune Partnership Interests acquired both (A) pursuant to this
Agreement (other than in a public market transaction) and (B) in a public market
transaction, shall be a Subject Transferee only as to the Tune Partnership
Interests not acquired in a transaction referred to in clause (B) above.
(b) At any time during the 60-day period commencing on the
sixth anniversary of the Closing Date, MTVNS (whether or not it is then a
Partner) may, by written notice to each Subject Transferee (the "Call Notice"),
require each Subject Transferee to sell to MTVNS all, but not less than all, of
the Tune Partnership Interest. Any such purchase or sale shall be effected, for
cash, on the date which is the 120th day following the sixth anniversary of this
Agreement, or (if not a Business Day) the next following Business Day (the "Call
Closing Date"), and at a price equal to the product of (x) the Tune Partnership
Interest Value as of the sixth anniversary of the date hereof and (y) a
fraction, the numerator of which is the Percentage Interest of the Tune
Partnership Interest on the Call Closing Date and the denominator of which is
the Percentage Interest of the Tune Partnership Interest on such sixth
anniversary (excluding, in each case, any changes in such Percentage Interest
resulting other than from a Disposition of any portion of the Tune Partnership
Interest during such period) (the "Call Purchase Price"). The Call Purchase
Price shall bear interest at an annual rate of LIBOR plus 1% for any period from
the date which is 90 days after the date of the Call Notice until the Call
Closing Date unless the delay in such consummation is primarily attributable to
any act or failure to take a required action on the part of Tune or such Subject
Transferee.
(c) If a Put Notice or Call Notice is delivered, as the case
may be, then MTVNS and Tune shall proceed with the closing of the purchase (the
"PUT/CALL CLOSING") in accordance with Section 8.06(b) as follows:
---------------
(i) The Put/Call Closing shall be held at the principal
office of the Partnership on the Put Closing Date or Call Closing Date, as
the case may be, or at such other place or on such other date as MTVNS and
Tune may agree, provided that MTVNS shall have the right to designate
another reasonably convenient location to avoid stamp duty or other
transfer taxes to the extent that it is not unlawful to do so.
-46-
<PAGE>
(ii) At the Put/Call Closing, MTVNS shall purchase (or
cause its designee to purchase) all but not less than all of the applicable
Tune Partnership Interest for the Put Purchase Price or the Call Purchase
Price, as the case may be, and against payment of such price in cash, the
Subject Transferee(s) shall deliver all such documents and instruments as
are reasonably necessary to transfer, and shall be deemed to have
transferred and to have represented and warranted to MTVNS that it has
transferred, good title to the Partnership Interests being sold to MTVNS,
free and clear of all liens, other than those created by this Agreement or
any Additional Agreement or created by MTVNS.
(iii) Subject to Section 8.06(b), the obligation of MTVNS
---------------
and Tune to proceed with the Put/Call Closing shall be conditioned upon, and the
scheduled Put Closing Date or Call Closing Date, as the case may be, shall be
extended to 10 days following the last to occur of, the receipt of all material
governmental and regulatory consents, approvals or waivers that may be required
in connection with the purchase and sale of the Tune Partnership Interest (other
than any such consent or approval which has, if permitted by law, been waived by
MTVNS or Tune, as applicable, in which case MTVNS or Tune, as applicable, shall
indemnify and hold harmless Tune or MTVNS, as applicable, for all losses,
damages and expenses incurred by Tune or MTVNS, as applicable, their respective
Affiliates and their respective partners, shareholders, members, directors,
officers, employees and agents as a result of MTVNS' or Tune's (as the case may
be) decision to so proceed with the Put/Call Closing pursuant to an instrument
reasonably satisfactory to Tune or MTVNS, as applicable); provided, however,
--------- --------
that Tune shall not be obligated to sell, and MTVNS shall not be obligated to
purchase, such interest to the extent that proceeding in such transaction would
violate any law, rule or regulation applicable to TCI Music or MTVN or their
respective Controlled Affiliates or their respective businesses or assets, or
subject any of the foregoing to any injunction, or other equitable remedy of any
court or government entity. MTVNS and Tune shall each use all reasonable efforts
in cooperation with each other promptly to make all filings, give all notices
and secure all consents, approvals and waivers that may be required in
connection with the purchase and sale of the Tune Partnership Interests.
(iv) Upon consummation of the purchase of all of the Tune
Partnership Interest, Tune shall cease to be a Partner or to have any
right, title or interest in or to the Partnership.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE PARTNERS
------------------------------------------------------------
Each Partner hereby makes the following representations and warranties to
each other, each with respect to itself only:
(i) It is, and at all times material to this Agreement
shall be, duly incorporated or organized, validly existing and in good
standing under the laws of its state of incorporation or organization and
duly qualified or registered to do business in
-47-
<PAGE>
each state or jurisdiction in which failure to so qualify or register would
have a material adverse effect upon such Partner or the Partnership.
(ii) It has, and at all times material to this Agreement
shall continue to have, the full power and authority to take all actions
contemplated by this Agreement.
(iii) The execution, delivery and performance of this
Agreement and the transaction contemplated hereby has been duly authorized
by all necessary action on its part.
(iv) This Agreement constitutes a valid and binding
obligation of it enforceable against it in accordance with the terms
hereof, subject as to enforceability to limits imposed by bankruptcy,
insolvency or similar laws affecting creditors' rights (including, without
limitation, laws relating to fraudulent conveyances) generally and the
availability of equitable remedies.
(v) The execution, delivery and performance of this
Agreement does not violate any provision of law applicable to it or of its
organizational documents which violation could reasonably be expected to
have a material adverse effect on such Partner or the Partnership.
(vi) The execution, delivery and performance of this
Agreement does not violate or cause a breach or default under any agreement
or obligation to which it is a party or is otherwise subject, except for
such violations, breaches or defaults as would not have a material adverse
effect on such Partner or the Partnership.
(vii) Except with respect to consents, approvals and
authorizations relating to Tune and MTVNS and their respective Controlled
Affiliates and the Tune Contribution and the MTVN Contribution, no consent,
approval or authorization of, or registration or filing with, any Person
(governmental or private) is required in connection with the execution,
delivery and performance by it of this Agreement or the consummation by it
of the transactions contemplated hereby except for such consents,
approvals, authorizations, registrations or filings which have been
obtained or filed.
ARTICLE XIV
[Intentionally Left Blank]
------------------------
ARTICLE XV
MISCELLANEOUS
-------------
Section 15.01. Notices. Except as expressly provided herein, notices
-------
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed (certified or registered
mail, postage prepaid, return receipt requested) or sent by facsimile copier of
the sending Partner, as follows:
-48-
<PAGE>
(a) If to MTVN to:
MTVN Online Partner I LLC and Imagine Radio, Inc.
1515 Broadway
New York, New York 10036-5794
Telecopier No.: (212) 846-1735
Attention: Fred Seibert
with a copy to:
Viacom International Inc.
1515 Broadway
New York, New York 10036-5794
Telecopier No.: (212) 258-6069
Attention: General Counsel
(b) If to Tune to:
SonicNet, Inc. and The Box Worldwide Inc.
c/o TCI Music, Inc.
67 Irving Place North, Fourth Floor
New York, New York 10003
Telecopier No.: (212) 387-8171
Attention: Lee Masters
or to such other address or attention of such other Partner or Person as any
Partner shall advise the other Partner in writing. All notices and other
communications given to a Partner in accordance with the provisions of this
Agreement shall be deemed to have been given (i) three Business Days after the
same are sent by certified or registered mail, postage prepaid, return receipt
requested, (ii) when delivered by hand or transmitted by facsimile (confirmation
received) unless delivered on a day which is not a Business Day or after 5:00
p.m., local time, at the place of receipt, in which case such notice shall be
deemed to have been given on the next succeeding Business Day or (iii) one
Business Day after the same are sent by a reliable overnight courier service,
with acknowledgment of receipt.
Section 15.02. Table of Contents; Headings. The table of contents and
---------------------------
headings of the Articles, Sections and other subdivisions of this Agreement are
for convenience of reference only and shall not modify, define or limit any of
the terms or provisions of this Agreement.
Section 15.03. Governing Law. This Agreement shall be construed in
-------------
accordance with, and governed by, the internal laws of the State of Delaware
without regard to principles of conflict of laws.
Section 15.04. Severability. If any provision of this Agreement shall
------------
be held to be illegal, invalid or unenforceable, that provision will be enforced
to the maximum extent
-49-
<PAGE>
permissible so as to effect the intent of the Partners and the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. If necessary to effect the intent of the Partners,
the Partners will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.
Section 15.05. Amendments. This Agreement may be modified or amended
----------
only by a written amendment signed by each party hereto.
Section 15.06. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts shall have been signed
by each Partner and delivered to the other Partner.
Section 15.07. Entire Agreement. The provisions of this Agreement and
----------------
the Additional Agreements set forth the entire agreement and understanding
between the Partners as to the subject matter hereof and supersede all prior
agreements, oral or written, and other communications between the Partners
relating to the subject matter hereof, including the Memorandum of Understanding
dated May 19, 1999 among MTVN, TCI Music, Inc. and Liberty.
Section 15.08. Parties in Interest; Limitation on Rights of Others.
---------------------------------------------------
The terms of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and, except as provided herein, their respective successors
and permitted assigns. Any assignment of rights hereunder in violation hereof
shall be null and void ab initio. Nothing in this Agreement, whether express or
-- ------
implied, shall be construed to give any Person (other than the parties hereto
and their permitted successors and assigns) any legal or equitable right, remedy
or claim under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
Section 15.09. Waivers; Remedies. The observance of any term of this
-----------------
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if it is in a writing signed
by the party or parties against which such waiver is to be asserted and only in
the specific instance and for the specific purpose for which it is given.
Except as otherwise provided herein, no failure or delay of any Partner in
exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.
Section 15.10. Further Assurances. Upon reasonable request from time to
------------------
time, each Partner shall execute and deliver all documents and instruments and
do all other acts that may be reasonably necessary or desirable to carry out the
intent and purposes of this Agreement and give effect to the exercise by a party
of its rights hereunder.
-50-
<PAGE>
Section 15.11. Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each Partner hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of any New
York State court sitting in the County of New York or any federal court of the
United States of America sitting in the Southern District of New York, as the
party instituting suit shall elect in its sole discretion, and any appellate
court from any such court, in any suit, action or proceeding arising out of or
relating to the Partnership or this Agreement, or for recognition or enforcement
of any judgment relating hereto. Each Partner hereby irrevocably and
unconditionally agrees that any suit, action or proceeding against it by any
other Partner with respect to the Partnership or this Agreement may be
instituted, and that any suit, action or proceeding shall be instituted only in
any New York State court sitting in the County of New York or any federal court
sitting in the Southern District of New York, and any appellate court from any
such court, as the Partner instituting such suit, action or proceeding may elect
in its sole discretion. Each Partner also hereby irrevocably and unconditionally
agrees that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each Partner hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to the Partnership or this Agreement in
any New York State court sitting in the County of New York or any federal court
sitting in the Southern District of New York, and any affiliate court for such
court. Each Partner hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court and further waives the right to object,
with respect to such suit, action or proceeding, that such court does not have
jurisdiction over such Partner. Each Partner hereby irrevocably waives the right
to a jury trial in any suit, action or proceeding arising out of or relating to
the Partnership or this Agreement.
(c) Each Partner hereby irrevocably and unconditionally
consents to service of process in the manner provided for the giving of notices
pursuant to this Agreement. Nothing in this Agreement shall affect the right of
either party to serve process in any other manner permitted by law.
Section 15.12. Reliance on Officer's Certificate. Persons dealing
---------------------------------
with the Partnership shall be entitled to rely on a certificate of the
secretary, any assistant secretary or any other officer of the Partnership as
conclusive evidence of the incumbency of any officer of the Partnership and his
or her authority to take action on behalf of the Partnership and shall be
entitled to rely on a copy of any resolution or other action taken by the
Management Committee, certified by the secretary, any assistant secretary or any
other officer of the Partnership, as conclusive evidence of such action and of
the authority of the officer referred to in such resolution or other action to
bind the Partnership to the extent set forth therein.
Section 15.13. Public Announcements. No Partner shall make or shall
--------------------
permit any of its Affiliates to make any public announcement about the
Partnership and its formation or activities without the prior written consent of
the other Partners, which consent shall not be
-51-
<PAGE>
unreasonably withheld or delayed. Notwithstanding the foregoing or any other
provision contained herein, any Partner or Affiliate of such Partner may at any
time make announcements which are required by applicable law or the rules of any
national stock exchange or stock association so long as the Partner or Affiliate
so required to make the announcement, promptly upon learning of such
requirement, notifies the other Partners of such requirement and discusses with
the other Partner in good faith the exact wording of any such announcement.
Section 15.14. Confidential and Proprietary Information. Except as
----------------------------------------
otherwise provided in the Contribution Agreements, all Proprietary Information
(as defined below) of any Partner or its Affiliates shall remain the property of
such Partner or its Affiliates (other than the Partnership and its
Subsidiaries), and all Proprietary Information of the Partnership shall remain
the property of the Partnership. Each of the Partners and their respective
Affiliates (i) shall use any and all Confidential Information (as defined below)
only for purposes of the Partnership and shall not use such Confidential
Information for the benefit of or in connection with any other business or
enterprise of such Partner or any of its Affiliates and (ii) shall, and shall
use its reasonable best efforts to cause its and their respective officers,
directors, employees, attorneys, accountants, and agents (collectively,
"Agents") to, keep secret and retain in strictest confidence any and all
Confidential Information, and shall not disclose such Confidential Information,
and shall use its reasonable best efforts to cause its Agents not to disclose
such Confidential Information, to any Person other than such Partner, its
Affiliates, the Partnership or their respective Agents, except for (i) such
disclosures as may be required by law or legal process, disclosures to such
Partner's counsel, or disclosures pursuant to any listing agreement with, or the
rules or regulations of, any securities exchange on which securities of such
Partner or any such Affiliate are listed or traded (in which event the Partner
making such disclosure or whose Affiliates or Agents are making such disclosure
shall so notify the other Partners as promptly as practicable (and if possible,
prior to making such disclosure) and shall seek confidential treatment of such
information); (ii) as may be necessary to establish or enforce its rights
hereunder; (iii) as part of the normal review or reporting procedure to its
Parent, its auditors and its attorneys; provided, that such Partner shall be
--------
liable for any breach by such Parent, auditors or attorneys of any provision of
this Section 15.14; (iv) disclosures to an Affiliate of, or a professional
-------------
advisor to, such Partner in connection with the performance by such Partner of
its obligations hereunder, under the Additional Agreements or under an agreement
with the Partnership; provided, that such Partner shall be liable for any breach
--------
by such Affiliate or professional advisor of any provision of this Section
-------
15.14; (v) disclosures to a prospective third party purchaser pursuant to
- - -----
Article VIII or a prospective third party purchaser (by merger, stock
acquisition or otherwise) of all or substantially all of the assets of the
Parent of such Partner so long as such prospective purchaser executes and
delivers a confidentiality agreement in form and substance acceptable to the
Partnership; provided that such Partner shall be liable for any breach by such
prospective third party purchaser of any provision of this Section 15.14; and
-------------
(vi) with the prior written consent of the nondisclosing Partners.
Notwithstanding the foregoing, MTVN and its Affiliates shall be permitted to use
Confidential Information of the Partnership for the benefit of or in connection
with their respective businesses, except that MTVN and its Affiliates shall not
have the right to use Confidential Information of the Partnership which
constitutes, is set forth in, or concerns architecture or design of data
processing or communications systems, information or data processing algorithms,
and source code, flow charts and internal technical documentation relating to
the design or operation of computer programs. The obligations under
-52-
<PAGE>
this Section 15.14 shall survive the termination of this Agreement, the
-------------
withdrawal of any Partner and any Person ceasing to be an Affiliate of a Partner
for a period of five years after the occurrence of such event. For purposes of
this Section 15.14:
-------------
"Confidential Information" shall mean (i) the terms of this Agreement and
the Additional Agreements and (ii) all Proprietary Information; provided,
--------
however, that such Confidential Information shall not include, with respect to
- - -------
any Partner, any information that (A) is or has become generally available to
the public other than as a result of a disclosure by such Partner, its
Affiliates or its Agents, (B) has been independently developed by such Partner
or an Affiliate or Parent of such Partner or (C) is, or becomes available to
such Partner or an Affiliate or Parent of such Partner on a non-confidential
basis from a third party having no obligation of confidentiality to a Partner or
the Partnership known to the receiving party and which has not itself received
such information directly or indirectly in breach of any such obligation of
confidentiality.
"Proprietary Information" means any proprietary ideas, plans or
information, including, without limitation, information of a technological or
business nature (including, without limitation, all trade secrets, proposed
trade names, proposed slogans, computer software, technology, data, summaries,
reports, or mailing lists, whether written or oral and if written, however
produced or reproduced) (i) belonging to any Partner or any of its Affiliates or
(ii) developed by or for the Partnership, that is marked proprietary or
confidential, or bears a marking of like import, or that such Partner or
Affiliate or the Partnership, as the case may be, states in writing within 30
days of disclosure thereof is to be considered proprietary or confidential
except for computer source code internal software technical documentation,
machine readable databases or customer lists, which shall be deemed proprietary
whether or not so marked or designated), in each case other than any such
information that is already known to the party receiving the same or its
Affiliates at the time of receipt from the party disclosing the same, as
evidenced by written records made prior to such receipt, or is independently
developed or formulated by such receiving party or its Affiliates, or is
provided to such receiving party or its Affiliates by a third party not as a
result of any breach of any obligation of confidentiality to such disclosing
party or that otherwise becomes publicly available through no fault of such
receiving party or its Affiliates.
Section 15.15. No Presumption. This Agreement shall be construed without
--------------
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
Section 15.16. Freedom of Action. Except as otherwise expressly provided
-----------------
herein or in the Parent Agreement and Guaranty or in any Additional Agreement to
which such Partner is or will be a party or bound, no Partner shall have any
obligation to the Partnership or its Partners not to (i) engage in the same or
similar activities or lines of business as the Partnership or develop or market
any products or services that compete, directly or indirectly, with those of the
Partnership or (ii) invest or own any interest publicly or privately in, or
develop a business relationship with, any corporation, partnership or other
entity engaged in the same or similar activities or lines of business as, or
otherwise in competition with, the Partnership or (iii) do business with any
client or customer of the Partnership or (iv) employ or otherwise engage any
-53-
<PAGE>
former officer or employee of the Partnership. Except as otherwise expressly
provided herein or in the Parent Agreement and Guaranty or in any Additional
Agreement to which such Partner is or will be a party or bound, no Partner shall
be obligated to present or offer to the Partnership any particular investment or
business opportunity, regardless of whether the Partnership could take advantage
of such opportunity if it were presented to the Partnership, but may, subject to
the terms of any agreement between the Partners other than this Agreement, avail
itself of any such opportunity for its own benefit or direct such opportunity to
another Person. For purposes of this Section 15.16, any reference to a Partner
-------------
shall include its Affiliates, including its Parent, and the Affiliates of such
Parent.
-54-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
General Partner:
MTVN ONLINE PARTNER I LLC
By: /s/ David W. Sussman
----------------------------------------
Name: David W. Sussman
Title: Sr. Vice President, General
Counsel and Assistant Secretary
Limited Partners:
MTVN ONLINE PARTNER I LLC
/s/ David W. Sussman
-------------------------------------------
Name: David W. Sussman
Title: Sr. Vice President, General
Counsel and Assistant Secretary
IMAGINE RADIO, INC.
/s/ David W. Sussman
-------------------------------------------
Name: David W. Sussman
Title: Sr. Vice President, General
Counsel and Assistant Secretary
SONICNET, INC.
By: /s/ David Koff
---------------------------------------
Name: David Koff
Title: Vice President
THE BOX WORLDWIDE, INC.
By: /s/ David Koff
---------------------------------------
Name: David Koff
Title: Vice President
<PAGE>
EXHIBIT 2.3
CONFORMED COPY
PARENT AGREEMENT AND GUARANTY
PARENT AGREEMENT AND GUARANTY, dated as of July 15, 1999, among TCI Music,
Inc., a Delaware corporation ("TCI Music"), MTVN Networks ("MTVN"), a division
--------- ----
of Viacom International Inc., a Delaware corporation ("Viacom"), Liberty Media
------
Corporation, a Delaware corporation ("Liberty"), SonicNet, Inc., a Delaware
-------
corporation ("SonicNet"), The Box Worldwide Inc., a Florida corporation ("Box")
-------- ---
and MTVN Online L.P., a Delaware limited partnership (the "Partnership").
-----------
Contemporaneously herewith, MTVN Online Partner I LLC, a Delaware limited
liability company ("VLLC"), Imagine Radio, Inc., a Delaware corporation
----
("Imagine"), SonicNet, and Box are entering into an Agreement of Limited
-------
Partnership dated as of the date hereof (as such Agreement of Limited
Partnership may from time to time be amended, modified or supplemented in
accordance with its terms, the "Partnership Agreement") pursuant to which VLLC,
---------------------
Imagine, SonicNet and Box will form the Partnership (as such limited partnership
may exist in such form or in a reorganized, corporate or other form, "Newco").
-----
As of the Closing, VLLC, Imagine, SonicNet and Box will collectively own
100% of the partnership interests in the Partnership.
Viacom and its wholly-owned Subsidiaries are the sole members of and own
all of the equity securities of VLLC, and Viacom owns a controlling interest in
Imagine and has the right to acquire all of the equity interests of Imagine
which it does not currently own (VLLC and Imagine, collectively with their
Permitted Transferees, the "MTVN Partners"). TCI Music owns all of the equity
-------------
securities of SonicNet and Box (SonicNet and Box, collectively with their
Permitted Transferees, the "Tune Partners").
-------------
MTVN and TCI Music are willing to permit VLLC and Imagine and SonicNet and
Box, respectively, to enter into the Partnership Agreement only on the condition
that the parties hereto enter into this Agreement.
Each of VLLC and Imagine and SonicNet and Box is willing to enter into the
Partnership Agreement only if certain obligations therein and under certain
other agreements are guaranteed as set forth below.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Partnership Agreement.
In consideration of the premises and other covenants and conditions
contained herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I
REORGANIZATION OF PARTNERSHIP TO CORPORATE FORM;
------------------------------------------------
INITIAL PUBLIC OFFERING
-----------------------
Section 1.1. Reorganization in Corporate Form.
--------------------------------
(a) The parties hereto agree to take such steps as may be reasonably
necessary to cause the Partnership to be reorganized as, or to cause its assets
and liabilities to be contributed to, a Delaware corporation (which will be
wholly-owned by the Partnership or the Partners prior to the IPO, as defined
below), in connection with the IPO or, if the Chief Executive Officer of the
Partnership determines in good faith that it is appropriate, in advance of the
IPO in order to avoid adverse tax consequences to the Partners (the
"Reorganization"). The Partners acknowledge that the Partnership will not be
--------------
the entity to go public in the IPO unless agreed by all Partners. For any
period during which Newco is not a wholly-owned subsidiary of the Partnership,
the parties shall enter into or cause their respective Controlled Affiliates to
enter into a stockholders agreement (the "Newco Stockholders Agreement"), which
----------------------------
shall provide that the parties and their respective Controlled Affiliates, as
applicable, shall continue to be bound by, and entitled to the benefits of, the
following provisions of the Partnership Agreement, mutatis mutandis, subject to
------- --------
the terms and conditions and applicable time periods contained therein (except
to the extent otherwise provided herein): provisions relating to capital
contributions (Section 3.03); provisions relating to management and governance
(Article VI (including Sections 6.10 and 6.11)); restrictions on transfer
(Section 8.01); rights of first offer (Section 8.04); "tag along/drag along"
rights (Section 8.05); provisions relating to Tune's audit rights with respect
to Related Party Transactions (Article XI); preemptive rights (Section 12.02);
put and call rights (Section 12.03); and restrictions on competition (Article
XIV); provided, however, that the provisions relating to capital contributions
-------- -------
and to management and governance shall cease to apply upon the consummation of
the IPO; and provided further that the provisions with respect to the right of
-------- -------
first offer shall be modified as follows: (x) in the event that Newco has
consummated an IPO and the Shares (as defined below) are publicly traded, (i)
the two 30-day periods shall be reduced to one period of five Business Days, to
run concurrently (i.e., a Tune Partner must notify MTVN of its intention to sell
----
five days before selling, and MTVN has through the fifth day to make an offer),
(ii) any offer to be made by MTVNS or its designee must be made at the then-
current market price (i.e. at the opening of business on the date such offer is
----
made) or higher, (iii) the 180-day period shall be reduced to five Business Days
and (iv) the price at and terms on which the Shares may be sold during such five
Business Day period shall be the market price and market terms (including terms
relating to block sales) at the time of sale; (y) such right of first offer
shall not apply to any sale by a Tune Partner or a Permitted Transferee of a
Tune Partner pursuant to any exercise of its registration rights granted
pursuant to this Agreement (including any such public sale occurring following
the exercise of such registration rights where Newco determines such
registration rights are not available (and therefore refuses to register such
Shares) because of the type of sale contemplated (for example, because such
Shares can be sold pursuant to Rule 144) or where Newco elects not to register
such Shares because of events related to Newco (for example, where Newco
suspends its obligation to register such
2
<PAGE>
shares pursuant to Article III of this Agreement); and (z) in the event of a
sale to MTVNS or its designee pursuant to the right of first offer where a Tune
Partner had initially proposed a public market sale, the 180-day period for
which the closing may be suspended will be reduced to a 20 day period, and the
90 day period within which a designated substitute purchaser is required to
close a sale shall be reduced to 60 days). The parties hereto agree to cause
Newco, promptly, upon its organization, to agree to be bound by this Agreement
as if it were a party hereto. The certificate of incorporation and bylaws of
Newco and the Newco Stockholders Agreement are referred to as the "Newco
-----
Organizational Documents".
- - ------------------------
(b) The parties hereto further agree that, upon the effectiveness of
the Reorganization and provided that (i) neither TCI Music nor any of its
Controlled Affiliates is then in material default under this Agreement, the
Partnership Agreement or the Additional Agreements, (ii) the Tune Partners
beneficially own at least 5% of the outstanding Shares (as defined below)
(excluding any Shares issued or granted in any transaction or transactions with
respect to which TCI Music had no preemptive rights pursuant to any provision
comparable to Section 12.02 of the Partnership Agreement (or where the
Partnership Interests in respect of which such Shares were issued or granted
were originally issued or granted in a transaction with respect to which the
Tune Partners did not have preemptive rights pursuant to Section 12.02 of the
Partnership Agreement)), and (iii) none of the Tune Partners has Disposed of any
Partnership Interests or Shares to any Person that is not a Permitted
Transferee, each party shall take such steps as are reasonably necessary
(including causing such party's director designees to take such actions as are
necessary) to nominate for election and to vote all Shares of Newco beneficially
owned by such party in favor of the election of one designee of TCI Music as a
member of the Board of Directors of Newco.
Section 1.2. The Initial Public Offering.
---------------------------
(a) The parties hereto intend that Newco conduct an initial
registered public offering of the common stock of Newco (the "Shares") no later
------
than the Offering Expiration Date which results in the Shares being publicly
traded and listed on the Nasdaq Stock Market or a national securities exchange
(the "IPO"). As used herein the term "Shares" includes all shares of common
--- ------
stock of Newco and any other shares of capital stock of Newco issued in respect
of such shares as a result of stock splits, stock dividends, reclassification,
recapitalizations, mergers, consolidations or similar events. References in this
Agreement to amounts or percentages of Shares as of or on any particular date
shall be deemed to refer to amounts or percentages after giving effect to any
applicable events contemplated by the preceding sentence. References herein to
Shares acquired in a transaction with respect to which TCI Music did not have
preemptive rights pursuant to the provisions of the Newco Stockholders Agreement
comparable to Section 12.02 of the Partnership Agreement shall include Shares
issued in respect of Partnership Interests which were acquired by the applicable
Person in a transaction with respect to which the Tune Partners did not have
preemptive rights under Section 12.02 of the Partnership Agreement.
3
<PAGE>
(b) If the IPO is consummated while Newco is owned by the
Partnership, the Partnership shall be liquidated immediately following or
contemporaneously with the IPO, and, provided that neither TCI Music nor any of
its Controlled Affiliates is in material default of its obligations under this
Agreement, the Partnership Agreement or the Additional Agreements, the number of
Shares distributed to the Tune Partners in respect of their interests in the
Partnership shall be increased, if necessary (without the payment of any
additional consideration other than the payment of the par value for any newly-
issued Shares), above the number that would otherwise be so distributed so that
the number of Shares so distributed shall have an aggregate value (with each
such Share valued for this purpose at the price to the public listed on the
cover page of the final prospectus delivered in connection with such IPO) equal
to at least the Target Value (as reduced proportionally to reflect any
Disposition by any Tune Partner of any portion of the Tune Partnership Interest
prior to the IPO other than to a Permitted Transferee); provided, however, that
-------- -------
the number of Shares distributed to the Tune Partners shall not exceed 15% (or
such lesser percentage which equals 150% of the Percentage Interest of the Tune
Partners immediately prior to the IPO other than to a Permitted Transferee) of
the total number of Shares outstanding immediately prior to the IPO.
(c) If (i) Newco consummates an IPO (except under the circumstances
described in Section 1.2(b) above) and (ii) the aggregate value of the Shares
held by the Tune Partners (with each Share valued for such purpose at the price
to the public listed on the cover page of the final prospectus delivered in
connection with such IPO) at the time of such IPO is less than the Target Value
(as reduced proportionally to reflect any Disposition by any Tune Partner of any
portion of the Tune Partnership Interest or of any Shares prior to the IPO other
than to a Permitted Transferee) and provided that neither TCI Music nor any of
its Controlled Affiliates is in material default of their obligations under this
Agreement, the Partnership Agreement or the Additional Agreements, then the
parties hereto shall cause Newco to promptly issue to the Tune Partners (without
the payment of additional consideration, other than the payment of the par value
for the Shares) such additional number of Shares as is required to cause the
aggregate value of Shares (valued as provided above) held by the Tune Partners
to equal the Target Value (as reduced proportionally to reflect any Disposition
by any Tune Partner of any portion of the Tune Partnership Interest or of any
Shares prior to the IPO other than to a Permitted Transferee); provided,
--------
however, that the number of Shares to be held by the Tune Partners after such
- - -------
issuance shall in no event exceed 15% (or such lesser percentage which equals
150% of the percentage of outstanding Shares held by the Tune Partners
immediately prior to the IPO) of the total Shares outstanding immediately prior
to the IPO (but after the issuance of such additional Shares).
Section 1.3. No Public Offering.
------------------
(a) In the event that Newco has been formed but has not consummated
the IPO on or before the Offering Expiration Date and the Tune Partners then
hold Shares rather than Partnership Interests, TCI Music shall be entitled to
request that the Private Share Valuation (as defined below) as of the Offering
Expiration Date of the Shares held by the Tune Partners be determined. Such
election shall be made by written notice to MTVN and Newco delivered
4
<PAGE>
within six months after the Offering Expiration Date. If the Private Share
Valuation as of the Offering Expiration Date of the Shares held by the Tune
Partners is determined to be less than the Target Value and provided that
neither TCI Music nor any of its Controlled Affiliates is in material default of
their obligations under this Agreement, the Partnership Agreement or the
Additional Agreements, then Newco shall promptly issue to the Tune Partners
(without the payment of additional consideration, other than the payment of the
par value for the Shares) such additional number of Shares as is required to
cause the aggregate Private Share Valuation of the Shares held by the Tune
Partners as of the Offering Expiration Date to equal the Target Value; provided,
--------
however, that the number of Shares to be held by the Tune Partners after such
- - -------
issuance shall in no event exceed 15% (or such lesser percentage which equals
150% of the percentage of outstanding Shares held by the Tune Partners on the
Offering Expiration Date) of the then outstanding Shares; and provided, further,
-------- -------
however, that the Tune Partners may elect to defer receipt of such additional
- - -------
Shares (in such number as determined above) until the first to occur of the (x)
the IPO, (y) such date as the Tune Partners shall request such receipt or (z)
the first anniversary of the Offering Expiration Date.
(b) For purposes hereof, "Private Share Valuation" shall mean the
-----------------------
amount determined pursuant to the following procedure, which determination shall
be final and binding on the parties hereto. Upon receipt by MTVN of the written
notice from TCI Music to MTVN and Newco provided for in Section 1.3(a) above,
MTVN and TCI Music shall attempt to mutually agree on the Fair Market Value as
of the Offering Expiration Date of the Shares held by the Tune Partners. If the
parties are unable to reach agreement within 60 days after such notice is
received by MTVN, each party shall, within 30 days thereafter, retain an
investment bank to determine the Fair Market Value as of the Offering Expiration
Date of the Shares held by the Tune Partners. If any party fails to retain an
investment bank within such 30-day period, the investment bank retained shall be
the sole investment bank to make such determination. Each investment bank (or in
the event either party fails to retain an investment bank, the sole investment
bank) shall submit its estimation of such Fair Market Value within 45 days from
the date of its selection. If the determinations of Fair Market Value as of the
Offering Expiration Date of the Shares held by the Tune Partners by the
investment banks differ by less than 10% of the average of the two
determinations, such Fair Market Value shall be the average of the two
determinations. If such determinations vary by more than 10% of the average of
such two determinations, the two investment banks shall promptly designate a
third investment bank which shall be unaffiliated with any of the first two
investment banks and shall not have had any significant affiliation with, or
engagement for, any of the parties hereto or any Affiliate of any of the parties
during the two years prior to its selection. The third investment bank shall
select one of the two determinations as the Fair Market Value as of the Offering
Expiration Date of the Shares held by the Tune Partners within 30 days from the
date of its selection. In determining the Private Share Valuation, the
investment bank or banks shall be instructed to assume the continuation of the
Promotion Agreement in accordance with its terms.
Section 1.4. Going Private. In the event that, following the IPO, MTVN
-------------
(or a Controlled Affiliate of Viacom Inc.) engages or causes Newco to engage in
a "Rule 13e-3 transaction" (as such term is defined in Rule 13e-3 under the
Securities Exchange Act of 1934, as
5
<PAGE>
amended (the "1934 Act")) with respect to Newco, MTVN (or such Controlled
--------
Affiliate of Viacom Inc.) shall offer TCI Music and its Controlled Affiliates an
opportunity to continue their existing proportionate equity interest in Newco
vis-a-vis MTVN (or Viacom Inc. or a Controlled Affiliate of Viacom Inc.) by
participation in such Rule 13e-3 transaction with Viacom Inc. and its Controlled
Affiliates after such transaction on the same basis as Viacom Inc. and its
Controlled Affiliates.
ARTICLE II
GUARANTIES; COVENANTS
---------------------
Section 2.1. Guaranties.
----------
(a) Each Guarantor (as defined below) hereby unconditionally and
irrevocably guarantees (this "Guaranty") to an Other Partner (as defined below),
--------
and its successors and assigns permitted under the Partnership Agreement (as
primary obligor and not merely as surety), (i) the due and punctual payment of
all monetary obligations now or hereafter payable by a Related Partner (as
defined below) under each of the Partnership Agreement and the Contribution
Agreements, (ii) the full and complete performance of all obligations, duties
and covenants to be performed by a Related Partner under the Partnership
Agreement and the Contribution Agreements, (iii) the accuracy of the
representations and warranties made by a Related Partner in the Partnership
Agreement and the Contribution Agreements and (iv) in the case of TCI Music, as
Guarantor, the full and complete performance of all of the obligations, duties
and covenants to be performed by VJN LPTV Corp. under the Local Marketing
Arrangement (the "LMA") dated as of the date hereof between VJN LPTV Corp. and
---
Box LLC as and when the same shall become due and the full and complete
performance by Box of all of the obligations, duties and covenants to be
performed by Box under the License Agreement dated as of the date hereof between
The Box Worldwide LLC and Box and the Box Holland Promissory Note dated as of
the date hereof from The Box Worldwide-Europe, B.V. to the Partnership (the
obligations under such License Agreement and such Promissory Note being referred
to as the "Box Obligations") (collectively, the "Guaranteed Obligations"), in
--------------- ----------------------
the case of the obligations described in clauses (i) and (ii) when and as the
same shall become due under the Partnership Agreement and the Contribution
Agreements, as the case may be.
As used in this Section 2.1, (i) the term "Guarantor" shall mean each of
---------
MTVN and TCI Music, (ii) the term "Related Partner" shall mean each of VLLC and
---------------
Imagine, with respect to MTVN as Guarantor, and each of SonicNet and Box, with
respect to TCI Music as Guarantor, and (iii) the term "Other Partner" shall
-------------
mean, with respect to MTVN, each of SonicNet and Box, and with respect to TCI
Music, each of VLLC and Imagine, and/or, in each case, any immediate or
subsequent successor to or transferee of the Partnership Interest (as such term
is defined in the Partnership Agreement) originally held by such person.
Notwithstanding anything to the contrary in this Guaranty, (i) the terms
"Related Partner" and "Other Partner," respectively, shall not mean (x) any
--------------- -------------
transferee of the Partnership Interest of a Related Partner or Other Partner
(except to the extent that obligations of a Related Partner
6
<PAGE>
under the Partnership Agreement expressly survive a transfer by the Other
Partner to a transferee other than a Permitted Transferee), as the case may be,
other than a Permitted Transferee or (y) any immediate or subsequent successor
to or transferee of the Partnership Interest of a transferee referred to in
clause (x), and (ii) a Guarantor shall not be deemed to have guaranteed hereby
any obligation (monetary or otherwise) of any such transferee or successor other
than a Permitted Transferee, and a Guaranty shall not inure to the benefit of
any such transferee or successor other than a Permitted Transferee.
(b) Each Guarantor shall not cause or suffer a Related Partner
voluntarily to institute any proceeding seeking to adjudicate a Related Partner
a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of the Partner or its
debts under any law relating to bankruptcy, insolvency or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or for any part of its property, in
each case unless in connection with the institution by Guarantor itself of any
such proceeding; provided, however, that, without limitation of the other
-------- -------
provisions of this Guaranty, nothing in this Section 2.1(b) shall require a
Guarantor to provide any funds to a Related Partner for the payment or discharge
of the Partner's obligations.
(c) Each Guarantor waives any and all notices of the creation,
renewal, extension or accrual of any of the Guaranteed Obligations and notice or
proof of reliance by an Other Partner on this Guaranty or acceptance of this
Guaranty. The Guaranteed Obligations shall conclusively be deemed to have been
created, contracted or incurred in reliance on this Guaranty, and all dealings
between an Other Partner and/or its Affiliates, on the one hand, and a Related
Partner and/or its Affiliates, on the other hand, in connection with the
Partnership Agreement and the Contribution Agreements shall likewise
conclusively be presumed to have been had or consummated in reliance on this
Guaranty, and the LMA and the Box Obligations shall also conclusively be
presumed to have been entered into in reliance on this Guaranty. The Guarantor
also waives diligence, presentment, demand for payment, protest and notice of
nonpayment or dishonor and all other notices and demands whatsoever relating to
the Guaranteed Obligations or the requirement that the Partnership or an Other
Partner proceed first against a Related Partner or any other guarantor of the
Guaranteed Obligations or otherwise exhaust any right, power or remedy under the
Partnership Agreement or the Contribution Agreements, as the case may be, giving
rise to such Guaranteed Obligations before proceeding hereunder. The Guarantor
covenants that this Guaranty shall not be discharged except by complete payment
and performance of the Guaranteed Obligations.
(d) The obligations of each Guarantor hereunder shall constitute a
present and continuing guarantee of payment and not of collectability only,
shall be absolute and unconditional, shall not be subject to any counterclaim,
setoff, deduction or defense the Guarantor may have against an Other Partner, a
Related Partner, the Partnership or any other person (other than counterclaims,
setoffs, deductions or defenses available to the Related Partner under or in
respect of the Partnership Agreement, the Contribution Agreements, the LMA and
the Box Obligations, as the case may be), and shall remain in full force and
effect until all
7
<PAGE>
Guaranteed Obligations have been satisfied and performed in full, without regard
to any event whatsoever (whether or not the Guarantor shall have any knowledge
or notice thereof or shall have consented thereto), including, without
limitation:
(i) any amendment or modification of or supplement to the
Partnership Agreement, the Contribution Agreements, the LMA, the Box
Obligations or this Guaranty, any assignment or transfer of any of the
rights, obligations, duties or covenants of any party to the Partnership
Agreement, the Contribution Agreements, the LMA, the Box Obligations or
this Guaranty, any renewal or extension of time for the performance of any
of the Guaranteed Obligations, or any furnishing or acceptance of security
so furnished or accepted for any of the Guaranteed Obligations;
(ii) any waiver, consent, extension, forbearance, release or
substitution of security or other action or inaction under or in respect of
the Partnership Agreement, the Contribution Agreements, the LMA, the Box
Obligations or this Guaranty, or any excise of, or failure to exercise, any
right, remedy or power in respect hereof or thereof;
(iii) any bankruptcy, insolvency, marshaling of assets and
liabilities, arrangements, readjustment, composition, receivership,
assignment for the benefit of creditors, liquidation or similar proceedings
with respect to a Related Partner or Guarantor;
(iv) the dissolution, sale or other disposition of all or
substantially all of the assets of a Related Partner, a Guarantor, an Other
Partner or the Partnership; or
(v) any default by a Related Partner or Guarantor under, or any
invalidity or any unenforceability of, or any misrepresentation by a
Related Partner or Guarantor in, or any irregularity or other defect in,
the Partnership Agreement, the Contribution Agreements, the LMA, the Box
Obligations or this Guaranty or any other instrument or agreement.
Any term of this Guaranty to the contrary notwithstanding, if at any time
any amount (constituting a Guaranteed Obligation) paid or payable by a Related
Partner is rescinded or must otherwise be restored or returned, whether upon or
as a result of the appointment of a custodian, receiver or trustee or similar
officer for a Related Partner or any substantial part of its assets, or the
insolvency, bankruptcy or reorganization of a Related Partner or otherwise, the
Guarantor's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
(e) Each Guarantor will not exercise any rights which it may have
acquired against a Related Partner by way of subrogation, by any payment made
hereunder or otherwise, or accept any payment on account of such subrogation
rights, unless and until all of the Guaranteed Obligations of the Related
Partner for which performance is then due have been fully satisfied.
8
<PAGE>
(f) Each Guarantor may at any time elect to pay or otherwise perform
any Guaranteed Obligation, which shall operate (subject to the last sentence of
clause (d) of this Section 2.1) as a discharge and release of a Related Partner
from such Guaranteed Obligation to an Other Partner or the Partnership (but not
to the Guarantor as subrogee); provided, however, that no such election shall
-------- -------
release a Related Partner from any of its other Guaranteed Obligations.
(g) The obligations of each Guarantor hereunder with respect to
Guaranteed Obligations shall apply, in addition and not in limitation of the
obligations of the Guarantor with respect to a Related Partner, to each
immediate or subsequent successor to or transferee of the Partnership Interest
of the Partner who is a Permitted Transferee with the same force and effect as
would be the case if such successor or transferee had originally be named as a
"Related Partner" hereunder.
(h) Neither Guarantor may assign its rights or delegate its duties
hereunder, except to any entity into which it may be merged or with which it may
be consolidated or to which it may transfer all or substantially all of its
assets, without the prior written consent of each Other Partner.
(i) The Guaranty by each Guarantor is intended solely for the benefit
of, and shall inure to the benefit of and may be enforced solely by, each Other
Partner and its successors and permitted assigns under the Partnership Agreement
(including without limitation any successor of each Other Partner), and may not
be relied on, nor is it enforceable by, any other Person.
Section 2.2. Guaranties Relating to Newco. Substantially contemporaneous
----------------------------
with the Reorganization, for any period during which Newco is not wholly owned
by the Partnership, the Guarantors shall enter into guaranties of the
obligations of the stockholders of Newco which may be Affiliates of the
respective Guarantors under the Newco Stockholders Agreement which are
comparable, mutatis mutandis, to the Guaranties set forth in Section 2.1.
------- --------
Section 2.3. Restrictions on Transfers of Stock of Partners.
----------------------------------------------
(a) TCI Music represents and acknowledges that it owns, directly or
indirectly, all of the equity securities of each of the Tune Partners and of
each Person holding an equity interest in the Tune Partners and it covenants and
agrees that it will not cease to own, either directly or indirectly through an
unbroken chain of wholly owned Subsidiaries, all of the outstanding equity
interests in each Tune Partner; provided, however, that TCI Music will be
-------- -------
entitled to Dispose of its interest in any such Person or Partner by complying
with the obligations such Person or Partner would have with respect to any
Disposition of the Partnership Interest or Shares held by such Person or Partner
as if obligations comparable thereto, mutatis mutandis, applied to TCI Music and
------- --------
its holdings of the equity securities of such Person or Partner so long as (i)
the ultimate parent of the Person acquiring such interest or (ii) if any parent
of such Person is a public corporation, the highest such public parent in such
Person's ownership structure becomes a party to this Agreement and is bound by
Article II hereof to the same extent that TCI Music is so bound, in which case
TCI Music's obligations under Section 2.1 will terminate in
9
<PAGE>
accordance with the third paragraph of Section 2.1(a) as if TCI Music's Related
Partner had disposed of a proportionate amount of its Partnership Interest or
Shares.
(b) Viacom represents and acknowledges that it owns, directly or
indirectly, all of the equity securities of each of the MTVN Partners and of
each Person holding an equity interest in the MTVN Partners (except for a
minority interest in Imagine, which it has a right to acquire) and it covenants
and agrees that it will not cease to own, either directly or indirectly through
an unbroken chain of wholly owned subsidiaries, all of the outstanding equity
interests in each MTVN Partner, free and clear of all Liens, pledges and
security interests; provided, however, that Viacom will be entitled to Dispose
-------- -------
of its interest in any such Person or Partner by complying with the obligations
such Person or Partner would have with respect to any Disposition of the
Partnership Interest or Shares held by such Person or Partner as if obligations
comparable thereto, mutatis mutandis, applied to Viacom and its holdings of the
------- --------
equity securities of such Person or Partner so long as the ultimate parent of
the Person acquiring such interest becomes a party to this Agreement and is
bound by Article II hereof to the same extent that Viacom is so bound, in which
case MTVN's obligations under Section 2.1 will terminate in accordance with the
third paragraph of Section 2.1(a) as if MTVN's Related Partner had disposed of a
proportionate amount of its Partnership Interest or Shares.
ARTICLE III
REGISTRATION RIGHTS
-------------------
Section 3.1. Demand Rights.
-------------
(a) The Tune Partners shall have the right, at any time after the
consummation of the IPO, upon written notice and subject to the provisions of
this Article III, to require Newco to prepare and file as soon as practicable
after receipt of such notice and use its reasonable best efforts to cause to
become effective as soon as practicable thereafter a registration statement (a
"Registration Statement") under the Securities Act of 1933, as amended (the
----------------------
"Securities Act"), with respect to the resale of all Shares requested by the
--------------
Tune Partners to be so registered (a "Demand Registration"); provided, however,
------------------- -------- -------
that Newco shall not be required to violate the terms of any "lock-up" or
"standstill" provisions relating to any securities offering by it by which it
may be bound.
(b) Notwithstanding anything to the contrary contained herein, Newco
shall have no obligation to prepare, file and cause to become effective the
Registration Statement (i) unless the Shares to be registered pursuant to the
Registration Statement constitute at least 25% of the Shares beneficially owned
by the Tune Partners as of the date of the notice requesting such registration
or (ii) if Newco delivers to TCI Music an opinion of counsel to the effect that
all such Shares for which registration was requested may be sold in a single
transaction without registration under the Securities Act. Furthermore, Newco
shall not be obligated to prepare, file and cause to become effective
Registration Statements for more than two such registrations pursuant to this
Section 3.1.
10
<PAGE>
(c) If the selling Tune Partner so elects, it may cause the public
offering or distribution of the Shares pursuant to a Demand Registration to be
pursuant to a firm commitment underwriting, the managing underwriter of which
shall be a nationally recognized investment banking firm selected by the selling
Tune Partner and approved by Newco (which approval shall not be unreasonably
withheld). Newco shall enter into the same underwriting agreement as shall the
selling Tune Partner, containing representations, warranties, indemnities, and
agreements reasonably acceptable to Newco and not substantially different from
those customarily made by an issuer in underwriting agreements with respect to
secondary distributions. If (i) a Demand Registration is for a firm commitment
underwritten public offering and the managing underwriter thereof determines in
good faith that the aggregate number of Shares to be offered thereby exceeds the
total number of Shares that may be successfully offered at an estimated initial
price per share to the public that is at least equal to the minimum initial
price per Share (which shall not be higher than the market price at the time of
designation) to the public that has been designated in writing at the time of
the notice referred to in Section 3.1(a) by the selling Tune Partner, and/or
(ii) a Demand Registration is delayed more than 30 days pursuant to Section
3.3(b) prior to being declared effective, and in either case no Shares are sold
pursuant to such Demand Registration, then the selling Tune Partner shall have
the right to reduce or withdraw its request for such registration by giving
written notice to the Company to such effect, in which event, in the case of a
withdrawal, such registration shall not be deemed to have occurred for purposes
of the last sentence of Section 3.1(b).
(d) The selling Tune Partners may elect to withdraw their Shares from
inclusion in a Demand Registration; provided that, except for a withdrawal
pursuant to the last sentence of Section 3.1(c), notwithstanding such
withdrawal, such registration shall be deemed to have occurred for the purposes
of the last sentence of Section 3.1(b), unless the selling Tune Partners pay
(pro rata, in proportion to the number of Shares requested by them to be
included in such registration) within 30 days after any such withdrawal, all of
the out-of-pocket expenses of Newco incurred in connection with such
registration. Neither Newco nor any Person that is not a Tune Partner shall
participate in any Demand Registration unless the selling Tune Partners
otherwise agree.
(e) A Demand Registration shall not be deemed to have been effected
until such registration has been effective (and not subject to any stop order,
injunction or other order or requirement of the Securities and Exchange
Commission (the "SEC") or other Governmental Entity for any reason) for a period
of 150 days following the date on which such registration was declared
effective, or, if earlier, the date on which all Shares requested to be
registered thereunder have been sold.
(f) Newco shall not grant to any other Person the right to include
any other Shares in any Registration Statement filed pursuant to this Section
3.1.
11
<PAGE>
Section 3.2. Piggy-Back Rights.
-----------------
(a) For so long as the Tune Partners beneficially own at least 1% of
the Shares outstanding, each time that Newco intends to proceed with the actual
preparation and filing of a registration statement under the Securities Act for
its own account or the account of any member of the MTVN Stockholder Group in
connection with the proposed offer and sale (including in connection with the
IPO) for money of any securities of Newco (other than a registration statement
on Form S-4 or Form S-8 or any successor to either such form), Newco will give
at least 20 days written notice of its election to TCI Music. Upon the written
request of TCI Music to Newco given within 10 days after receipt of any such
notice from Newco, Newco will, except as herein provided, use its reasonable
best efforts to cause all Shares for which TCI Music has requested registration
to be included in such registration statement, all to the extent requisite to
permit the sale or other disposition by the Tune Partners of the Shares to be so
registered, with TCI Music paying any direct incremental expenses attributable
to the registration of such Shares; provided, however, that (i) nothing herein
-------- -------
shall prevent Newco from, at any time, abandoning or delaying any such
registration initiated by it; (ii) if Newco determines not to proceed with a
registration after the registration statement has been filed with the SEC, Newco
shall complete the registration for the benefit of the Tune Partners if TCI
Music wishes to proceed with a public offering of such Shares and agrees, along
with any other selling shareholder also electing to proceed, to bear its pro
rata share of expenses reasonably incurred by Newco as the result of such
registration of such Shares after Newco has decided not to proceed; (iii) for
purposes of this sentence, the use by Newco of reasonable best efforts shall not
require Newco to materially reduce the amount or sale price of the securities it
proposes to distribute for its own account; and (iv) Newco shall not be required
to violate the terms of any "lock-up" or "standstill" provisions relating to any
securities offering by which it may be bound. If any registration pursuant to
this Section 3.2 shall be underwritten in whole or in part, (A) Newco may
require that the Shares requested for inclusion pursuant to this Section 3.2 be
included in the underwriting on the same terms and conditions as the Shares
otherwise being sold through the underwriters and (B) the selling Tune Partners
may elect, in writing not less than three Business Days prior to the effective
date of the registration statement filed in connection with such registration,
not to register their Shares in connection with such registration. No
registration effected under this Section 3.2 shall relieve Newco of its
obligation to effect Demand Registrations in accordance with Section 3.1.
(b) In connection with a registration under this Section 3.2, Newco
may enter into an underwriting agreement in such customary form as shall have
been negotiated and agreed to by Newco with the underwriter or underwriters
selected for such underwriting by Newco. Notwithstanding any other provision of
this Section 3.2, if in the opinion of the managing underwriter the inclusion of
Shares owned by the Tune Partners in a registration statement would materially
reduce the amount or sale price of the other securities to be included in such
registration, Newco may reduce, to as low as zero, the number of Shares to be
included by the Tune Partners in the registration and underwriting under this
Section 3.2, to the extent necessary to cause inclusion of such Shares not to be
materially detrimental to the registration filed pursuant to this Section 3.2.
12
<PAGE>
Section 3.3. General Provisions.
------------------
(a) If and whenever Newco is required by the provisions of this
Article III to effect the registration of Shares owned by the Tune Partners
under the Securities Act, Newco will:
(i) subject to the terms and conditions of this Article III,
as expeditiously as possible, prepare and file with the SEC a registration
statement with respect to such Shares, and use its reasonable best efforts
to cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
Shares, but in no event longer than 150 days;
(ii) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such Shares,
but in no event longer than 150 days;
(iii) furnish to TCI Music such reasonable number of copies of
the registration statement, preliminary prospectus, final prospectus and
such other documents as TCI Music may reasonably request in order to
facilitate the public offering of such Shares;
(iv) prepare and promptly file with the SEC and promptly notify
TCI Music of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omission if, at the time when a prospectus relating to such
Shares is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading and promptly provide to TCI Music sufficient copies of
such amended or supplemented prospectus so that it can be delivered to the
purchasers of the Shares as required by the Securities Act and the
regulations thereunder; and
(v) advise TCI Music, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose, promptly use
its reasonable best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued and promptly
notify Tune of the forbearance, lifting or withdrawal of such stop order or
proceeding.
(vi) notify TCI Music, (A) when a registration statement
becomes effective, (B) when the filing of a post-effective amendment to a
registration statement or
13
<PAGE>
supplement to a prospectus is required, when the same is filed, and in the
case of a post-effective amendment, when the same becomes effective, and
(C) of any request by the SEC for any amendment of or supplement to a
Registration Statement or any prospectus relating thereto or for additional
information;
(vii) register or qualify the Shares covered by a Registration
Statement under the securities or blue sky laws of such jurisdictions in
the United States as the selling Tune Partners shall reasonably request,
and do any and all other acts and things which may be necessary to enable
each Tune Partner whose Shares are covered by such Registration Statement
to consummate the disposition in such jurisdictions of such Shares;
provided, however, that Newco shall in no event be required to qualify to
-------- -------
do business as a foreign corporation or a dealer in any jurisdiction where
it is not so qualified, to conform its capitalization or the composition of
its assets at the time to the securities or blue sky laws of such
jurisdiction, to execute or file any general consent to service of process
under the laws of any jurisdiction, to take any action that would subject
it to service of process in suits other than those arising out of the offer
and sale of the Shares covered by such Registration Statement, or to
subject itself to taxation in any jurisdiction where it has not theretofore
done so; and
(viii) cause the Shares covered by a Registration Statement to
be listed on the principal exchange or exchanges or qualified for trading
on the principal over the counter market on which the common stock of Newco
is then listed or traded upon the sale of such Shares pursuant to such
Registration Statement.
(ix) at least three Business Days prior to filing a
registration statement or any amendment or supplement thereto, furnish to
TCI Music and each underwriter, if any, of the Shares covered by such
registration statement copies of such registration statement, amendment or
supplement as proposed to be filed (excluding documents to be incorporated
by reference therein) which registration statement, amendment or supplement
will be subject to reasonable review and comments by TCI Music and such
underwriter insofar as such documents relate to TCI Music or its Controlled
Affiliates or such underwriter (and their respective attorneys) during such
three-Business Day period, and Newco will not file any registration
statement, any prospectus or any amendment or supplement thereto containing
any statements with respect to TCI Music or its Controlled Affiliates to
which TCI Music shall reasonably object in writing.
(x) furnish to TCI Music and the underwriter, if any, such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and
such other documents as TCI Music or such underwriter may reasonably
request in order to facilitate the disposition of the Shares.
14
<PAGE>
(xi) make available for inspection by TCI Music, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by
TCI Music or such underwriter (collectively, the "Inspectors"), all
----------
financial and other records, pertinent corporate documents and properties
of Newco (collectively, the "Records") as shall be reasonably necessary to
-------
enable them to exercise their due diligence responsibility, so long as such
Inspectors execute a confidentiality agreement with respect thereto in form
and substance reasonably satisfactory to Newco, and cause Newco's officers,
directors and employees to supply all information reasonably requested by
any Inspectors in connection with such registration statement.
(xii) furnish to TCI Music and to each underwriter, if any, a
signed counterpart of (i) an opinion or opinions of counsel to Newco
addressed to TCI Music and such underwriter on which opinion both TCI Music
and such underwriter are entitled to rely and (ii) a comfort letter or
comfort letters from Newco's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as TCI Music or the
managing underwriter therefor reasonably requests.
(xiii) make available to its security holders, as soon as
reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
TCI Music, upon receipt of any notice from Newco of the happening of any event
of the kind described in paragraph (iv) or (v) above, will forthwith
discontinue, and cause its Affiliates to discontinue, disposition of the Shares
until TCI Music's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (iv) above or until it is advised in
writing by Newco that the use of the prospectus may be resumed and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus. If so directed by Newco, TCI Music will deliver to
Newco or destroy all copies, other than permanent file copies then in the
possession of TCI Music or its Affiliates, of the prospectus required to be
supplemented or amended.
(b) Notwithstanding anything to the contrary in this Agreement, if at
any time after the filing of a registration statement (i) in the case of any
registration statement for a firm commitment underwritten offering of Shares,
before it is declared effective by the SEC, or (ii) in the case of any other
registration statement, before or after it is declared effective by the SEC,
Newco determines, in its reasonable good faith business judgment, that such
registration and the offering of Shares covered by such registration would
interfere with or otherwise adversely affect any financing, acquisition,
corporate reorganization or other material transaction or development involving
Newco or any of its Controlled Affiliates or require Newco to disclose material
matters regarding itself or such Controlled Affiliates that otherwise would not
be required to be disclosed at such time, then Newco may require the suspension
of the distribution of any Shares (a
15
<PAGE>
"Blackout Period") by giving notice to TCI Music. Any such notice need not
- - ----------------
specify the reasons for such suspension if Newco determines, in its reasonable
good faith business judgment, that doing so would interfere with or adversely
affect such transaction or development or would result in the disclosure of
material nonpublic information. In the event that such notice is given, then
until Newco has determined, in its reasonable good faith business judgment, that
such registration and distribution would no longer materially interfere with the
matters described in the preceding sentence and has given notice thereof to TCI
Music, Newco's obligations under this Article III will be suspended, provided
that such suspension shall not exceed the first to occur of (x) the filing of
Newco's next SEC filing and (y) 90 days. Newco shall extend the period of time
Newco is required to maintain effective any registration statement required
pursuant to clauses (i) and (ii) of paragraph (a) hereof by a length of time
equal to the aggregate length of the Blackout Periods. In the event of any
suspension of a registration pursuant to this Section 3.3(b), the selling Tune
Partners shall be entitled to withdraw from such registration upon written
notice to Newco.
(c) Newco's obligations to Tune under this Article III will be
conditioned on compliance with the following:
(i) TCI Music and its Affiliates will cooperate with Newco in
connection with the preparation of the applicable registration statement,
and for so long as Newco is obligated to keep such registration statement
effective, TCI Music and its Affiliates will provide to Newco, in writing
in a timely manner, for use in such registration statement (and expressly
identified in writing as such), all information regarding TCI Music and its
Affiliates and such other information as may be required by applicable law
to enable Newco to prepare such registration statement and the related
prospectus covering the applicable Shares owned by the selling Tune
Partners and to maintain the currency and effectiveness thereof, so long as
Newco executes a confidentiality agreement in form and substance reasonably
satisfactory to TCI Music in the event any Confidential Information is
requested by Newco;
(ii) TCI Music and its Affiliates will permit Newco and its
representatives and agents to examine such documents and records and will
supply in a timely manner any information as they may reasonably request in
connection with the offering or other distribution of Shares by the Tune
Partners;
(iii) TCI Music and its Affiliates will enter into such
agreements with Newco and any broker-dealer or similar securities industry
professional containing representations, warranties, indemnities and
agreements as are customarily entered into and made by a seller of
securities and such seller's controlling shareholders with respect to
secondary distributions under similar circumstances;
(iv) during such time as TCI Music and its Affiliates may be
engaged in a distribution of the Shares, TCI Music and its Affiliates will
comply with all applicable laws, including Regulation M promulgated under
the 1934 Act, and, to the
16
<PAGE>
extent required by such laws, will, among other things: (A) not engage in
any stabilization activity in connection with the securities of Newco in
contravention of such rules; (B) distribute the Shares acquired by it
solely in the manner described in the applicable registration statement;
(C) if required by applicable law, rules or regulations, cause to be
furnished to each agent or broker-dealer to or through whom such Shares may
be offered, or to the offeree if an offer is made directly by TCI Music and
its Affiliates, such copies of the applicable prospectus (as amended and
supplemented to such date) and documents incorporated by reference therein
as may be required by such agent, broker-dealer or offeree, provided that
Newco shall provide TCI Music with an adequate number of copies thereof;
and (D) not bid for or purchase any securities of Newco; and
(v) on notice from Newco of the happening of any of the events
specified in Section 3.3(a)(iv) or (v), or that, as set forth in Section
3.3(b), requires the suspension by TCI Music and its Affiliates of the
distribution of any of the Shares owned by the Tune Partners, then TCI
Music and its Affiliates will cease offering or distributing the Shares
owned by the Tune Partners until the offering and distribution of the
Shares owned by the Tune Partners may recommence in accordance with the
terms hereof and applicable law.
(d) Except as otherwise provided with respect to registrations
terminated by Newco, Newco shall bear the following fees, costs and expenses in
connection with its obligations under this Article III: all registration, filing
fees, printing expenses, all internal Newco expenses, the premiums and other
costs of policies of insurance against liability arising out of the public
offering, and all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdiction in which Shares to be
offered are to be registered or qualified. Fees and disbursements of counsel
and accountants for TCI Music and its Affiliates, underwriting discounts and
commissions and transfer taxes for TCI Music and its Affiliates and other direct
selling expenses incurred by TCI Music and its Affiliates not expressly included
above shall be borne by TCI Music and its Affiliates.
(e) Newco shall indemnify and hold harmless the selling Tune
Partners, and each Person, if any, who controls the selling Tune Partners within
the meaning of the Securities Act, from and against any and all claims, losses,
damages, liabilities, costs and expenses to which the selling Tune Partners or
any such controlling Person may become subject under the Securities Act or
otherwise, insofar as such claims, losses, damages, liabilities, costs or
expenses arise out of or are based on any untrue statement or alleged untrue
statement of any material fact contained in any registration statement filed by
Newco pursuant to this Article III which relates to Shares owned by the selling
Tune Partners, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, except insofar as any such claim, loss, damage, liability, costs
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by TCI Music or its Affiliates or such controlling Person
17
<PAGE>
specifically for inclusion in such registration statement; provided, however,
-----------------
that the foregoing indemnity is subject to the condition that, insofar as it
relates to any untrue statement or alleged untrue statement, omission or alleged
omission made in a preliminary prospectus but eliminated or remedied in a
prospectus, such indemnity agreement shall not inure to the benefit of the
selling Tune Partner or any Person who controls the selling Tune Partner if (A)
Newco complied with all of its notification and delivery obligations as provided
herein, (B) such claim, loss, damage, liability, cost or expense relates to the
matter so eliminated or remedied in the final prospectus and (C) the selling
Tune Partner or its Affiliates failed to deliver a copy of the prospectus at or
prior to the time such action is required by the Securities Act; provided,
--------
further, that the foregoing indemnity is also subject to the condition that,
- - -------
insofar as it relates to any untrue statement or alleged untrue statement,
omission or alleged omission made in a prospectus attributable solely to facts
or events which occur after the effective date of the registration statement,
which untrue statement or alleged untrue statement, omission or alleged omission
is eliminated or completely remedied in an amendment or supplement to the
prospectus, such indemnity agreement shall not inure to the benefit of the
selling Tune Partner or any Person who control the selling Tune Partner or any
of its Affiliates, if, having previously been furnished by or on behalf of Newco
with copies of the prospectus as so amended or supplemented, in lieu thereof the
selling Tune Partner or its Affiliates delivered the prospectus without such
amendment or supplement.
(f) TCI Music shall indemnify and hold harmless Newco and any
underwriter (as defined in the Securities Act) for Newco, and each Person, if
any, who controls the Newco or such underwriter within the meaning of the
Securities Act from and against any claims, losses, damages, liabilities, costs
or expenses to which Newco or any such underwriter or controlling Person may
become subject under the Securities Act or otherwise, insofar as such claims,
losses, damages, liabilities, costs or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in any registration
statement filed by Newco pursuant to this Article III which relates to Shares
owned by any Tune Partner or any of its Affiliates, any prospectus contained
therein or any amendment or supplement thereto, and arise out of or are based
upon the omission or the 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, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by TCI Music or its
Affiliates specifically for inclusion in such registration statement, prospectus
or amendment or supplement thereto).
(g) Except to the extent otherwise provided in this Section 3.3(g), a
party obligated to provide indemnification under Section 3.3(e) or (f) shall
reimburse each party entitled to such indemnification the costs of investigating
and defending any claim, loss, damage, liability, cost or expense giving rise to
such indemnification obligation. Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (e) and (f) of this Section 3.3 of
notice of commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim thereof
is to be made against the indemnifying party pursuant to the provisions of said
paragraph (e) and (f) promptly notify the indemnifying
18
<PAGE>
party of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party, except to the extent that the indemnifying party is
materially prejudiced by the failure to give such prompt notice. If such action
is brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party shall have the right to
participate therein, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof so long as
it agrees to accept full responsibility to indemnify and hold harmless the
indemnified party in accordance herewith in respect of such action. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (e) and (f) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have been advised by its
counsel that use of the same counsel to represent both the indemnifying party
and the indemnified party would present a conflict of interest (which shall be
deemed to include any case where there may be a legal defense or claim available
to the indemnified party which is different from or additional to those
available to the indemnifying party) or (ii) the indemnifying party shall fail
vigorously to defend or prosecute such claim or demand within a reasonable time,
in which case the fees of counsel for the indemnified party shall be for the
account of the indemnifying party and the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent, or if
there be a final judgment for the plaintiff, the indemnifying party shall
indemnify and hold harmless such indemnified parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability arising out of such proceeding.
(h) The registration rights granted to TCI Music and its Controlled
Affiliates pursuant to this Article III are not assignable, except to the extent
any Partnership Interests or Shares are Disposed of to a Permitted Transferee or
other Controlled Affiliate in accordance with the terms of the Partnership
Agreement, the Newco Stockholder Agreement and/or this Agreement. Any
assignment not permitted hereunder shall be null and void ab initio.
(i) If the indemnification provided for under Sections 3.3(e) or (f),
as applicable, is unavailable to or insufficient to hold the indemnified party
harmless under such Section in respect of any claim, loss, damage, liability,
cost or expense referred to therein (a "Liability") for any reason other than as
---------
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such claims, losses,
damages, liabilities, costs or expenses (i) in such proportion as is appropriate
to reflect the relative benefits received by the indemnifying party on the one
hand and such indemnified party on the other from the subject offering or
distribution or (ii) if the allocation provided by clause (i)
19
<PAGE>
of this sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
of this sentence but also the relative fault of the indemnifying party on the
one hand and such indemnified party on the other in connection with the
statements or omissions which resulted in such Liability as well as any other
relevant equitable considerations. The relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other hand
shall be deemed to be in the same proportion as the net proceeds of the offering
or other distribution (after deducting expenses) received by the indemnifying
party bears to the net proceeds of the offering or other distribution (after
deducting expenses) received by the indemnified party. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by (or omitted to be supplied
by) Newco or the selling Tune Partners, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, the relative benefits received by each party from the sale of the
Shares and any other equitable considerations appropriate under the
circumstances. The amount paid or payable by an indemnified party as a result of
the Liability referred to above in this Section 3.3(i) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(j) Notwithstanding anything herein to the contrary, the parties
agree that the obligations and liability of the selling Tune Partners with
respect to any registration in which any Tune Partner participates pursuant to
Section 3.1 or 3.2 whether from indemnification pursuant to Section 3.3(f),
contribution pursuant to Section 3.3(i), or otherwise shall not in any event
exceed, in the aggregate, the amount of net proceeds received by such selling
Tune Partner from the sale of the Shares sold by such Tune Partner in such
registration.
ARTICLE IV
CONFIDENTIAL INFORMATION; NON-COMPETITION; EXCLUSIVITY
------------------------------------------------------
Section 4.1. Confidential and Proprietary Information. Except as
----------------------------------------
otherwise provided in the Additional Agreements, all Proprietary Information (as
defined below) of any party hereto or its Affiliates shall remain the property
of such party or its Affiliates (other than Newco and its Subsidiaries), and all
Proprietary Information of Newco and its Controlled Affiliates shall remain the
property of Newco and its Controlled Affiliates. Each of the parties hereto and
their respective Affiliates (i) shall use any and all Confidential Information
(as defined below) only for purposes of Newco and shall not use such
Confidential Information for the benefit of or in connection with any other
business or enterprise of such party or any of its Affiliates and (ii) shall,
and shall use its reasonable best efforts to cause its and their respective
officers, directors, employees, attorneys, accountants, and agents
(collectively, "Agents") to, keep secret and retain in strictest confidence any
------
and all Confidential Information, and shall not disclose such Confidential
Information, and shall use its reasonable best efforts to cause its Agents not
to
20
<PAGE>
disclose such Confidential Information, to any Person other than such party,
its Affiliates, Newco or their respective Agents, except (i) for such
disclosures as may be required by law or legal process, disclosures to such
party's counsel, or disclosures pursuant to any listing agreement with, or the
rules or regulations of, any securities exchange on which securities of such
party or any such Affiliate are listed or traded (in which event the party
making such disclosure or whose Affiliates or Agents are making such disclosure
shall so notify the other parties hereto as promptly as practicable (and if
possible, prior to making such disclosure) and shall seek confidential treatment
of such information); (ii) as may be necessary to establish or enforce its
rights hereunder; (iii) as part of the normal review or reporting procedure to
its Parent, its auditors and its attorneys; provided, that such party shall be
--------
liable for any breach by such Parent, auditors or attorneys of any provision of
this Section 4.1; (iv) for disclosures to an Affiliate of, or a professional
advisor to, such party in connection with the performance by such party of its
obligations hereunder, under the Additional Agreements or under an agreement
with Newco; provided, that such party shall be liable for any breach by such
--------
Affiliate or professional advisor of any provision of this Section 4.1; (v) for
disclosures to a prospective third party purchaser pursuant to Article VIII of
the Partnership Agreement or a prospective third party purchaser (by merger,
stock acquisition or otherwise) of all or substantially all of the assets of the
Parent of such party so long as such prospective purchaser executes and delivers
to Newco a confidentiality agreement in form and substance reasonably
satisfactory to Newco; provided that such party shall be liable for any breach
--------
by such prospective third party purchaser of any provision of this Section 4.1;
and (vi) with the prior written consent of the nondisclosing parties.
Notwithstanding the foregoing, Viacom Inc. and its Controlled Affiliates shall
be permitted to use Confidential Information of Newco and its Controlled
Affiliates for the benefit of or in connection with their respective businesses,
except that Viacom Inc. and its Controlled Affiliates shall not have the right
to use Confidential Information of Newco and its Controlled Affiliates which
constitutes, is set forth in, or concerns architecture or design of data
processing or communications systems, information or data processing algorithms,
and source code, flow charts and internal technical documentation relating to
the design or operation of computer programs. The obligations under this
Section 4.1 shall survive the termination of this Agreement and any Person
ceasing to be an Affiliate of a party for a period of five years after the
occurrence of such event. For purposes of this Section 4.1:
"Confidential Information" shall mean (i) the terms of this Agreement and
------------------------
the Additional Agreements and (ii) all Proprietary Information; provided,
--------
however, that such Confidential Information shall not include, with respect to
- - -------
any party, any information that (A) is or has become generally available to the
public other than as a result of a disclosure by such party, its Affiliates or
its Agents, (B) has been independently developed by such party or an Affiliate
or Parent of such party, or (C) is, or becomes available to such party or an
Affiliate or Parent of such party on a non-confidential basis from a third party
having no obligation of confidentiality to a party hereto or Newco or its
Controlled Affiliates known to the receiving party and which has not itself
received such information directly or indirectly in breach of any such
obligation of confidentiality.
21
<PAGE>
"Proprietary Information" means any proprietary ideas, plans or
-----------------------
information, including, without limitation, information of a technological or
business nature (including, without limitation, all trade secrets, proposed
trade names, proposed slogans, computer software, technology, data, summaries,
reports, or mailing lists, whether written or oral and if written, however
produced or reproduced) (i) belonging to any party or any of its Affiliates or
(ii) developed by or for Newco or its Controlled Affiliates, that is marked
proprietary or confidential, or bears a marking of like import, or that such
party or Affiliate or Newco or its Controlled Affiliates, as the case may be,
states in writing within 30 days of disclosure thereof is to be considered
proprietary or confidential (except for computer source code internal software
technical documentation, machine readable databases or customer lists, which
shall be deemed proprietary whether or not so marked or designated), in each
case other than any such information that is already known to the party
receiving the same or its Affiliates at the time of receipt from the party
disclosing the same, as evidenced by written records made prior to such receipt,
or is independently developed or formulated by such receiving party or its
Affiliates, or is provided to such receiving party or its Affiliates by a third
party not as a result of any in breach of any obligation of confidentiality to
such disclosing party, or that otherwise becomes publicly available through no
fault of such receiving party or its Affiliates.
Section 4.2. Non-Competition.
---------------
(a) Neither SonicNet, Box, TCI Music nor Liberty, directly or
indirectly through their respective Controlled Affiliates, shall, for a period
ending on the earlier of (x) 3 years from the Closing or (y) such date as the
MTVN Stockholder Group ceases to own the largest percentage of the outstanding
equity of Newco and have the right to designate the greatest number of
representatives or directors to serve on Newco's Management Committee or Board
of Directors, as the case may be (the "MTVN Loss of Control Date"), make an
-------------------------
investment in, or own or otherwise operate the Business other than its
investment in Newco or announce or disclose any intention to do any of the
foregoing.
(b) Neither SonicNet, Box, TCI Music nor Liberty, directly or
indirectly through their respective Controlled Affiliates, shall, for a period
ending on the earlier of (x) five years from the Closing or (y) the MTVN Loss of
Control Date, make an investment in, or own or otherwise operate, any cable or
satellite audio/visual television services, digital or analog, principally or in
large part devoted to music-related or music-themed programming (the "Television
----------
Business"), or announce any intention to do any of the foregoing.
- - --------
(c) The restrictions on competition set forth in subsections (a)
and (b) of this Section 4.2 shall not apply to any of the following or the
announcement of any of the following: (i) the operations of DMX Inc. as
currently conducted or the operation of an internet radio business by DMX Inc.
through sites owned or operated by Lycos Inc. and any of its successors and
assigns pursuant to DMX Inc.'s current agreement with Lycos Inc. as it may be
amended (the "Lycos Deal") or the operations of DMX Inc. as a distributor of a
----------
bona fide subscription service consisting exclusively, with de minimis
exceptions, of audio and/or text and/or non-moving pictures content provided
that the foregoing will not include an internet radio business
22
<PAGE>
(other than the Lycos Deal) similar to Spinner.com or Imagine as currently
conducted; (ii) e-commerce operations which derive less than 50% of their
revenue from music related products; provided that if such e-commerce operation
is a television service which includes visual programming, such programming
shall not contain music related programming for more than (x) 33% of the time
such programming is aired on any given day, (y) four consecutive hours on any
given day, or (z) 120 minutes on a given day during the hours of 6:00 p.m. to
12:00 a.m.; (iii) any business which would fall within the definition of the
Television Business so long as less than 35% of its programming consists of
music related programming; (iv) investments or acquisitions of less than 3% of
the outstanding equity interests in any company, or investments or acquisitions
of less than 25% of the outstanding equity interests in a company involved in
the Television Business and not involved in the Business; (v) the acquisition or
ownership of any interest in a company or assets not principally engaged in the
Business or the Television Business (i.e., the competing business does not
represent in excess of 35% of the fair market value of the assets or revenues of
such acquired or owned company or assets); (vi) any interest in a company
resulting from a spin-off from a company in which SonicNet, Box, TCI Music,
Liberty or any of their Controlled Affiliates holds an interest that does not
violate the provisions of Section 4.2(a) or (b); (vii) any interest in a company
resulting from an exercise of rights to acquire securities or interests in such
company (directly or indirectly) from any person if such rights would be
forfeited if not so exercised or if SonicNet, Box, Liberty, TCI Music or a
Controlled Affiliate would be required to sell or dispose of its interest in
such company (provided, that the acquisition of such rights as they relate to
the Business or the Television Business was ancillary to the transaction in
which such rights were acquired); (viii) any interest in BET Holdings, Inc.;
(ix) any interest in Ticketmaster Group Inc.; (x) the ownership and operation of
any Excluded Tune Assets as existing and operating on the date hereof or as
otherwise necessary to fulfill the obligations under or with respect to the
Excluded Tune Assets (as such term is defined in the Organization Agreement);
provided, that the business of The Box Holland, B.V. may be extended to other
Dutch-speaking operating territories and the technology of The Box Holland, B.V.
may be upgraded for use by The Box Holland, B.V.; (xi) if Newco invests in the
Interactive Music Channel (as defined in the Organization Agreement), an
investment in such Interactive Music Channel; and (xii) in the event that the
approval of the Federal Communications Commission (the "FCC") of the transfer of
---
the low power television station licenses from VJN LPTV Corp. to Box LLC has
not been obtained by the Closing, the LMA will remain in effect until the
applicable FCC approvals are obtained. Notwithstanding the foregoing, the
exceptions to the restrictions on competition set forth in the prior sentence
shall not be available to SonicNet, Box, TCI Music, Liberty or their Controlled
Affiliates if any of such persons structures a transaction to fall within one of
such exceptions with the primary purpose of evading the restrictions on
competition contained herein and subsequently engages in such a transaction.
(d) If SonicNet, Box, TCI Music, Liberty or any of their respective
Controlled Affiliates makes an acquisition of a company which has a competing
business and clause (v) of Section 4.2(c) is the only one of the exceptions to
the restrictions on competition provisions of Section 4.2(a) or (b) pursuant to
which such acquisition is permitted, at such time during the restricted period
set forth in Section 4.2(a) or (b) applicable to such competing business as
23
<PAGE>
SonicNet, Box, TCI Music, Liberty or any of their respective Controlled
Affiliates acquires control of such competing business, SonicNet, Box, Liberty
or TCI Music must, or must cause the applicable Controlled Affiliate to, offer
to sell such competing business to Newco at a price not in excess of the fair
market value of the consideration paid, if Newco declines to purchase such
competing business, SonicNet, Box, Liberty or TCI Music must, or must cause the
applicable Controlled Affiliate to, divest it, unless (i) the Board of Directors
of SonicNet, Box, Liberty or TCI Music or such Controlled Affiliate shall have
been advised by outside counsel that the approval by such Board of such sale to
Newco or divestiture (a "Divestiture") is reasonably likely to constitute a
-----------
breach by such directors of their fiduciary duties owed to third parties or
stockholders other than stockholders of TCI Music or its parent entities, (ii)
such Divestiture would violate the provisions of any contract to which SonicNet,
Box, Liberty, TCI Music or such Controlled Affiliate is a party (other than
contracts entered into with a primary purpose referred to in the last sentence
of Section 4.2(c)), or (iii) such Divestiture would trigger any tax liability
for SonicNet, Box, Liberty or TCI Music or such Controlled Affiliate which is
material to SonicNet, Box, Liberty or TCI Music and would otherwise not be
triggered; provided, however, that in the event of the occurrence of any of the
-------- -------
circumstances referred to in clauses (i)-(iii) above, such obligation to make a
Divestiture shall arise at such subsequent time during the restricted period (as
set forth in Section 4.2(a) or (b) as applicable) applicable hereto, if any, as
such potential breach of fiduciary duty or potential breach of contract or such
adverse tax consequence may be reasonably avoided.
Section 4.3. Exclusivity
-----------
(a) For a period of five years from the Closing, if MTVN,
directly or indirectly through a Controlled Affiliate, acquires or makes an
investment in or otherwise operates the Business other than through Newco, MTVN
shall provide TCI Music the right to purchase a pro-rata interest in such
business or assets; provided that this provision shall not apply to (i) any
children's services, including children's music services regardless of the means
of distribution of such services; (ii) the delivery of content purely ancillary
to a business that is not the Business, provided that the ancillary content that
may be delivered relates solely to MTVN and its operations; (iii) investment or
acquisitions of less than 3% (and, after the third anniversary of the Closing
Date, 25%) of the outstanding equity interest in any person or entity; (iv) the
acquisition or operation of any interest in a company or assets not principally
engaged in the Business (i.e., the competing business does not represent in
excess of 35% of the fair market value of the assets or revenues of such
acquired company or assets); or (v) any current or future business conducted by
any of the entities listed on Schedule I hereto to the extent such businesses
were not contributed to the Partnership by an MTVN Partner.
(b) For a period of five years from the Closing, MTVN will not
promote the Business as owned or operated by any Affiliate of MTVN (other than
the Partnership or Newco) on its cable television services except on commercial
terms.
(c) Notwithstanding the foregoing, the covenants set forth in
Section 4.3(a) and (b) shall be of no force or effect in the event that (i)
members of the Tune Stockholder Group
24
<PAGE>
own less than 5% of the outstanding Partnership Interests or equity in Newco
(excluding any Partnership Interests or equity issued or granted in any
transaction or transactions with respect to which TCI Music has no preemptive
rights pursuant to Section 12.02 of the Partnership Agreement (or any comparable
provision of the Newco Stockholders Agreement)), (ii) TCI Music or any of its
Affiliates is in material default of this Agreement, the Organization Agreement,
the Partnership Agreement, any of the Related Party Agreements or any other
agreement contemplated hereby or thereby; or (iii) any of the Tune Stockholder
Group has transferred any portion of its Partnership Interest or any equity
interest in Newco to any Person that is not a Permitted Transferee.
Section 4.4. Freedom of Action. Except as otherwise expressly provided
-----------------
herein or in the Partnership Agreement or in any Additional Agreement to which
such party is or will be a party or bound, no party hereto shall have any
obligation to Newco or the Partners not to (i) engage in the same or similar
activities or lines of business as Newco or develop or market any products or
services that compete, directly or indirectly, with those of Newco or (ii)
invest or own any interest publicly or privately in, or develop a business
relationship with, any corporation, partnership or other entity engaged in the
same or similar activities or lines of business as, or otherwise in competition
with, Newco or (iii) do business with any client or customer of Newco or (iv)
employ or otherwise engage any former officer or employee of Newco. Except as
otherwise expressly provided herein or in the Partnership Agreement or in any
Additional Agreement to which such party is or will be a party or bound, no
party hereto shall be obligated to present or offer to Newco any particular
investment or business opportunity, regardless of whether Newco could take
advantage of such opportunity if it were presented to Newco, but may, subject to
the terms of any agreement between the parties hereto other than this Agreement,
avail itself of any such opportunity for its own benefit or direct such
opportunity to another Person. For purposes of this Section 4.4, any reference
to a party shall include its Affiliates, including its Parent, and the
Affiliates of such Parent.
Section 4.5. Rights and Remedies Upon Breach. If a party hereto or any of
-------------------------------
its Affiliates breaches, or threatens to commit a breach of, any of its
obligations under any of the provisions of Sections 2.3, 4.1, 4.2 or 4.3 (a
"Restrictive Covenant"), the other parties hereto shall have the right and
- - ---------------------
remedy to have such obligations or such Restrictive Covenant specifically
enforced by any court having jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the other
parties and that money damages will not provide an adequate remedy to the other
parties. Nothing in this Section 4.5 shall be construed to limit the right of
any party hereto to collect money damages in the event of a breach of any such
obligation or Restrictive Covenant. The parties hereto acknowledge that the
restrictions contained in Sections 2.3, 4.1, 4.2 and 4.3 are reasonable and
necessary protections of the immediate interests of the parties hereto and each
party hereto acknowledges that the other parties hereto would not have entered
into this Agreement without receiving the additional consideration offered by
the other parties hereto in binding themselves to these restrictions. If any
portion of the covenants or agreements contained in Sections 2.3, 4.1, 4.2 or
4.3, or the application thereof, is construed to be invalid or unenforceable,
then the other portions of such covenant(s) or agreement(s) or the application
thereof will be given full force and effect without
25
<PAGE>
regard to the invalid or unenforceable portions. If any such covenant or
agreement is held to be unenforceable in equity because of the area covered, the
duration thereof, or the scope thereof, then the court making such determination
will have the power to reduce the area and/or duration and/or limit the scope
thereof, and the covenant or agreement will then be enforceable in equity in its
reduced form.
Section 4.6. Release of Liberty. In the event of the transfer of
------------------
substantially all of Liberty's assets and businesses to (i) Liberty Media Group
LLC or (ii) a subsidiary of AT&T the stock of which is then distributed in
redemption of the shares of AT&T Liberty Media Group Common Stock, each as
described in the definition of "Liberty" as set forth in the Organization
Agreement, then upon the execution by Liberty Media Group LLC or such AT&T
subsidiary of an instrument assuming all of Liberty's obligations under Section
4.2 hereof, Liberty will be released and discharged from its obligations under
Section 4.2 effective as of such date.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1. Notices. Except as expressly provided herein, notices and
-------
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed (certified or registered
mail, postage prepaid, return receipt requested) or sent by facsimile copier of
the sending party, as follows:
(a) If to MTVN to:
MTV Networks
1515 Broadway
New York, New York 10036-5794
Fax: (212) 846-1839
Attention: General Counsel
with a copy to:
Viacom International Inc.
1515 Broadway
New York, New York 10036-5794
Fax: (212) 258-6069
Attention: General Counsel
26
<PAGE>
(b) If to TCI Music, Box or SonicNet to:
TCI Music, Inc.
67 Irving Place North, Fourth Floor
New York, New York 10003
Fax: (212) 387-8171
Attention: Lee Masters
with a copy to:
Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Fax: (720) 875-5448
Attention: David Koff
(c) If to Liberty to:
Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Fax: (720) 875-5448
Attention: David Koff
(d) If to the Partnership to:
MTV Online L.P.
1515 Broadway
New York, New York 10036
Fax: (212) 846-1735
Attention: Fred Seibert
or to such other address or attention of such other Person as any party shall
advise the other parties in writing. All notices and other communications given
in accordance with the provisions of this Agreement shall be deemed to have been
given (i) three Business Days after the same are sent by certified or registered
mail, postage prepaid, return receipt requested, (ii) when delivered by hand or
transmitted by facsimile (confirmation received) unless delivered on a day which
is not a Business Day in which case such notice shall be deemed to have been
given on the next succeeding Business Day or (iii) one Business Day after the
same are sent by a reliable overnight courier service, with acknowledgment of
receipt.
Section 5.2. Table of Contents; Headings. The table of contents and
---------------------------
headings of the Articles, Sections and other subdivisions of this Agreement are
for convenience of reference only and shall not modify, define or limit any of
the terms or provisions of this Agreement.
27
<PAGE>
Section 5.3. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of New York, excluding the
choice of law rules thereof.
Section 5.4. Severability. If any provision of this Agreement shall be
------------
held to be illegal, invalid or unenforceable, that provision will be enforced to
the maximum extent permissible so as to effect the intent of the parties and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If necessary to effect the intent of
the parties, the parties will negotiate in good faith to amend this Agreement to
replace the unenforceable language with enforceable language which as closely as
possible reflects such intent.
Section 5.5. Amendments. This Agreement may be modified or amended only
----------
by a written amendment signed by each party hereto.
Section 5.6. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each party and delivered to the other party.
Section 5.7. Entire Agreement. The provisions of this Agreement set forth
----------------
the entire agreement and understanding among the parties as to the subject
matter hereof and supersede all prior agreements, oral or written, and other
communications between the parties relating to the subject matter hereof,
including the Memorandum of Understanding dated May 19, 1999 among MTVN, TCI
Music and Liberty.
Section 5.8. Parties in Interest; Limitation on Rights of Others. MTVN
---------------------------------------------------
may assign its rights and obligations under this Agreement to one or more
Affiliates of MTVN which is directly or indirectly wholly-owned (and including
for this purpose Imagine) by Viacom, Inc.; provided that, in connection with any
--------
such assignment, the applicable assignee executes and delivers to TCI Music an
instrument, in form and substance reasonably satisfactory to TCI Music, by which
MTVN guarantees the performance of any such assignee's obligations hereunder.
TCI Music may assign any or all of its rights and obligations under this
Agreement to any of wholly-owned subsidiaries; provided that, in connection with
--------
any such assignment, TCI Music executes and delivers to MTVN an instrument, in
form and substance reasonably satisfactory to MTVN, by which TCI Music
guarantees the performance of any such assignee's obligations hereunder. No
party to this Agreement may assign any of its rights or obligations under this
Agreement except as specifically provided in this Section 5.8. The terms of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and, except as provided herein, their respective successors and permitted
assigns. Any assignment of rights hereunder in violation hereof shall be void
ab initio. Nothing in this Agreement, whether express or implied, shall be
- - -- ------
construed to give any Person (other than the parties hereto, including Newco
following its execution of a counterpart hereof, and their successors and
permitted assigns) any legal or equitable right, remedy or claim under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
28
<PAGE>
Section 5.9. Waivers; Remedies. The observance of any term of this
-----------------
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party or parties against which such waiver is to be asserted and only in the
specific instance and for the specific purpose for which given. Except as
otherwise provided herein, no failure or delay of any party in exercising any
power or right under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.
Section 5.10. No Presumption. This Agreement shall be construed without
--------------
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
Section 5.11. Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each party hereby irrevocably and unconditionally submits,
for itself and its property, to the exclusive jurisdiction of any New York State
court sitting in the County of New York or any federal court of the United
States of America sitting in the Southern District of New York, and any
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to this Agreement, or for recognition or enforcement of any
judgment relating hereto. Each party hereby irrevocably and unconditionally
agrees that any suit, action or proceeding against it by any other party to this
Agreement with respect to this Agreement shall be instituted only in any New
York State court sitting in the County of New York or any federal court sitting
in the Southern District of New York, as the party instituting such suit, action
or proceeding may elect in its sole discretion. Each party also hereby
irrevocably and unconditionally agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each party hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York State
court sitting in the County of New York or any federal court sitting in the
Southern District of New York, and any appellate court from any such court. Each
party hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court and further waives the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party. Each party hereby irrevocably waives the right to
a jury trial in any suit, action or proceeding arising out of or related to this
Agreement.
(c) Each party hereby irrevocably and unconditionally consents
to service of process in the manner provided for the giving of notices pursuant
to this Agreement. Nothing in
29
<PAGE>
this Agreement shall affect the right of either party to serve process in any
other manner permitted by law.
Section 5.12. Public Announcements. No party shall make or shall permit
--------------------
any of its Affiliates to make any public announcement about Newco and its
formation or activities without the prior written consent of the other parties
hereto, which consent shall not be unreasonably withheld or delayed.
Notwithstanding any other provision contained herein, Newco may make any public
announcements without restriction after consummation of the IPO, and any party
or Affiliate of such party may at any time make announcements which are required
by applicable law or the rules of any national stock exchange or stock
association so long as the party or Affiliate so required to make the
announcement, promptly upon learning of such requirement, notifies the other
parties of such requirement and discusses with the other parties in good faith
the exact wording of any such announcement.
Section 5.13. Binding on Viacom. The parties acknowledge that MTVN is a
-----------------
division of Viacom and that, consequently, Viacom is obligated to perform the
obligations to be paid or performed by MTVN hereunder. The use of the term
"MTVN" in Section 4.3 of this Agreement shall refer only to the operating unit
or units of Viacom that on a day-to-day basis operate the business of MTV:
Music Television or VH1 Music First; provided, however, that Viacom is obligated
-------- -------
to cause MTVN to perform its obligations under Section 4.3.
Section 5.14. TCI Music and Liberty. Each of the obligations under this
---------------------
Agreement of TCI Music and Liberty, including under Section 4.2, are several and
not joint.
Section 5.15. Capitalized Terms: Capitalized terms used and not otherwise
-----------------
defined herein shall have the meanings assigned to such terms in the Partnership
Agreement.
Section 5.16. Provisions Related to the Put and Call Rights.
---------------------------------------------
(a) Following the IPO, the Tune Partnership Interest Value (as
otherwise defined in the Partnership Agreement or in the corresponding provision
of the Newco Stockholders Agreement) shall be the product of the Current Market
Price of one Share and the number of Shares that compromise the Tune Partnership
Interest.
The "Current Market Price" for a security shall be the average of the
reported last sales prices for the 40 consecutive Trading Days before the date
of the applicable Put Notice or Call Notice, as the case may be.
The reported last sales price of a security for each Trading Day shall be:
(i) the reported last sales price, regular way, as reported on the New
York Stock Exchange Composite Tape; or
(ii) if the security is not listed or admitted to trading on the New York
Stock Exchange, on the National Market tier of The Nasdaq Stock
Market; or
30
<PAGE>
(iii) if the security is not listed or admitted to trading on the National
Market tier of the Nasdaq Stock Market at such time, in the
principal consolidated or composite transaction reporting system on
the principal national securities exchange on which such security is
listed or admitted to trading; or
(iv) if such security is not quoted on such National Market tier or any
national securities exchange, the average of the highest bid and
lowest asked prices on such day as reported on The Nasdaq Stock
Market.
As used herein, the term "Trading Days" means a day on which the New York Stock
Exchange, each national securities exchange on which the security is listed and
The Nasdaq Stock Market are open for business, provided that if no sales of the
security takes place on such day on the relevant exchange or stock market
determined under the immediately preceding sentence, such day shall not be a
Trading Day.
(b) If TCI Music exercises its right to acquire an interest in
any business or assets pursuant to Section 4.3 of this Agreement, then such
interest shall be deemed to be part of the Tune Partnership Interest for all
purposes under Section 12.03 of the Partnership Agreement (and the corresponding
provision of the Newco Organizational Documents). If such interest is not in a
Publicly Traded security, its value shall be determined in the same manner as
provided for the determination of the Tune Partnership Interest Value in the
Partnership Agreement (or the corresponding provision of the Newco
Organizational Documents). If such interest is in a Publicly Traded security,
then its value shall be determined as provided in subsection (a) of this Section
5.16. A security shall be considered to be "Publicly Traded" as of any date if
on such date (i) the security is registered under Section 12(b) or 12(g) of the
1934 Act and (ii) the security is listed for trading on a national securities
exchange registered under the 1934 Act or traded in the over-the-counter market
and quoted on The Nasdaq Stock Market.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
TCI MUSIC, INC.
By: /s/ David Koff
---------------------------------
Name: David Koff
Title: Vice President
VIACOM INTERNATIONAL, INC.
By: /s/ Michael D. Fricklas
---------------------------------
Name: Michael D. Fricklas
Title: Sr. Vice President and
General Counsel
LIBERTY MEDIA CORPORATION
By: /s/ David Koff
----------------------------------
Name: David Koff
Title: Sr. Vice President
SONICNET, INC.
By: /s/ David Koff
----------------------------------
Name: David Koff
Title: Vice President
THE BOX WORLDWIDE, INC.
By: /s/ David Koff
----------------------------------
Name: David Koff
Title: Vice President
MTVN ONLINE L.P.
By: MTVN ONLINE PARTNER I LLC, its
General Partner
By: /s/ David W. Sussman
------------------------------
Title: Sr. Vice President
General Counsel and Assistant
Secretary
<PAGE>
New York, NY, July 15, 1999 -- MTV Networks, a division of Viacom Inc. (NYSE:
VIA, VIA.B) and TCI Music, Inc, (NASDAQ: TUNE) announced today the completion of
the transaction under which TCI Music has acquired a 10% stake in MTV Networks
Online music ventures and MTV Online music ventures has acquired SonicNet, one
of the Internet's leading music web sites, from TCI Music. Under the
transaction, which was originally announced in May, MTV Networks also acquired
rights to THE BOX, an interactive, 24-hour all-music network.
The transaction, which enhanced MTV Networks growing position as a leader in
Internet music content and commerce, also provides for the companies to
cooperate on the creation and launch of an interactive commerce-oriented music
channel for advanced digital set top boxes anticipated to be deployed by cable
operators beginning in late 1999. In addition, MTV Networks recently announced a
10-year comprehensive affiliation agreement with AT&T Broadband and Interactive
Services for its core services - MTV: Music Television VH1 and Nickelodeon/Nick
- - - as well as its digital services.
Viacom Inc. is one of the world's largest entertainment companies and is a
leading force in nearly every segment of the international media marketplace.
The operations of Viacom include Blockbuster, MTV Networks, Paramount Pictures,
Paramount Television, Spelling Television, Paramount Parks, Showtime Networks,
Simon Schuster, 19 television stations, and international theatrical
exhibition operations. Viacom also owns half-interests in the Comedy Central
cable channel, the UPN television broadcast network and UCI., an international
theatrical exhibition chain. National Amusements, Inc., a closely held
corporation which operates approximately 1,300 motion picture screens in the
U.S., the U.K. and South America, is the parent company of Viacom. More
information about Viacom is available at the Company's Web site located at
http://www.viacom.com .
TCI Music, Inc. is a diversified music entertainment company delivering audio
and video music services to commercial and residential consumers via satellite,
television, the internet and other methods. TCI Music Inc. is comprised of DMX,
LLC (DMX) which programs, markets and distributes the premium digital audio
music service known as Digital Music Express; prior to the transaction with MTV,
TCI Music Inc. also included The Box Worldwide, Inc. (The Box), which programs
and distributes the interactive music video television network, the Box Music
Network and Sonic Net, a leading Internet music network consisting of a group
of music websites. Under an agreement with Liberty Media Corporation (NYSE:
LMG.A and LMG.B), TCI Music has agreed to acquire all of Liberty's directly held
internet content and interactive television assets in exchange for shares of
Series B Common Stock and a new Series of Convertible Preferred Stock of TCI
Music. Following the Liberty transaction, TCI Music will change its name to
Liberty Digital, Inc. TCI Music, Inc. is traded on the Nasdaq Small Cap Market
through its Series A Common Stock under the symbol TUNE.
