TELE COMMUNICATIONS INC /CO/, S-4, 1997-06-06

TELE COMMUNICATIONS INC /CO/
S-4, 1997-06-06
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1997

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

<TABLE>
<C> <C>
TCI MUSIC, INC. TELE-COMMUNICATIONS, INC.
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
4899 4841
(Primary Standard Industrial Classification Code (Primary Standard Industrial Classification Code
Number) Number)
84-1380293 84-1260157
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</TABLE>

------------------------
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111
(303) 267-5500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
STEPHEN M. BRETT, ESQ.
C/O TELE-COMMUNICATIONS, INC.
TERRACE TOWER II
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111
(303) 267-5500
(Name, Address, including zip code, and telephone number, including area code,
of agent for service)
------------------------

Copies to:
CHARLES Y. TANABE, ESQ.
SHERMAN & HOWARD L.L.C.
633 SEVENTEENTH STREET, SUITE 3000
DENVER, COLORADO 80202
(303) 297-2900
FAX: (303) 298-0940
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: Upon
consummation of the Merger described herein.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==================================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(2)(3)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Series A Common Stock
$.01 par value 14,896,648 $101,297,210 $10,436
Rights of Tele-
Communications, Inc. 14,896,648
==================================================================================================================================
</TABLE>

(1) Based upon registrants' estimate of the maximum number of shares of TCI
Music Series A Common Stock and rights that may be issued in the Merger
described herein.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(f)(1) based upon the average of the bid and asked
price of DMX Inc. Common Stock on June 2, 1997, times the number of such
shares outstanding on June 2, 1997.
(3) In accordance with Rule 457(b) the total registration fee of $30,696 has
been reduced by $20,260, which has previously been paid with respect to the
Merger pursuant to Section 14(g) of the Securities Exchange Act of 1934.

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

PURSUANT TO RULE 416(a) THIS REGISTRATION STATEMENT ALSO RELATES TO SUCH
ADDITIONAL RIGHTS AS MAY BE ISSUABLE FROM TIME TO TIME IN CONNECTION WITH THE
ANTIDILUTION PROVISIONS OF THE RIGHTS AGREEMENT.
================================================================================
<PAGE> 2

PART I

INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
<PAGE> 3

DMX INC.

11400 WEST OLYMPIC BOULEVARD
SUITE 1100
LOS ANGELES, CALIFORNIA 90064
(310) 444-1744

, 1997

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of
DMX Inc. (the "Company"), which will be held at the Company's executive offices,
located at 11400 West Olympic Boulevard, Suite 1100, Los Angeles, California
90064 on , 1997, starting at 10:00 a.m., local time. A notice of the
special meeting, a proxy card and a Proxy Statement/Prospectus containing
important information about the matters to be acted upon at the special meeting
are enclosed.

At the special meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of
February 6, 1997, as amended by Amendment One to Merger Agreement dated May 29,
1997 (the "Merger Agreement"), among the Company, Tele-Communications, Inc.
("TCI"), TCI Music, Inc., a wholly owned subsidiary of TCI ("TCI Music"), and
TCI Merger Sub, Inc. ("Merger Sub"), a wholly owned subsidiary of TCI Music,
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger") with the Company as the surviving corporation (the "Surviving
Corporation").

In connection with the Merger, TCI and TCI Music will enter into a
Contribution Agreement. Pursuant to the Contribution Agreement, effective as of
the closing of the Merger: (i) TCI Music will issue to TCI (as designee of
certain of its indirect subsidiaries), 62,500,000 shares of Series B Common
Stock, par value $.01 per share, of TCI Music and a promissory note in the
amount of $40 million; (ii) until December 31, 2006 certain subsidiaries of TCI
will transfer to TCI Music the right to receive all revenues from sales of DMX
music services to their residential and commercial subscribers, net of an amount
equal to the 10% of revenues from such sales to residential subscribers and net
of the revenues otherwise payable to DMX (which will be a wholly owned
subsidiary of TCI Music) as license fees for DMX music services under
affiliation agreements currently in effect; (iii) TCI will contribute to TCI
Music the digital commercial tuners that are not in service as of the effective
date of the Merger; and (iv) TCI will grant to each stockholder who becomes a
stockholder of TCI Music pursuant to the Merger, one right (a "Right") with
respect to each whole share of Series A Common Stock, $.01 par value per share,
of TCI Music ("TCI Music Series A Common Stock") acquired by such stockholder in
the Merger pursuant to the terms of a Rights Agreement among TCI, TCI Music and
the rights agent. Each Right will entitle the holder to require TCI to purchase
from such holder one share of TCI Music Series A Common Stock for $8.00 per
share (the equivalent of $2.00 per share of DMX Common Stock), payable at the
election of TCI, in cash, a number of shares of Tele-Communications, Inc. Series
A TCI Group Common Stock, par value $1.00 per share, having an equivalent value
or a combination thereof, if during the one-year period beginning on the
effective date of the Merger, the price of TCI Music Series A Common Stock does
not equal or exceed $8.00 per share for a period of at least 20 consecutive
trading days.

Upon consummation of the Merger, each outstanding share of Common Stock,
$.01 par value per share, of the Company ("DMX Common Stock") will be converted
into the right to receive (i) one-quarter share of TCI Music Series A Common
Stock, (ii) one Right with respect to each whole share of TCI Music Series A
Common Stock and (iii) cash in lieu of fractional shares of TCI Music Series A
Common Stock and Rights. The accompanying Proxy Statement/Prospectus provides
you with detailed information concerning the Merger Agreement (a copy of which
(exclusive of Exhibits and Schedules) is included therein as Appendix I
thereto), the TCI Music Series A Common Stock and the Rights to be issued in
connection with the Merger and other information. Please give all of this
information your careful attention.

<PAGE> 4

The Board of Directors has carefully reviewed and considered the terms and
conditions of the Merger Agreement. In addition, the Board retained Houlihan
Lokey Howard & Zukin, which has delivered to the Board a written opinion, dated
February 6, 1997, to the effect that, as of the date of such opinion and based
upon and subject to certain matters stated therein, the consideration to be
received by the public stockholders of the Company in connection with the
proposed Merger is fair to such stockholders, from a financial point of view. A
copy of Houlihan Lokey's opinion, which sets forth the assumptions made, matters
considered and the scope of review undertaken in connection therewith, is set
forth as Appendix II to the accompanying Proxy Statement/Prospectus and should
be read carefully in its entirety. The Board of Directors has determined that
the terms of the Merger Agreement are fair to, and that the Merger is in the
best interests of, the Company and its stockholders and recommends that you vote
FOR the proposal to approve and adopt the Merger Agreement. For a further
discussion of the Board's consideration and evaluation of the Merger Agreement
as well as a discussion of the interests of certain directors and executive
officers of the Company in the proposed Merger, see "THE
MERGER -- Recommendation of the DMX Board; DMX's Reasons for the Merger" and
"-- Interests of Certain Persons in the Merger" in the accompanying Proxy
Statement/Prospectus.

Holders of shares of DMX Common Stock who comply with the applicable
procedural requirements of the Delaware General Corporation Law are entitled to
appraisal rights with respect to their shares. See "APPRAISAL RIGHTS" in, and
Appendix III to, the accompanying Proxy Statement/Prospectus.

Whether or not you are personally able to attend the special meeting,
please complete, sign and date the enclosed proxy card and return it in the
enclosed postage prepaid envelope as soon as possible. This action will not
limit your right to vote in person if you wish to attend the special meeting and
vote personally.

Sincerely yours,

Jerold H. Rubinstein
Chairman of the Board and Chief
Executive Officer

PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR COMMON
STOCK AT THIS TIME.

2
<PAGE> 5

DMX INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD , 1997

TO THE STOCKHOLDERS OF DMX INC.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (together
with any adjournment or postponement thereof, the "Special Meeting") of DMX
Inc., a Delaware corporation (the "Company"), will be held at the Company's
executive offices located at 11400 West Olympic Boulevard, Suite 1100, Los
Angeles, California, starting at 10:00 a.m., local time, on ,
, 1997, for the following purposes:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of February 6, 1997, as amended by
Amendment One to Merger Agreement dated May 29, 1997 (the "Merger
Agreement"), among the Company, Tele-Communications, Inc., a Delaware
corporation ("TCI"), TCI Music, Inc., a Delaware corporation and a wholly
owned subsidiary of TCI ("TCI"), and TCI Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of TCI Music ("Merger Sub").
Pursuant to the Merger Agreement, among other things, (a) Merger Sub will
be merged (the "Merger") with and into the Company, with the Company as the
surviving corporation and (b) each outstanding share (other than shares
held directly by the Company or any of its subsidiaries) of Common Stock,
par value $.01 per share, of the Company (the "DMX Common Stock"), will be
converted into the right to receive (i) one-quarter share of Series A
Common Stock, $.01 par value per share, of TCI Music ("TCI Music Series A
Common Stock"), (ii) one right (a "Right") with respect to each whole share
of TCI Music Series A Common Stock and (iii) cash in lieu of fractional
shares of TCI Music Series A Common Stock and Rights. Each Right will
entitle the holder to require TCI to purchase from such holder one share of
TCI Music Series A Common Stock for $8.00 per share (the equivalent of
$2.00 per share of DMX Common Stock), payable at the election of TCI, in
cash, a number of shares of Tele-Communications, Inc. Series A TCI Group
Common Stock having an equivalent value or a combination thereof, if during
the one-year period beginning on the effective date of the Merger, the
price of TCI Music Series A Common Stock does not equal or exceed $8.00 per
share for a period of at least 20 consecutive trading days. The terms of
the Merger Agreement, the Series Common Stock and the Rights are described
in detail in the accompanying Proxy Statement/Prospectus, and the full text
of the Merger Agreement (exclusive of Exhibits and Schedules) is included
as Appendix I thereto.

2. To transact such other business as may properly come before the
Special Meeting.

Holders of record of shares of Common Stock at the close of business on May 26,
1997, the record date for the Special Meeting, are entitled to notice of and to
vote at the Special Meeting.

To assure that your interests will be represented at the Special Meeting,
regardless of whether you plan to attend in person, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed
<PAGE> 6

return envelope, which requires no postage if mailed in the United States. This
action will not limit your right to vote in person if you wish to attend the
Special Meeting and vote personally.

By Order of the Board of Directors

Jerold H. Rubinstein
Chairman of the Board
and Chief Executive Officer

Los Angeles, California
, 1997

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY, WHETHER OR NOT YOU INTEND
TO BE PRESENT IN PERSON AT THE SPECIAL MEETING.

2
<PAGE> 7

THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN
ARE SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE OFFICIAL STATEMENT
IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS PRELIMINARY
OFFICIAL STATEMENT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH JURISDICTION.

SUBJECT TO COMPLETION, DATED JUNE 6, 1997

PROSPECTUS

TELE-COMMUNICATIONS, INC.
PROSPECTUS

14,896,648 RIGHTS TO SELL TCI MUSIC, INC.

SERIES A COMMON STOCK TO TELE-COMMUNICATIONS, INC.
---------------------

TCI MUSIC, INC.
PROSPECTUS

14,896,648 SHARES OF SERIES A COMMON STOCK

---------------------

THIS PROSPECTUS INCLUDES THE PROXY STATEMENT OF

DMX INC.

FOR SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD , 1997

---------------------

This Proxy Statement/Prospectus is being furnished to holders of common
stock of DMX Inc., a Delaware corporation ("DMX") in connection with the
solicitation of proxies by the Board of Directors of DMX (the "DMX Board") for
use at a special meeting of the stockholders of DMX, or any adjournment or
postponement thereof (the "Special Meeting"), called to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of
February 6, 1997, as amended by Amendment One to Merger Agreement dated May 29,
1997 (the "Merger Agreement"), by and among Tele-Communications, Inc., a
Delaware corporation ("TCI"), TCI Music, Inc., a Delaware corporation and wholly
owned subsidiary of TCI ("TCI Music"), TCI Merger Sub, a Delaware corporation
and wholly owned subsidiary of TCI Music ("Merger Sub"), and DMX.

The Merger Agreement provides, among other things, for the merger of Merger
Sub with and into DMX (the "Merger"). As a result of the Merger, stockholders of
DMX will become stockholders of TCI Music on the terms described in this Proxy
Statement/Prospectus. The Merger will become effective at the time of the filing
of a Certificate of Merger with the Secretary of State of the State of Delaware
(the "Effective Time"), which is currently expected to occur as soon as
practicable after the last of the conditions precedent to the Merger set forth
in the Merger Agreement has been satisfied, or where permissible, waived. See
"THE MERGER AGREEMENT."

In connection with the Merger, TCI and TCI Music will enter into a
Contribution Agreement (the Contribution Agreement"). Pursuant to the
Contribution Agreement, as of the Effective Time of the Merger: (i) TCI Music
will issue to TCI (as designee of certain of its indirect subsidiaries)
62,500,000 shares of Series B Common Stock, par value $.01 per share, of TCI
Music ("TCI Music Series B Common Stock") and a promissory note in the amount of
$40 million (the "TCI Music Note"); (ii) until December 31, 2006 certain
subsidiaries of TCI will transfer to TCI Music the right to receive all revenues
from sales of DMX music services to their residential and commercial
subscribers, net of an amount equal to 10% of the revenues from such sales to
residential subscribers and net of the license fees otherwise payable to DMX
(which will be a wholly owned subsidiary of TCI Music) for DMX music services
under affiliation agreements currently in effect ("Contributed Net DMX
Revenues"); (iii) TCI will cause all of the commercial tuners used for satellite
distribution of DMX music services then indirectly owned by it that are not in
service as of the Effective Time (the "Contributed Tuners") to be contributed to
TCI Music; and (iv) TCI will grant to each stockholder who becomes a stockholder
of TCI Music pursuant to the Merger, one right (a "Right") with respect to each
whole share of Series A Common Stock, $.01 par value per share, of TCI Music
("TCI Music Series A Common Stock") acquired by such stockholder in the Merger
pursuant to the terms of a Rights Agreement to be entered into among TCI, TCI
Music and The Bank of New York as Rights Agent (the "Rights Agreement"). Each
Right will entitle the holder to require TCI to purchase from such holder one
share of TCI Music Series A Common Stock for $8.00 per share (the equivalent of
$2.00 per share of DMX Common Stock), payable at the election of TCI, in cash, a
number of shares of TeleCommunications, Inc. Series A TCI Group Common Stock,
par value $1.00 per share ("Series A TCI Group Common Stock"), having an
equivalent value or a combination thereof, if during the one-year period
beginning on the effective date of the Merger, the price of TCI Music Series A
Common Stock does not equal or exceed $8.00 per share for a period of at least
20 consecutive trading days.

Upon consummation of the Merger, each outstanding share of common stock,
$.01 par value per share, of DMX ("DMX Common Stock") will be converted into the
right to receive (i) one-quarter share of TCI Music Series A Common Stock, (ii)
one Right with respect to each whole share of TCI Music Series A Common Stock
and (iii) cash in lieu of fractional shares of TCI Music Series A Common Stock
and Rights. The accompanying Proxy Statement/Prospectus provides you with
detailed information concerning the Merger Agreement (a copy of which (exclusive
of Exhibits and Schedules) is included herein as Appendix I), the TCI Music
Series A Common Stock and the Rights to be issued in connection with the Merger
and other information. Please give all of this information your careful
attention. See "THE MERGER AGREEMENT -- Consideration to be Received in the
Merger."

Immediately following the Merger (i) the outstanding shares of TCI Music
Series A Common Stock will represent approximately 19.25% of, and 2.3% of the
voting power related to, the total outstanding shares of TCI Music Series A
Common Stock and TCI Music Series B Common Stock (together, the "TCI Music
Common Stock"); and (ii) the outstanding shares of TCI Music Series B Common
Stock will represent approximately 80.75% of, and 97.7% of the voting power
related to, the total outstanding shares of TCI Music Common Stock. TCI
beneficially owns approximately 45.7% of the outstanding shares of DMX Common
Stock. Immediately following the Merger, TCI will beneficially own approximately
45.7% of the outstanding shares of TCI Music Series A Common Stock and 100% of
the outstanding TCI Music Series B Common Stock, which will collectively
represent approximately 89.6% of the outstanding shares of TCI Music Common
Stock and 98.7% of the voting power of the outstanding shares of TCI Music
Common Stock.

SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH CONSIDERATION OF THE MERGER AND THE
ISSUANCE OF THE TCI MUSIC SERIES A COMMON STOCK.

This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to the stockholders of DMX on or about , 1997.

THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Proxy Statement/Prospectus is , 1997.
<PAGE> 8

AVAILABLE INFORMATION

TCI and TCI Music have filed a registration statement on Form S-4 (together
with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), relating
to 14,896,648 shares of TCI Music Series A Common Stock and Rights that are
proposed to be issued in connection with the Merger to holders of outstanding
shares of DMX Common Stock. This Proxy Statement/Prospectus also constitutes the
Prospectuses of TCI and TCI Music filed as part of the Registration Statement.

This Proxy Statement/Prospectus does not include all of the information set
forth in the Registration Statement filed by TCI and TCI Music with the
Commission under the Act, as permitted by the rules and regulations of the
Commission. The Registration Statement, including any amendments, schedules and
exhibits filed or incorporated by reference as a part thereof, is available for
inspection and copying as set forth below. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated herein by reference as to
the contents of any contract or other document referred to herein or therein are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, and each such statement shall be deemed
qualified in its entirety by such reference.

TCI and DMX are each subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Commission also maintains a Web
site on the Internet that contains information regarding registrants (including
TCI and DMX) that file electronically with the Commission (http://www.sec.gov).
In addition, material filed by TCI and DMX should be available at the offices of
the National Association of Securities Dealers, Inc., Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES COVERED BY THIS PROXY STATEMENT/PROSPECTUS OR A
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF TCI OR TCI MUSIC SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. ALL INFORMATION HEREIN WITH RESPECT TO DMX HAS BEEN
PROVIDED BY DMX; ALL INFORMATION HEREIN WITH RESPECT TO TCI HAS BEEN PROVIDED BY
TCI; AND ALL INFORMATION HEREIN WITH RESPECT TO TCI MUSIC HAS BEEN PROVIDED BY
TCI MUSIC.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed by TCI with the Commission under
the Exchange Act are incorporated herein by reference and made a part hereof
(Commission File No. 0-20421):

(a) TCI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10-K/A (Amendment No. 1);

(b) TCI's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;

ii
<PAGE> 9

(d) The financial statements and notes thereto of VII Cable as of
December 31, 1994 and 1995 and for the years ended December 31, 1993, 1994
and 1995, which appear in TCI's Current Report on Form 8-K dated June 19,
1996; and

(e) Description of Capital Stock of TCI set forth in Item 1 of a
Registration Statement on Form 8-A filed by TCI on July 11, 1995 as amended
by Form 8-A/A (Amendment No. 1), dated September 29, 1995, Form 8-A/A
(Amendment No. 2) dated October 25, 1995 and in Item 4 of a Registration
Statement on Form 8-B filed by TCI on July 13, 1994 as amended by Form
8-B/A (Amendment No. 1) dated April 4, 1995, Form 8-B/A (Amendment No. 2)
dated August 11, 1995, Form 8B/A (Amendment No. 3) dated September 29, 1995
and Form 8-B/A (Amendment No. 4) dated October 25, 1995.

The following documents previously filed by DMX with the Commission under
the Exchange Act are incorporated herein by reference and made a part hereof
(Commission File No. 0-18806):

(a) DMX's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, as amended by Form 10-K/A (Amendment No. 1) and Form
10-K/A (Amendment No. 2);

(b) DMX's Quarterly Report on Form 10-Q for the quarter ended December
31, 1996; and

All documents filed by TCI and DMX pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the Special Meeting shall be deemed to be incorporated by reference
into this Proxy Statement/Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document that is or is deemed to be
incorporated by reference herein) modifies or supersedes such previous
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.

All information appearing in this Proxy Statement/Prospectus is qualified
in its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. TCI WILL PROVIDE COPIES OF THESE
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) RELATING TO TCI WITHOUT CHARGE,
TO ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED UPON
WRITTEN OR ORAL REQUEST. SUCH REQUESTS SHOULD BE DIRECTED TO STEPHEN M. BRETT,
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, TELECOMMUNICATIONS, INC., TERRACE
TOWER II, 5619 DTC PARKWAY, ENGLEWOOD, COLORADO 80111 (TELEPHONE (303)
267-5500). DMX WILL PROVIDE COPIES OF THESE DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
HEREIN) RELATING TO DMX WITHOUT CHARGE, TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN DELIVERED UPON WRITTEN OR ORAL REQUEST. SUCH
REQUESTS SHOULD BE DIRECTED TO J. WENDY KIM, CHIEF FINANCIAL OFFICER AND
CORPORATE SECRETARY, 11400 WEST OLYMPIC BOULEVARD, SUITE 1100, LOS ANGELES,
CALIFORNIA 90064. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUESTS SHOULD BE MADE BY , 1997.

iii
<PAGE> 10

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii
SUMMARY..................................................... 1
The Companies............................................. 1
The Special Meeting....................................... 1
The Merger................................................ 2
Interests of Certain Persons in the Merger................ 4
Appraisal Rights.......................................... 4
Certain Federal Income Tax Consequences................... 5
Comparative Market Price Data............................. 5
Relationship Between TCI and TCI Music After the Merger... 5
Dividend Policy........................................... 6
Transfer Agent............................................ 6
Risk Factors and Forward-Looking Statements............... 7
SUMMARY SELECTED FINANCIAL AND OTHER DATA................... 8
RISK FACTORS................................................ 12
THE SPECIAL MEETING......................................... 19
Time and Place; Purpose................................... 19
Voting Rights; Votes Required for Approval................ 19
Proxies................................................... 19
THE MERGER.................................................. 21
Background of the Merger.................................. 21
Recommendation of DMX Board; DMX's Reasons for the
Merger................................................. 25
TCI's Reasons for the Merger.............................. 27
Opinion of Financial Advisor Retained by the DMX Board.... 27
Interests of Certain Persons in the Merger................ 32
CERTAIN CONSEQUENCES OF THE MERGER.......................... 36
General................................................... 36
Certain Federal Income Tax Consequences................... 36
Accounting Treatment...................................... 39
THE MERGER AGREEMENT........................................ 39
General; Effective Time................................... 39
Consideration to be Received in the Merger................ 39
Conditions to the Merger.................................. 45
Governmental Approvals.................................... 45
Covenants................................................. 46
No Solicitation of Transactions........................... 47
Certain Personnel Matters................................. 47
Indemnification........................................... 48
Termination; Amendment and Waiver......................... 48
Certain Restrictions on Resale of TCI Music Series A
Common Stock........................................... 49
Expenses.................................................. 49
ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER..... 49
Contribution Agreement.................................... 50
TCI Loan............................................... 51
Services Agreement........................................ 51
Tax Sharing Agreement..................................... 52
</TABLE>

iv
<PAGE> 11

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BUSINESS OF TCI............................................. 53
BUSINESS OF DMX............................................. 54
General................................................... 54
CERTAIN INFORMATION CONCERNING TCI MUSIC.................... 54
General................................................... 54
Current DMX Distribution.................................. 55
Effect of Launch of Digital Compression Technology........ 55
CERTAIN LITIGATION.......................................... 57
DESCRIPTION OF TCI MUSIC CAPITAL STOCK...................... 57
TCI Music Common Stock.................................... 57
TCI Music Preferred Stock................................. 59
COMPARISON OF STOCKHOLDERS' RIGHTS.......................... 60
Authorized Capital Stock.................................. 60
Voting.................................................... 60
Special Meeting of Stockholders........................... 60
Directors................................................. 60
Removal of Directors...................................... 61
Vacancies on the Board of Directors....................... 61
Anti-Takeover Statute; Mergers, Consolidations and Sales
of Assets.............................................. 61
Amendments to Certificate of Incorporation................ 65
Amendments to Bylaws...................................... 65
Limitation of Liability of Directors and Officers......... 65
Preferred Stock........................................... 65
APPRAISAL RIGHTS............................................ 66
MANAGEMENT OF TCI MUSIC..................................... 68
Directors and Executive Officers.......................... 68
Committees of the Board................................... 69
Compensation of Directors................................. 69
Compensation of Executive Officers........................ 69
The TCI Music, Inc. 1997 Stock Incentive Plan............. 70
Other Arrangements........................................ 74
SECURITY OWNERSHIP OF TCI MUSIC AND DMX..................... 74
Security Ownership of TCI and TCI Music................... 74
Security Ownership of DMX................................. 78
CERTAIN TRANSACTIONS........................................ 81
LEGAL MATTERS............................................... 82
EXPERTS..................................................... 82
</TABLE>

INDEX TO FINANCIAL STATEMENTS

APPENDICES

Appendix I: Merger Agreement and Amendment One to Merger Agreement

Appendix II: Opinion of Houlihan Lokey Howard & Zukin
Appendix III: Section 262 of the Delaware General Corporation Act

Appendix IV: DMX Annual Report on Form 10-K and Quarterly Report on Form 10-Q
(to be filed by amendment)

v
<PAGE> 12

INDEX OF CERTAIN DEFINED TERMS

<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
1995 Act....................................................
Act.........................................................
Applicable Entity...........................................
ASCAP.......................................................
BMI.........................................................
Code........................................................
Commission..................................................
Company.....................................................
Component...................................................
Contributed Net DMX Revenues................................
Contributed Tuners..........................................
Contribution................................................
Contribution Agreement......................................
DBS.........................................................
DGCL........................................................
Digital Distribution........................................
DMX.........................................................
DMX Board...................................................
DMX Bylaws..................................................
DMX Charter.................................................
DMX Common Stock............................................
DMX Voting Stock............................................
Effective Time..............................................
Exchange Act................................................
Exchange Agent..............................................
Exercise Period.............................................
Hart-Scott-Rodino Act.......................................
Houlihan Lokey..............................................
Liberty.....................................................
Merger......................................................
Merger Agreement............................................
Merger Sub..................................................
Person......................................................
Put.........................................................
Record Date.................................................
Registration Statement......................................
Right.......................................................
Rights Agreement............................................
SARs........................................................
Satellite Distribution......................................
SESAC.......................................................
Section 262.................................................
Series A TCI Group Common Stock.............................
Services Agreement..........................................
Shaw........................................................
Special Committee...........................................
Special Meeting.............................................
Surviving Corporation.......................................
</TABLE>

vi
<PAGE> 13

<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Tax Sharing Agreement.......................................
TCI.........................................................
TCIC........................................................
TCI Board...................................................
TCI Loan....................................................
TCI Music...................................................
TCI Music Bylaws............................................
TCI Music Charter...........................................
TCI Music Component.........................................
TCI Music Note..............................................
TCI Music Preferred Stock...................................
TCI Music Series A Common Stock.............................
TCI Music Series B Common Stock.............................
TCI Music Voting Stock......................................
TCI-E.......................................................
TCI-E Merger................................................
Termination Date............................................
Tuner Distribution..........................................
UAPI........................................................
WTCI........................................................
</TABLE>

vii
<PAGE> 14

SUMMARY

The following summary is intended only to highlight certain information
contained elsewhere in this Proxy Statement/Prospectus. This summary is not
intended to be complete and is qualified in its entirety by the more detailed
information contained elsewhere in this Proxy Statement/Prospectus, the
Appendices hereto and the documents incorporated by reference or otherwise
referred to herein. Stockholders are urged to review this entire Proxy
Statement/Prospectus carefully, including the Appendices hereto.

THE COMPANIES

TCI. TCI, through its subsidiaries and affiliates, is principally engaged
in the construction, acquisition, ownership and operation of cable television
systems and the provision of satellite-delivered video entertainment,
information and home shopping programming services to various distribution
media, principally cable television systems. TCI also has interests in cable and
telecommunications operations and television programming in certain
international markets, as well as investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies. TCI believes that, measured by the number of
basic subscribers, it is the largest provider of cable television services in
the United States. TCI is a Delaware corporation and was incorporated in 1994.
Its executive offices are located at Terrace Tower II, 5619 DTC Parkway,
Englewood, Colorado 80111-3000; telephone (303) 267-5500. See "BUSINESS OF TCI."

DMX. DMX (formerly International Cablecasting Technologies Inc.) is
primarily engaged in programming, distributing and marketing a premium digital
music service, Digital Music Express(R) (DMX(R)), which provides continuous
24-hours-per-day commercial free, CD quality music programming. DMX is a
Delaware corporation and its executive offices are located at 11400 West Olympic
Boulevard, Suite 1100, Los Angeles, California 90064; telephone (310) 444-1744.
See "BUSINESS OF DMX."

TCI Music. TCI Music was incorporated in Delaware in January 1997 and is
currently a wholly owned subsidiary of TCI. Since its formation, TCI Music has
not conducted any significant activities other than those incident to its
formation, the Contribution Agreement, the Merger Agreement and the preparation
of this Proxy Statement/Prospectus. Following consummation of the Merger, TCI
Music's business will consist principally of the business of DMX prior to the
Merger. See "BUSINESS OF DMX." Immediately following the Merger (i) the
outstanding shares of TCI Music Series A Common Stock will represent
approximately 19.25% of, and 2.3% of the voting power related to, the total
outstanding shares of the TCI Music Series A Common Stock; and (ii) the
outstanding shares of TCI Music Series B Common Stock will represent
approximately 80.75% of, and 97.7% of the voting power related to, the total
outstanding shares of the TCI Music Common Stock. TCI will beneficially own
approximately 45.7% of the outstanding shares of TCI Music Series A Common Stock
and all of the outstanding shares of TCI Music Series B Common Stock, which will
collectively represent approximately 89.6% of the outstanding shares of TCI
Music Common Stock and 98.7% of the voting power of the outstanding shares of
TCI Music Common Stock. The executive offices of TCI Music are located at
Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000; telephone
(303) 267-5500. See "CERTAIN INFORMATION CONCERNING TCI MUSIC."

THE SPECIAL MEETING

The Special Meeting will be held at DMX's executive offices located at
11400 West Olympic Boulevard, Suite 1100, Los Angeles, California, on
, 1997, starting at 10:00 a.m., local time. At the Special Meeting, holders of
DMX Common Stock will be asked to approve and adopt the Merger Agreement, which
is summarized below and described in more detail elsewhere in this Proxy
Statement/Prospectus. See "THE MERGER AGREEMENT."

Holders of record of DMX Common Stock at the close of business on May 26,
1997 (the "Record Date") have the right to receive notice of and to vote at the
Special Meeting. Each share of DMX Common Stock is entitled to one vote on each
matter that is properly presented to stockholders for a vote at the Special
Meeting under the Amended and Restated Certificate of Incorporation of DMX, as
amended (the "DMX

<PAGE> 15

Charter"), and the Delaware General Corporation Law ("DGCL"). Pursuant to the
DGCL, the affirmative vote, in person or by proxy, of the holders of record of a
majority of the outstanding shares of DMX Common Stock entitled to vote at the
Special Meeting is required to approve and adopt the Merger Agreement. As of the
Record Date, (i) DMX's directors and executive officers beneficially owned
9,607,561 outstanding shares of DMX Common Stock (exclusive of any shares
issuable upon exercise of stock options exercisable on such date), representing
approximately 16.6% of the outstanding shares of DMX Common Stock on such date
and (ii) affiliates of TCI owned 27,249,575 outstanding shares of DMX Common
Stock, representing approximately 45.7% of the outstanding shares of DMX Common
Stock. Such persons, who together beneficially owned as of the Record Date
approximately 62.3% of the outstanding shares of DMX Common Stock, have
indicated they intend to vote all of their shares of DMX Common Stock in favor
of the Merger Agreement and the Merger. See "THE SPECIAL MEETING -- Voting
Rights; Votes Required for Approval."

If DMX's directors, executive officers and TCI's affiliates vote their
shares as they have indicated, the Merger Agreement will be approved and adopted
at the Special Meeting irrespective of the vote of any other stockholder of DMX.

Holders of shares of DMX Common Stock who comply with the applicable
procedural requirements of the DGCL are entitled to appraisal rights with
respect to their shares. A vote in favor of the Merger Agreement by a DMX
stockholder will preclude such stockholder from any right to exercise appraisal
rights under the DGCL, and may, under applicable law, estop such stockholder
from later challenging the Merger on fairness grounds. See "APPRAISAL RIGHTS"
in, and Appendix III to, the accompanying Proxy Statement/Prospectus.

THE MERGER

General; Consideration to be Received by DMX Stockholders. Pursuant to the
Merger Agreement, Merger Sub, an indirect wholly owned subsidiary of TCI Music,
will be merged with and into DMX with DMX as the surviving corporation of the
Merger (DMX or the "Surviving Corporation").

In connection with the Merger, TCI and TCI Music will enter into the
Contribution Agreement. Pursuant to the Contribution Agreement, effective as of
the closing of the Merger: (i) TCI Music will issue to TCI (as designee of
certain of its indirect subsidiaries) 62,500,000 shares of TCI Music Series B
Common Stock and a promissory note in the amount of $40,000,000, bearing
interest in the amount of 10% per annum, which interest will be waived by TCI if
the principal is paid in full at or before maturity, which will be 180 days
after the closing of the Merger (the "TCI Music Note"); (ii) until December 31,
2006 certain subsidiaries of TCI will transfer to TCI Music the Contributed Net
DMX Revenues; (iii) TCI will contribute the Contributed Tuners; and (iv) TCI
will grant to each stockholder who becomes a stockholder of TCI Music pursuant
to the Merger, one Right with respect to each whole share of TCI Music Series A
Common Stock acquired by such stockholder in the Merger pursuant to the terms of
the Rights Agreement. Each Right will entitle the holder to require TCI to
purchase from such holder one share of TCI Music Series A Common Stock for $8.00
per share (the equivalent of $2.00 per share of DMX Common Stock), subject to
reduction by the aggregate amount per share of any dividend and certain other
distributions, if any, made by TCI Music to its stockholders, and payable at the
election of TCI, in cash, a number of shares of Series A TCI Group Common Stock
having an equivalent value or a combination thereof, if during the one-year
period beginning on the effective date of the Merger, the price of TCI Music
Series A Common Stock does not equal or exceed $8.00 per share for a period of
at least 20 consecutive trading days. The foregoing transactions by TCI and
certain of its subsidiaries pursuant to the Contribution Agreement are referred
to as the "Contribution." Upon the occurrence of certain events, each Right will
also represent the additional right to require TCI to purchase equity interests
of another entity or entities. If the Rights become exercisable, they will be
exercisable only during the 30-day period commencing on the date of the first
anniversary of the closing of the Merger and, unless exercised, will expire and
cease to exist at the end of such period. See "ARRANGEMENTS BETWEEN TCI AND TCI
MUSIC AFTER THE MERGER -- Contribution Agreement" and "THE MERGER
AGREEMENT -- Summary of Rights Agreement."

2
<PAGE> 16

Upon consummation of the Merger, each outstanding share of DMX Common Stock
will be converted into the right to receive (i) one-quarter share of TCI Music
Series A Common Stock, (ii) one Right with respect to each whole share of TCI
Music Series A Common Stock and (iii) cash in lieu of fractional shares of TCI
Music Series A Common Stock and Rights. See "THE MERGER
AGREEMENT -- Consideration to be Received in the Merger -- General" and
"-- Summary of Rights Agreement." For a description of the TCI Music Series A
Common Stock, see "DESCRIPTION OF TCI MUSIC CAPITAL STOCK." For a summary of
differences between the rights of holders of TCI Music Series A Common Stock and
the rights of holders of DMX Common Stock, see "COMPARISON OF STOCKHOLDERS'
RIGHTS."

As holders of shares of DMX Common Stock, Liberty DMX, Inc., an indirect
wholly owned subsidiary of TCI, United Artists Programming International, Inc.,
an indirect majority-owned subsidiary of TCI ("UAPI"), TCI Pacific
Communications, Inc., an indirect wholly owned subsidiary of TCI, and TCI Music
Holdings, Inc., a wholly owned subsidiary of TCI, will each receive one-quarter
share of TCI Music Series A Common Stock and one Right with respect to each
whole share of TCI Music Series A Common Stock in exchange for each share of DMX
Common Stock they own at the Effective Time. If the Merger had occurred as of
March 31, 1997 an aggregate of 6,812,393 shares of TCI Music Series A Common
Stock and 6,812,393 Rights would have been issued to entities controlled by TCI
in exchange for shares of DMX Common Stock held by such entities. In addition,
certain subsidiaries of TCI will be issued 62,500,000 shares of TCI Music Series
B Common Stock, and TCI Music, as obligor, will issue TCI, as obligee, the TCI
Music Note. TCI Music expects to refinance the TCI Music Note with proceeds of a
new long-term debt financing. No assurance can be given that TCI Music will be
able to obtain such financing on terms acceptable to TCI Music. See
"ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER -- Contribution
Agreement."

Opinion of Financial Advisor. Houlihan Lokey Howard & Zukin ("Houlihan
Lokey") was retained by a special committee of independent directors of the DMX
Board (the "Special Committee") to act as its financial advisor and to render an
opinion as to the fairness to DMX's public stockholders of the consideration to
be received by such stockholders in connection with the Merger. On January 20,
1997, prior to the execution of the Merger Agreement, Houlihan Lokey rendered to
the DMX Board an oral opinion, subsequently confirmed in writing on February 6,
1997, to the effect that, as of the date of such opinion and based upon and
subject to certain matters, the consideration to be received in the Merger by
holders of DMX Common Stock was fair, from a financial point of view, to such
holders.

DMX stockholders are urged to read carefully the opinion of Houlihan Lokey,
which is set forth in its entirety as Appendix II to this Proxy
Statement/Prospectus, for a description of the procedures followed, the factors
considered and the assumptions made by Houlihan Lokey in rendering its opinion.
See "THE MERGER -- Opinion of Financial Advisor."

Recommendation of the DMX Board; DMX's Reasons for the Merger. On January
20, 1997, the Special Committee unanimously recommended and the DMX Board (other
than Messrs. Hindery and Fisher, who did not vote on the Merger, and Mr.
Sparkman, who did not attend the meeting (each of whom have been recommended to
the DMX Board by TCI)) approved the Merger Agreement and the Merger, and
determined that the terms of the Merger Agreement are fair to, and that the
Merger is in the best interests of, DMX and its stockholders and therefore
recommends that the holders of DMX Common Stock vote FOR approval of the Merger
Agreement. The primary factors considered and relied upon by the DMX Board in
reaching its recommendation are described in "THE MERGER -- Recommendation of
the DMX Board; DMX's Reasons for the Merger." For a discussion of the interests
of certain members of DMX's management and the DMX Board in the Merger, see "THE
MERGER -- Interests of Certain Persons in the Merger."

TCI's Reasons for the Merger. The Board of Directors of TCI ("TCI Board")
has unanimously approved the Merger Agreement. The primary factors considered
and relied upon by the TCI Board in reaching its decision to approve the Merger
are described in "THE MERGER -- TCI's Reasons for the Merger."

Conditions to the Merger. The respective obligations of DMX and TCI and
TCI Music to effect the Merger are subject to the satisfaction of certain
conditions, including (i) the Merger Agreement and the
3
<PAGE> 17

transactions contemplated by the Merger Agreement shall have been duly approved
by the holders of DMX Common Stock; (ii) no more than 5% of the number of DMX
stockholders of record have demanded appraisal rights in accordance with Section
262 of the Delaware General Corporation Law, attached as Appendix III to this
Proxy Statement/Prospectus; (iii) the waiting period applicable to the
consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "Hart-Scott-Rodino Act") shall have expired, or
been earlier terminated and any other notices or approvals or consents required
by or of governmental entities, to the extent required to be obtained under the
Merger Agreement, shall have been either filed or obtained; and (iv) the
Registration Statement shall have become effective in accordance with the
provisions of the Act and any necessary state securities law approvals shall
have been obtained and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and remain in
effect. In addition, the obligations of DMX, TCI and TCI Music to effect the
Merger are subject to the satisfaction of certain other conditions. See "THE
MERGER AGREEMENT -- Conditions to the Merger," and "Governmental Approvals" and
"APPRAISAL RIGHTS."

Termination of the Merger Agreement. The Merger Agreement is subject to
termination at the option of either DMX or TCI (i) if the Merger has not been
consummated on or before July 31, 1997, so long as the party seeking to
terminate the Merger Agreement has not breached its obligations under the Merger
Agreement in any material respect or (ii) if the stockholders of DMX shall not
have approved the Merger by such date. The Merger Agreement also is subject to
termination by either TCI or DMX prior to such time upon the occurrence of
certain events. See "THE MERGER AGREEMENT -- Termination; Amendment and Waiver."

Indemnification. The Merger Agreement provides that TCI Music will cause
the Surviving Corporation to indemnify, and should the Surviving Corporation
fail to or be unable to do so, TCI Music will indemnify, the directors and
officers of DMX for a period after the Effective Time to the fullest extent
permitted by the DGCL, the DMX Charter and the bylaws of DMX (the "DMX Bylaws")
in effect on the date of the Merger Agreement. See "THE MERGER
AGREEMENT -- Indemnification."

ACCOUNTING TREATMENT

The Merger and Contribution will be accounted for using the purchase method
of accounting except that any TCI Music Common Stock and any Rights issued to
entities controlled by TCI will be recorded at carryover basis. See the
condensed pro forma combined financial statements and notes thereto of TCI Music
appearing under the heading "INDEX TO FINANCIAL STATEMENTS."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendation of the DMX Board with respect to the
Merger, stockholders should be aware that certain members of the DMX Board and
of DMX management have certain interests in the Merger that are in addition to
or different from the interests of the stockholders of DMX generally. See "THE
MERGER -- Interests of Certain Persons in the Merger." The DMX Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement.

APPRAISAL RIGHTS

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Contribution and Merger are intended to qualify as transactions
described in Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code"). See "CERTAIN CONSEQUENCES OF THE MERGER -- Certain Federal Income Tax
Consequences."

COMPARATIVE MARKET PRICE DATA

DMX. The DMX Common Stock is quoted on the OTC Bulletin Board. From May
28, 1996 to April 8, 1997, the DMX Common Stock was quoted in the NASDAQ
SmallCap Market under the symbol "TUNE." Until May 28, 1996, the DMX Common
Stock was traded on the NASDAQ National Market System.

The following table sets forth the range of the high and low sales prices
of DMX Common Stock for the periods indicated. DMX's fiscal year ends on
September 30.

<TABLE>
<CAPTION>
COMMON STOCK HIGH LOW
- ------------ ---- ---
<S> <C> <C>
Year ended September 30, 1995
First Quarter............................................. 3 11/2
Second Quarter............................................ 4 27/16
Third Quarter............................................. 33/8 2
Fourth Quarter............................................ 35/16 21/8
Year ended September 30, 1996
First Quarter............................................. 3 21/8
Second Quarter............................................ 27/8 13/4
Third Quarter............................................. 21/4 13/16
Fourth Quarter............................................ 115/16 9/16
Year ending September 30, 1997
First Quarter............................................. 15/16 13/16
Second Quarter............................................ 113/16 31/32
Third Quarter (to , 1997).......................
</TABLE>

TCI Music. There is no established public trading market for TCI Music
Common Stock. Only one share of capital stock of TCI Music is issued and
outstanding, which has been issued to TCI. The TCI Music Series A Common Stock
has been approved by NASDAQ for inclusion for trading on its SmallCap Market
upon consummation of the Merger, subject to the condition that the TCI Music
Series A Common Stock trade at a price of $3.00 or more for the first five
trading days after the Merger. See "CERTAIN INFORMATION CONCERNING TCI MUSIC."

On August 30, 1996, the last full trading day prior to the public
announcement of TCI's Merger proposal, the high and low sales prices on the
NASDAQ SmallCap Market for the DMX Common Stock were $1 1/8 and $1 1/16,
respectively. On January 21, 1997, the last full trading day before DMX publicly
announced that the DMX Board had approved the Merger, the high and low sales
prices on the NASDAQ SmallCap Market for shares of DMX Common Stock were
$1 17/64 and $1 13/32, respectively. On February 6, 1997, the last full trading
day before TCI and DMX publicly announced that they had entered into the Merger
Agreement, the high and low sales prices on the NASDAQ SmallCap Market for
shares of DMX Common Stock were $1 11/16. On , 1997, the last full
trading day before the date of this Proxy Statement/Prospectus, the high and low
sales prices on the OTC Bulletin Board for shares of DMX Common Stock were
$ and $ , respectively. Stockholders are urged to obtain
current market quotations for the DMX Common Stock.

RELATIONSHIP BETWEEN TCI AND TCI MUSIC AFTER THE MERGER

TCI Music is currently a wholly owned subsidiary of TCI. Immediately
following the Merger (i) the outstanding shares of TCI Music Series A Common
Stock will represent approximately 19.25% of, and 2.3% of the voting power
related to, the total outstanding shares of the TCI Music Common Stock; and (ii)
the

5
<PAGE> 19

outstanding shares of TCI Music Series B Common Stock will represent
approximately 80.75% of, and 97.7% of the voting power related to, the total
outstanding shares of the TCI Music Common Stock. TCI will beneficially hold
approximately 45.7% of the outstanding shares of TCI Music Series A Common Stock
and all of the outstanding shares of TCI Music Series B Common Stock, which will
collectively represent approximately 89.6% of the outstanding shares of TCI
Music Common Stock and 98.7% of the voting power of the outstanding shares of
TCI Music Common Stock. Under agreements with TCI Music, TCI will provide
certain administrative, legal, financial, treasury, accounting, tax and other
services to TCI Music and will make available certain of its employee benefit
plans to TCI Music's employees. In addition, TCI and TCI Music will enter into a
number of intercompany agreements covering such matters as the use of services
and allocation of income tax liabilities.

If the Contribution had been effective as of January 1, 1996, the total
amount of Contributed Net DMX Revenues for the three months ended March 31, 1997
and the year ended December 31, 1996 would have been approximately $4.4 million
and $16.4 million, respectively. Additionally, the book value of the Contributed
Tuners at March 31, 1997 was approximately $4.5 million. The launch by TCI and
other cable operators of video and audio programming using digital compression
technology may materially reduce the Contributed Net DMX Revenues and subscriber
fee revenues of TCI Music. See "RISK FACTORS -- Effect of Launch of Digital
Compression Technology on Contributed Net DMX Revenues and Other Revenues" and
"CERTAIN INFORMATION CONCERNING TCI MUSIC -- Effect of Launch of Digital
Compression Technology."

Pursuant to the Contribution Agreement, effective as of the closing of the
Merger, TCI Music, as obligor, will issue to TCI the TCI Music Note in the
principal amount of $40,000,000 payable to the order of TCI, as obligee, bearing
interest at 10% per annum, which interest will be waived by TCI if the principal
is paid in full at or before maturity, which will be 180 days after the closing
of the Merger. TCI Music expects to refinance the TCI Music Note with proceeds
of a new long-term debt financing. No assurance can be given that TCI Music will
be able to obtain such financing on terms acceptable to TCI Music.

In addition, TCI and DMX have entered into a Loan and Security Agreement,
as amended (the "TCI Loan"), pursuant to which TCI has agreed to make loans to
DMX from time to time until August 31, 1997 up to an aggregate outstanding
principal amount of $3,500,000. Such loans are due on or before June 1, 2000 and
accrue interest at a rate of 12.5% per annum. As of June 4, 1997, TCI had made
approximately $2,420,000 in loans to DMX under the TCI Loan.

See "RISK FACTORS -- Relationship with TCI," "RISK FACTORS -- Disparate
Voting Rights; Control by TCI," "RISK FACTORS -- Potential Conflicts of
Interest" and "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER."

DIVIDEND POLICY

TCI Music does not anticipate declaring and paying cash dividends on the
TCI Music Common Stock in the foreseeable future. The decision whether to apply
any legally available funds to the payment of dividends on TCI Music Common
Stock will be made by the Board of Directors of TCI Music from time to time in
the exercise of its business judgment, taking into account TCI Music's financial
conditions, results of operations, existing and proposed commitments for use of
TCI Music's funds and other relevant factors. See "DESCRIPTION OF TCI MUSIC
CAPITAL STOCK -- Common Stock -- Dividends."

TRANSFER AGENT

The transfer agent for the TCI Music Common Stock will be The Bank of New
York.
6
<PAGE> 20

RISK FACTORS AND FORWARD-LOOKING STATEMENTS

In reviewing this Proxy Statement/Prospectus, stockholders should carefully
consider the matters described under the heading "Risk Factors" beginning on
page 12.

This Proxy Statement/Prospectus contains statements relating to future
results of DMX and TCI Music that are "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995. When used in this Proxy
Statement/Prospectus, the words "estimate," "project," "intend," "expect" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Such risks
and uncertainties include those detailed from time to time in the filings of DMX
with the Commission and those risks and uncertainties described under the
heading "Risk Factors" appearing on page 12. The "safe harbor" for
forward-looking statements provided by the Private Securities Litigation Reform
Act of 1995 will not be available to TCI Music with respect to the offering of
TCI Music Series A Common Stock made hereby.

7
<PAGE> 21

SUMMARY SELECTED FINANCIAL AND OTHER DATA

CERTAIN COMPARATIVE PER SHARE DATA

The following table sets forth certain comparative data related to book
value (deficit) and loss per common share (i) on a historical basis for TCI
Music and DMX, (ii) on a pro forma basis for TCI Music and (iii) on a pro forma
equivalent basis for DMX. The pro forma information shown is derived from the
condensed pro forma combined financial statements of TCI Music presented
elsewhere herein, which give effect to the Merger and Contribution as if such
events had occurred as of March 31, 1997 with respect to the pro forma balance
sheet data. The pro forma operating data give effect to the Merger and
Contribution as if such events had occurred as of January 1, 1996. The
information shown below should be read in conjunction with the historical
financial statements and notes thereto of DMX, which are included in Appendix IV
of this Proxy Statement/Prospectus, and the condensed pro forma financial
statements and notes thereto of TCI Music appearing elsewhere herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "INDEX TO FINANCIAL
STATEMENTS." DMX did not pay any cash dividends on its common stock during the
three months ended March 31, 1997 and the year ended December 31, 1996. See
"DESCRIPTION OF TCI MUSIC CAPITAL STOCK -- Dividends."

<TABLE>
<CAPTION>
DMX
TCI MUSIC DMX TCI MUSIC PRO FORMA
HISTORICAL(1) HISTORICAL PRO FORMA EQUIVALENTS(4)
------------- ---------- --------- --------------
<S> <C> <C> <C> <C>
Book value (deficit) per common share as of
March 31, 1997............................. $1.00 $ (.15) $ .53(2) $ .13
Primary and fully diluted loss attributable
to common stockholders per common and
common equivalent share:
Three months ended March 31, 1997.......... -- (.06) (.08)(3) (.02)
Year ended December 31, 1996............... -- (.57) (.54)(3) (.14)
</TABLE>

- ---------------

(1) TCI Music was formed on January 21, 1997. Since its formation TCI Music has
not conducted any significant activities other than those incident to its
formation, the Contribution Agreement and the Merger Agreement.

(2) The pro forma book value per common share is based upon 14,896,648 shares of
TCI Music Series A Common Stock and 62,500,000 shares of TCI Music Series B
Common Stock. Such amounts represent the number of shares that would have
been issued by TCI Music if the Merger and Contribution had occurred on
March 31, 1997.

(3) The pro forma net loss per share calculation is based upon 77,396,648 and
75,923,829 weighted average shares outstanding for the three months ended
March 31, 1997 and the year ended December 31, 1996, respectively. Such
amounts represent the number of weighted average shares of TCI Music that
would have been outstanding if the Merger and Contribution had occurred on
January 1, 1996.

(4) DMX pro forma equivalents are determined by multiplying TCI Music pro forma
book value and pro forma loss per share times the 0.25 conversion ratio. See
"THE MERGER AGREEMENT -- Consideration to be Received in the
Merger -- General."

SELECTED HISTORICAL FINANCIAL DATA

DMX. The following table sets forth selected historical financial data for
DMX and subsidiaries (i) as of March 31, 1997 and for each of the six-month
periods ended March 31, 1997 and 1996 and (ii) as of and for each of the years
in the five-year period ended September 30, 1996. The selected financial data as
of March 31, 1997 and for the six-month periods ended March 31, 1997 and 1996
are derived from the unaudited financial statements appearing in Appendix IV
which have been prepared on the same basis as the audited financial information,
and in the opinion of management, contain all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position and results of operations of DMX as of March 31, 1997 and for the
six-month periods ended March 31, 1997 and 1996. The following information is
qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements and notes thereto of DMX, included as Appendix
IV to this Proxy Statement/Prospectus and with the condensed pro forma combined
financial statements and notes thereto of TCI Music and TCI appearing elsewhere
in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "INDEX TO FINANCIAL STATEMENTS."

8
<PAGE> 22

DMX INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------- -------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue...................... $ 10,801,467 7,632,763 17,326,603 12,773,384 9,377,059 4,792,527 773,861
Operating, selling, general
and administrative
expenses................... (17,390,149) (12,672,247) (30,460,622) (22,166,898) (20,558,849) (17,726,103) (27,306,904)
Depreciation and
amortization............... (1,193,713) (805,762) (1,883,415) (1,341,775) (1,065,666) (790,229) (565,694)
Loss on disposal of
DMX-Europe N.V............. -- -- (7,153,278) -- -- -- --
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net operating loss........... (7,782,395) (5,845,246) (22,170,712) (10,735,289) (12,247,456) (13,723,805) (27,098,737)
Equity earnings in
Galactic/TEMPO............. 172,003 31,241 197,227 306,640 223,852 143,622 283,889
Equity loss in DMX-Europe
N.V........................ -- (9,486,767) (11,852,650) (13,271,599) (4,746,239) (3,553,932) --
Interest income (expense),
net........................ (220,004) (25,409) (188,507) 73,540 38,168 85,943 482,974
Other income (expense),
net........................ (601) 137,080 159,865 547,179 226,461 640,197 (108,530)
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net loss............. $ (7,830,997) (15,189,101) (33,854,777) (23,079,529) (16,505,214) (16,407,975) (26,440,404)
============ =========== =========== =========== =========== =========== ===========
Loss per share....... $ (.13) (.35) (0.68) (0.60) (0.48) (0.52) (0.90)
============ =========== =========== =========== =========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF SEPTEMBER 30,
MARCH 31, ------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ 1992
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Current assets...................... $ 8,144,450 7,719,069 12,122,658 9,650,493 3,102,741 10,972,178
Investments in Galactic/TEMPO Sound
Partnership....................... 526,159 504,156 456,929 450,289 476,448 332,826
Property and equipment, net of
accumulated depreciation.......... 5,193,212 5,893,988 4,336,378 4,443,995 3,225,093 2,388,227
Goodwill, net of accumulated
amortization...................... 4,275,264 4,535,658 -- -- 15,459 41,960
Other assets, net of accumulated
depreciation...................... 108,271 99,148 166,419 55,169 54,000 219,141
------------ ------------ ------------ ------------ ------------ ------------
Total assets................ $ 18,247,356 18,752,019 17,082,384 14,599,946 6,873,741 13,954,332
============ ============ ============ ============ ============ ============
Current liabilities................. $ 22,228,834 16,636,107 3,250,042 3,405,082 3,714,835 3,198,719
Royalty payable..................... 1,773,275 1,773,275 1,251,983 713,421 267,770 37,162
Deferred revenue.................... 258,531 295,461 376,395 418,540 -- --
Capital lease obligation............ 1,170,242 1,401,426 1,446,085 1,502,990 -- --
Notes payable....................... 1,867,791 -- -- 201,090 382,545 --
Investment in DMX-Europe N.V........ -- -- 15,886,116 8,175,171 3,428,932 --
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities........... 27,298,673 20,106,269 22,210,621 14,416,294 7,794,082 3,235,881
Net stockholders' (deficit)
equity............................ (9,051,317) (1,354,250) (5,128,237) 183,652 (920,341) 10,718,451
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficit)................. $ 18,247,356 18,752,019 17,082,384 14,599,946 6,873,741 13,954,332
============ ============ ============ ============ ============ ============
</TABLE>

9
<PAGE> 23

TCI. The following table sets forth (i) selected historical data for TCI
as of March 31, 1997 and for the three-month periods ended March 31, 1997 and
1996, and as of and for each of the five fiscal years in the period ended
December 31, 1996 and (ii) selected pro forma data as of March 31, 1997 and for
the three months ended March 31, 1997 and the year ended December 31, 1996. The
pro forma summary balance sheet data assumes the Merger and Contribution had
occurred as of March 31, 1997. The pro forma summary of operations data for the
three months ended March 31, 1997 assumes that the Merger and Contribution had
occurred as of January 1, 1996 and the pro forma summary of operations data for
the year ended December 31, 1996 assumes that the Merger and Contribution, the
distribution of all of the outstanding common stock of TCI Satellite
Entertainment, Inc. and the acquisition of all of the common stock of a
subsidiary of Viacom, Inc. had occurred as of July 1, 1996. The pro forma data
does not purport to be indicative of the results of operations or financial
position that would have been obtained had such transactions occurred on such
dates. The following information is qualified in its entirety by, and should be
read in conjunction with, the consolidated financial statements and notes
thereto of TCI incorporated by reference into this Proxy Statement/Prospectus
and the Condensed Pro Forma Combined Financial Statements and notes thereto of
TCI, appearing elsewhere herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "INDEX TO FINANCIAL STATEMENTS."

<TABLE>
<CAPTION>
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
--------- ------------- --------- -----------------------------------------------
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
--------- ----- ----- --------- ------ ------ ----- ----- -----
AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS DATA:
Revenue............................ $1,833 1,827 1,861 7,943 8,022 6,506 4,682 3,977 3,463
Operating income................... $ 343 349 172 794 632 542 788 916 864
Interest expense................... $ (289) (289) (261) (1,171) (1,096) (1,010) (785) (731) (718)
Share of losses of affiliates,
other than Liberty Media
Corporation, net................. $ (154) (156) (115) (459) (473) (193) (112) (76) (105)
Gain (loss) on disposition of
assets........................... $ 19 19 10 1,593 1,593 49 (10) 42 9
Earnings (loss) from continuing
operations....................... $ (62) (58) (121) 306 278 (171) 62 (5) 8
Net earnings (loss) attributable to
common stockholders:
TCI Class A and Class B common
stock.......................... $ -- -- -- -- -- (71)(b) 54 (7) (22)
TCI Group Stock(a)............... (88) (84) (145) (793) (813) (107)(c) -- -- --
Liberty Group Stock(a)........... 16 16 15 1,064 1,056 (27)(c) -- -- --
------ ----- ----- ------ ------ ------ ----- ----- -----
$ (72) (68) (130) 271 243 (205) 54 (7) (22)
====== ===== ===== ====== ====== ====== ===== ===== =====
Primary earnings (loss) from
continuing operations
attributable to common
stockholders per common and
common equivalent share:
TCI Class A and Class B common
stock.......................... $ -- -- -- -- -- (.11)(b) .10 (.02) (.01)
TCI Group Stock.................. (.13) (.12) (.22) (1.19) (1.22) (.16)(c) -- -- --
Liberty Group Stock.............. .06 .06 .06 4.00 3.97(d) (.11)(c)(d) -- -- --
Fully diluted earnings (loss) from
continuing operations
attributable to common
stockholders per common and
common equivalent share:
TCI Class A and Class B common
stock.......................... -- -- -- -- -- (.11)(b) .10 (.02) (.01)
TCI Group Stock.................. (.13) (.12) (.22) (1.19) (1.22) (.16)(c) -- -- --
Liberty Group Stock.............. .06 .06 .06 3.91 3.88(d) (.11)(c)(d) -- -- --
</TABLE>

- ---------------

(a) On August 3, 1995, the stockholders of TCI authorized the TCI Board to issue
two new series of stock ("Liberty Group Stock") which reflect the separate
performance of TCI's business which produces and distributes cable
television programming services ("Liberty Media Group"). Additionally, the
stockholders of TCI approved the redesignation of the previously authorized
TCI Class A and Class B common stock into Series A TCI Group and Series B
TCI Group common stock ("TCI Group Stock"). On August 10, 1995, TCI
distributed, in the form of a dividend, one share of Liberty Group Stock for
each
10
<PAGE> 24

four shares of TCI Group Stock owned. Such distribution (the "Distribution")
represented one hundred percent of the equity value attributable to Liberty
Media Group. The TCI Group Stock reflects the performance of those
businesses of the Company not attributed to Liberty Media Group.
(b) From January 1, 1995 through the date of the Distribution.
(c) From the date of the Distribution through December 31, 1995.
(d) Effective January 13, 1997, TCI issued a stock dividend to holders of
Liberty Group Stock consisting of one share of Series A Liberty Group Stock
for every two shares of Series A Liberty Group Stock owned and one share of
Series A Liberty Group Stock for every two shares of Series B Liberty Group
Stock owned (the "Liberty Group Stock Dividend"). Amount has been adjusted
to give effect to the Liberty Group Stock Dividend.

<TABLE>
<CAPTION>
PRO
FORMA HISTORICAL
------- -----------------------------------------------------
MARCH 31, DECEMBER 31,
---------------- --------------------------------------------
1997 1997 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------ ------
AMOUNTS IN MILLIONS
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Property and equipment, net................. $ 7,693 7,688 7,528 7,409 5,876 4,935 4,562
Franchise costs, net........................ $17,004 15,911 15,436 12,230 9,444 9,197 9,300
Total assets................................ $30,815 30,676 30,244 25,577 19,276 16,527 16,315
Debt........................................ $15,052 15,049 14,926 13,211 11,162 9,900 10,285
Minority interests in equity of consolidated
subsidiaries.............................. $ 1,409 1,349 1,493 651 429 285 280
Redeemable preferred stock.................. $ 655 655 658 478 170 18 110
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely subordinated debt
securities of TCI Communications, Inc..... $ 1,502 1,502 1,000 -- -- -- --
Stockholders' equity........................ $ 4,422 4,422 4,253 4,550 2,655 2,116 1,728
Shares outstanding (net of shares held by
subsidiaries):
Class A common stock...................... -- -- -- -- 491 403 382
Class B common stock...................... -- -- -- -- 85 47 48
Series A TCI Group Stock.................. 598 598 579 572 -- -- --
Series B TCI Group Stock.................. 85 85 85 85 -- -- --
Series A Liberty Group Stock.............. 229 229 228(a) 225(a) -- -- --
Series B Liberty Group Stock.............. 21 21 21 21 -- -- --
</TABLE>

- ---------------

(a) Adjusted to give effect to the Liberty Group Stock Dividend.
11
<PAGE> 25

PROXY STATEMENT/ PROSPECTUS

RISK FACTORS

In deciding how to vote their shares at the Special Meeting, holders of
shares of DMX Common Stock should carefully consider all of the information
contained in this Proxy Statement/Prospectus and, in particular, the following
factors:

UNPROFITABLE HISTORY OF DMX; GOING CONCERN CONSIDERATIONS

Following consummation of the Merger, TCI Music's business will consist
primarily of the business operations conducted by DMX prior to the Merger. DMX's
predecessor began its basic audio operations in 1990 and, since its formation,
DMX has experienced significant losses. Net operating losses were $7.8 million
for the six months ended March 31, 1997 and were $22.2 million, $10.7 million
and $12.2 million for the fiscal years ended September 30, 1996, 1995 and 1994,
respectively. In addition, in connection with its audit of the financial
statements for the fiscal year ended September 30, 1996, KPMG Peat Marwick LLP
stated that DMX's recurring losses from operations and its net capital
deficiency raised substantial doubt about its ability to continue as a going
concern. See "SUMMARY SELECTED FINANCIAL AND OTHER DATA," "CERTAIN INFORMATION
CONCERNING TCI MUSIC", "INDEX TO FINANCIAL STATEMENTS," and APPENDIX IV.

LIMITED LIQUIDITY AND CAPITAL RESOURCES

DMX has limited capital resources and has been operating under severe cash
flow constraints. DMX's historical operations have been funded primarily by
sales of DMX Common Stock. DMX generally has not generated cash from operating
activities and accordingly, TCI Music will require additional sources of working
capital. TCI Music expects that the Contributed Net DMX Revenues will be a
source of funds that is not currently available to DMX. However, the
Contribution Agreement does not require that any specified or minimum amount be
contributed to TCI Music. Accordingly, there can be no assurance that the
Contributed Net DMX Revenues will continue at current historical levels or that
TCI Music will be able to successfully address DMX's potential short and long
term cash needs. See "-- Unprofitable History of DMX" and "-- Effect of Launch
of Digital Compression Technology on Contributed Net DMX Revenues and License
Fees."

EFFECT OF LAUNCH OF DIGITAL COMPRESSION TECHNOLOGY ON CONTRIBUTED NET DMX
REVENUES AND LICENSE FEES

Cable operators have recently begun to launch a new method of distributing
video and other programming using digital compression technology. Digital
compression technology digitizes hundreds of television channels, compressing,
on average, as many as 14 of the current analog video signals into the space
normally occupied by one. Such technology improves picture quality and allows
for carriage of significantly more video product offerings and channels
("Digital Distribution"). The technology permits subscribers to receive video
and music signals through a single standard set-top tuner or "box" without the
use of a separate tuner for music, as is the case with the current distribution
system whereby DMX music signals are delivered directly to cable operators by
C-band for distribution to residential and commercial cable subscribers ("Tuner
Distribution").

The launch of digital compression technology has the potential to provide
an additional distribution market for DMX music services if cable operators
utilizing Digital Distribution, such as TCI, elect to offer DMX music services
as part of one or more digital video programming packages, thereby capturing as
subscribers customers who might not otherwise elect to subscribe to DMX music
services on an a la carte basis. However, the launch of and the transition to
Digital Distribution may also have the effect of materially reducing TCI Music's
residential subscriber fee revenues and Contributed Net DMX Revenues as a result
of the expected change from the a la carte fee structure currently in effect for
Tuner Distribution to a fee structure similar to that in effect for distribution
of DMX music services via direct broadcast satellite (DBS) dishes directly or as
part of a package delivered by DBS distributors. See "CERTAIN INFORMATION

12
<PAGE> 26

CONCERNING TCI MUSIC -- Effect of Launch of Digital Compression
Technology -- Potential Effects on DMX and TCI Music Residential Subscriber Fee
Revenues."

In addition, TCI Music expects that Tuner Distribution will continue to be
available in markets where Digital Distribution has not been introduced.
However, because Tuner Distribution currently utilizes more of the cable
spectrum than is now used to deliver one video channel, it is likely that some
of such cable operators may determine to eliminate Tuner Distribution of DMX
music services in certain markets to recover or maintain channel capacity for
Digital Distribution. If TCI or any cable operator terminates Tuner Distribution
in any system, all revenues from residential and commercial subscribers
receiving Tuner Distribution DMX music services in such system would terminate,
unless such residential subscribers elect to purchase a video and music
programming package through Digital Distribution, and Digital Distribution and
other distribution means were made available to commercial subscribers.
Accordingly, DMX's and TCI Music's revenues could be materially adversely
affected if Tuner Distribution were terminated by cable operators. See "CERTAIN
INFORMATION CONCERNING TCI MUSIC -- Effect of Launch of Digital Compression
Technology -- Potential Elimination of Current Distribution Outlet."

DEPENDENCE ON SATELLITE DELIVERY CAPABILITIES

There are a limited number of satellites with orbital positions suitable
for transmission of DMX's signals and a limited number of available transponders
on those satellites. Satellite transponders receive signals, translate signal
frequencies and transmit signals to receiving satellite dish antennas. DMX
subleases transponder capacity from Western Tele-Communications, Inc., a
subsidiary of TCI ("WTCI"), which also provides facilities for uplink
transmission of DMX's signals to the transponders. WTCI, in turn, leases the
satellite transponder capacity on the Satellite known as Satcom C-3, Transponder
24 from GE American Communications, Inc., and the satellite known as AT&T
Telstar 402R from AT&T Skynet. The term of DMX's principal transponder sublease
with WTCI for the Satcom satellite runs through the end of the life of that
satellite or April 2005, whichever is earlier. The term of DMX's transponder
sublease with WTCI for the AT&T Telstar 402R runs through February 2000.
Although there has never been sustained interruption of DMX's signals due to
transponder failure or satellite unavailability, failure or loss, no assurance
can be given that any such event will not occur in the future. If such an event
were to occur or if WTCI were unable to provide transponder services to DMX, DMX
would have to seek alternative transponder or satellite facilities. However,
alternative facilities may not be available on a timely or cost-effective basis
and may require the expense of repositioning each DBS subscriber's satellite
dish in order to receive signals from another satellite. Any one or more of
these events would require DMX to incur additional expenditures and could
degrade DMX's ability to serve its customer base and have a material adverse
effect on DMX's financial condition and results of operations. If DMX is
required to enter into new transponder lease agreements, no assurance can be
given that it will be able to do so on terms as favorable as those in its
current agreements with WTCI.

DEPENDENCE ON LICENSED RIGHTS; RISK OF INCREASED FEES

DMX licenses rights to rerecord and distribute music from a variety of
sources and pays royalties to songwriters and publishers through contracts
negotiated with performing rights societies such as the American Society of
Composers, Authors and Publishers ("ASCAP"), Broadcast Music, Inc. ("BMI") and
the Society of European Stage Authors and Composers ("SESAC"). DMX has separate
agreements with ASCAP, BMI and SESAC for residential and commercial
distribution. DMX's agreement with ASCAP for commercial music distribution is
currently governed by an industry-wide agreement that runs through 1999. Its
agreement with SESAC for commercial distribution expires in June 1997 and is
subject to automatic renewal, unless terminated, for a three-year period. DMX's
agreement with BMI dated October 11, 1991 for commercial distribution has been
extended on an interim basis until the resolution of a new industrywide
commercial agreement with BMI that is currently being negotiated.

The agreement with ASCAP with respect to residential music distribution is
governed by an industry-wide agreement dated December 20, 1991. The parties are
operating under the terms of an interim agreement until the resolution of
pending proceedings in rate court. Although DMX cannot predict the outcome of
such proceedings, the rate determination when made, may require retroactive rate
increases. In 1995, DMX entered

13
<PAGE> 27

into a new agreement with BMI for residential distribution with a term extending
to 1999. The term of DMX's agreement with SESAC for residential distribution is
the same as the commercial agreement. In 1996, the fees expensed by DMX for
ASCAP, BMI and SESAC license fees were approximately $2.3 million, in the
aggregate. Although DMX has been accruing for potential increases in the BMI
commercial and ASCAP residential rates, if the fees to be paid by DMX to these
licensors increase in excess of such accruals, DMX's results of operations could
be materially adversely affected by the increase.

DIGITAL PERFORMANCE RIGHTS

On November 1, 1995, the Digital Performance Right in Sound Recordings Act
of 1995 was signed into law ("1995 Act"). The 1995 Act establishes the right of
owners of the performance rights, such as the performers and record companies,
to control digital transmission of sound recordings by means of subscription
service digital transmissions. The 1995 Act provides a compulsory license for
noninteractive subscription services. An arbitration proceeding relating to
residential digital music distribution is pending before the United States
Copyright Office. The purpose of the proceeding is to determine the statutory
license royalty rate to be paid under the 1995 Act by DMX (and other digital
music residential subscription services) on services transmitted to non-business
subscribers. The proceeding commenced August 2, 1996. The royalty rate would be
retroactive to February 1996, and accordingly, DMX has been accruing 3% of
residential subscriber fee revenue since such date. The results of the
arbitration could have an adverse effect on DMX if DMX is required to pay a
higher royalty rate pursuant to the provisions of the 1995 Act.

INTEGRATION OF OPERATIONS

The integration of DMX and TCI Music's operations following the Merger will
initially require certain management resources, which may temporarily detract
attention from the day-to-day business of the combined company. The difficulties
of assimilation may be increased by the necessity of coordinating geographically
separated organizations, integrating personnel with disparate business
backgrounds and combining different corporate cultures. The process of combining
the organizations may cause a temporary interruption of, or a loss of momentum
in, the activities of DMX and TCI Music's business, which could have an adverse
effect on the revenues and operating results of the combined company, at least
in the near term. There can be no assurance that the combined entity will be
able to retain its key technical and management personnel or that the combined
entity will realize any of the other anticipated benefits of the Merger. See
"CERTAIN INFORMATION CONCERNING TCI MUSIC."

FIXED EXCHANGE RATIO

Under the terms of the Merger Agreement, each share of DMX Common Stock
issued and outstanding at the Effective Time (other than shares held by
stockholders of DMX who perfect their appraisal rights in the manner described
in this Proxy Statement/Prospectus) will be converted into the right to receive
(i) one-quarter share of TCI Music Series A Common Stock, (ii) one Right with
respect to each whole share of TCI Music Series A Common Stock and (iii) cash in
lieu of fractional shares of TCI Music Series A Common Stock and Rights. Each
Right will entitle the holder to require TCI to purchase from such holder one
share of TCI Music Series A Common Stock for $8.00 per share (the equivalent of
$2.00 per share of DMX Common Stock), subject to reduction by the aggregate
amount per share of any dividend and certain other distributions, if any, made
by TCI Music to its stockholders, payable at the election of TCI, in cash, a
number of shares of Series A TCI Group Common Stock having an equivalent value
or a combination thereof, if during the one-year period beginning on the
effective date of the Merger, the price of TCI Music Series A Common Stock does
not equal or exceed $8.00 per share for a period of at least 20 consecutive
trading days. If the Rights become exercisable, they will be exercisable only
during the 30-day period commencing on the date of the first anniversary of the
closing of the Merger and, unless exercised, will expire and cease to exist at
the end of such period. See "The Merger Agreement -- Consideration to be
Received in the Merger." The Merger Agreement does not contain any provisions
for adjustment of the values based on fluctuations in the price of DMX Common
Stock that may occur after the execution of the Merger Agreement and prior to
the Closing Date. On February 6, 1997, the date on which the Merger Agreement
was executed, the closing sale

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price of DMX Common Stock was $1 11/16. There can be no assurance that the
market price of TCI Music Series A Common Stock on and after the Effective Time
will not be higher or lower than such price. See "THE MERGER
AGREEMENT -- Consideration to be Received in the Merger."

CONFLICTS OF INTEREST

Potential Conflicts of Interest of DMX Management. Certain members of
DMX's management and Board of Directors have interests in the Merger that are in
addition to and potentially in conflict with the interests of stockholders of
DMX generally. Messrs. Hindery, Fisher and Sparkman, directors of DMX, also
serve as directors and/or executive officers of TCI and TCI Music. Mr. Troxel,
Chief Operating Officer of DMX, also serves as a director of TCI Music. Certain
key employees of DMX have been offered retention bonuses and have stock options
that will carry over after the Merger and be exercisable for TCI Music Series A
Common Stock and Rights. The Board of Directors of DMX was aware of these
interests and considered them, among other things, in approving the Merger
Agreement and the transactions contemplated by the Merger Agreement. See "THE
MERGER -- Interests of Certain Persons in the Merger."

Relationship with TCI; Potential Conflicts of Interest. Certain members of
TCI Music's management and Board of Directors are also members of the management
and Board of Directors of TCI or Liberty Media Corporation, a wholly owned
subsidiary of TCI engaged in the provision of programming services ("Liberty").
Stephen M. Brett, Vice President and General Counsel of TCI Music, is Executive
Vice President and General Counsel of TCI. J.C. Sparkman and Donne F. Fisher,
directors of TCI Music, are directors of TCI. Leo J. Hindrey, Jr., Chairman of
the Board of TCI Music, is a director and President and Chief Operating Officer
of TCI. Robert R. Bennett, a director and acting Chief Financial Officer of TCI
Music, is an Executive Vice President of TCI. David B. Koff, a director,
President, and Chief Executive Officer of TCI Music, is Vice
President -- Corporate Development of Liberty. Robert R. Bennett, a director of
TCI Music, is a director, President and Chief Executive Officer of Liberty. No
formal policies or guidelines have been adopted by TCI Music with respect to
board actions that may involve actual or potential conflicts of interest between
TCI Music and TCI or Liberty. The directors of TCI Music, however, have
fiduciary obligations under Delaware law to TCI Music and all of its
stockholders. Mr. Fisher and Mr. Sparkman will also have fiduciary obligations,
when acting as TCI directors, to TCI and its stockholders. Mr. Bennett will also
have fiduciary obligations, when acting as a Liberty director, to Liberty and
TCI as the sole stockholder of Liberty. See "MANAGEMENT OF TCI MUSIC."

TCI is principally engaged in the construction, acquisition, ownership and
operation of cable television systems and the provision of satellite-delivered
video services to various distribution media, principally cable television
systems. DMX is primarily engaged in programming, distributing and marketing a
digital audio music service. TCI, through certain of its affiliates, sells and
provides DMX audio music services to its cable television subscribers in
conjunction with the delivery of video programming. Such audio music services
are provided pursuant to affiliation agreements between DMX and certain TCI
affiliates that provide for such TCI affiliates to pay license fees to DMX.
Ordinarily, these arrangements may give rise to conflicts between TCI and TCI
Music because of TCI Music's desire to maximize the fees DMX receives for its
audio music programming and TCI's and its affiliates' desire to minimize the
fees paid; however, TCI believes that its obligation under the Contribution
Agreement to contribute the Contributed Net DMX Revenues received from sales of
DMX audio music services to TCI Music (in addition to license fees already paid
to DMX) minimizes this potential conflict for the term of the Contribution
Agreement, which expires in 2006.

Liberty is principally engaged in the provision of video programming
services, including video music services. TCI does not own any interests in any
other entity providing audio music services, and TCI has no current plans or
intentions to engage in the direct programming and distribution of audio music
services in the future other than through TCI Music. However, under the
Contribution Agreement, TCI and its affiliates have the right to engage in or
possess interests in businesses or ventures of any nature or description,
without regard to whether any of such businesses or ventures are or may be
deemed to be competitive in any way with any of the businesses of TCI Music or
DMX; therefore there can be no assurance that TCI or its affiliates will not
engage in the provision of competitive audio or video music services in the
future.

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<PAGE> 29

See "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE
MERGER -- Contribution Agreement."

Under agreements with TCI Music, TCI will provide certain administrative,
legal, financial, treasury, accounting, tax and other services to TCI Music and
will make available certain of its employee benefit plans to TCI Music's
employees. In addition, TCI and TCI Music will enter into a number of
intercompany agreements covering such matters as the use of services and tax
sharing. After the Merger, pursuant to a services agreement between TCI and TCI
Music (the "Services Agreement"), TCI will provide to TCI Music certain
administrative and other services. On or before the Effective Time, TCI Music
will also become a party to the existing tax sharing agreement among TCI and
certain of its subsidiaries (the "Tax Sharing Agreement"), which will provide,
among other things, for the allocation among TCI Music and the other members of
the TCI consolidated tax group of tax liabilities attributable to periods after
the Merger.

In addition, in connection with the Merger, TCI and TCI Music will enter
into the Contribution Agreement. Pursuant to the Contribution Agreement, certain
subsidiaries of TCI will transfer to TCI Music, effective as of the Effective
Time and until December 31, 2006, the right to receive the Contributed Net DMX
Revenues and TCI will contribute to TCI Music the Contributed Tuners. If the
Contribution had been effective as of January 1, 1996, the total amount of
Contributed Net DMX Revenues for the three months ended March 31, 1997 and the
year ended December 31, 1996 would have been approximately $4.4 million and
$16.4 million, respectively. Additionally, the book value of the Contributed
Tuners at March 31, 1997 was approximately $4.5 million. The launch by TCI and
other cable operators of video and audio programming using digital compression
technology may materially reduce the Contributed Net DMX Revenues and subscriber
fee revenues of TCI Music. See "-- Effect of Launch of Digital Compression
Technology on Contributed Net DMX Revenues and Other Revenues" and "CERTAIN
INFORMATION CONCERNING TCI MUSIC -- Effect of Launch of Digital Compression
Technology."

Pursuant to the Contribution Agreement, effective as of the closing of the
Merger, TCI Music, as obligor, will issue to TCI the TCI Music Note in the
principal amount of $40,000,000 payable to the order of TCI, as obligee, bearing
interest at 10% per annum, which interest will be waived by TCI if the principal
is paid in full at or before maturity which will be 180 days after the closing
of the Merger. TCI Music expects to refinance the TCI Music Note with proceeds
of a new long-term debt financing. No assurance can be given that TCI Music will
be able to obtain such financing on terms acceptable to TCI Music.

TCI and DMX have entered into the TCI Loan pursuant to which TCI has agreed
to make loans to DMX from time to time until August 31, 1997, up to an aggregate
outstanding principal amount of $3,500,000. Such loans are due on or before June
1, 2000 and accrue interest at a rate of 12.5% per annum. As of June 4, 1997,
TCI had made approximately $2,420,000 in loans under the TCI Loan.

The terms of the agreements that will govern the relationship between TCI
Music and TCI were established by TCI in consultation with TCI Music's
management prior to the Merger and are not the result of arm's-length
negotiations. Accordingly, although TCI Music believes that the terms and
conditions of these arrangements taken as a whole are reasonable, there can be
no assurance that the terms and conditions of these agreements are not more or
less favorable to TCI Music than those that might have been obtained from
unaffiliated third parties. In addition, there can be no assurance that
comparable services could be obtained from third parties if the Services
Agreement were to be terminated. Although TCI Music believes that its
relationship with TCI is excellent, adverse developments or material disputes
with TCI following the Merger could have a material adverse effect on TCI Music.

See "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER."

DISPARATE VOTING RIGHTS; CONTROL BY TCI

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and 97.7% of the voting power related to, the total outstanding shares of the
TCI Music Common Stock. TCI will beneficially own approximately 45.7% of the
outstanding shares of TCI Music Series A Common Stock and all of the outstanding
shares of TCI Music Series B Common Stock, which will collectively represent
approximately 89.6% of the outstanding shares of TCI Music Common Stock. Since
holders of shares of TCI Music Series A Common Stock are entitled to one vote
per share, and holders of shares of TCI Music Series B Common Stock are entitled
to ten votes per share, on each matter presented to a vote of the holders of TCI
Music Common Stock, TCI will control approximately 98.7% of the voting power of
the outstanding shares of TCI Music Common Stock. See "DESCRIPTION OF CAPITAL
STOCK." Thus, immediately after the Merger, TCI will have the voting power to
control all matters requiring approval of TCI Music's stockholders voting as a
single class, including the ability to elect all of the members of the TCI Music
Board of Directors. See "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE
MERGER" and "CERTAIN TRANSACTIONS."

DIVIDENDS AND DIVIDEND POLICY

TCI Music does not anticipate declaring and paying cash dividends on the
TCI Music Common Stock at any time in the foreseeable future. The decision
whether to apply legally available funds to the payment of dividends on TCI
Music Common Stock will be made by the TCI Music Board from time to time in the
exercise of its business judgment, taking into account, among other things, TCI
Music's results of operations and financial condition, any then existing or
proposed commitments by TCI Music for the use of available funds, and TCI
Music's obligations with respect to the holders of any then outstanding
indebtedness or preferred stock. In addition, TCI Music may in the future issue
debt securities or preferred stock or enter into loan agreements or other
agreements that restrict the payment of dividends on, and repurchases of, TCI
Music's Common Stock. See "DESCRIPTION OF TCI MUSIC CAPITAL STOCK -- Common
Stock -- Dividends."

ABSENCE OF PRIOR TRADING MARKET

The DMX Common Stock is currently traded on the OTC Bulletin Board. From
May 28, 1996 to April 8, 1997 the DMX Common Stock was traded on the NASDAQ
SmallCap Market. Until May 28, 1996, the DMX Common Stock was traded on the
NASDAQ National Market System. There is no public market for TCI Music Series A
Common Stock. Although the TCI Music Series A Common Stock has been approved by
NASDAQ for inclusion for trading in the NASDAQ SmallCap Market following the
Merger, such approval is conditioned on the trading of TCI Music Series A Common
Stock at or above a price of $3.00 per share for the first five trading days
following the Merger. There can be no assurance that such trading price will be
achieved or, if achieved, that an active trading market will develop for the TCI
Music Series A Common Stock or, if developed, that such market will be
maintained. The market price for the shares of TCI Music Series A Common Stock
may be highly volatile depending on news announcements or changes in general
market conditions. See "Comparative Market Data."

POTENTIAL ADVERSE EFFECTS OF FUTURE SALES OF TCI MUSIC COMMON STOCK

There currently is no market for the TCI Music Series A Common Stock. The
sale of large amounts of TCI Music Series A Common Stock in the public market
following the Merger could adversely affect the market price of TCI Music Series
A Common Stock.

POTENTIAL EFFECTS OF CERTAIN TCI MUSIC ANTI-TAKEOVER PROVISIONS

Certain provisions of Delaware law and the Certificate of Incorporation of
TCI Music (the "TCI Music Charter") and the Bylaws of TCI Music (the "TCI Music
Bylaws") may have the effect of making more difficult an acquisition of control
of TCI Music in a transaction that is not approved by the TCI Music Board. These
provisions include the disparate voting rights of the TCI Music Series A Common
Stock and TCI Music Series B Common Stock; provisions giving the TCI Music Board
the power to issue up to 5,000,000 shares of preferred stock, and to fix the
rights and preferences thereof, without further authorization of TCI Music's
common stockholders; the requirement of a supermajority vote to approve
specified actions;

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and the other provisions described under "COMPARISON OF STOCKHOLDERS RIGHTS." In
addition, the TCI Music Board is divided into three classes, each of which
serves for a staggered three-year term, which may make it more difficult for a
third party to gain control of the TCI Music Board. Many of these provisions
generally are designed to permit TCI Music to develop its businesses and foster
its long-term growth without the disruption caused by the threat of a takeover
not deemed by the TCI Music Board to be in the best interests of TCI Music and
its stockholders. These provisions may also have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of TCI Music even though such an attempt might be economically beneficial to TCI
Music and its stockholders. See "COMPARISON OF STOCKHOLDERS RIGHTS."

CERTAIN LITIGATION

In September 1996, after announcement of TCI's proposal to DMX, certain DMX
stockholders filed a putative class action lawsuit in the Delaware Court of
Chancery on behalf of a purported class consisting of all public stockholders of
DMX (other than the directors of DMX and TCI) captioned Brickell Partners v.
Jerold H. Rubinstein, Donne F. Fisher, Leo J. Hindery, Jr., James R. Shaw, Sr.,
Kent Burkhart, J. C. Sparkman, Bhaskar Menon, DMX Inc. and Tele-Communications,
Inc. (Civil Action No. 15206). See "CERTAIN LITIGATION." The complaint seeks as
relief, among other things, an injunction preventing consummation of the Merger
as well as unspecified compensatory damages. Neither TCI nor DMX can estimate,
based on facts available as of the date of this Proxy Statement/Prospectus, the
possible adverse effects if such plaintiffs are successful, which could include
the inability to consummate the Merger, rescission of the Merger and monetary
damages.

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THE SPECIAL MEETING

TIME AND PLACE; PURPOSE

The Special Meeting will be held at DMX's executive offices, located at
11400 West Olympic Boulevard, Suite 1100, Los Angeles, California 90064 on
, 1997, starting at 10:00 a.m., local time. At the Special Meeting,
the stockholders of DMX will be asked to consider and vote upon (i) a proposal
to approve and adopt the Merger Agreement and (ii) such other matters as may
properly come before the Special Meeting. A copy of the Merger Agreement is
included as Appendix I to this Proxy Statement/Prospectus.

VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL

The DMX Board has fixed the close of business on May 26, 1997, as the date
for the determination of holders of DMX Common Stock entitled to notice of and
to vote at the Special Meeting. Only holders of record of shares of DMX Common
Stock at the close of business on the Record Date are entitled to notice of and
to vote at the Special Meeting. At the close of business on the Record Date,
there were 59,586,594 shares of DMX Common Stock outstanding and entitled to
vote at the Special Meeting held by 418 stockholders of record.

Each holder of record, as of the Record Date, of DMX Common Stock is
entitled to cast one vote per share, in person or by proxy, on approval of the
Merger. The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote is necessary to
constitute a quorum at the Special Meeting. The affirmative vote, in person or
by proxy, of the holders of record of a majority of the outstanding shares of
DMX Common Stock entitled to vote at the Special Meeting is required to approve
and adopt the Merger Agreement.

As of the Record Date, (i) DMX's directors and executive officers
beneficially owned 9,607,561 outstanding shares of DMX Common Stock (exclusive
of any shares issuable upon exercise of stock options exercisable on such date),
representing approximately 16.6% of the outstanding shares of DMX Common Stock
on such date and (ii) affiliates of TCI owned 27,249,575 outstanding shares of
DMX Common Stock, representing approximately 45.7% of the outstanding shares of
DMX Common Stock. Such persons and entities, who together beneficially owned as
of the Record Date approximately 62.3% of the outstanding shares of DMX Common
Stock, have indicated they intend to vote all of their shares of DMX Common
Stock in favor of the Merger Agreement and the Merger. If such persons vote
their shares as they have indicated, the Merger Agreement will be approved and
adopted at the Special Meeting irrespective of the vote of any other stockholder
of the Company.

PROXIES

All shares of DMX Common Stock represented by properly executed proxies
received prior to or at the Special Meeting, and not revoked, will be voted in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted FOR approval and adoption of the
Merger Agreement and, at the discretion of the proxy holder, on any other matter
that may properly come before the Special Meeting. A properly executed proxy
marked "ABSTAIN" will not be voted, although it will be counted for purposes of
determining whether there is a quorum and for purposes of determining the
aggregate number of outstanding shares entitled to vote at the Special Meeting
and will have the effect of a "NO" vote on the Merger. If a broker indicates on
the proxy that it does not have discretionary authority to vote certain shares
on the Merger, those shares will be considered for purposes of determining
whether there is a quorum and for purposes of determining the aggregate number
of outstanding shares entitled to vote at the Special Meeting and will have the
effect of a "NO" vote on the Merger. Such a non-vote occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not vote
on a proposal because the nominee does not have discretionary voting power and
has not received instructions from the beneficial owner.

A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of DMX a signed notice of revocation or a later
dated signed proxy or by attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not in itself constitute the revocation
of a proxy.

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The cost of solicitation of proxies will be paid by DMX. In addition to
solicitation by mail, officers and regular employees of DMX may solicit proxies
by telephone, telegram, letter, facsimile or by personal interviews. Such
persons will receive no additional compensation for such services. Nominees,
fiduciaries and other custodians will be requested to forward soliciting
material to the beneficial owners of shares held of record by them and will be
reimbursed for their reasonable expenses.

STOCKHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.

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THE MERGER

BACKGROUND OF THE MERGER

TCI currently beneficially owns, directly and through certain of its
subsidiaries, 27,249,575 shares representing approximately 45.7% of the
outstanding shares of DMX Common Stock. TCI acquired the DMX Common Stock in
several transactions over the period from August 1994 to May 1996 as follows:

On August 4, 1994, in connection with a business combination of TCI
Communications, Inc., a direct wholly owned subsidiary of TCI ("TCIC") and
Liberty, resulting in the companies becoming wholly owned subsidiaries of TCI
(the "TCI Business Combination"), TCI acquired indirect beneficial ownership of
3,409,063 shares of the DMX Common Stock beneficially owned by Liberty.

In August 1995, TCI acquired beneficial ownership of 2,000,000 shares of
DMX Common Stock from DMX for a total cash purchase price of $5,000,000, or
$2.50 per share.

TCI acquired 650,000 shares of DMX Common Stock on January 2, 1996 and
January 8, 1996 in three open market transactions for a total cash purchase
price of $1,520,918. On January 2, 1996, TCI purchased 340,000 shares of DMX
Common Stock for $2.31 per share for a total purchase price of $786,250. On
January 8, 1996, TCI purchased 140,000 shares of DMX Common Stock for $2.4062
per share for a total purchase price of $336,868. On January 8, 1996, TCI
purchased 170,000 shares of DMX Common Stock for $2.34 per share for a total
purchase price of $397,800.

On May 17, 1996, TCI acquired 5,700,000 shares of DMX Common Stock from
Stephen A. Wynn, a former director of DMX, pursuant to a Stock Purchase
Agreement, dated as of May 13, 1996, between Mr. Wynn and TCI. Such shares were
purchased for $2.00 per share for a total cash purchase price of $11,400,000.

On May 17, 1996, TCI acquired 4,500,000 shares of DMX Common Stock from DMX
for $2.00 per share for a total cash purchase price of $9,000,000, pursuant to a
Stock Purchase Agreement, dated as of May 14, 1996, between DMX and TCI. On the
same date, UAPI, an indirect majority-owned subsidiary of TCI, received
10,841,624 shares of DMX Common Stock from DMX in connection with a merger
pursuant to the terms of an Agreement and Plan of Merger, dated as of August 28,
1995, as amended, among DMX, TCI-Euromusic, Inc. ("TCI-E"), and UAPI (the "TCI-E
Merger"). In connection with the TCI-E Merger, TCI-E was merged with and into
DMX and DMX was the surviving corporation. The TCI-E Merger was effective as of
May 17, 1996. Prior to the TCI-E Merger, UAPI owned all of the outstanding
shares of common stock of TCI-E.

Effective July 31, 1996, TCI acquired beneficial ownership of 148,888
shares of DMX Common Stock in connection with the acquisition by TCI of all of
the common stock of Viacom International, Inc.

In connection with the TCI-E Merger, Tele-Communications International,
Inc., a majority-owned subsidiary of TCI, received the right to appoint two
directors to the DMX Board. Donne F. Fisher and Leo J. Hindery, Jr. were
appointed to the board of DMX to satisfy this requirement and to fill immediate
vacancies created by resignations of Stephen A. Wynn and W. Thomas Oliver. Mr.
Fisher currently serves as a director of TCI and serves as a consultant to TCI.
Mr. Fisher served as an officer of TCI until January 1996. Additionally, Mr.
Hindery is the managing general partner of the general partner of InterMedia
Partners and certain affiliated entities. InterMedia Partners is a multi-system
cable television operator. TCI has various investments in InterMedia Partners
and its related entities. Mr. Hindery was appointed a director of TCI in May
1997 and President and Chief Operating Officer of TCI in February 1997 and
President and Chief Operating Officer of TCIC in March 1997. In addition, there
is an informal, non-binding understanding between TCI and a majority of the
existing directors of DMX that TCI may recommend the appointment of two
additional candidates for election to the board of directors of DMX. TCI has not
made any appointments to the DMX Board pursuant to this arrangement.

The DMX Board viewed the investments as a strategic investment by TCI that
would provide necessary capital for DMX's operations. No formal relationship
between DMX and TCI was contemplated (other than

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those described above regarding directors), although the DMX Board did
anticipate that DMX should benefit from the experience of TCI's nominees to the
DMX Board, as well as from having TCI as its largest stockholder. The DMX Board
also believed that there might be the potential to form certain distribution
alliances with TCI and that TCI would be more likely to form such alliances if
it was DMX's largest stockholder. The prices paid by TCI to DMX in the
above-described transactions in which TCI acquired DMX Common Stock directly
from DMX were based upon the then-current trading prices for DMX Common Stock at
the time the transactions were agreed to and were not intended to reflect a
premium to or discount from such prices.

On August 30, 1996, TCI delivered an unsolicited written proposal to the
DMX Board with respect to a merger of an indirect wholly owned subsidiary of a
corporation to be formed by TCI with and into DMX. The proposal provided, among
other things, that (a) the outstanding shares of DMX Common Stock (including
shares held by TCI affiliates) would be converted into shares of TCI Music
Series A Common Stock representing in the aggregate 19.25% of the total number
of shares of TCI Music Common Stock outstanding immediately after the Merger,
(b) all shares of TCI Music Series B Common Stock would be held by TCI
Affiliates, and (c) TCI Music Series A Common Stock and TCI Music Series B
Common Stock would be identical, except that each share of TCI Music Series B
Common Stock would represent the right to cast ten votes per share compared to
one vote per share of TCI Music Series A Common Stock. TCI also agreed that if,
during the one-year period beginning on the date of the closing of the Merger,
the market price of the TCI Music Series A Common Stock had not equaled or
exceeded $2.00 per share (the proposal assumed that DMX Common Stock would be
exchanged for TCI Music Series A Common Stock in a one-for-one ratio) for any
period of at least 20 consecutive trading days, holders of TCI Music Series A
Common Stock issued in the Merger would have the right (a "Put") exercisable
during the 30-day period beginning on the first anniversary of the closing of
the Merger, to require TCI to purchase such stock at a price of $2.00 per share,
payable, at TCI's election, in cash, shares of Series A TCI Group Common Stock
having an equivalent value, or a combination thereof. The proposal also provided
that if the proposal were accepted by DMX, TCI would provide a loan to DMX of
$3.5 million payable with interest at 12.5% per annum in 36 equal installments
of principal and interest, the proceeds of which would be used by DMX to
purchase tuners for use by residential and commercial customers. Such loan would
be secured by a security interest in the tuners and DMX's commercial
subscription agreements. The proposal also contemplated that DMX would grant TCI
and its affiliates rights to distribute DMX services on the terms and conditions
set forth in the form of an affiliation agreement to be submitted to DMX
separately.

TCI's proposal was discussed at a special meeting of the DMX Board held on
September 3, 1996, at which all directors participated in person or by
conference telephone. The DMX Board determined that a special committee should
be appointed to evaluate TCI's proposal and to engage in discussions with
representatives of TCI regarding the proposal. The directors appointed to serve
on the Special Committee were Messrs. Burkhart, Menon and Shaw. Shortly after
its formation, the Special Committee retained Houlihan Lokey to act as financial
advisor with respect to TCI's proposal. See "-- Opinion of Financial Advisor."

On September 3, 1996, certain DMX stockholders filed a putative class
action lawsuit in the Delaware Court of Chancery on behalf of a purported class
consisting of all public stockholders of DMX (other than the directors of DMX
and TCI). See "CERTAIN LITIGATION." The complaint seeks as relief, among other
things, an injunction preventing consummation of the Merger as well as
unspecified compensatory damages.

On September 17, 1996, Irell & Manella LLP, counsel to DMX, delivered a
letter in response to TCI's proposal (the "September 17 Letter"). The September
17 Letter advised TCI that the DMX Board had formed a Special Committee of
independent directors to evaluate the TCI proposal and that the Special
Committee had retained Houlihan Lokey as its financial advisors. The letter
sought to confirm certain assumptions concerning the proposal and identified
various issues that the Special Committee determined should be discussed with
TCI, including among other things: (i) the percentage ownership in TCI Music
proposed by TCI, and the Put amount and the period during which the Put could be
exercised; (ii) the necessity for the TCI Music Common Stock to consist of two
classes given TCI's proposed greater than 80% interest in TCI Music; (iii) a
proposal that TCI contribute the proposed tuner loan and any other DMX

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indebtedness to the capital of TCI Music if the Merger were consummated; (iv) a
proposed additional loan to be mutually agreed upon to provide working capital
to DMX pending completion of the transaction; (v) additional terms to be
included in the definitive agreement with respect to information access and
confidentiality limitations and standstill provisions; (vi) terms of the
proposed form of affiliation agreement referred to in TCI's letter; (vii) plans
for DMX's European operations; and (viii) a requirement that any transaction be
subjected to approval by a majority of the non-TCI affiliated stockholders.

On September 18, 1996, Mr. J.R. Shaw, on behalf of the Special Committee,
and a representative of Irell & Manella LLP met with Stephen M. Brett, Executive
Vice President and General Counsel of TCI, and a representative of Sherman &
Howard L.L.C., counsel to TCI, to discuss TCI's proposal. No conclusions as to
the issues raised by the Special Committee in the September 17 Letter were
reached at that meeting, although TCI indicated that it would consider such
requests and would provide, to the extent available, information pertaining to
the assets to be contributed by TCI to TCI Music and TCI's plans for the
development of TCI Music's business.

During the period from September 19, 1996 until February 6, 1997 when the
Merger Agreement was executed, representatives of Irell & Manella LLP had
numerous conversations with representatives of Sherman & Howard L.L.C. with
respect to the various issues raised in the September 17 Letter. TCI, through
its counsel, initially advised the Special Committee, through its counsel, that
TCI was unwilling to agree to any of the changes proposed by the Special
Committee with the possible exception of the committee's request that the Put be
exercisable for a full year even if the trading price of TCI Music Common Stock
trades at more than the equivalent of $2.00 per share of DMX Common Stock for
twenty consecutive days during that year. Thereafter, TCI's counsel advised the
Special Committee's counsel that TCI was not willing to revise the Put to
provide this feature. However, as part of the negotiations the parties did agree
to change the exchange ratio of DMX Common Stock for TCI Music Series A Common
Stock from 1:1 to 1:one-half share, which increased the purchase price of TCI
Music Series A Common Stock to be paid by TCI in the Put to $4.00. In addition,
TCI, through its counsel, also advised DMX that it was not prepared to
contractually commit that TCI Music would be the exclusive vehicle through which
TCI and its affiliates would conduct their residential and commercial music
operations.

During this time period, the members of the Special Committee had numerous
conversations among themselves and with representatives of Irell & Manella LLP
and Houlihan Lokey and with the Company's Chief Executive Officer as to various
aspects of the proposed Merger, including the proposed exchange ratio and the
Put, and as to whether there were other alternatives, such as a merger or
strategic combination with another party other than TCI, which might produce a
more favorable result to the Company's stockholders.

The Special Committee had formal committee meetings on September 3, 1996,
September 5, 1996, September 17, 1996 and November 5, 1996 at which they
discussed the status of negotiations, reviewed DMX's operations, cash flow and
ongoing financing needs and reviewed with Houlihan Lokey at the committee
meeting on November 5, 1996 its preliminary views as to the adequacy and
fairness of the TCI proposal. The Special Committee also concluded at such
meeting that it was not appropriate to engage Houlihan Lokey to solicit or seek
out another merger or strategic combination partner for a variety of reasons,
including the fact that Houlihan Lokey's preliminary view was that the TCI
proposal was an attractive one, that the TCI proposal might be withdrawn if TCI
learned that DMX was actively seeking alternatives, that the TCI proposal had
been publicly announced and any interested bidder could readily contact the
Company or Houlihan Lokey if it wished to discuss a possible alternative
transaction, that the 45.7% ownership interest of TCI's affiliates in DMX made
it unlikely that any competing proposal would be successful and the significant
incremental cost which such an engagement would entail. As of the date of this
Proxy Statement/Prospectus, no such contact or offer has been made by any third
party. Accordingly, although DMX considered the feasibility of soliciting a
business combination with other companies besides TCI, it did not do so for the
foregoing reasons.

During this period, representatives of DMX's outside counsel and
representatives of TCI's outside counsel negotiated the terms of the Merger
Agreement, the Rights Agreement, the Contribution Agreement and the TCI Loan. On
January 20, 1997 the Special Committee met and received the written report and
oral

23
<PAGE> 37

opinion (which was later confirmed in writing) of Houlihan Lokey to the effect
that the Merger was fair to DMX's stockholders from a financial point of view.
The Special Committee unanimously recommended that the Board of Directors
approve the Merger. Thereafter, the DMX Board approved the merger and authorized
the execution of each of the foregoing agreements at a meeting on January 20,
1997. The Merger Agreement was executed by the parties as of February 6, 1997.

Effective May 29, 1997, the parties entered into Amendment One to the
Merger Agreement (attached as Appendix I), changing the exchange ratio of DMX
Common Stock for TCI Music Series A Common Stock from 1: one-half share to 1:
one-quarter share, which increased the purchase price of TCI Music Series A
Common Stock to be paid by TCI pursuant to the exercise of the Rights to $8.00
per share.

DMX's Board of Directors had decided in August 1996, unrelated to TCI's
merger proposal, that it would discontinue further funding the operations of
DMX's European subsidiaries, DMX-Europe N.V. ("DMX-E") and its wholly-owned
subsidiary DMX-Europe (UK) Limited ("DMX-UK" and, together with DMX-E, the
"European Companies"). In May 1993, TCI-Euromusic, Inc., which subsequently
became an indirect subsidiary of TCI, acquired a 49% equity position in DMX-E.
DMX agreed to acquire this interest in August 1995 and did acquire it in May
1996. Among other things, as a result of that acquisition, DMX received a
release of its guarantee obligations with respect to $24,436,000 of DMX-E's
indebtedness to a TCI subsidiary and obtained 100% control of DMX-E. However,
the operations of the European Companies have sustained substantial ongoing
operating losses. For example, for the fiscal years ending September 30, 1996
and September 30, 1995, DMX's net losses were approximately $33.9 million and
$23.1 million, respectively, of which approximately $16.8 million and $13.3
million, respectively, were attributable to the operations of DMX-E. In
addition, in fiscal 1996, DMX funded $9.4 million of the cash requirements of
the European Companies. Of this amount, $6.4 million was funded prior to the
acquisition by DMX of TCI's indirect 49% equity position in DMX-E, with the
remaining $3.0 million funded subsequent thereto. Although DMX-E's capital
structure became considerably less leveraged as a result of the transactions
associated with DMX's acquisition of a 100% interest in DMX-E, the DMX Board
concluded that it was necessary to focus the Company's limited financial
resources on making its domestic operations profitable. Accordingly, the DMX
Board concluded that DMX would cease to fund the operations of the European
Companies and the boards of directors of the European Companies would either
have to seek financing on their own or place the companies in receivership.

On October 3, 1996, Jerold H. Rubinstein, Chairman of the Board and Chief
Executive Officer of DMX, made a proposal to the Board of Directors to acquire
DMX's interest in the European Companies. The DMX Board of Directors appointed
J.C. Sparkman as a committee of the Board to negotiate with Mr. Rubinstein with
respect to his proposal. Thereafter, on December 3, 1996, the DMX Board of
Directors approved the disposition of the European Companies to Mr. Rubinstein
and on December 18, 1996, DMX and Mr. Rubinstein entered into two alternative
agreements providing for such disposition. Under the first alternative
agreement, DMX will retain a ten percent equity interest in the European
Companies, which will have an exclusive, five-year, royalty-free license to
distribute the DMX music service in Europe, the former Soviet Union and the
Middle East and will have the right to use DMX's trademarks for two years. In
addition, Mr. Rubinstein has agreed to guarantee certain obligations of the
operations of the European Companies for satellite-uplink capacity (which
guarantee would be secured by a pledge of the DMX Common Stock owned by Mr.
Rubinstein). Mr. Rubinstein will seek to reorganize the operations of the
European Companies by obtaining creditor concessions and will seek new equity
investors. If the European Companies cannot be reorganized, then DMX and Mr.
Rubinstein will proceed under the second alternative agreement, under which the
European Companies would be placed in receivership and Mr. Rubinstein would
organize the operations of the European Companies under a new company to
distribute the DMX music service on essentially the same terms as provided for
in the first alternative agreement and DMX will subscribe for a ten percent
equity interest in the new venture.

The DMX Board did not seek offers for DMX-E from other parties, because the
DMX Board believed that DMX-E's financial condition made it highly unlikely that
any other offers would be forthcoming. In addition, because the DMX Board had
been advised that, due to deterioration of the orbit of the satellite which
carries the signal for the DMX music service provided by DMX-E, it might be
necessary for DMX-E

24
<PAGE> 38

to enter into a new, long-term contract regarding new satellite capacity, which
would entail a significant new financial commitment by DMX, the DMX Board
believed that it was necessary to proceed as expeditiously as possible with the
disposition of the European Companies.

RECOMMENDATION OF DMX BOARD; DMX'S REASONS FOR THE MERGER

On January 20, 1997, the Special Committee recommended that the DMX Board
approve the Merger. Based on this recommendation and certain other factors, the
DMX Board (other than Messrs. Hindery and Fisher, who did not vote on the
Merger, and Mr. Sparkman, who did not attend the meeting (each of whom has been
recommended to the DMX Board by TCI)) has approved the Merger Agreement and the
Merger, has determined unanimously that the terms of the Merger Agreement are
fair to, and that the Merger Agreement is in the best interests of, DMX and its
stockholders and therefore recommends that the holders of DMX Common Stock vote
FOR approval of the Merger Agreement.

Reasons for the Merger. In reaching their determination to approve the
Merger Agreement and the transactions contemplated thereby, the Special
Committee and the DMX Board concluded that the proposed Merger was the best way
to deliver value to DMX's stockholders given DMX's limited financial resources
and on-going significant operating losses. In addition, they have identified the
following potential benefits of the Merger that they believe will contribute to
the success of the Surviving Corporation and benefit DMX stockholders:

(i) The Merger provides DMX stockholders with an opportunity to
participate in the potential benefits of the Merger while still giving them
the right to sell their TCI Music Series A Common Stock to TCI after one
year at $8.00 per share or the equivalent of $2.00 per share of DMX Common
Stock (a premium of approximately fifty percent, assuming a fifteen percent
discount rate, over the closing price of DMX's Common Stock of $1.125 on
August 30, 1996, the last full trading day prior to the public announcement
of TCI's Merger proposal) if TCI Music's stock has not traded at that level
for at least 20 consecutive trading days before such time.

(ii) DMX believes that its future success is highly dependent upon its
ability to increase substantially the number of subscribers it has in both
commercial and residential markets. Inasmuch as DMX's offerings to
residential cable subscribers are increasingly "bundled" as part of a
package of services made available by cable operators to subscribers for a
single price rather than paid for separately by subscribers, DMX believes
that the revenue it derives from each residential cable subscriber will be
reduced and that its future profitability will increasingly be based on its
ability to substantially increase the number of such subscribers. DMX
believes that its existing financial constraints severely limit its ability
to effectuate such an increase on a stand-alone basis and that it is very
unlikely that DMX will have access to adequate capital to implement its
business plan if it does not complete the Merger. DMX's primary source of
operating funds has been private placements of DMX Common Stock and, given
DMX's results of operations and financial condition, the DMX Board believes
that it is unlikely that DMX will be able to raise sufficient funds through
private placements in order to meet its capital needs, although TCI's
Merger proposal included a commitment by TCI to provide DMX with up to a
$3.5 million loan in order to meet certain of DMX's liquidity needs. See
"ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER -- TCI Loan."
Subsequent to entering into the Merger Agreement, DMX asked TCI if it would
be willing to make an additional equity investment in DMX; TCI declined to
do so.

Further, DMX believes that the combined company may have access to
greater financial resources than DMX on a stand-alone basis and that any
such improved financial strength will enhance the Surviving Corporation's
flexibility in developing and expanding its existing products, services and
subscriber base (which it currently lacks the financial resources to do),
as well as in exploring and capitalizing on new expansion opportunities.

(iii) DMX believes that the Surviving Corporation will be able to
achieve synergistic benefits through the complement of projects and
services of DMX, TCI and TCI Music. Additionally, DMX believes that the
Merger should result in financial and administrative synergies, including
increased

25
<PAGE> 39

availability and reduced cost of capital for DMX, cost efficiencies in
restructuring DMX's contractual commitments and overhead reductions.

(iv) DMX believes that the management of TCI Music and TCI Music's
close association with TCI would give DMX increased personnel depth and
expertise in marketing.

In the course of its deliberations, the Special Committee and the DMX Board
reviewed and considered a number of other factors relevant to the Merger,
including, among other things, the following:

(i) The information concerning DMX's and TCI's respective businesses,
financial position, results of operations and properties, including that
DMX has sustained significant operating losses and has not generated
positive cash flow from operations for several years and that DMX requires
substantial additional capital and debt financing in order to exploit its
business opportunities which DMX was unlikely to secure on acceptable terms
due to its financial condition;

(ii) The views of DMX's management and the Special Committee's
recommendations, in the case of the DMX Board, and DMX's financial advisor,
Houlihan Lokey, including the due diligence review which had been conducted
regarding TCI Music's business plans and possible synergistic and expansion
opportunities for the two companies;

(iii) With the assistance of its financial advisor, the consideration
paid in other comparable merger and acquisition transactions (and the fact
that the Merger is a strategic combination), and the terms of the Rights
Agreement providing DMX stockholders with the right to sell their TCI Music
Series A Common Stock to TCI at $8.00 per share (the equivalent of $2.00
per share of DMX Common Stock) after one year if the stock has not
previously traded at that level for 20 consecutive trading days;

(iv) The opinion of Houlihan Lokey that, as of the date of the Merger
Agreement, the Merger Consideration to be received by the DMX stockholders
is fair to DMX's stockholders from a financial point of view (see
"-- Opinion of Financial Advisor");

(v) An evaluation of the prospects of DMX on a stand-alone basis
(which the DMX Board concluded were unfavorable), including financing
alternatives for DMX, taking into consideration its efforts during the 18
months prior to execution of the Merger Agreement, including DMX's
unsuccessful efforts during that time period to secure equity or debt
financing either through investment bankers or strategic alliances or
corporate partnering arrangements with other companies engaged in the music
and entertainment business;

(vi) TCI Music's rights and obligations under the Contribution
Agreement, including the fact that TCI Music's obligations with respect to
the TCI Music Note would not affect TCI's purchase obligations under the
Rights;

(vii) The changing nature of the cable and music delivery industries
and the need for substantial capital to compete effectively;

(viii) The potential to reduce DMX's guarantee and other contractual
commitments relating to its European operations which the restructuring of
those operations in anticipation of the Merger provided (although the
Merger is not conditioned upon, and is not subject to, consummation of the
disposition of the European Companies by DMX);

(ix) With the assistance of DMX's legal counsel, the terms of the
Merger Agreement, including the obligation of DMX following the date of
execution of the Merger Agreement (February 6, 1997) not to solicit or
encourage other acquisition proposals (and the fact that no other
expressions of acquisition interest were forthcoming in the five months
following announcement of TCI's acquisition proposal), the circumstances
under which DMX can terminate the Merger Agreement and the closing
conditions to the Merger; and

(x) That the Merger requires approval by the holders of a majority of
the outstanding voting power of the DMX Common Stock and that TCI owns
approximately 45.7% of such outstanding shares and will be entitled to vote
with respect to the Merger.

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<PAGE> 40

The DMX Board also considered a variety of potentially negative factors in
its deliberations concerning the Merger, including the following factors: (i)
the substantial charges expected to be incurred in connection with the Merger,
including the transaction expenses arising from the Merger; (ii) the risk that,
despite the intentions and the efforts of the parties, the benefits sought to be
achieved in the Merger will not be achieved; (iii) the fact that TCI was not
willing to contractually commit that TCI Music would be the exclusive vehicle
through which it and its affiliates would conduct their residential and
commercial audio music activities; (iv) the risk that DMX might be required to
perform its obligations under various guarantees or contractual obligations
relating to its European operations notwithstanding the effort to restructure
those obligations to avoid such commitments; and (v) the other risks described
above under "Risk Factors." The DMX Board also considered the fact that,
although a substantial portion of the business of TCI Music after the Merger
would be the business of DMX, TCI would be the beneficial owner of 80.75% of,
and 97.7% of the voting power related to, the TCI Music Common Stock outstanding
immediately after the Merger. The allocation of ownership of TCI Music Common
Stock was determined by negotiation between DMX and TCI, during which there was
no attempt to value the tangible assets and potential revenue stream represented
by the Contributed Net DMX Revenues to be contributed by TCI pursuant to the
Contribution Agreement in exchange for TCI Music Series B Common Stock and the
TCI Music Note. Nevertheless, as described above, various factors, including
DMX's financial condition and the value to be provided to DMX stockholders
through TCI's issuance of the Rights, influenced the DMX Board's determination
that it should accept TCI's proposal as to the share of economic and voting
power to be held by TCI after the Merger, notwithstanding the uncertainty as to
the value of the Contribution to be made by TCI to TCI Music pursuant to the
Contribution Agreement.

The foregoing discussion of the information and factors considered by the
DMX Board is not intended to be exhaustive but is believed to include all
material factors considered by the DMX Board. In view of the variety of factors
considered in connection with its evaluation of the Merger, the DMX Board did
not find it practicable to and did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the DMX Board may have given different weights
to different factors.

Board Recommendation. THE DMX BOARD HAS APPROVED THE MERGER AGREEMENT AND
THE MERGER AND BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND
THAT THE MERGER IS IN THE BEST INTERESTS OF, DMX AND ITS STOCKHOLDERS AND
THEREFORE RECOMMENDS THAT THE HOLDERS OF DMX COMMON STOCK VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.

For a discussion of the interests of certain members of DMX's management
and the DMX Board in the Merger, see "-- Interests of Certain Persons in the
Merger."

TCI'S REASONS FOR THE MERGER

The TCI Board has unanimously approved the Merger Agreement. The TCI Board
believes that the Merger represents an opportunity for TCI to increase its
ownership interest in DMX to approximately 89.6% in a manner that does not
initially require expenditure of its cash resources or the borrowing of funds.

In making its determination, the TCI Board considered a number of factors,
including among other things, the terms and conditions of the transactions
contemplated by the Merger Agreement; information with respect to the business,
operations and prospects of DMX; and the views and opinions of the management of
TCI. The foregoing discussion is believed to include all material factors
considered by the TCI Board.

OPINION OF FINANCIAL ADVISOR RETAINED BY THE DMX BOARD

The Special Committee engaged Houlihan Lokey to render an opinion on behalf
of the public stockholders of DMX that the Merger Consideration to be received
by the public stockholders of DMX in connection with the Merger is fair to them
from a financial point of view.

27
<PAGE> 41

Representatives of the Special Committee interviewed various investment
bankers to assist it in its evaluation of TCI's merger proposal. In selecting a
firm, the Special Committee considered a variety of factors, including the
firm's reputation, experience, expertise in the relevant industries, cost and
ability to assist the Special Committee in a timely fashion. Based on the
foregoing, the Special Committee selected Houlihan Lokey as its financial
advisor.

As compensation to Houlihan Lokey for its services in connection with the
Merger, the Special Committee agreed to pay Houlihan Lokey a fee of $115,000. No
portion of Houlihan Lokey's fees are contingent upon the successful completion
of the merger. The Special Committee and DMX have also agreed to indemnify
Houlihan Lokey and related persons against certain liabilities, including
liabilities under Federal securities laws, arising out of the engagement of
Houlihan Lokey, and reimburse Houlihan Lokey for certain expenses.

Houlihan Lokey is a nationally recognized investment banking firm that is
continually engaged in providing financial advisory services in connection with
mergers and acquisitions, leveraged buyouts, business valuations for a variety
of regulatory and planning purposes, recapitalizations, financial
restructurings, and private placements of debt and equity securities. Houlihan
Lokey has no prior relationship with DMX or its affiliates or TCI or its
affiliates.

Houlihan Lokey did not, and was not requested by the Special Committee to,
make any recommendations as to the form or amount of consideration to be paid to
the stockholders in connection with the Merger. The Special Committee did not
impose any restrictions or limitations upon Houlihan Lokey with respect to its
investigation made or the procedures it followed in rendering its opinion.

In arriving at its opinion, Houlihan Lokey has made such analyses and
inquiries as it deemed necessary and appropriate under the circumstances,
including:

(i) reviewed DMX's annual report on Form 10-K for the fiscal year
ended September 30, 1996, which DMX's management has identified as being
the most current financial statements available;

(ii) reviewed copies of the following agreements:

The Merger Agreement;

The Rights Agreement;

The Contribution Agreement;

The TCI Loan; and

The Agreements respecting DMX's European operations between DMX and
Mr. Rubinstein;

(iii) met with, or held discussions with, certain members of the
senior managements of DMX and TCI Music to discuss the operations,
financial condition, future prospects and projected operations and
performance of DMX and TCI Music, and met with representatives of DMX's
counsel to discuss certain matters;

(iv) visited certain facilities and business offices of DMX;

(v) reviewed forecasts and projections prepared by DMX's management
with respect to DMX for the fiscal years ended September 30, 1997 through
2000;

(vi) reviewed the historical market prices and trading volume for the
DMX Common Stock for the two-year period prior to announcement of the TCI
Merger proposal which Houlihan Lokey believed was sufficient to evaluate
the short and long-term trends in the trading price of DMX Common Stock;

(vii) reviewed certain other publicly available financial data for
certain companies that Houlihan Lokey deemed comparable to DMX, and
publicly available prices and premiums paid in other transactions that
Houlihan Lokey considered similar to the Merger; and

(viii) conducted such other studies, analyses and inquiries as they
deemed appropriate.

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<PAGE> 42

In order to render its opinion, Houlihan Lokey estimated the value of the
DMX Common Stock and compared it to the value of the Merger Consideration to be
paid in connection with the Merger. When determining the value of a business
enterprise, there are three general approaches available to the valuation
professional: the market approach, the income approach and the asset approach.
These are also commonly referred to as the market multiple, discounted cash flow
and adjusted book value approaches, respectively. The choice of which approach
to use in a particular situation will depend upon the specific facts and
circumstances associated with the company, as well as the purpose for which the
valuation analysis is being conducted. Houlihan Lokey did not utilize the
adjusted book value approach because, in the exercise of its professional
judgment, Houlihan Lokey concluded that such approach was not appropriate for
determining the value of the DMX Common Stock, including because DMX did not
have a significant investment in tangible assets. The comparable market multiple
analysis estimated the per share value by calculating market multiples for the
latest twelve month's revenues of a peer group of companies and then applying a
selected multiple based on a comparative financial analysis of DMX to the peer
group of companies. The discounted cash flow analysis estimated the per share
value by discounting to the present, at a risk-adjusted discount rate, the
projected cash flows to be generated by DMX's business. The per share value
generated by each methodology was lower than the Merger Consideration to be paid
in connection with the Merger, leading Houlihan Lokey to conclude that the
Merger Consideration to be paid to the public stockholders of DMX in connection
with the Merger was fair to them from a financial point of view. No other
conclusions of value were reached by Houlihan Lokey.

Houlihan Lokey relied upon and assumed, without independent verification,
that the financial forecasts and projections provided to it have been reasonably
prepared and reflect the best currently available estimates of the future
financial results and condition of DMX, and that there has been no material
change in the assets, financial condition, business or prospects of DMX since
the date of the most recent financial statements made available to it.

Houlihan Lokey did not independently verify the accuracy and completeness
of the information supplied to it with respect to DMX and did not assume any
responsibility with respect to it. Houlihan Lokey has not made any physical
inspection or independent appraisal of any of the properties or assets of DMX.
Houlihan Lokey's opinion is necessarily based on business, economic, market and
other conditions as they exist and can be evaluated by it at the date of its
letter.

In reaching its conclusions, Houlihan Lokey utilized two primary valuation
methodologies, as described below:

The Market Multiple Approach. The market multiple approach is one of
determining a level of earnings or revenues that is considered to be
representative of the future performance of the business, and multiplying this
figure by an appropriate risk-adjusted market multiple.

The market multiple is an expression of what investors believe to be a fair
and reasonable rate of return for the particular security, given the inherent
risks of ownership. It incorporates expectations of growth and rests on the
implicit assumption that some level of earnings or revenues will be generated by
the enterprise into perpetuity. The market multiple employed was selected
through the market comparison method, whereby companies having their stock
traded in the public market were selected for comparison purposes and used as a
basis for choosing a reasonable market multiple for DMX.

In employing the market multiple approach, a representative list of
publicly owned companies that are similar to DMX in those respects carrying the
greatest weight with the investing public were selected for comparison purposes.
Houlihan Lokey conducted a search for companies which were comparable to DMX in
terms of its operating and financial characteristics. Key search criteria
included:

- The company's primary business had to be supplying content to cable
systems and networks.

- The company's common stock had to be outstanding in the hands of the
public.

- The trading market of the company had to be relatively active to obtain
true investor sentiment.

- The company had to make its financial information public.

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<PAGE> 43

The results of this search indicated that the following three companies met
this search criteria and were most comparable to DMX: BET Holdings Inc., Gaylord
Entertainment and International Family Entertainment. In some cases, companies
may be quite similar from an investment standpoint, even though they appear to
be engaged in somewhat different lines of business. Primarily, they offered
operational and economic comparability in the areas of major importance to the
investing public. Accordingly, Houlihan Lokey relied upon the entire peer group,
taken as a whole, for comparison purposes.

Houlihan Lokey noted that the selected comparable companies are
significantly larger than DMX, have more liquidity and are more profitable.
Moreover, several of the comparable companies operate more diversified
activities than DMX. However, DMX exhibits above average revenue growth relative
to the comparable companies.

Total invested capital to revenue multiples for the comparable companies
were derived by dividing the value of each company's total invested capital by
the latest twelve months' revenues. Total invested capital ("TIC") is defined as
the book value of a company's debt and preferred equity (where book value
approximates fair market value), plus the enterprise value of the company's
common equity. The enterprise value of the common equity is computed by
multiplying the number of shares outstanding and the most recent 20-day average
price per share as of the valuation date. These resulting multiples of
TIC/Revenue ranged from 2.74 to 3.90.

It was Houlihan Lokey's opinion that an investor considering an investment
in DMX would select a TIC/Revenue multiple at the high end of the comparables'
range to reflect the expected growth of DMX's operations. Based on all the
evidence analyzed, a TIC/Revenue multiple of 3.5 times DMX's trailing twelve
months' revenue is considered reasonable for DMX. The selected multiple was
multiplied by DMX's last twelve months' revenue. DMX's debt was subtracted from
the result to arrive at an estimate of its equity value.

The Discounted Cash Flow Approach. Forecasts for the four-year period
ended September 30, 2000 were provided by Company management. The key
determinants to value once the forecasted cash flows are established is the rate
used to discount the cash flows to present value and the expected annual growth
rate or market multiple to be applied to the last year's cash flow in estimating
the terminal value of the enterprise.

SELECTING DISCOUNT RATES. Houlihan Lokey utilizes several approaches in
the determination of relevant discount rates (costs of capital) by which
projected cash streams may be discounted. Generally, Houlihan Lokey utilizes
different discount rates for different corporate assets (i.e., receivables, real
estate, library receipts, future production receipts and so on). When
discounting the cash stream of the combined operations of a company, Houlihan
Lokey will utilize a weighted average discount rate of the various assets.

Houlihan Lokey utilizes two general approaches in developing discount rates
that are risk-adjusted for the assets (or company) being valued. The first
approach consists of comparing the subject company (or subject company's assets)
with companies that have publicly traded debt and/or equity. By contrasting the
subject company with the public company information, Houlihan Lokey is able to
determine whether rates of return for the subject company should be
risk-adjusted as compared to those of the public companies. In the selection of
discount rates appropriate for DMX, consideration was given to the growth
expectations and the risk characteristics of an investment in DMX relative to
those of the public companies used in the analysis. While no one public company
is perfectly comparable to DMX, information regarding how investors would view
DMX can be gained by a comparative analysis of the three public companies
included in this analysis as listed in the market multiple approach section.

The second approach, a market-based approach, consists of Houlihan Lokey's
continual required return information updates arising from conversations with
debt and equity providers.

Depending upon whether the cash flows being discounted are before the
payment of interest expense or after, the appropriate discount rate is either
the cost of equity ("K(e)") or a weighted average cost of capital ("WACC"). The
cash flows throughout this analysis do not consider the payment of interest,
they are debt-free cash flows, and therefore WACC was selected as the
appropriate discount rate. The WACC represents the combined average cost of debt
and equity. The cost of debt is determined, in this analysis, from the median

30
<PAGE> 44

cost of debt of the comparable public companies as well as from consideration of
information gathered from debt providers in the market. The Capital Asset
Pricing Model ("CAPM"), which states that the return on any risky asset must be
greater than the risk-free rate, is used to calculate the cost of equity K(e),
as indicated in the following table.

<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
K(e) = R(F)+(R(M)-R(F))(B(L))
R(F) = Risk-free rate of return
Where R(M) = Return on market portfolio
B(L) = Leveraged beta*
* Beta is a standardized measure of nondiversifiable risk and is defined as the covariance
of the subject company return with the market divided by the variance of the market
returns.
- -------------------------------------------------------------------------------------------
</TABLE>

Houlihan Lokey's application of the CAPM to compute a reasonable cost of
equity for DMX, and selection of the additional variables used in the WACC
equation were based on the comparative analysis summarized in the "Market
Multiple" section, above. In addition, Houlihan Lokey's selection of an
appropriate discount rate incorporated Houlihan Lokey's assessment of DMX's
ability to achieve the results projected by its management. In summary, Houlihan
Lokey's analysis yielded an estimated WACC ranging from 14.5 percent to 16.5
percent.

DETERMINATION OF TERMINAL VALUE. The terminal value used in the discounted
cash flow approach is essentially an estimate of the value of the enterprise as
of the end of the final period for which cash flow projections have been made.
It is necessary to compute this value because, although the expectation is that
the company will remain a viable going-concern beyond the final period, one
cannot project with enough certainty the cash flows to be generated in any given
period.

There are two basic methods of computing the terminal value for a
going-concern. One is the "multiple method," which uses a projected market
multiple as in the market multiple approach.

Typically, the earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the final projection period is adjusted to arrive at
a "normalized" EBITDA level, and then multiplied by a reasonable Price/EBITDA
multiple to yield an indication of value for the TIC of the company. The other
common method of computing the terminal value is referred to as the "perpetuity
method," and it uses the projected free operating cash flow as its basis, rather
than EBITDA. The free operating cash flow projected in the final period is
adjusted to arrive at a level of cash flow for the first year beyond the
projection period which is representative of the future cash-generating
capability of the company. This "normalized" cash flow figure incorporates
expectations of the level of investment required to maintain the business into
the future, as well as the return on investment that the business can be
expected to sustain. The normalized cash flow figure is then capitalized as a
perpetuity by the previously determined discount rate, adjusted for some level
of growth which can be expected into perpetuity. The following is a
representation of the perpetuity method formula:

<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
T = CF(n)/(WACC-G)
Where T = Terminal value
CF(n) = Normalized cash flow
WACC = Weighted-average cost of capital
G = Growth rate in perpetuity
- ---------------------------------------------------------------------------------------
</TABLE>

The terminal value is then discounted back to the present using the
previously selected discount rate.

In Houlihan Lokey's analysis of DMX, Houlihan Lokey chose to use the
perpetuity method to compute the terminal value. The analysis indicates that an
appropriate terminal growth rate would range from 6.0 to 8.0 percent.

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<PAGE> 45

In analyzing the value of the Merger Consideration, Houlihan Lokey utilized
two methodologies. The first discounted to present value the $2.00 equivalent
per share of DMX Common Stock potentially available at the end of a one-year
period upon exercising a Right and putting a share of TCI Music Series A Common
Stock to TCI pursuant thereto, resulting in a valuation of the Merger
Consideration of $1.85. The second methodology was to utilize sophisticated
financial models which value put options and to add the value of the Right to
the estimated value of a share of TCI Music Series A Common Stock immediately
after the close of the Merger. The value of the Right (regardless of whether TCI
paid cash, stock or a combination of both) derived by use of these models was
$0.49. The 20-day average market value as of February 5, 1997 of a share of DMX
Common Stock of $1.47 was used as a proxy for the value of a share of TCI Music
Series A Common Stock immediately after the close of the Merger. The value of
the Right of $0.49 added to the value of a share of DMX Common Stock of $1.47
resulted in a value indication for the Merger Consideration of $1.96.

Because the value of the Merger Consideration in the Merger was higher than
each of the implied values of DMX's stock price generated by each of the above
analyses, Houlihan Lokey concluded that the Merger Consideration to be received
by the public stockholders of DMX was fair to them from a financial point of
view.

The aforementioned analyses required studies of the overall market,
economic and industry conditions in which DMX operates, and DMX's operating
results. Research into, and consideration of, these conditions were incorporated
into the analyses.

Houlihan Lokey's opinion is based on the business, economic, market and
other conditions as they existed as of February 6, 1997. In rendering its
opinion, Houlihan Lokey has relied upon and assumed, without independent
verification, that the financial results provided to Houlihan Lokey by DMX's
management have been reasonably prepared and reflect the best current available
estimates of the financial results and condition of DMX. Houlihan Lokey did not
independently verify the accuracy or completeness of the information supplied to
it with respect to DMX and does not assume responsibility for it. Except as set
forth above, Houlihan Lokey did not make any physical inspection or independent
appraisal of the specific properties or assets of DMX.

The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and application of those methods to the particular
circumstances and is therefore not readily susceptible to summary description.
In arriving at its opinion, Houlihan Lokey did not attribute any particular
weight to any analysis or factor considered by it, but rather made the
qualitative judgements as to the significance and relevance of each analysis and
factor. Accordingly, Houlihan Lokey believes that its analyses and the summary
set forth herein must be considered as a whole and that selecting portions of
its analyses without considering all factors and analyses could create an
incomplete view of the processes underlying the analyses set forth in the
Houlihan Lokey opinion. In its analysis, Houlihan Lokey made numerous
assumptions with respect to DMX, industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of DMX. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be more or less favorable than suggested by such analyses.
Additionally, analyses relating to the value of businesses or securities are not
appraisals. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.

Houlihan Lokey's analysis described above resulted in indications of the
value of DMX's operations ranging from $83 million to $86 million. Based on
Houlihan Lokey's analyses and considerations which it deems appropriate under
the circumstances, and after subtracting off debt from the total value of DMX,
Houlihan Lokey concluded that the relevant range of value for DMX's aggregate
equity is $77 million to $80 million and on a per share basis ranged from $1.30
to $1.33.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendations of the DMX Board with respect to the
Merger, stockholders should be aware that certain members of DMX's management
and the DMX Board have certain interests in the

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<PAGE> 46

Merger that are in addition to or different from the interests of stockholders
of DMX generally. The DMX Board was aware of these interests and considered
them, among other matters, in approving the Merger and the Merger Agreement.

Relationship of DMX Directors to TCI. Messrs. Hindery, Fisher and
Sparkman, directors of DMX, also serve as directors or executive officers of
TCI. Mr. Sparkman currently serves as a director of TCI. Mr. Sparkman was
Executive Vice President of TCI until March 1995. Mr. Fisher currently serves as
a director of TCI and serves as a consultant to TCI. Mr. Fisher served as an
officer of TCI until January 1996. Additionally, Mr. Hindery is the managing
general partner of the general partner of InterMedia Partners and its affiliated
entities. InterMedia Partners is a multi-system cable television operator. TCI
has various investments in InterMedia Partners and its related entities. Mr.
Hindery was appointed a director of TCI in May 1997, President and Chief
Operating Officer of TCI effective March 1, 1997 and Director, President and
Chief Operating Officer of TCIC in March 1997. In addition, there is an
informal, non-binding understanding between TCI and a majority of the existing
directors of DMX that TCI may recommend the appointment of two additional
candidates for election to the DMX Board. TCI has not made any appointments to
the DMX Board pursuant to this arrangement.

Retention Bonus Arrangements. The DMX Board has authorized retention
bonuses for four key employees, including DMX's Chief Financial Officer. Each
such employee will be paid an amount equal to six months' base salary (nine
months in the case of DMX's Chief Financial Officer), payable upon consummation
of the Merger. The aggregate amount of such payments will be approximately
$206,000.

Stock Options. Under the terms of DMX's 1991 Incentive Stock Option Plan,
1991 NonQualified Stock Option Plan and 1991 Non-Qualified Stock Option Plan for
Non-Employee Directors (collectively, the "1991 Plans"), in the case of a merger
such as the Merger, option holders have the right to continue to hold their
options, which become exercisable for the "acquisition consideration."
Accordingly, options granted under the 1991 Plans will carry over after the
Merger and be exercisable for TCI Music Series A Common Stock and Rights (if the
Rights are not then terminated). However, all such options terminate and are not
exercisable three months after the holder is no longer employed or serving as a
director of DMX. By the terms of DMX's 1993 Stock Option Plan and certain option
agreements relating to options granted outside any plans, all outstanding
options may be accelerated, regardless of vesting effective 30 days prior to the
date of the Merger upon written notice to option holders, and, unless exercised,
such options will terminate upon consummation of the Merger. DMX has agreed in
the Merger Agreement to take all action necessary to cause the options that can
be terminated upon consummation of the Merger to be canceled if not otherwise
exercised, and to use its best efforts to cause each other option that is
outstanding that is not terminable upon consummation of the Merger to be
canceled prior to the Effective Time of the Merger. As of the date of this Proxy
Statement/Prospectus, no action has been taken by DMX to cancel any such
carryover options.

As of May 26, 1997, employees of DMX held options to purchase an aggregate
of 600,000 shares of DMX Common Stock under the 1991 Plans, 2,934,583 shares of
DMX Common Stock under the 1993 Stock Option Plan and 125,000 shares of DMX
Common Stock pursuant to grants made outside any plan. The options granted under
the 1993 Stock Option Plans and outside any plans, are exercisable at a weighted
average exercise price of $3.71 (at exercise prices ranging from $2.00 to
$6.25); the options granted under the 1991 Plans are exercisable at a weighted
average exercise price of $4.32 (at exercise prices ranging from $4.18 to
$5.75). See "THE MERGER AGREEMENT -- Certain Personnel Matters."

Indemnification. After the Effective Time, TCI Music will cause the
Surviving Corporation to, and, should the Surviving Corporation fail or be
unable to do so, TCI Music will (i) indemnify, defend and hold harmless each
person who is or has been at any time prior to the Effective Time, an officer or
director of DMX, in connection with any claim based on or arising out of, any
actions or omissions of such person as an officer or director of DMX on or prior
to the Effective Time until the expiration of the applicable statutes of
limitation to the fullest extent permitted under the DGCL and the DMX Charter
and DMX Bylaws in effect on the date of the Merger Agreement and (ii) pay
expenses in advance of the final disposition of any such claim to the fullest
extent permitted by and pursuant to applicable law. See "THE MERGER
AGREEMENT -- Indemnification."

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<PAGE> 47

Disposition of European Companies. DMX's Board of Directors had decided in
August 1996, unrelated to TCI's Merger proposal, that it would discontinue
further funding of the operations of the European Companies. On October 3, 1996,
Jerold H. Rubinstein, Chairman of the Board and Chief Executive Officer of DMX,
made a proposal to the DMX Board to acquire DMX's interest in the European
Companies. The DMX Board appointed J.C. Sparkman as a committee of the Board to
negotiate with Mr. Rubinstein with respect to his proposal. Thereafter, on
December 3, 1996, the DMX Board of Directors approved the disposition of the
European Companies to Mr. Rubinstein and on December 18, 1996, DMX and Mr.
Rubinstein entered into two alternative agreements providing for such
disposition. Under the first alternative agreement (the "Reorganization
Agreement"), DMX would retain a ten percent equity interest in the European
Companies, which would have an exclusive, five-year, royalty-free license to
distribute the DMX music service in Europe, the former Soviet Union and the
Middle East and would have the right to use DMX's trademarks for two years. In
addition, Mr. Rubinstein has agreed to guarantee certain obligations of the
European Companies for satellite-uplink capacity (which guaranty will be secured
by a pledge of the DMX Common Stock owned by Mr. Rubinstein). Mr. Rubinstein
will seek to reorganize the operations of the European Companies and will seek
new equity investors. If the European Companies cannot be reorganized, then DMX
and Mr. Rubinstein will proceed under the second alternative agreement (the
"Newco Agreement"), under which the European Companies would be placed in
receivership and Mr. Rubinstein would organize the operations of the European
Companies under a new company to distribute the DMX music service on
substantially the same terms as provided for in the Reorganization Agreement and
DMX will subscribe for a ten percent equity interest in the new venture.

Under the Reorganization Agreement, DMX would retain (a) ten percent of the
common stock of DMX-NV; (b) ten percent of the preference shares of DMX-UK now
owned by DMX, or to be issued to DMX after the articles of organization of
DMX-UK have been amended; (c) a ten percent interest in the $24,436,000
principal amount note acquired from TCI-Euromusic, Inc. that is owed by DMX-NV
to DMX; and (d) a ten percent interest in any other indebtedness of DMX-UK or
DMX-NV to DMX. Mr. Rubinstein would obtain a ninety percent interest in each of
the foregoing. Under the Reorganization Agreement, Mr. Rubinstein would use his
ninety percent interest in the equity of the European Companies to provide
equity to creditors or new investors in the reorganization of the European
Companies until he has obtained $15,000,000 in debt forgiveness, new investment,
or property or services provided without charge. Thereafter, Mr. Rubinstein
would not be obligated to use only his equity interest in the European Companies
to provide such equity, and DMX's interest in the European Companies would be
diluted by any further equity issuances required to effect the reorganization of
the European Companies. In addition, DMX would be required to participate pro
rata, as a continuing owner of ten percent of the intercompany debt of DMX-UK
and DMX-NV, in any arrangement that Mr. Rubinstein makes for his ninety percent
interest in such debt (such as exchanging the debt for equity or forgiving all
or part of the debt) in connection with reorganizing DMX-UK and DMX-NV.

If necessary creditor concessions cannot be obtained, DMX and Mr.
Rubinstein will proceed with the Newco Agreement, pursuant to which DMX would
receive ten percent of the common stock of the new company ("Newco") that would
be organized by Mr. Rubinstein to conduct the operations of the European
Companies. Initially, Mr. Rubinstein would hold the other ninety percent of the
common stock of Newco, but he would be obligated to raise the first $15,000,000
of Newco's capital requirements (whether as cash or as services and property
provided without charge) by providing investors or vendors with common stock
interests from his ninety percent interest in Newco.

DMX does not believe that its ten percent equity ownership interest, either
in the European Companies or Newco, will expose it to any material risks, other
than the risk that the value of such interest may decrease. DMX agreed to Mr.
Rubinstein's request for a five-year, royalty-free license because DMX believed
that any amounts it might be able to receive from a license that provided for a
royalty would be offset by the resulting decrease in the value of its interest
in the entity. Furthermore, the DMX Board believed that the royalty-free license
would significantly increase Mr. Rubinstein's ability to successfully negotiate
with the creditors of the European Companies in order to reorganize their
operations, which the DMX Board believed would be more beneficial to DMX than
placing the European Companies in receivership. Reorganization would likely
result

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<PAGE> 48

in the release of DMX from certain of its guarantees of contractual obligations
of the European Companies, and would also help maintain DMX's relationships with
major European cable companies that would likely be adversely affected if the
European Companies were placed in receivership. In addition, although DMX did
not establish a value for either the distribution or trademark license, because
DMX does not anticipate that in the near future it will recommence business
operations in the territories covered by the distribution license, the DMX Board
did not believe that there was a significant opportunity cost to DMX from
providing the license on a royalty-free basis.

The respective interests of the members of DMX's management and the DMX
Board described above constitute all of the material interests of those persons
in the Merger that are known to DMX to be different from, or that constitute an
extra or special benefit not shared on a pro rata basis with, the stockholders
of DMX.

Security Ownership. For information regarding the security ownership of
DMX Common Stock by DMX's directors, five highest paid executive officers and
directors and executive officers as a group, see "OWNERSHIP OF TCI MUSIC AND DMX
STOCK -- Security Ownership of DMX."

Interests of TCI under the Contribution Agreement. Pursuant to the
Contribution Agreement, at the Effective Time TCI will cause each TCI System
Owner to contribute to TCI Music the right to receive the Contributed Net DMX
Revenues of such TCI System Owner until the earlier of the date on which the
contributing entity ceases to be a TCI System Owner and December 31, 2006. TCI
also will cause the commercial tuners held in inventory by its subsidiaries,
which had a book value of approximately $4.5 million as of March 31, 1997, to be
contributed to TCI Music and will issue the Rights with respect to the TCI Music
Series A Common Stock to be issued to DMX stockholders in the Merger. In
exchange for the consideration provided by TCI and its subsidiaries pursuant to
the Contribution Agreement, TCI, as designee of the TCI System Owners, will
receive 62,500,000 shares of TCI Music Series B Common Stock and the TCI Music
Note in the principal amount of $40 million. See "ARRANGEMENTS BETWEEN TCI AND
TCI MUSIC AFTER THE MERGER -- Contribution Agreement."

No attempt was made by DMX or TCI to determine the value of the Contributed
Net DMX Contributed Revenues which, had the Merger been completed as of January
1, 1996, would have totaled approximately $4.4 million and $16.4 million for the
three months ended March 31, 1997 and the year ended December 31, 1996,
respectively. There is substantial uncertainty as to whether Contributed Net DMX
Revenues can be sustained at such levels because of the possible effects of
various factors, including the launch of digital compression technology. See
"CERTAIN INFORMATION CONCERNING TCI MUSIC -- Effect of Launch of Digital
Compression Technology." See "INDEX TO FINANCIAL STATEMENTS."

The amount of the TCI Music Note was fixed at $40 million to provide some
compensation to TCI for the reduction in its and its subsidiaries' borrowing
capacity that would result from the loss of cash flow represented by the
transfer of Contributed Net DMX Revenues to TCI Music. Under covenants in
various financing agreements, the amount of debt that TCI (or one or more of its
subsidiaries treated as separate borrowing entities) may incur is limited by
various financial tests, including covenants that limit debt as a multiple of
cash flow. Accordingly, TCI determined that TCI Music should compensate it for a
portion of this lost borrowing capacity. In light of the uncertainty as to the
amount of Contributed Net DMX Revenues that would be paid to TCI Music in the
future and the desire to provide TCI Music with additional revenues, TCI
determined that $40 million represented a reasonable offset against such lost
borrowing capacity and agreed to accept payment in the form of the TCI Music
Note, which will mature 180 days after the Effective Time, to permit TCI Music
sufficient time to obtain long-term debt financing, proceeds of which would be
used to retire the TCI Music Note. However, there can be no assurance that such
long-term debt financing will be available on terms acceptable to TCI Music.

After the Merger, TCI will provide certain administrative and other
services and benefits to TCI Music, in exchange for which TCI will receive
reimbursement of all direct expenses and an allocated share of all indirect
expenses incurred by TCI in providing those services and benefits. See
"ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER -- Services Agreement."
TCI and TCI

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<PAGE> 49

Music do not anticipate that payments made by TCI Music to TCI under the
Services Agreement will be material in amount.

CERTAIN CONSEQUENCES OF THE MERGER

GENERAL

Upon consummation of the Merger (i) Merger Sub will cease to exist as a
separate corporation and DMX as the Surviving Corporation will become a wholly
owned subsidiary of TCI Music and (ii) holders of DMX Common Stock will be
entitled to receive shares of TCI Music Series A Common Stock, the Rights and
cash in lieu of the issuance of fractional shares of TCI Music Series A Common
Stock and Rights. See "THE MERGER AGREEMENT -- Consideration to be Received in
the Merger." As described under the caption "APPRAISAL RIGHTS," stockholders of
DMX have the right to pursue appraisal rights in lieu of receiving the TCI Music
Series A Common Stock and the Rights pursuant to the Merger. DMX stockholders
who receive TCI Music Series A Common Stock pursuant to the Merger will continue
to be stockholders of a Delaware corporation. See "COMPARISON OF STOCKHOLDERS'
RIGHTS."

Following the consummation of the Merger, the officers and directors of
Merger Sub will be the officers and directors of the Surviving Corporation.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

TCI and TCI Music have not requested a ruling from the IRS with respect to
the federal income tax consequences of the Contribution or the Merger. It is not
a condition to the Merger that the parties receive such a ruling or an opinion
of tax counsel with respect to the intended tax consequences of the Contribution
or the Merger. The following is a summary of the anticipated material federal
income tax consequences of the Merger to a holder of DMX Common Stock who
exchanges DMX Common Stock for TCI Music Series A Common Stock and Rights
pursuant to the Merger. Sherman & Howard L.L.C., counsel to TCI Music, is of the
opinion that the following summary, to the extent it represents matters of law
or legal conclusions, accurately summarizes the anticipated material federal
income tax consequences of the Merger to holders of DMX Common Stock.

The following discussion does not address all aspects of federal income
taxation that may be important to particular stockholders and may not be
relevant or applicable to stockholders who are subject to special tax rules,
including the tax consequences to DMX stockholders who acquired their shares of
DMX Common Stock pursuant to the exercise of stock options or otherwise as
compensation, or who are not citizens or residents of the United States or are
subject to the alternative minimum tax. Finally, the discussion does not address
the federal income tax consequences to stockholders who exercise and perfect
appraisal rights with respect to the Merger. This discussion is based upon laws,
regulations and rulings and judicial authorities now in effect, all of which are
subject to change.

For federal income tax purposes, the Contribution and the Merger should
qualify as transactions described in Section 351 of the Code.

Contribution and Merger. Assuming the Contribution and the Merger qualify
as transactions described in Section 351 of the Code, the following tax
consequences will result:

(i) Except for possible gain equal to the fair market value of the
Rights that could be recognized by TCI Music on the issuance of the Rights,
no gain or loss will be recognized by TCI Music solely as a result of the
Contribution and the Merger. The Contribution and the Merger will result in
deferred intercompany gain in the amount of $40 million to TCI and its
subsidiaries.

(ii) No gain or loss will be recognized by or includable in the income
of a holder of DMX Common Stock solely as a result of the receipt of TCI
Music Series A Common Stock pursuant to the Merger. A holder of DMX Common
Stock will recognize gain upon the receipt of cash in lieu of fractional
shares of

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<PAGE> 50

TCI Music Series A Common Stock and upon receipt of the Rights as described
in (iii) and (iv) below. No loss will be recognized as a result of the
receipt of the Rights.

(iii) Any cash received by a holder of DMX Common Stock in lieu of a
fractional share of TCI Music Series A Common Stock will be treated as
having been received in exchange for such fractional share of TCI Music
Series A Common Stock and not as a dividend, and any gain or loss
recognized as a result of the receipt of such cash will be capital gain or
loss (assuming that the shares of DMX Common Stock are held as capital
assets) equal to the difference between the amount of cash received and the
portion of the stockholder's basis in DMX Common Stock allocable to such
fractional share. The capital gain or loss will be long term capital gain
or loss if the DMX Common Stock allocable to such fractional share was held
for more than 12 months.

(iv) If subsequent to the Merger after applying the constructive
ownership rules of Sections 318 and 304(c)(3) of the Code, the percentage
of DMX Common Stock constructively owned by a holder of DMX Common Stock is
less than 80% of the percentage of DMX Common Stock constructively and
actually owned by such holder of DMX Common Stock before the Merger or if
the Merger otherwise results in a "meaningful reduction" in such holder's
actual and constructive ownership of DMX Common Stock, any gain realized by
such holder as a result of the Merger will be recognized as capital gain to
the extent of the fair market value of the Rights (assuming that the shares
of DMX Common Stock are held as capital assets by such holder). The capital
gain or loss will be long term capital gain if the DMX Common Stock
allocable to the Rights was held for more than 12 months. If neither of
these tests is satisfied, a holder of DMX Common Stock will be treated as
having received a distribution equal to the fair market value of the
Rights, which distribution may be partially or wholly taxable as a
dividend. DMX stockholders should consult their own tax advisors concerning
the application of these tests.

(v) The tax basis for the shares of TCI Music Series A Common Stock
received by each holder of DMX Common Stock will equal the tax basis of
such holder's shares of DMX Common Stock (reduced by any amount allocable
to fractional share interests for which cash is received and the fair
market value of the Rights and increased by any gain recognized on the
receipt of the Rights). The tax basis for the Rights received by each
holder of DMX Common Stock will equal the fair market value of the Rights
as of the Effective Time.

(vi) Assuming that the shares of DMX Common Stock are held as capital
assets, a stockholder's holding period for the shares of TCI Music Series A
Common Stock received in the Merger will include the period during which
the shares of DMX Common Stock were held. A DMX stockholder's holding
period for the Rights will begin as of the Effective Time.

If the Contribution and Merger do not qualify under Section 351 of the Code
then:

(i) TCI will realize deferred intercompany gain equal to the
difference between (x) the sum of the fair market value of the TCI Music
Series B Common Stock and $40 million and (y) TCI and its subsidiaries' tax
basis in the property contributed pursuant to the Contribution and Merger;

(ii) Assuming that the shares of DMX Common Stock are held as capital
assets, each DMX stockholder who receives shares of TCI Music Series A
Common Stock and Rights would recognize capital gain or loss equal to the
difference between the fair market value of the TCI Music Series A Common
Stock and Rights received (and cash received in lieu of fractional shares)
and such stockholder's tax basis in the shares of DMX Common Stock
surrendered and the capital gain or loss would be long-term capital gain or
loss if the shares of DMX Common Stock were held for longer than 12 months;

(iii) The holding period for TCI Music Series A Common Stock and
Rights received in the Merger would commence as of the day after the
Effective Time; and

(iv) Each former DMX stockholder would have a tax basis in the shares
of TCI Music Series A Common Stock and Rights received in the Merger equal
to the fair market value of such shares of TCI Music Series A Common Stock
and Rights.

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<PAGE> 51

Exercise of the Rights. The exercise of the Rights may be taxable or
non-taxable to the exercising holders of the Rights depending upon whether at
the time the Rights are exercised, the exercise of the Rights satisfies the
requirements of a reorganization within the meaning of Section 368(a)(1)(B) of
the Code. Because Section 368(a)(1)(B) requires that stock of TCI Music be
acquired solely for TCI voting stock, the exercise of the Rights will satisfy
the requirements of Section 368(a)(1)(B) of the Code only if TCI elects to pay
all of the purchase price for shares of TCI Music Series A Common Stock upon
exercise of the Rights in shares of Series A TCI Group Common Stock. If TCI
elects to pay any part of such purchase price in cash, the exercise of the
Rights will be a taxable transaction. Pursuant to the Rights Agreement TCI has
the right, in its sole discretion, to elect the form of consideration payable
upon exercise of the Rights and therefore, whether the exercise of the Rights
will be taxable or non-taxable will depend in part on the form of consideration
elected to be paid by TCI. See "THE MERGER -- Consideration to be Received in
the Merger -- Summary of Rights Agreement -- Exercise of Rights Generally;
Consideration Payable." In addition, even if TCI elects to pay the purchase
price on exercise of the Rights solely in shares of Series A TCI Group Common
Stock, the exercise of the Rights must satisfy the additional requirements of
Section 368(a)(1)(B) of the Code, including the requirement that TCI must own
80% of the voting stock and 80% of each class of nonvoting stock of TCI Music at
the time the Rights are exercised (the "80% Test") in order for the exercise of
the Rights to be non-taxable. TCI Music Series A Common Stock acquired by TCI in
connection with the exercise of the Rights will be included in determining
whether the 80% test is satisfied. Neither TCI nor any of its affiliates is
required to take or to omit any action to cause the exercise of the Rights to
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Code, so there is no assurance that the 80% Test will be satisfied when the
Rights are exercised or that TCI's ownership of TCI Music will not be reduced
below 80% in an integrated transaction occurring subsequent to the exercise of
the Rights. Finally, if the exercise of the Rights by the DMX stockholders is
integrated with the acquisition of TCI Music Series B Common Stock pursuant to
the Contribution and Merger, the solely for voting stock requirement of Section
368(a)(1)(B) will not be satisfied. If the 80% Test or the solely for voting
stock requirement of Section 368(a)(1)(B) is not satisfied or if TCI elects to
acquire any shares of TCI Music Series A Common Stock for consideration other
than Series A TCI Group Common Stock, the exercise of the Rights by all TCI
Music stockholders will be taxable.

If the exercise of the Rights is taxable, a TCI Music stockholder will
recognize gain or loss equal to the difference between the fair market value of
the cash and any Series A TCI Group Common Stock acquired pursuant to the
exercise of the Rights (which will be decreased by such TCI Music stockholder's
tax basis in the Rights) and such TCI Music stockholder's tax basis in the TCI
Music Series A Common Stock. Assuming that such shares of TCI Music Series A
Common Stock are held as capital assets, the gain or loss will be capital gain
or loss and the capital gain or loss will be long-term capital gain or loss if
the shares of TCI Music Series A Common Stock were held for longer than 12
months. The holding period for any Series A TCI Group Common Stock acquired
pursuant to the exercise of the Rights will begin on the day the Rights are
exercised.

If the exercise of the Rights does qualify as a reorganization within the
meaning of Section 368(a)(1)(B) of the Code, each TCI Music stockholder who
exercises the Rights will not recognize gain on the receipt of shares of Series
A TCI Group Common Stock exchanged for TCI Music Series A Common Stock pursuant
to the exercise of the Rights. Such TCI Music stockholder's tax basis for the
shares of Series A TCI Group Common Stock acquired pursuant to the exercise of
the Rights will equal the sum of (i) the tax basis of such TCI Music
stockholder's shares of TCI Music Series A Common Stock exchanged for such
shares of Series A TCI Group Common Stock and (ii) the tax basis of such TCI
Music stockholder's Rights. Assuming that the shares of TCI Music Series A
Common Stock are held as capital assets, the holding period for the shares of
Series A TCI Group Common Stock acquired upon the exercise of the Rights will
include the period during which the shares of TCI Music Series A Common Stock
were held.

Assuming that the shares of Series A TCI Group Common Stock are held as
capital assets, if the Rights are not exercised and therefore expire, such
expiration of the non-exercised Rights will result in a capital loss to the
holders of DMX Common Stock other than TCI and its subsidiaries.

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Because qualification of the exercise of the Rights as a reorganization
within the meaning of Section 368(a)(1)(B) is dependent upon conditions that may
or may not exist when the Rights are exercised and neither TCI nor any of its
affiliates is required to take or to omit any action to cause the exercise of
the Rights to qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Code, TCI Music stockholders should consult their own tax
advisors at the time the Rights are exercised to determine the tax effects of
the exercise of the Rights.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY. DMX STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, IF ANY.

ACCOUNTING TREATMENT

THE MERGER AGREEMENT

GENERAL; EFFECTIVE TIME

The Merger Agreement provides for the merger of Merger Sub with and into
DMX. As a result of the Merger, the separate corporate existence of Merger Sub
will cease and DMX will be the Surviving Corporation. In the Merger,
stockholders of DMX will receive the consideration described below. The Merger
will become effective upon the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware. Such filing is anticipated to take
place as soon as practicable after the last of the conditions precedent to the
Merger set forth in the Merger Agreement have been satisfied or, where
permissible, waived. The following description of the Merger Agreement, as
amended, is qualified in its entirety by reference to the complete text of the
Merger Agreement and Amendment One to Merger Agreement, which are incorporated
by reference herein and copies of which (exclusive of exhibits and schedules)
are annexed to this Proxy Statement/Prospectus as Appendix I.

CONSIDERATION TO BE RECEIVED IN THE MERGER

General. Upon consummation of the Merger, each outstanding share
(including shares held directly by TCI or any of its subsidiaries) of DMX Common
Stock will be converted into the right to receive (i) one-quarter share of TCI
Music Series A Common Stock, (ii) one Right with respect to each whole share of
TCI Music Series A Common Stock and (iii) cash in lieu of fractional shares of
TCI Music Series A Common Stock and Rights. Each Right gives the holder the
right, under certain conditions, to require TCI to purchase one share of TCI
Music Series A Common Stock issued in the Merger at a price equal to $8.00 (or
the equivalent of $2.00 per share of DMX Stock), if during the one-year period
beginning at the Effective Time of the Merger, the price of TCI Music Series A
Common Stock does not equal or exceed $8.00 per share for a period of at least
20 consecutive trading days. Such purchase price may be paid, at the election of
TCI, in cash or shares of Series A TCI Group Common Stock having an equivalent
value or a combination thereof. Upon the occurrence of certain events, each
Right will also represent the additional right to require TCI to purchase equity
interests of another entity or entities. See "-- Summary of Rights Agreement."
For a description of the TCI Music Series A Common Stock, see "DESCRIPTION OF
TCI MUSIC CAPITAL STOCK" and for a description of the Rights, see "-- Summary of
Rights Agreement." For a summary of differences between the rights of holders of
TCI Music Series A Common Stock and the rights of holders of DMX Common Stock,
see "COMPARISON OF STOCKHOLDERS' RIGHTS."

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Fractional shares of TCI Music Series A Common Stock will not be issued in
the Merger. Holders of DMX Common Stock otherwise entitled to a fractional share
of TCI Music Series A Stock will be paid cash in an appropriate amount based
upon the value of TCI Music Series A Common Stock of $8.00 per share.

Summary of Rights Agreement. The Rights will be issued pursuant to the
Rights Agreement. The Rights will be evidenced by certificates for shares of TCI
Music Series A Common Stock and will not be transferable separately from the TCI
Music Series A Common Stock. Accordingly, the Rights will be transferable only
in connection with the transfer of the associated TCI Music Series A Common
Stock. One Right will be issued for each whole share of TCI Music Series A
Common Stock that is issued in connection with the Merger. The following summary
of the Rights Agreement does not purport to be complete and is subject to and
qualified in its entirety by reference to all provisions of the Rights
Agreement, including the definitions of certain terms. Whenever particular
provisions or defined terms of the Rights Agreement are referred to, such
provisions or defined terms are incorporated herein by reference. Section
references below are to Sections of the Rights Agreement. The complete text of
the Rights Agreement has been filed as an exhibit to the Registration Statement.
See "AVAILABLE INFORMATION."

Rights Components. Each Right will initially entitle its holder to require
TCI to purchase one share of TCI Music Series A Common Stock from such holder at
the time specified in, for the consideration and subject to the terms and
conditions of the Rights Agreement (such right being referred to as the "TCI
Music Component" of a Right). If TCI Music makes a distribution to all holders
of shares of TCI Music Series A Common Stock of shares of the Capital Stock of
any entity or of rights or warrants entitling such holders (for a period
expiring within 45 days after the effective date of such distribution) to
purchase shares of the Capital Stock of any entity, and if such distribution is
of the magnitude described below (a "Subject Distribution"), then each Right
will also entitle its holder to require TCI to purchase shares of the class of
Capital Stock ("Distributed Entity Stock") of the entity ("Distributed Entity")
distributed or sold in such distribution, at the time specified in, for the
consideration and subject to the terms and conditions of the Rights Agreement
(such right being referred to as the "Distributed Entity Component" of a Right).
(Section 6.04). Similarly, if a Distributed Entity makes a Subject Distribution,
each Right will entitle its holder to require TCI to purchase shares of the
Capital Stock (also referred to as Distributed Entity Stock) of the entity (also
referred to as a Distributed Entity) distributed or sold in such distribution,
at the time specified in, for the consideration and subject to the terms and
conditions of the Rights Agreement. (Section 6.07). A new Distributed Entity
Component of a Right will be created with respect to the Distributed Entity
Stock distributed in each Subject Distribution by TCI Music or a Distributed
Entity. (Section 6.04). The number of shares of Distributed Entity Stock that a
holder of Rights will be entitled to require TCI to purchase upon the valid
exercise of the related Distributed Entity Component of a Right (the "Underlying
Number") will initially equal the number of shares of Capital Stock of such
entity distributed or sold in the Subject Distribution divided by (i) the number
of shares of TCI Music Series A Common Stock or (ii) in the case of a Subject
Distribution by a Distributed Entity, the number of shares of Distributed Entity
Stock of the Distributed Entity making the Subject Distribution, outstanding on
the record date for such distribution. (Sections 6.04 and 6.07).

A distribution of the type described above will be a Subject Distribution
for purposes of the Rights Agreement if the positive difference between (x) the
Fair Market Value of such entity (or, if less than 100% of the Capital Stock of
such entity is distributed or sold, that portion of the Fair Market Value of
such entity that is represented by the shares distributed or sold), minus (y)
the aggregate consideration paid for the shares sold pursuant to such
distributed rights and warrants (such difference being referred to as the
"Distribution Value" (Section 1.01)), represents 10% or more of the sum of the
respective Fair Market Values immediately prior to such distribution of TCI
Music and, if any Subject Distributions had previously been made, of each
Distributed Entity (the aggregate of such Fair Market Values being referred to
as the "Undistributed Value of TCI Music" (Section 1.01). (Sections 6.03 and
6.07). The determination of whether a distribution meets each of the criteria
referred to above and is therefore a Subject Distribution will be made by the
Board of Directors of TCI Music (whose good faith determination will be
conclusive). If TCI Music or any Distributed Entity makes a distribution that
individually is not a Subject Distribution, but that would be a Subject
Distribution if aggregated with any other distribution or distributions
previously made by TCI Music or any Distributed Entity that also were not
Subject Distributions when made (and were not thereafter

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deemed to be Subject Distributions by virtue of this sentence), then upon the
making of the later of such distributions each of such distributions will be
deemed to be a single Subject Distribution for the purpose of any Right
exercised thereafter. (Section 6.07). The determination of whether any
combination of distributions would constitute a Subject Distribution pursuant to
the Rights Agreement will be made by the Board of Directors of TCI Music (whose
good faith determination will be conclusive) on the basis of the Distribution
Values of such distributions and the Undistributed Value of TCI Music calculated
in each case immediately prior to the time the first of such distributions was
made. (Section 6.07).

Each of the TCI Music Component and each Distributed Entity Component of a
Right is sometimes referred to below as a "Component" and each of TCI Music and
each Distributed Entity is sometimes referred to below as an "Applicable
Entity." No Component of a Right will be separable from any of the other
Components of such Right.

Exercise of Rights Generally; Consideration Payable. During the period
commencing at the opening of business on the first anniversary of the date of
the closing of the Merger and ending at the close of business, New York time, on
the 30th day after such date (or the next business day thereafter if such date
is not a business day) (the "Exercise Period"), the holders of Rights may
irrevocably exercise all or any number of their Rights. (Section 4.01). The
Exercise Period for each Right is subject to acceleration upon the occurrence of
the events described below.

If the Rights have one or more Distributed Entity Components at the time
such Rights are exercisable, the holder may irrevocably exercise such Right as
to its TCI Music Component, any or all of its Distributed Entity Components, or
any combination thereof (Section 4.01). Upon the valid exercise of Rights in any
Exercise Period (subject, in the case of an accelerated Exercise Period, to the
rescission of such acceleration under the circumstances described below), the
holder will be entitled to sell to TCI (i) if the TCI Music Component of any or
all of such exercised Rights has been exercised, a number of whole shares of TCI
Music Series A Common Stock equal to the number of whole Rights of which the TCI
Music Component has been so exercised and honored and (ii) if any Distributed
Entity Component of any or all of such exercised Rights have been exercised, a
number of whole shares of the Distributed Entity Stock to which such Distributed
Entity Component relates not in excess of the product of the number of whole
Rights of which such Distributed Entity Component has been exercised and
honored, multiplied by the Underlying Number for such Distributed Entity
Component of a whole Right. (Section 4.04).

The amount to be paid by TCI for each share of TCI Music Series A Common
Stock and Distributed Entity Stock upon the valid exercise of a Right will equal
(i) in the case of TCI Music Series A Common Stock (x) $8.00 minus (y) the sum
of the aggregate per share amount of any TCI Music Dividends and (z) the sum of
the Per Share Value of each Distributed Entity, which will be determined on the
basis of the Fair Market Value of each Applicable Entity as of the last day of
the most recent quarter ended prior to the Exercise Period (or, in the case of
an accelerated Exercise Period, prior to the date of a Triggering Event) divided
by the number of shares of Capital Stock of the Applicable Entity (determined on
a fully-diluted basis) then outstanding. (Sections 1.01, 4.05 and 4.16); and
(ii) in the case of Distributed Entity Stock, the Per Share Value of the
Distributed Entity. The Fair Market Value of the Applicable Entity will be
determined on a going concern or liquidation basis, whichever is greater, taking
into account the considerations described in the Rights Agreement. (Section
1.01). In no event will the amount paid for a share of TCI Music Series A Common
Stock exceed $8.00.

TCI may choose to pay the purchase price upon exercise of Rights in cash,
in shares of Series A TCI Group Common Stock having an equivalent value (based
upon the Current Market Price of such shares, determined in accordance with the
Rights Agreement), or in a combination of cash and shares of Series A TCI Group
Common Stock. (Sections 4.04 and 4.05). However, TCI must pay cash unless (i)
the Series A TCI Group Common Stock is then quoted on the NASDAQ National Market
System or listed for trading on a national securities exchange and (ii) the
issuance of shares of Series A TCI Group Common Stock upon the exercise of
Rights is registered under the Act or such shares are otherwise freely tradable
by TCI Music stockholders receiving such shares other than stockholders who were
deemed to be affiliates of TCI. (Sections 4.04 and 4.06). If TCI elects to offer
a combination of cash and shares of Series A TCI Group

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Common Stock in consideration for the sale of TCI Music Series A Common Stock
and/or Distributed Entity Stock in any Exercise Period, each holder of a Right
exercised during the applicable Exercise Period will receive his or her total
consideration for the shares of TCI Music Series A Common Stock sold in the same
proportions of cash and shares of Series A TCI Group Common Stock as other
holders exercising the TCI Music Component of their Rights during that period
and will receive his or her total consideration for the shares of Distributed
Entity Stock sold upon the exercise of the related Distributed Entity Component
of his or her Rights in the same proportions of cash and shares of Series A TCI
Group Common Stock as other holders exercising such Distributed Entity Component
of their Rights during that period (subject to rounding or other adjustments
made by the Rights Agent and to the payment of cash in lieu of fractional
shares). (Section 4.12). Promptly following the end of an Exercise Period and
the deposit by TCI with the Rights Agent of the amount of cash and/or number of
shares of Series A TCI Group Common Stock required to make full payment of the
purchase price for the shares of TCI Music Series A Common Stock and Distributed
Entity Stock sold to TCI pursuant to the Rights exercised in such Exercise
Period, the Rights Agent will mail to the holders the purchase price for the
shares of TCI Music Series A Common Stock and Distributed Entity Stock, if any,
sold by them. Payment of any cash purchase price and any cash in lieu of
fractional shares of Series A TCI Group Common Stock will be made by check.
(Section 4.11).

Acceleration of Exercise Period. The Exercise Period will be accelerated
upon the occurrence of (a) a Significant Corporate Transaction (as defined
below), (b) any disposition by TCI of equity securities of TCI Music if as a
result of such disposition TCI would cease to be the beneficial owner of at
least 30% in voting power of the outstanding equity securities of TCI Music (a
"Change in Control Transaction"), (c) certain bankruptcy or similar proceedings
by or against TCI or (d) the liquidation or dissolution of TCI. (Section 4.17).
A Significant Corporate Transaction is defined, in general, as the merger or
consolidation of, or the dissolution or liquidation of, an Applicable Entity the
Fair Market Value of which represents a greater percentage of the Undistributed
Value of TCI Music than the percentage thereof represented by the Fair Market
Value of any other Applicable Entity, as determined by the Board of Directors of
TCI Music (whose good faith determination will be conclusive) as of the date the
agreement of merger or consolidation is executed, or the vote of the Board of
Directors of such Applicable Entity to dissolve or liquidate such Applicable
Entity is taken. (Section 1.01). Promptly following the execution of the
agreement of merger or consolidation, the vote of the directors of the
Applicable Entity or TCI to dissolve or liquidate, the execution by TCI of a
binding agreement to dispose of its TCI Music equity securities, or the
occurrence of any other event that causes the acceleration of the Exercise
Period, as the case may be (each a "Triggering Event"), TCI Music or TCI (or if
applicable, the Applicable Entity) will give written notice thereof to the
other(s), with a copy to the Rights Agent. (Section 4.18). The date as of which
such Fair Market Value is determined will be the last day of the fiscal quarter
of TCI Music immediately preceding the fiscal quarter in which the Triggering
Event occurs. (Section 4.18). The accelerated Exercise Period will begin from 30
to 60 days after the publication of the notice described below, and will last
for 20 business days. (Section 4.19). Except as set forth below, any Rights
(including all Components thereof) not validly exercised prior to the end of the
accelerated Exercise Period will expire. (Section 4.19). If the Exercise Period
is accelerated due to a proposed Significant Corporate Transaction or Change in
Control Transaction and such transaction is not consummated prior to the
expiration of the accelerated Exercise Period, TCI may defer purchasing the
shares of TCI Music Common Stock and Distributed Entity Stock surrendered upon
exercise of the Rights until consummation of such transaction. (Section 4.13).
If a proposed Significant Corporate Transaction or Change in Control Transaction
is terminated or abandoned, the acceleration of the Exercise Period will be
deemed to have been rescinded and annulled and any Rights that expired by virtue
of the failure of the holder to validly exercise them prior to the expiration of
the accelerated Exercise Period (or by virtue of the partial exercise thereof
during such accelerated Exercise Period) will be reinstated. (Sections 4.13,
4.14 and 4.20).

Notice of Exercise Period and Consideration Payable. TCI is required to
publish a notice in The Wall Street Journal between 20 and 30 days before an
Exercise Period begins, stating the number of Rights then outstanding; the
purchase price determined for such Exercise Period in accordance with the Rights
Agreement for each share of TCI Music Series A Common Stock; if the Rights have
one or more Distributed Entity Components, then as to each such Component the
number of shares of Distributed Entity Stock to which such Component relates and
the purchase price determined for such Exercise Period in accordance with

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the Rights Agreement for each share of such Distributed Entity Stock; and the
form of consideration (cash or shares of Series A TCI Group Common Stock or a
combination thereof) TCI has elected to pay and, if both such forms have been
elected, the relative proportions thereof or any other basis on which the
relative amounts of cash to be paid and numbers of shares of Series A TCI Group
Common Stock to be issued shall be determined. The Rights Agent is then required
promptly to mail to each registered holder of a Right, by first class mail, a
copy of such notice, together with a letter of transmittal to be used to tender
stock certificates and such other documents as TCI may be required to deliver to
such holder under federal and state securities laws (Section 4.07). Failure to
give the notice in accordance with these provisions extends the Exercise Period
for a period of time equal to the delay in giving the Notice.

Expiration of Rights. The Rights will expire upon termination of the
Exercise Period. Upon the exercise of any Right, such Right (including any
Component thereof not exercised or not exercised in full) will expire and cease
to be exercisable. Upon the consummation of a Terminating Event (as defined
below) with respect to an Applicable Entity, the Component of each Right (and
fractional Right) that relates to the Capital Stock of such Applicable Entity
will expire and cease to be exercisable. (Section 4.02). A Terminating Event is
defined, in general, as the merger or consolidation of, or the liquidation or
dissolution of, an Applicable Entity. (Section 1.01). If a Terminating Event
occurs with respect to an Applicable Entity the Fair Market Value of which
represents a greater percentage of the Undistributed Value of TCI Music than the
percentage thereof represented by the Fair Market Value of any other Applicable
Entity, such Terminating Event would constitute a Significant Corporate
Transaction and the Exercise Period of the Rights would be accelerated as
described above under "Acceleration of Exercise Period." Upon consummation of
any other Terminating Event, the Exercise Period would not be accelerated and
the value, if any, associated with the Component related to the Applicable
Entity undergoing the Terminating Event would be lost.

Manner of Exercise. Only whole Rights may be exercised. To exercise a
Right, the holder must surrender to the Rights Agent, at its designated office
in New York, the following, together with the duly completed and signed letter
of transmittal: (i) if the TCI Music Component is being exercised, a certificate
or certificates, representing the shares of TCI Music Series A Common Stock to
be sold to TCI, duly endorsed and in proper form for transfer with such
endorsement guaranteed by a bank or trust company or a broker who is a member of
a national securities exchange, (ii) if a Distributed Entity Component is being
exercised, a certificate or certificates representing the shares of the
applicable Distributed Entity Stock to be sold to TCI, duly endorsed and in
proper form for transfer with such endorsement similarly guaranteed, and (iii)
payment in United States currency of an amount equal to any stamp or other tax
or governmental charge required to be paid in connection with the transfer of
such shares. (Section 4.08).

Adjustments to Rights. The Rights Agreement contains antidilution
provisions pursuant to which the number of Rights outstanding and, if
applicable, the Underlying Number for the Distributed Entity Component of a
Right, will be adjusted to reflect any stock dividend on, or stock split,
reverse stock split or reclassification of, the TCI Music Series A Common Stock
or Distributed Entity Stock (Section 6.02). However, the antidilution provisions
will not protect holders of the Rights against certain actions that could be
taken by TCI Music or a Distributed Entity that could decrease the amount
payable upon exercise of the Rights. For example, any issuance of TCI Music
Series A Common Stock or Distributed Entity Stock at a price below what would be
the Per Share Value of TCI Music or such Distributed Entity if TCI Music or such
Distributed Entity were appraised at the time of such issuance, or any
declaration of a cash dividend by TCI Music or a Distributed Entity, could
decrease the amount eventually payable by TCI upon exercise of the Rights. The
Rights Agreement does not restrict the taking of such actions and the
antidilution provisions are not triggered by them, although the holder of a
Right who also holds a share of TCI Music Series A Common Stock or Distributed
Entity Stock will not be diluted by a dividend declared on any class of the TCI
Music Series A Common Stock or Distributed Entity Stock that he or she holds
since he or she will receive the dividend, thus offsetting any decrease in the
amount eventually payable by TCI to such holder upon the exercise of his or her
Rights. Notwithstanding any adjustment to the number of Rights or to the
Underlying Number for the Distributed Entity Component of a Right, or the
creation of a Distributed Entity Component, each certificate for TCI Music
Series A Common Stock theretofore issued or thereafter issuable may continue to
express solely the number of Rights as are stated on the Rights Certificates
initially issuable pursuant to the

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Rights Agreement. (Section 6.10). Notices of each adjustment and of the creation
of a Distributed Entity Component will be given to the Rights holders in
accordance with the Rights Agreement. (Section 6.09).

Transfers; Exchanges. Rights may not be transferred or exchanged except in
connection with transfers of the TCI Music Series A Common Stock. The surrender
for transfer of any certificates evidencing TCI Music Series A Common Stock will
constitute a transfer of the Rights associated with such shares of TCI Music
Series A Common Stock represented by such certificate. (Section 3.01).

No Recourse Against Others. Neither TCI Music nor any Distributed Entity
nor any director, officer, employee or stockholder, as such, of TCI Music or any
Distributed Entity shall have any liability to the holders of the Rights for any
obligations of TCI under the Rights Agreement and the Rights or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
holder by accepting a certificate for TCI Music Series A Common Stock will waive
and release such liability. The waiver and release are part of the consideration
for the issue of the Rights. (Section 8.07).

Amendment; Supplement; Waiver. TCI and the Rights Agent may supplement or
amend the Rights Agreement, without the consent of any of the holders of the
Rights, to cure ambiguities or correct or supplement any defective or
inconsistent provisions in the Rights Agreement, or to make other changes that
are not inconsistent with the provisions of the Rights and that do not adversely
affect the holders of the Rights. In addition, the Rights Agreement can be
supplemented or amended or provisions of it may be waived with the written
approval of the holders of a majority of the then outstanding Rights, except
that each holder affected must approve (a) any waiver of a default in payment by
TCI of the purchase price on exercise of a Right or (b) any amendment to the
provisions of the Rights Agreement governing the expiration of the Rights, the
exercise of the Rights, acceleration of the Exercise Period, the determination
of the purchase price upon exercise of a Right or the antidilution provisions,
if such amendment would adversely affect the rights of such holder in any
material respect. (Section 8.04).

Consideration to be Received by TCI Affiliates. As holders of shares of
DMX Common Stock, Liberty DMX, Inc., UAPI, TCI Pacific Communications, Inc. and
TCI Music Holdings, Inc., will receive one-quarter share of TCI Music Series A
Common Stock and one Right with respect to each whole share of TCI Music Series
A Common Stock in exchange for each share of DMX Common Stock they own at the
Effective Time. In addition, certain subsidiaries of TCI Communications, Inc.
will be issued 62,500,000 shares of TCI Music Series B Common Stock in
connection with the Contribution Agreement. Immediately following the Merger,
(i) the outstanding shares of TCI Music Series A Common Stock will represent
approximately 19.25% of, and 2.3% of the voting power related to, the total
outstanding shares of the TCI Music Common Stock; and (ii) the outstanding
shares of TCI Music Series B Common Stock will represent approximately 80.75%
of, and 97.7% of the voting power related to, the total outstanding shares of
the TCI Music Common Stock. TCI will beneficially own approximately 45.7% of the
outstanding shares of TCI Music Series A Common Stock and 100% of the
outstanding TCI Music Series B Common Stock, which will collectively represent
approximately 89.6% of the outstanding shares of TCI Music Common Stock and
98.7% of the voting power of the outstanding shares of TCI Music Common Stock.
See "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER -- Contribution
Agreement" and "SECURITY OWNERSHIP OF TCI MUSIC AND DMX."

Exchange of Shares. Promptly after the Effective Time, transmittal forms
will be mailed to each holder of record of shares of DMX Common Stock to be used
in forwarding his or her certificates evidencing such shares for surrender and
exchange for certificates evidencing the shares of TCI Music Series A Common
Stock and the Rights represented thereby to which he or she has become entitled
and, if applicable, cash in lieu of fractional shares of such TCI Music Series A
Common Stock and Rights. After receipt of such transmittal form, each holder of
certificates formerly representing DMX Common Stock should surrender such
certificates to The Bank of New York, as exchange agent (the "Exchange Agent"),
and each such holder will receive in exchange therefor certificates evidencing
the whole number of shares of TCI Music Series A Common Stock and the Rights
represented thereby to which he or she is entitled and a check for any cash that
may be payable in lieu of a fractional share of such TCI Music Series A Common
Stock and Rights. Such transmittal forms will be accompanied by instructions
specifying other details of the exchange.

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STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM.

After the Effective Time, each certificate evidencing DMX Common Stock
(other than certificates evidencing shares held directly by DMX or any of its
subsidiaries (which will be canceled)), until so surrendered and exchanged, will
be deemed, for all purposes, to evidence only the right to receive the number of
shares of TCI Music Series A Common Stock and Rights that the holder of such
certificate is entitled to receive and the right to receive any cash payment in
lieu of fractional shares of TCI Music Series A Common Stock and Rights. The
holder of such unexchanged certificate will not be entitled to receive any
dividends or other distributions, if any, payable by TCI Music until the
certificate is surrendered. Subject to applicable laws, such dividends and
distributions, if any, will be accumulated and, at the time of such surrender,
all such unpaid dividends and distributions, together with any cash payment in
lieu of a fractional share and Rights, will be paid, without interest.

For a discussion of the procedures that will be followed with respect to
holders of DMX Common Stock who may be subject to the notification and reporting
requirements of the Hart-Scott-Rodino Act, see "-- Governmental Approvals"
below.

CONDITIONS TO THE MERGER

The respective obligations of DMX, TCI and TCI Music to effect the Merger
are subject to the satisfaction of certain conditions, including (i) the Merger
Agreement and the transactions contemplated by the Merger Agreement shall have
been duly approved by the holders of DMX Common Stock; (ii) no more than 5% of
the number of DMX stockholders of record have demanded appraisal rights in
accordance with Section 262 of the Delaware General Corporation Act; (iii) the
waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Act shall have expired, or been earlier terminated and any
other notices or approvals or consents required by or of governmental entities,
to the extent required to be obtained under the Merger Agreement, shall have
either filed or obtained; and (iv) the Registration Statement shall have become
effective in accordance with the provisions of the Act and any necessary state
securities law approvals shall have been obtained and no stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
Commission and remain in effect.

The obligation of DMX to consummate the transactions contemplated by the
Merger Agreement is also subject to the satisfaction or waiver of the following
conditions: (i) the performance by TCI, TCI Music and Merger Sub, in all
material respects, of their respective agreements in the Merger Agreement to be
performed prior to the Effective Time and the accuracy of the representations
and warranties of each of them in all material respects; and (ii) the
transactions contemplated by the Contribution Agreement shall have been
consummated.

The respective obligations of TCI, TCI Music and Merger Sub to consummate
the transactions contemplated by the Merger Agreement are also subject to the
satisfaction or waiver of the following conditions: (i) the performance by DMX,
in all material respects, of the agreements of it in the Merger Agreement to be
performed by it by the Effective Time and the accuracy of DMX's representations
and warranties in all material respects; (ii) receipt of all consents, orders or
approvals of governmental entities and third parties, to the extent required to
be obtained under the Merger Agreement; and (iii) the number of stockholders
exercising dissenter's rights does not exceed 5% of the DMX Common Stock
outstanding as of the date of the Merger Agreement.

GOVERNMENTAL APPROVALS

The only governmental consents and governmental filings that TCI and DMX
are aware of that must be obtained or made in connection with the consummation
of the Merger (other than in connection with compliance with federal and state
securities laws) are filings with the Department of Justice and the Federal
Trade Commission under the Hart-Scott-Rodino Act with respect to the Merger.

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On February 28, 1997, TCI and DMX each filed a notification of the
transaction with the Federal Trade Commission and the U.S. Department of Justice
pursuant to the Hart-Scott-Rodino Act. The waiting period under the
Hart-Scott-Rodino Act expired on March 30, 1997 without a request for an
extension or additional information from the Federal Trade Commission or the
U.S. Department of Justice.

Certain stockholders of DMX may be individually subject to the notification
and waiting-period requirements of the Hart-Scott-Rodino Act if as a result of
the Merger they will hold TCI Music Series A Common Stock (or a combination of
TCI Music Series A Common Stock and other voting securities of TCI) having a
value of more than $15 million. Determination of whether notification is
required in a particular case will necessitate, among other things,
consideration of potentially applicable exemptions and application of a
jurisdictional test relating to such holder's revenue and assets. Persons whom
DMX and TCI expect to hold as a result of the Merger shares of TCI Music Series
A Common Stock (or a combination of TCI Music Series A Common Stock and other
voting securities of TCI) having a value in excess of $15 million will be
required, as a precondition to receiving such shares, to provide TCI with
evidence of compliance with the Hart-Scott-Rodino Act, satisfactory in form and
substance to TCI and its counsel. If necessary, TCI will deposit into escrow the
shares of TCI Music Series A Common Stock issuable to any stockholder obligated
to file a pre-merger notification and report form under the Hart-Scott-Rodino
Act and will instruct the Exchange Agent to hold such shares pending the
expiration or termination of the applicable waiting period.

COVENANTS

DMX has agreed to conduct its business in the ordinary course and to use
its reasonable best efforts to preserve intact its present business
organization, and to preserve its relationships with customers, suppliers and
others having business dealings with it. DMX has agreed that, except as required
or permitted by the Merger Agreement or consented to in writing by TCI, it will
not, prior to the Effective Time, (i) sell or pledge any capital stock or other
ownership interest in any of its subsidiaries, (ii) amend or propose to amend
the DMX Charter or DMX Bylaws, (iii) split, combine or reclassify its
outstanding capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
capital stock of, or other ownership interests in, DMX, or declare, set aside or
pay any dividend or other distribution to stockholders of DMX, (iv) directly or
indirectly redeem, purchase or otherwise acquire any shares of capital stock of,
or other ownership interests in, DMX; (v) (a) issue, deliver or sell any shares
of, capital stock of, or other ownership interests in, DMX, or any option, or
warrant or other right to acquire, or any security convertible into, shares of
capital stock of, or other ownership interests in, DMX, (b) acquire, lease or
dispose of any assets, other than in the ordinary course of business consistent
with past practice, (c) create, assume or incur any additional indebtedness for
borrowed money or mortgage, pledge or subject to any lien any of its assets or
enter into any other material transaction other than in the ordinary course of
business consistent with past practice, (d) make any payments with respect to
any indebtedness of DMX except for such payments that are scheduled to come due
prior to the Effective Time or (e) acquire any business or business organization
or division thereof that are material, individually or in the aggregate to DMX
taken as a whole or (vi) agree to do any of the foregoing.

DMX further agreed that except as consented to in writing by TCI or
required to comply with applicable law or existing company benefit plans it will
not and will not permit any of its subsidiaries to (i) adopt or terminate or
amend any bonus, profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, employment or other benefit
plan, agreement, trust, fund or other arrangement for the benefit or welfare of
any director, officer or current or former employee, (ii) increase in any manner
the compensation or fringe benefit of any director, officer or employee (except
for normal increases in the ordinary course of business consistent with past
practice), (iii) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or benefit plan, (iv) take any action to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or benefit plan (except
for such actions made in the ordinary course of business consistent with past
practice) or (v) agree to do any of the foregoing.

DMX has further agreed that without the consent of TCI it will not take, or
agree to take, any actions that would (x) make any representation or warranty of
DMX contained in the Merger Agreement untrue or

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incorrect so as to cause the condition with respect to DMX's representations and
warranties not to be fulfilled as of the Effective Time or (y) result in any of
the other conditions to the obligations of TCI, TCI Music and Merger Sub in the
Merger Agreement not being satisfied as of the Effective Time.

NO SOLICITATION OF TRANSACTIONS

The Merger Agreement provides that, subject to the fiduciary duties of the
DMX Board, none of DMX or any of its subsidiaries or any of their respective
officers, directors, representatives or agents will take any action to initiate
the submission of any Acquisition Proposal, enter into any agreement with
respect to any Acquisition Proposal or participate in negotiations with any
person in connection with any Acquisition Proposal. "Acquisition Proposal" is
defined in the Merger Agreement to mean any proposed (i) merger, consolidation
or similar transaction involving DMX, (ii) sale, lease or other disposition
directly or indirectly by merger, consolidation, share exchange or otherwise of
all or any substantial part of the assets of DMX or its subsidiaries, (iii)
issuance, sale or other disposition of securities representing 50% or more of
the voting power of DMX Common Stock or (iv) any transaction in which any person
shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act) or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed that
beneficially owns or has the right to acquire beneficial ownership, of 50% or
more of the outstanding DMX Common Stock.

CERTAIN PERSONNEL MATTERS

The DMX Board has authorized retention bonuses for four key employees,
including DMX's Chief Financial Officer. Each such employee will be paid an
amount equal to six months' base salary (nine months in the case of DMX's Chief
Financial Officer), payable upon consummation of the Merger. The aggregate
amount of such payments will be approximately $206,000.

Under the terms of DMX's 1991 Incentive Stock Option Plan, 1991
Non-Qualified Stock Option Plan and 1991 Non-Qualified Stock Option Plan for
Non-Employee Directors (collectively, the "1991 Plans"), in the case of a merger
such as the Merger, option holders have the right to continue to hold their
options, which become exercisable for the "acquisition consideration."
Accordingly, options granted under the 1991 Plans will carry over after the
Merger and be exercisable for TCI Music Series A Common Stock and Rights (if the
Rights are not then terminated). However, all such options terminate and are not
exercisable three months after the holder is no longer employed or serving as a
director of DMX. By the terms of DMX's 1993 Stock Option Plan and certain option
agreements relating to options granted outside any plans, all outstanding
options may be accelerated, regardless of vesting effective 30 days prior to the
date of the Merger upon written notice to option holders, and, unless exercised,
such options will terminate upon consummation of the Merger. DMX has agreed in
the Merger Agreement to take all action necessary to cause the options that can
be terminated upon consummation of the Merger to be canceled if not otherwise
exercised, and to use its best efforts to cause each other option that is
outstanding that is not terminable upon consummation of the Merger to be
canceled prior to the Effective Time of the Merger. As of the date of this Proxy
Statement/Prospectus, no action has been taken by DMX to cancel any such
carryover options.

Pursuant to the Merger Agreement, each employee of the Surviving
Corporation who was an employee of DMX prior to the Effective Time, to the
extent permitted by TCI's employee benefit plans (defined in Section 3(b) of
ERISA) (i) will receive credit for past service with DMX for purposes of
eligibility and vesting under the Surviving Corporation's employee benefit plans
(defined in Section 3(3) of ERISA) to the extent such service was credited under
the DMX benefit plans on the date the transactions contemplated by

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the Merger Agreement are consummated, (ii) will not be subject to any waiting
periods or limitations on benefits for pre-existing conditions under the
Surviving Corporation's employee benefit plans, including any group health and
disability plans, except to the extent such employees were subject to such
limitations under the DMX benefit plans and (iii) will receive credit for past
service with DMX for purposes of eligibility and vesting under the Surviving
Corporation's plans and policies with respect to seniority benefits, including
vacation and sick leave.

After the Merger, TCI will provide to TCI Music certain services and other
benefits, including certain administrative and other services pursuant to the
Services Agreement. Such services will include (i) tax reporting, financial
reporting, payroll, employee benefit administration, workers' compensation
administration, telephone, package delivery, management information systems,
billing, lock box, remittance processing and risk management services, (ii)
other services typically performed by TCI's accounting, finance, treasury,
corporate, legal, tax, benefits, insurance, facilities, purchasing and advanced
information technology department personnel, (iii) use of telecommunications and
data facilities and of systems and software developed, acquired or licensed by
TCI from time to time for financial forecasting, budgeting and similar purposes,
including without limitation any such software for use on personal computers, in
any case to the extent available under copyright law or any applicable
third-party contract, (iv) technology support and consulting services and (v)
such other management, supervisory, strategic planning or other support services
as TCI Music and TCI may from time to time mutually determine to be necessary or
desirable. See "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE
MERGER -- Services Agreement."

INDEMNIFICATION

The Merger Agreement provides that after the Effective Time TCI Music will
cause the Surviving Corporation to indemnify, defend and hold harmless, and,
should the Surviving Corporation fail or be unable to do so, TCI Music will (i)
indemnify, defend and hold harmless the officers and directors of DMX until the
expiration of the applicable statutes of limitation to the fullest extent
permitted by applicable law and the DMX Charter and DMX Bylaws in effect on the
date of the Merger Agreement and (ii) pay expenses in advance of the final
disposition of any such claim to the fullest extent permitted by and pursuant to
applicable law.

TERMINATION; AMENDMENT AND WAIVER

The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after approval by DMX's
stockholders, (i) by mutual consent of the DMX Board and the TCI Board, (ii) by
either DMX or TCI (A) if the Merger has not been consummated on or before July
31, 1997, so long as the party seeking to terminate the Merger Agreement has not
breached its obligations under the Merger Agreement in any material respect, or
(B) if the stockholders of DMX shall not have approved the Merger Agreement by
such date, (iii) by DMX, provided DMX has not breached any of its obligations
thereunder in any material respect, if any of the conditions to its obligations
to consummate the Merger have not been satisfied or waived at such time as such
condition is no longer capable of satisfaction or (iv) by TCI, provided TCI has
not breached any of its obligations thereunder in any material respect, if any
of the conditions to its obligation to consummate the Merger have not been
satisfied or waived at such time as such condition is no longer capable of
satisfaction. See " -- Conditions to the Merger."

In the event of termination of the Merger Agreement by either DMX or TCI as
provided above, the Merger Agreement will become void and (except for the
willful breach of the Merger Agreement) there will be no liability or obligation
on the part of any of DMX, TCI, TCI Music or Merger Sub.

DMX, TCI, TCI Music and Merger Sub may agree to amend the Merger Agreement
by or pursuant to action taken by their respective boards of directors, either
before or after approval by the stockholders of DMX of the Merger Agreement,
except that after such approval by the stockholders of DMX, no amendment may be
made that alters the indemnification provisions of the Merger Agreement or
changes the ratio at which DMX Common Stock is to be converted into TCI Music
Series A Common Stock and Rights or that in any

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way materially adversely affects the rights of such stockholders, without the
further approval of such stockholders. At any time prior to the Effective Time,
DMX, TCI or TCI Music, by or pursuant to action taken by their respective boards
of directors, may agree to extend the time specified in the Merger Agreement for
the performance of any of the obligations or other acts of the other parties,
waive any inaccuracies in the representations and warranties of the other
parties contained in the Merger Agreement or in any document delivered pursuant
to the Merger Agreement or waive compliance with any of the agreements or
conditions contained in the Merger Agreement.

CERTAIN RESTRICTIONS ON RESALE OF TCI MUSIC SERIES A COMMON STOCK

The issuance of all shares of TCI Music Series A Common Stock issuable in
the Merger will be registered under the Act and such shares will be freely
transferable, except that any such shares received by persons who are deemed
"affiliates" (as such term is defined for purposes of Rule 145 under the Act) of
DMX prior to the Merger may be resold by them only in transactions permitted by
the resale provisions of Rule 145 under the Act (or Rule 144 in the case of such
persons who become affiliates of TCI) or as otherwise permitted under the Act.
Persons who may be deemed to be affiliates of DMX generally include individuals
or entities that control, are controlled by, or are under common control with,
DMX and may include certain officers and directors of DMX as well as principal
stockholders of DMX.

EXPENSES

The Merger Agreement provides that each party will pay its own costs and
expenses in connection with the transactions contemplated by the Merger
Agreement.

ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER THE MERGER

TCI Music is currently a wholly owned subsidiary of TCI. Following
consummation of the Merger (i) the outstanding shares of TCI Music Series A
Common Stock will represent approximately 19.25% of, and 2.3% of the voting
power related to, the total outstanding shares of the TCI Music Common Stock;
and (ii) the outstanding shares of TCI Music Series B Common Stock will
represent approximately 80.75% of, and 97.7% of the voting power related to, the
total outstanding shares of the TCI Music Common Stock. TCI will beneficially
own approximately 45.7% of the outstanding shares of TCI Music Series A Common
Stock and all of the outstanding shares of TCI Music Series B Common Stock,
which will collectively represent approximately 89.6% of the outstanding shares
of TCI Music Common Stock. Since holders of shares of TCI Music Series A Common
Stock are entitled to one vote per share, and holders of shares of TCI Music
Series B Common Stock are entitled to ten votes per share, on each matter
presented to a vote of the holders of TCI Music Common Stock, TCI will control
approximately 98.7% of the voting power of the outstanding shares of TCI Music
Common Stock. See "DESCRIPTION OF CAPITAL STOCK." Thus, immediately after the
Merger, TCI will have the voting power to control all matters requiring approval
of TCI Music's stockholders voting as a single class, including the election of
directors, the adoption of amendments to the TCI Music Charter and the approval
of mergers and sales of TCI Music's assets.

On or before the Effective Time, TCI Music and TCI will enter into a number
of intercompany agreements more fully described below covering matters such as
the provision of services and allocation of tax liabilities. TCI has also agreed
to provide certain administrative, financial, legal, treasury, accounting, tax
and other services to TCI Music and make available certain of its employee
benefit plans to TCI Music's employees. The terms of these arrangements were
established by TCI in consultation with TCI Music, and will be executed while
TCI Music is a wholly owned subsidiary of TCI and are not the result of
arm's-length negotiations. Accordingly, although TCI Music believes that the
terms of these arrangements are reasonable, there is no assurance that the terms
and conditions of these agreements, or the terms of any future arrangements
between TCI and TCI Music, are or will be as favorable to TCI Music as could be
obtained from unaffiliated third parties. In addition, TCI Music and TCI and
their respective subsidiaries and affiliates may from time to time do business
with one another following the Merger, in areas not governed by any of the
following agreements.

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If TCI were to seek to acquire the shares of TCI Music held by the public,
it would likely have the power to do so over the objection of other
stockholders, subject to any applicable provisions of Delaware law requiring
such a transaction to be "fair" to minority stockholders.

Conflicts of interest between TCI Music and TCI could arise with respect to
business dealings between them, including potential acquisitions of businesses
or properties, the issuance of additional securities, the election of new or
additional directors, and the payment of dividends by TCI Music. A conflict of
interest could also arise from TCI's position as the sole and exclusive agent
for TCI Music in any and all matters relating to TCI Music's federal income tax
liability, which includes the sole and exclusive responsibility for the
preparation and filing of consolidated federal and consolidated or combined
state income tax returns (or amended returns), to contest or compromise any
asserted tax adjustment or deficiency and to file, litigate or compromise any
claim for refund on behalf of TCI Music. TCI Music has not instituted any formal
plan or arrangement to address potential conflicts of interest that may arise
between TCI Music and TCI. However, the directors of TCI Music intend to
exercise reasonable judgment and take such steps as they deem necessary under
all of the circumstances in resolving any specific conflict of interest that may
occur and will determine what, if any, specific measures, such as retention of
an independent advisor or independent counsel or appointment of a special
committee, may be necessary or appropriate. There can be no assurance that any
conflicts will be resolved in favor of TCI Music.

CONTRIBUTION AGREEMENT

At the Effective Time, TCI Music and TCI will enter into the Contribution
Agreement. Pursuant to the Contribution Agreement, TCI will cause each TCI
System Owner to assign and contribute to TCI Music the right to receive the
Contributed Net DMX Revenues of such TCI System Owner for a period beginning on
the date of the closing of the Contribution Agreement and ending on the earlier
of the date that such TCI System Owner ceases to be a TCI System Owner and
December 31, 2006 (the "Termination Date"). TCI will cause each TCI System Owner
that becomes a TCI System Owner to assign to TCI Music the right to receive such
TCI System Owner's Contributed Net DMX Revenues until the Termination Date. In
addition, TCI will cause all of the Contributed Tuners to be contributed to TCI
Music. A "TCI System Owner" is a corporation controlled by TCI in which TCI owns
all of the common equity or an entity other than a corporation that is wholly
owned by TCI. In consideration of such agreement, TCI Music will deliver to TCI,
as designee for the TCI System Owners, 62,500,000 shares of TCI Music Series B
Common Stock and the TCI Music Note. The TCI Music Note will bear interest at
10% per annum, payable semiannually, and will provide for the payment of unpaid
principal and accrued interest not earlier than 180 days after the closing under
the Contribution Agreement.

If the Contribution had been effective as of January 1, 1996, the total
amount of Contributed Net DMX Revenues for the three months ended March 31, 1997
and the year ended December 31, 1996 would have been approximately $4.4 million
and $16.4 million, respectively. Additionally, the book value of the Contributed
Tuners at March 31, 1997 was approximately $4.5 million. The launch by TCI and
other cable operators of video and audio programming using digital compression
technology may materially reduce the Contributed Net DMX Revenues and subscriber
fee revenues of TCI Music. In addition, since December 31, 1996, TCI has not and
is not expected to add to its indirect inventory of commercial tuners prior to
the Effective Time. Accordingly, as such existing inventory of tuners is put
into use by TCI System Owners, the inventory of commercial tuners will be
reduced. See "CERTAIN INFORMATION CONCERNING TCI MUSIC -- Effect of Launch of
Digital Compression Technology."

Pursuant to the Contribution Agreement, effective as of the closing of the
Merger, TCI Music, as obligor, will issue to TCI the TCI Music Note in the
principal amount of $40,000,000 payable to the order of TCI, as obligee, bearing
interest at 10% per annum, which interest will be waived by TCI if principal is
paid in full at or before maturity, which will be 180 days after the closing of
the Merger. TCI Music expects to refinance the TCI Music Note with proceeds of a
new long-term debt financing. No assurance can be given that TCI Music will be
able to obtain such financing on terms acceptable to TCI Music.

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DMX is not a party to the Contribution Agreement and no vote of DMX
stockholders is required with respect to the Contribution Agreement. Completion
of the Contribution in accordance with the Contribution Agreement is, however, a
condition to the obligation of DMX to consummate the Merger. The Contribution
was structured to be separate from, but included as a condition to, the Merger
to accommodate TCI's desire not to transfer assets to TCI Music until it was
certain that the Merger would occur while permitting the Contribution and the
Merger to be integrated as transactions for purposes of Section 351 of the Code.
See "CERTAIN CONSEQUENCES OF THE MERGER -- Certain Federal Income Tax
Consequences."

The terms of the Contribution Agreement were determined by TCI and were
discussed with representatives of DMX in the course of negotiations of the
Merger Agreement between TCI and DMX. No attempt was made by either party to
place a fair market value on the Contributed Net DMX Revenues or the Contributed
Tuners contributed by TCI pursuant to the Contribution Agreement, although the
Contributed Tuners were assumed to have a fair market value that is not less
than their book value. From DMX's perspective, the fair market values of those
assets were of relatively small importance compared to the value provided to the
DMX stockholders by the Rights to be granted by TCI to stockholders receiving
TCI Music Class A Common Stock in the Merger, especially in light of the
substantial uncertainty as to the amount of the Contributed Net DMX Revenues
that would be contributed to TCI Music in the future because of the possible
adverse effects of various factors, including the launch of digital compression
technology. See "CERTAIN INFORMATION CONCERNING TCI MUSIC -- Effect of Launch of
Digital Compression Technology." None of the parties made any determination of
the value of the shares of TCI Music Class B Common Stock to be issued to TCI
pursuant to the Merger Agreement.

The amount of the TCI Music Note was fixed at $40 million to provide some
compensation to TCI for the reduction in its and its subsidiaries' borrowing
capacity that would result from the loss of cash flow represented by the
transfer of Contributed Net DMX Revenues to TCI Music. Under covenants in
various financing agreements, the amount of debt that TCI (or one or more of its
subsidiaries treated as separate borrowing entities) may incur is limited by
various financial tests, including covenants that limit debt as a multiple of
cash flow. Accordingly, TCI determined that TCI Music should compensate it for a
portion of this lost borrowing capacity. In light of the uncertainty as to the
amount of Contributed Net DMX Revenues that would be paid to TCI Music in the
future and the desire to provide TCI Music with additional revenues, TCI
determined that $40 million represented a reasonable offset against such lost
borrowing capacity and agreed to accept payment in the form of the TCI Music
Note, which will mature 180 days after the Effective Time, to permit TCI Music
sufficient time to obtain long-term debt financing, proceeds of which would be
used to retire the TCI Music Note. No assurance can be given that TCI Music will
be able to obtain such financing on terms acceptable to TCI Music.

TCI LOAN

SERVICES AGREEMENT

Pursuant to the Services Agreement between TCI and TCI Music, following the
Merger, TCI will provide to TCI Music certain services and other benefits,
including certain administrative and other services that were provided by TCI
prior to the Merger. Such services shall include (i) tax reporting, financial
reporting, payroll, employee benefit administration, workers' compensation
administration, telephone, package delivery, management information systems,
billing, lock box, remittance processing and risk management services, (ii)
other services typically performed by TCI's accounting, finance, treasury,
corporate, legal, tax, benefits, insurance, facilities, purchasing, and advanced
information technology department personnel, (iii) use of telecommunications and
data facilities and of systems and software developed, acquired or licensed by
TCI from time to time for financial forecasting, budgeting and similar purposes,
including without

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limitation any such software for use on personal computers, in any case to the
extent available under copyright law or any applicable third-party contract,
(iv) technology support and consulting services and (v) such other management,
supervisory, strategic planning or other services as TCI Music may from time to
time request. Pursuant to the Services Agreement, TCI has also agreed to provide
TCI Music access to any volume discounts that may be available to TCI for
purchase of certain equipment.

The Services Agreement will also provide that TCI, for so long as TCI
continues to beneficially own shares of TCI Music Common Stock representing at
least a majority in voting power of the outstanding shares of capital stock of
TCI Music entitled to vote generally in the election of directors, will continue
to provide in the same manner, and on the same basis as generally provided from
time to time to other participating TCI subsidiaries, benefits and
administrative services to the Company's employees. In this regard, TCI Music
will be allocated that portion of TCI's compensation expense attributable to
benefits extended to employees of TCI Music.

Pursuant to the Services Agreement, TCI Music from time to time will
reimburse TCI for all direct expenses incurred by TCI in providing such services
and a pro rata share of all indirect expenses incurred by TCI in connection with
the rendering of such services, including a pro rata share of the salary and
other compensation of TCI employees performing services for TCI Music, general
overhead expenses and rental expense for any physical facilities of TCI utilized
by TCI Music. In this regard, it is anticipated that TCI Music will, for the
foreseeable future, share office space with, or sublease office space from, TCI.

The Services Agreement will continue in effect until terminated by (i) TCI
Music upon 60 days' prior written notice to TCI, (ii) TCI at any time after
three years upon not less than six months' prior notice to TCI Music, and (iii)
either party if the other party is the subject of certain bankruptcy or
insolvency-related events.

TAX SHARING AGREEMENT

Effective July 1, 1995, TCI, TCIC and certain other subsidiaries of TCI
entered into the Tax Sharing Agreement, which formalized pre-existing tax
sharing arrangements and implemented additional procedures for the allocation of
certain consolidated income tax attributes and the settlement of certain
intercompany tax allocations. The Tax Sharing Agreement encompasses U.S.
Federal, state, local and foreign tax consequences and relies upon the Code and
any applicable state, local and foreign tax law and related regulations. On or
before the Effective Time, the Tax Sharing Agreement will be amended to provide
that TCI Music will be treated as if it had been a party to the Tax Sharing
Agreement, effective at the Effective Time. Pursuant to the amended Tax Sharing
Agreement, beginning at the Effective Time, TCI Music is responsible to TCI for
its share of current consolidated income tax liabilities. TCI will be
responsible to TCI Music to the extent that TCI Music's income tax attributes
generated after the effective date are utilized by TCI to reduce its
consolidated income tax liabilities. Accordingly, all tax attributes generated
by TCI Music's operations after the effective date including, but not limited
to, net operating losses, tax credits, deferred intercompany gains, and the tax
basis of assets are inventoried and tracked for the entities comprising TCI
Music.

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BUSINESS OF TCI

TCI and its predecessors have been engaged in the cable television business
since the early 1950's. TCI, through its subsidiaries and affiliates, is
principally engaged in the construction, acquisition, ownership and operation of
cable television systems and the provision of satellite-delivered video
entertainment, information and home shopping programming services to various
distribution media, principally cable television systems. TCI also has interests
in cable and telecommunications operations and television programming in certain
international markets, as well as investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies. TCI believes that, measured by the number of
basic subscribers, it is the largest provider of cable television services in
the United States. TCI is a Delaware corporation and was incorporated in 1994.
Its executive offices are located at Terrace Tower II, 5619 DTC Parkway,
Englewood, Colorado 80111-3000; telephone (303) 267-5500.

Additional information concerning TCI is included in the information filed
by TCI with the Commission incorporated by reference in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"AVAILABLE INFORMATION."

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BUSINESS OF DMX
GENERAL

DMX is primarily engaged in programming, distributing and marketing a
premium digital music service, Digital Music Express(R) (DMX(R)), which provides
continuous 24-hours-per-day commercial free, CD quality music programming. DMX
is a Delaware corporation and its executive offices are located at 11400 West
Olympic Boulevard, Suite 1100, Los Angeles, CA 90064; telephone (310) 444-1744.
Detailed information concerning DMX is set forth in its Annual Report on Form
10-K for the fiscal year ended September 30, 1996, and its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, included as Appendix IV to this
Proxy Statement/Prospectus. Additional information concerning DMX, is included
in the information filed by DMX with the Commission incorporated by reference in
this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "AVAILABLE INFORMATION."

CERTAIN INFORMATION CONCERNING TCI MUSIC
GENERAL

TCI Music was incorporated in Delaware in January 1997 and is currently a
wholly owned subsidiary of TCI. Since its formation, TCI Music has not conducted
any significant activities other than those incident to its formation, the
Contribution Agreement, the Merger Agreement and the preparation of this Proxy
Statement/Prospectus. Immediately following the Merger, (i) the outstanding
shares of TCI Music Series A Common Stock will represent approximately 19.25%
of, and 2.3% of the voting power related to, the total outstanding shares of the
TCI Music Common Stock; and (ii) the outstanding shares of TCI Music Series B
Common Stock will represent approximately 80.75% of, and 97.7% of the voting
power related to, the total outstanding shares of the TCI Music Common Stock.
TCI will beneficially own approximately 45.7% of the outstanding shares of TCI
Music Series A Common Stock and all of the outstanding shares of TCI Music
Series B Common Stock, which will collectively represent approximately 89.6% of
the outstanding shares of TCI Music Common Stock and 98.7% of the voting power
of the outstanding shares of TCI Music Common Stock. The executive offices of
TCI Music are located at Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado
80111-3000; telephone (303) 267-5500.

Following consummation of the Merger, TCI Music's business will consist
principally of the business of DMX prior to the Merger. See "BUSINESS OF DMX."
TCI Music intends to evaluate the operations of DMX to determine what actions,
if any, should be taken to improve DMX's operations. TCI Music anticipates that
the Contributed Net DMX Revenues will provide a source of additional revenue not
currently available to DMX. If the Merger had occurred as of January 1, 1996,
Contributed Net DMX Revenues for the three months ended March 31, 1997 and the
year ended December 31, 1996 would have been approximately $4.4 million and
$16.4 million, respectively. See "ARRANGEMENTS BETWEEN TCI AND TCI MUSIC AFTER
THE MERGER -- Contribution Agreement." However, as discussed below, DMX's
subscriber fee revenues and the Contributed Net DMX Revenues could be materially
reduced as a result of the launch of digital compression technology for the
delivery of video and audio services by cable system operators, including TCI,
and the likely elimination of Tuner Distribution in certain markets by cable
operators. See "-- Effect of Launch of Digital Compression Technology." Because
of the uncertainties as to the effect of the launch of Digital Distribution and
the likely elimination of Tuner Distribution in certain markets on DMX's
subscriber fee revenues, no adjustment for Contributed Net DMX Revenues has been
included in the Condensed Pro Forma Combined Statements of Operations appearing
elsewhere in this Proxy Statement/ Prospectus. See "INDEX TO FINANCIAL
STATEMENTS."

TCI Music anticipates that it will evaluate acquisitions of interests in,
or joint ventures or similar arrangements with, other companies engaged in the
audio or video music business as suitable opportunities become available. No
assurance can be given that any such acquisition or other transaction, if any is
effected, will be beneficial to TCI Music. Except for the acquisition of DMX as
discussed in this Proxy Statement/Prospectus, no specific acquisition, joint
venture or similar transaction is under consideration at this time.

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CURRENT DMX DISTRIBUTION

DMX music services are currently delivered primarily through two
distribution methods: (i) directly to cable operators by C-band satellite for
distribution to residential and commercial cable subscribers through a separate
tuner (Tuner Distribution); and (ii) via direct broadcast satellite (DBS) dishes
to residential and commercial subscribers either directly or as part of a
package delivered by DBS distributors, such as PrimeStar and Alpha Star
("Satellite Distribution"). Revenues to DMX from Tuner Distribution and
Satellite Distribution are generated by license fees paid to DMX by the cable
and DBS operators pursuant to so-called "affiliation" agreements between DMX and
such operators. For the 12-month period ended December 31, 1996, revenues from
Tuner Distribution represented approximately 75% of subscription fee revenues,
with approximately 53% of such amount derived from residential Tuner
Distribution subscribers.

In Tuner Distribution, cable operators generally offer DMX music services
to their subscribers for a separate a la carte fee. Customers who subscribe to
DMX music services receive the DMX signal through the same coaxial cable used to
distribute video cable signals, which is connected through a separate DMX tuner
to a customer's stereo system. In order to receive DMX music services via Tuner
Distribution, residential subscribers must subscribe to video programming from
their cable operator; commercial subscribers may, but do not need to, subscribe
to video programming to receive DMX music services. Under DMX's affiliation
agreements with cable operators, the operators generally have the right, but not
the obligation, to distribute DMX music services to subscribers, and pay a per
subscriber license fee to DMX for each paying subscriber receiving DMX music
services. The cable operator sets the fees charged to its commercial and
residential subscribers, which are generally higher than the corresponding
license fees paid by the cable operator to DMX. License fees vary depending on
whether the subscriber is a commercial establishment or a private residence.

For example, a cable operator might charge a residential DMX subscriber
$9.00 per month for DMX music service and, pursuant to its affiliation agreement
with DMX, pay DMX $3.00 per paying subscriber as a license fee. A similar fee
structure exists with cable operators with respect to commercial subscribers,
but both subscriber fees and license fees are significantly higher than for
residential subscribers, with DMX's license fee often based on the greater of a
minimum fee or a percentage of the fee charged to the commercial subscriber.

In Satellite Distribution, DMX music services are generally provided as
part of a package of video and music programming offered to the DBS operator's
subscribers, who pay a single rate for the package of video and music services.
DMX's affiliation agreements with the DBS operators generally provide for a
small per subscriber license fee for each subscriber that purchases a package of
video and music services.

EFFECT OF LAUNCH OF DIGITAL COMPRESSION TECHNOLOGY

Cable operators have recently begun to launch a new method of distributing
video and other programming using digital compression technology. Digital
compression technology can compress, on average, as many as 14 of the current
analog video signals into the space normally occupied by one. Such technology
improves picture quality and allows for carriage of significantly more video
product offerings (Digital Distribution) without cable operators having to build
new cable plant. The technology is distributed through TCI's "Headend in the
Sky" (HITS), that enables TCI and each other participating cable operator to
increase their program offerings and create new packages that could include, if
they so choose, DMX music services as part of a package of video and music
services. The technology permits subscribers to receive video and music signals
through a single standard set-top-tuner or "box" without the use of a separate
tuner for music, as is currently the case with Tuner Distribution. TCI conducted
a beta test of its Digital Distribution in late 1996 and began offering such
service to selected paying customers in three markets during the first quarter
of 1997.

Potential Effects on DMX and TCI Music Residential Subscriber Fee
Revenues. The launch of digital compression technology has the potential to
provide an additional distribution market for DMX music services if cable
operators utilizing Digital Distribution, such as TCI, elect to offer DMX music
services as part of one or more digital video programming packages, thereby
capturing as subscribers customers who might not otherwise elect to subscribe to
DMX music services on an a la carte basis. However, the launch of and the

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transition to Digital Distribution may also have the effect of materially
reducing TCI Music's residential subscriber fee revenues from Tuner Distribution
and Contributed Net DMX Revenues as a result of the expected change from the a
la carte fee structure currently in effect for Tuner Distribution to a fee
structure similar to that in effect for Satellite Distribution. TCI Music does
not expect the launch of Digital Distribution to affect the current rate
structure for commercial cable subscribers or Satellite Distribution.

Effect of New Residential Fee Structure on Per Subscriber Residential
License Fees. TCI Music expects that license fees paid by cable operators for
Digital Distribution that include DMX music services in their digital packages
will be in the range of $.25 to $.50 per subscriber, which are much lower than
the a la carte fees now paid under affiliation agreements currently in effect.
While a substantial increase in the overall number of residential subscribers
purchasing digital packages that include DMX music services could result in
revenues equal to or exceeding the revenues from residential subscribers
currently electing to purchase DMX services for a separate a la carte fee, such
a result depends on a number of factors over which TCI Music has no control,
including whether cable operators elect to include DMX music services as part of
their digital packages, the acceptance by consumers of the digital products and
whether those electing to purchase the digital packages are already DMX
subscribers. Neither TCI nor TCI Music can predict the number of DMX residential
subscribers that will elect to receive a digital package that includes DMX when
it is offered.

Effect of New Residential Fee Structure on Contributed Net DMX
Revenues. The new license fee structure for Digital Distribution will not only
affect DMX's subscriber fee revenues but also the Contributed Net DMX Revenues
that TCI will contribute to TCI Music under the Contribution Agreement.
Contributed Net DMX Revenues are the total revenues received by TCI and certain
of its subsidiaries from sales of DMX music services to their residential and
commercial subscribers net of an amount equal to 10% of the revenues from
residential sales and net of the license fees otherwise payable to DMX for DMX
music services under affiliation agreements currently in effect. If the Merger
had occurred as of January 1, 1996, Contributed Net DMX Revenues for the three
months ended March 31, 1997 and the year ended December 31, 1996 would have been
approximately $4.4 million and $16.4 million, respectively. See "ARRANGEMENTS
BETWEEN TCI AND TCI MUSIC AFTER THE MERGER -- Contribution Agreement." By
definition, Contributed Net DMX Revenues for each current Tuner Distribution
residential subscriber represent a substantial portion of the "spread" between
the rate charged by TCI to residential subscribers and the per subscriber
license fee payable to DMX under its affiliation agreement. Under residential
Digital Distribution, there will be no such "spread" (there will be no separate
a la carte fee charged by TCI, since TCI will be paying a small flat rate per
residential subscriber as a license fee) and Contributed Net DMX Revenues will
be eliminated for each current DMX residential subscriber that elects to
purchase a digital package. Although not included in Contributed Net DMX
Revenues, after the Merger, the license fee payable by TCI to DMX under current
affiliation agreements will continue to be paid to DMX, which will then be a
wholly owned subsidiary of TCI Music.

Potential Elimination of Current Distribution Outlet. TCI Music expects
that Tuner Distribution will continue to be available in markets where Digital
Distribution has not been introduced. However, because Tuner Distribution
currently utilizes more of the cable spectrum than is now used to deliver one
video channel, it is likely that some of such cable operators may determine to
eliminate Tuner Distribution of DMX music services in certain markets to recover
or maintain channel capacity for Digital Distribution. If TCI or any cable
operator terminates Tuner Distribution in any market, all revenues from
residential and commercial subscribers receiving DMX music services via Tuner
Distribution in such market would terminate, unless such residential subscribers
elect to purchase a video and music programming package through Digital
Distribution, and Digital Distribution and other distribution means were made
available to commercial subscribers. Accordingly, DMX's and TCI Music's revenues
could be materially adversely affected if Tuner Distribution were terminated by
cable operators.

Likewise, although cable operators may not as readily terminate Tuner
Distribution to commercial DMX subscribers, because they generally enter into
short term written contracts with commercial subscribers that obligate them to
provide such services, they may still choose to recover channel capacity by
terminating such agreements. In such a case, all revenues from commercial
subscribers receiving DMX services would also be eliminated unless alternative
delivery means such as Satellite Distribution or Digital Distribution were made

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available and accepted by the commercial subscriber. If Tuner Distribution were
to be eliminated, TCI Music expects that substantial additional expenses would
be incurred to retain such commercial subscribers, such as marketing and
equipment expenses, which could offset the revenues retained. In addition, an
available alternative distribution method may result in increased costs to the
subscriber in monthly fees and/or equipment. As a result, there would be a
substantial risk that some commercial subscribers would choose to terminate DMX
music services. Accordingly, DMX's and TCI Music's revenues could be materially
adversely affected if Tuner Distribution were terminated by cable operators.

CERTAIN LITIGATION

In September 1996, after announcement of TCI's proposal to DMX, certain DMX
stockholders filed a putative class action lawsuit in the Delaware Court of
Chancery on behalf of a purported class consisting of all public stockholders of
DMX (other than the directors of DMX and TCI) captioned Brickell Partners v.
Jerold H. Rubinstein, Donne F. Fisher, Leo J. Hindery, Jr., James R. Shaw, Sr.,
Kent Burkhart, J. C. Sparkman, Bhaskar Menon, DMX Inc. and Tele-Communications,
Inc. (Civil Action No. 15206). The complaint seeks as relief, among other
things, an injunction preventing consummation of the Merger as well as
unspecified compensatory damages. Neither TCI nor DMX can estimate, based on
facts available as of the date of this Proxy Statement/Prospectus, the possible
adverse effects if such plaintiffs are successful, which could include the
inability to consummate the Merger, rescission of the Merger and monetary
damages.

DESCRIPTION OF TCI MUSIC CAPITAL STOCK

TCI MUSIC COMMON STOCK

TCI Music's authorized common stock consists of 295,000,000 shares of TCI
Music Series A Common Stock and 200,000,000 shares of TCI Music Series B Common
Stock, par value $.01 per share. As of the date of this Proxy
Statement/Prospectus, there were no shares of TCI Music Series A Common Stock
issued and outstanding and one share of TCI Music Series B Common Stock was
issued and outstanding.

The rights of holders of TCI Music Series A Common Stock and TCI Music
Series B Common Stock are identical except for voting and conversion rights. All
of the shares of TCI Music Series A Common Stock and TCI Music Series B Common
Stock distributed in the Merger will be validly issued, fully paid and
nonassessable.

Voting. Each share of TCI Music Series A Common Stock entitles the holder
to one vote and each share of TCI Music Series B Common Stock entitles the
holder to ten votes on each matter to be voted upon by the holders of TCI Music
Common Stock. Except as may otherwise be required by the DGCL or, with respect
to any series of TCI Music Preferred Stock, as otherwise provided in any
resolution of the TCI Music Board providing for the establishment of such series
of TCI Music Preferred Stock, the holders of the TCI Music Series A Common Stock
and the holders of the TCI Music Series B Common Stock and the holders of each
series of TCI Music Preferred Stock, if any, entitled to vote thereon will vote
as one class on all matters to be voted on by such stockholders of TCI Music.
Neither the holders of TCI Music Series A Common Stock nor the holders of TCI
Music Series B Common Stock have any rights to vote as a separate class or
series on any matter coming before the stockholders of TCI Music, except for
certain limited series voting rights provided under the DGCL. Under the DGCL,
the approval of the holders of a majority of the outstanding shares of any class
of capital stock of a corporation, voting separately as a class, is required to
approve any amendment to the charter that would alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely, provided that, if any amendment would alter or change the powers,
preferences or special rights of one or more series of the class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment would be entitled to vote thereon
separately as a class. The TCI Music Charter does not provide for cumulative
voting in elections of directors of TCI Music. Under the TCI Music Bylaws
directors may be elected by a plurality of the votes of shares present in person
or represented by proxy at the meeting and entitled to vote on the election of
officers.

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Conversion. Each share of TCI Music Series B Common Stock is convertible
at any time, at the option of its holder, into one share of TCI Music Series A
Common Stock. The TCI Music Series A Common Stock is not convertible into TCI
Music Series B Common Stock.

Dividends. Subject to the preferential rights, if any, of the holders of
outstanding shares of any series of TCI Music Preferred Stock, dividends may be
paid on TCI Music Common Stock as determined by the TCI Music Board out of funds
of TCI Music legally available therefor under the DGCL. Except for dividends
declared or paid as described below under "-- Share Distributions," any
dividends paid on the TCI Music Series A Common Stock or the TCI Music Series B
Common Stock will be paid only on both series, in equal amounts per share.

The TCI Music Board will determine its dividend policy with respect to TCI
Music Common Stock based on TCI Music's results of operations, financial
condition, capital requirements and other circumstances, including restrictions
that may be contained in agreements pursuant to which TCI Music may borrow
funds. It is the TCI Music Board's present intention to retain cash for the
operations of TCI Music and it is not anticipated that cash dividends will be
paid on TCI Music Common Stock in the foreseeable future.

Share Distributions. If at any time a distribution paid in TCI Music
Series A Common Stock or TCI Music Series B Common Stock or any other securities
of TCI Music or of any other corporation, partnership, limited liability
company, trust or other legal entity ("Person") (hereinafter sometimes called a
"share distribution") is to be made with respect to the TCI Music Series A
Common Stock or TCI Music Series B Common Stock, such share distribution will be
declared and paid only as follows:

(a) a share distribution consisting of shares of TCI Music Series A Common
Stock (or Convertible Securities that are convertible into, exchangeable for or
evidence the right to purchase shares of TCI Music Series A Common Stock) to
holders of TCI Music Series A Common Stock and TCI Music Series B Common Stock,
on an equal per share basis; or consisting of shares of TCI Music Series B
Common Stock (or Convertible Securities that are convertible into, exchangeable
for or evidence the right to purchase shares of TCI Music Series B Common Stock)
to holders of TCI Music Series A Common Stock and TCI Music Series B Common
Stock, on an equal per share basis; or consisting of shares of TCI Music Series
A Common Stock (or Convertible Securities that are convertible into,
exchangeable for or evidence the right to purchase shares of TCI Music Series A
Common Stock) to holders of TCI Music Series A Common Stock and, on an equal per
share basis, shares of TCI Music Series B Common Stock (or Convertible
Securities that are convertible into, exchangeable for or evidence the right to
purchase shares of TCI Music Series B Common Stock) to holders of TCI Music
Series B Common Stock; or

(b) a share distribution consisting of shares of any class or series of
security of TCI Music or any other Person other than TCI Music Series A Common
Stock or TCI Music Series B Common Stock (or Convertible Securities that are
convertible into, exchangeable for or evidence the right to purchase shares of
TCI Music Series A Common Stock or TCI Music Series B Common Stock), either on
the basis of a distribution of identical securities, on an equal per share
basis, to holders of TCI Music Series A Common Stock and TCI Music Series B
Common Stock or on the basis of a distribution of one class or series of
securities to holders of TCI Music Series A Common Stock and another class or
series of securities to holders of TCI Music Series B Common Stock, provided
that the securities so distributed (and, if applicable, the securities into
which the distributed securities are convertible, or for which they are
exchangeable, or which the distributed securities evidence the right to
purchase) do not differ in any respect other than their relative voting rights
and related differences in designation, conversion and share distribution
provisions, with holders of shares of TCI Music Series B Common Stock receiving
the class or series having the higher relative voting rights (without regard to
whether such rights differ to a greater or lesser extent than the corresponding
differences in voting rights and related differences in designation, conversion
and share distribution provisions between TCI Music Series A Common Stock and
TCI Music Series B Common Stock), provided that if the securities so distributed
constitute capital stock of a Subsidiary of TCI Music, such rights shall not
differ to a greater extent than the corresponding differences in voting rights,
designation, conversion and share distribution provisions between TCI Music
Series A Common Stock and TCI Music Series B Common Stock, and provided in each
case that such distribution is otherwise made on an equal per share basis.

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The term "Convertible Securities" is defined in the TCI Music Charter as
any securities of TCI Music (other than any series of TCI Music Common Stock)
that are convertible into, exchangeable for or evidence the right to purchase
any shares of any series of TCI Music Common Stock, whether upon conversion,
exercise, exchange, pursuant to anti-dilution provisions of such securities or
otherwise. As used in the TCI Music Charter, the term "Subsidiary" means, when
used with respect to any Person, (i) a corporation in which such Person and/or
one or more Subsidiaries of such Person, directly or indirectly, owns capital
stock having a majority of the voting power of such corporation's capital stock
to elect directors under ordinary circumstances, and (ii) any other Person
(other than a corporation) in which such Person and/or one or more Subsidiaries
of such Person, directly or indirectly, has (x) a majority ownership interest or
(y) the power to elect or direct the election of a majority of the members of
the governing body of such first-named Person. The TCI Music Charter provides
that TCI Music shall not reclassify, subdivide or combine the TCI Music Series A
Common Stock without reclassifying, subdividing or combining the TCI Music
Series B Common Stock, on an equal per share basis, and TCI Music shall not
reclassify, subdivide or combine TCI Music Series B Common Stock without
reclassifying, subdividing or combining the Series A Common Stock, on an equal
per share basis.

Liquidation Rights. In the event of a liquidation, dissolution or winding
up of TCI Music, whether voluntary or involuntary, after payment or provision
for payment of the debts and other liabilities of TCI Music and subject to the
preferential rights, if any, of holders of any then outstanding shares of any
series of TCI Music Preferred Stock, holders of shares of TCI Music Series A
Common Stock and holders of shares of TCI Music Series B Common Stock would be
entitled to share ratably in all assets of TCI Music available for distribution
to holders of TCI Music Common Stock. Neither a consolidation, merger, nor sale
of assets will be construed to be a "liquidation," "dissolution" or "winding up"
of TCI Music.

No Preemptive Rights. Holders of TCI Music Common Stock have no preemptive
rights to subscribe for or purchase additional shares of capital stock or other
obligations or securities convertible into or exercisable for shares of capital
stock that may hereafter be issued by TCI Music.

The National Association of Security Dealers, Inc. has approved the TCI
Music Series A Common Stock for inclusion for trading on its SmallCap Market
upon consummation of the Merger, subject to the condition that the TCI Music
Series A Common Stock trade at a price of $3.00 or more per share for the first
five trading days after the Merger. The Bank of New York has agreed to be the
transfer agent for each class of TCI Music Common Stock.

TCI MUSIC PREFERRED STOCK

TCI Music is authorized to issue up to 5,000,000 shares of preferred stock,
par value $.01 per share ("TCI Music Preferred Stock"). As of the date of this
Proxy Statement/Prospectus no shares of TCI Music Preferred Stock have been
issued.

The TCI Music Preferred Stock may be divided and issued in one or more
series from time to time as determined by the TCI Music Board, without further
stockholder approval. The TCI Music Board is authorized to establish, by
resolution, the number of shares of each series, the powers, designations,
preferences and relative, participating, optional or other rights of each such
series, and the qualifications, limitations, or restrictions thereof. All shares
of any one series of TCI Music Preferred Stock are required to be alike in every
particular. Except to the extent otherwise provided in the resolution or
resolutions providing for the issue of any series of TCI Music Preferred Stock,
the holders of shares of such series will have no voting rights except as may be
required by Delaware law. At the date of this Information Statement, the TCI
Music Board has not authorized the issuance of any shares of TCI Music Preferred
Stock and TCI Music has no current plans for the issuance of any shares of TCI
Music Preferred Stock.

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COMPARISON OF STOCKHOLDERS' RIGHTS

DMX and TCI Music are each incorporated in Delaware, and the rights of
their respective stockholders are governed by the laws of the State of Delaware
and the DMX Charter and DMX Bylaws and the TCI Music Charter and TCI Music
Bylaws, respectively. Upon consummation of the Merger, stockholders of DMX will
become stockholders of TCI Music, which will result in their rights as
stockholders continuing to be governed by Delaware law and also being governed
by the TCI Music Charter and TCI Music Bylaws. Although it is impracticable to
describe all of the differences between the DMX Charter and DMX Bylaws and the
TCI Music Charter and TCI Music Bylaws, the following is a summary of certain
significant differences between the rights of holders of DMX Common Stock and
those of holders of TCI Music Common Stock. The following summary of the TCI
Music Charter and the TCI Music Bylaws is qualified in its entirety by reference
to such documents, which have been filed as exhibits to the Registration
Statement. See "AVAILABLE INFORMATION."

AUTHORIZED CAPITAL STOCK

DMX. DMX's authorized capitalization consists of 100,000,000 shares of DMX
Common Stock.

TCI Music. TCI Music's authorized capitalization consists of a total of
495,000,000 shares of Common Stock, 295,000,000 of which are TCI Music Series A
Common Stock and 200,000,000 of which are TCI Music Series B Common Stock, and
5,000,000 shares of preferred stock, $0.01 par value per share.

VOTING

DMX. Each share of DMX Common Stock entitles the holder to one vote on
each matter presented to stockholders for vote. The DMX Bylaws provide that the
presence, in person or by proxy, of the holders of a majority of the votes
entitled to be cast by the stockholders entitled to vote (the "DMX Voting
Stock") shall constitute a quorum.

TCI Music. Each share of TCI Music Series B Common Stock entitles the
holder to ten votes and each share of TCI Music Series A Common Stock entitles
the holder to one vote on each matter presented to stockholders. Except as
required by the DGCL, the holders of TCI Music Series A Common Stock and TCI
Music Series B Common Stock vote together as a single class. The TCI Music
Bylaws provide that, subject to the rights of the holders of any class or series
of TCI Music preferred stock and except as otherwise provided by law or in the
TCI Music Charter, the presence, in person or by proxy, of the holders of a
majority of the total voting power of the outstanding shares of capital stock of
TCI Music entitled to vote at the meeting (the "TCI Music Voting Stock") is
necessary to constitute a quorum at such meeting for the transaction of any
business.

SPECIAL MEETING OF STOCKHOLDERS

DMX. The DMX Charter and Bylaws provide that, subject to the rights of the
holders of any series of preferred stock of DMX, a special meeting may be called
only by the DMX Board pursuant to a resolution approved by a majority of the
entire DMX Board.

TCI Music. The TCI Music Charter and TCI Music Bylaws provide that a
special meeting of stockholders shall be held at any time, subject to the rights
of the holders of any series of TCI Music preferred stock, upon the call of the
Secretary of TCI Music (a) upon the written request of the holders of not less
than 662/3% of the total voting power of the TCI Music Voting Stock or (ii) at
the request of at least 75% of the members of the TCI Music Board of Directors
then in office.

DIRECTORS

DMX. The DMX Charter and Bylaws provide that the DMX Board shall consist
of not less than three directors, divided into three classes of approximately
equal size, with each class to be elected for a three-year term at each annual
meeting of stockholders. The number of directors shall be determined from time
to time by the vote of a majority of the entire DMX Board, provided that no
decrease in the number of directors shall

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shorten the term of any incumbent director. The DMX Board is currently comprised
of seven directors. Stockholders of DMX do not have cumulative voting rights.

TCI Music. The TCI Music Charter provides for a Board of Directors of not
less than three members, divided into three classes of approximately equal size,
with each class to be elected for a three-year term at each annual meeting of
stockholders. The TCI Music Charter provides that the exact number of directors
shall be fixed by the Board of Directors by resolution. The TCI Music Bylaws
provide that the Board of Directors, by resolution adopted by the affirmative
vote of at least 75% of the members of the Board of Directors then in office,
may increase or decrease the number of directors, provided that any decrease in
the number of directors shall not shorten the term of any incumbent director.
The current number of directors comprising the TCI Music Board of Directors is
seven. Stockholders of TCI Music do not have cumulative voting rights.

REMOVAL OF DIRECTORS

DMX. The DMX Charter provides that, except as otherwise provided by the
terms of any securities of DMX, directors may only be removed for cause by the
affirmative vote of the holders of 66 2/3% of the then outstanding shares of DMX
Common Stock. The DMX Charter defines "cause" as the willful and continuous
failure of a director to substantially perform such director's duties to DMX
(other than any such failure resulting from incapacity because of physical or
mental illness) or the willful engaging by a director in gross misconduct
materially and demonstrably injurious to DMX. The DMX Bylaws provide that the
vacancy caused by any such removal may be filled by the stockholders at the
meeting at which such removal takes place or pursuant to the procedure for
filling vacancies on the Board of Directors. See "-- Vacancies on the Board of
Directors."

TCI Music. The TCI Music Charter provides that, subject to the rights of
the holders of any series of TCI Music preferred stock, directors may be removed
only for cause upon the affirmative vote of the holders of at least 66 2/3% of
the total voting power of the outstanding shares of TCI Music Voting Stock,
voting together as a single class. The TCI Music Charter provides that "cause"
for removal exists if: (i) the director whose removal is proposed has been
convicted, or has been granted immunity to testify where another has been
convicted, of a felony, by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal; (ii) such director has become mentally
incompetent, whether or not so adjudicated, which mental incompetence directly
affects his ability as a director, as determined by at least 66 2/3% of the
members of the TCI Music Board of Directors then in office (other than such
director); or (iii) such director's actions or failure to act have been
determined by 66 2/3% of the members of the TCI Music Board of Directors then in
office (other than such director) to be in derogation of such director's duties.

VACANCIES ON THE BOARD OF DIRECTORS

DMX. The DMX Charter provides that, except as otherwise provided by the
terms of any securities of DMX, newly created directorships resulting from any
increase in the number of directors may be filled by the DMX Board, and any
vacancies on the DMX Board resulting from death, resignation, removal or other
cause may be filled by the affirmative vote of a majority of the remaining
directors then in office even though less than a quorum of the DMX Board, or by
a sole remaining director.

TCI Music. The TCI Music Charter provides that any newly created
directorship resulting from an increase in the number of directors and any
vacancies on the TCI Music Board of Directors caused by death, resignation,
removal, disqualification or other cause, may be filled by the affirmative vote
of a majority of the remaining directors then in office, although less than a
quorum, or by the sole remaining director. Such directors will serve for the
remainder of the full term of the class for which such director was chosen and
until his successor shall have been elected and qualified.

ANTI-TAKEOVER STATUTE; MERGERS, CONSOLIDATIONS AND SALES OF ASSETS

Anti-Takeover Statute. DGCL Section 203, in general, prohibits certain
forms of "business combinations" with an "interested stockholder" within three
years of the date such person became an "interested

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stockholder," unless (i) prior to such date the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, exclusive of shares owned by officers, directors and by certain
employee stock plans, or (iii) on or after such date, the business combination
is approved by the board of directors and authorized at a stockholders' meeting
by the affirmative vote of at least 66 2/3% of the outstanding voting stock that
is not owned by the interested stockholder.

An "interested stockholder" of a corporation is defined, subject to certain
exceptions, as any person or entity (and any affiliate or associate of such
person or entity) that (i) is the owner (as defined in Section 203) of 15% or
more of the outstanding voting stock of the corporation; or (ii) is an affiliate
or associate of the corporation and, at any time within the three-year period
immediately prior to the date of determination, was the owner of 15% or more of
the outstanding shares of voting stock of the corporation. The term "business
combination" is defined to include, among other transactions between the
interested stockholder and the corporation or any direct or indirect
majority-owned subsidiary thereof: a merger or consolidation; a sale, pledge,
transfer or other disposition (including as part of a dissolution) of assets
having an aggregate market value equal to 10% or more of either the aggregate
market value of all assets of the corporation on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; certain
transactions that would increase the interested stockholder's proportionate
share ownership of the stock of any series of the corporation or such
subsidiary; and any receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation or any such subsidiary. The term "owner" is broadly
defined to include any person that individually or with or through his or its
affiliates or associates, among other things, beneficially owns such stock, or
has the right to acquire such stock (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement or
understanding or upon the exercise of warrants or options or otherwise or has
the right to vote or direct the vote of such stock pursuant to any agreement or
understanding, or has an agreement or understanding with the beneficial owner of
such stock for the purpose of acquiring, holding, voting or disposing of such
stock.

Section 203 applies automatically to Delaware corporations (other than
corporations which do not have a class of voting stock that is listed on a
national securities exchange, authorized for quotation with a registered
national securities association, or held of record by more than 2,000
stockholders) unless the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by Section 203 or the
corporation has "opted out" of coverage under Section 203 by amending its
certificate of incorporation or bylaws to that effect in accordance with Section
203. A Delaware corporation which is not automatically covered by Section 203
may, however, "opt in" to such coverage by including in its original certificate
of incorporation or any amendment thereto a provision in which the corporation
elects to be governed by Section 203.

DMX. Section 203 of the DGCL automatically applies to DMX since it has a
class of voting stock that is authorized for quotation with a registered
national securities association. Even if Section 203 did not apply to DMX, the
DMX Charter incorporates by reference all of the provisions of DGCL Section 203
except for the provisions that exclude certain corporations from its coverage.
In addition, Article VI of the DMX Charter requires a "Business Combination"
with an "Interested Stockholder" to be approved by the holders of 80% of the
combined voting power of the then outstanding shares of DMX Voting Stock and the
affirmative vote of the holders of a majority of the voting power of the then
outstanding shares of DMX Voting Stock held by persons other than the Interested
Stockholder or any Affiliate or Associate (both as defined in Article VI) of the
Interested Stockholder, unless certain conditions specified in Article VI are
met.

For purposes of Article VI, an "Interested Stockholder" is defined as any
person (other than DMX or a subsidiary or certain of their employee benefit
plans) who is (a) the beneficial owner (as defined below), directly or
indirectly, of 15% or more of the then outstanding shares of DMX Common Stock or
(b) an Affiliate of DMX and at any time within the two-year period immediately
prior to the date in question was the beneficial owner of 15% or more of the
then outstanding shares of DMX Common Stock, or (c) an assignee

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of, or has otherwise succeeded to, any shares of DMX Common Stock which were at
any time within the two-year period immediately prior to the date in question
beneficially owned by a person described in (a) or (b) above (other than shares
acquired through a public offering).

For purposes of Article VI, a "Business Combination" is defined as any of
the following: (a) a merger or consolidation of DMX with an Interested
Stockholder or any corporation (whether or not itself an Interested Stockholder)
which is, or after such merger or consolidation would be, an Affiliate or an
Associate of an Interested Stockholder; (b) the sale or other disposition (in
one transaction or a series of transactions) to or with an Interested
Stockholder or any Affiliate or Associate of an Interested Stockholder of all or
substantially all the assets of DMX or the assets of its subsidiaries
representing more than 75% of the total value of DMX's consolidated
subsidiaries; (c) the sale or other disposition (in one transaction or a series
of transactions) of assets of DMX or any of its subsidiaries having an aggregate
Fair Market Value (as defined in Article VI) of $10 million or more, but less
than the amount specified in clause (b) above, if an Interested Stockholder or
any Affiliate or Associate of an Interested Stockholder is a party to the
transaction, and any merger or consolidation of any of DMX's subsidiaries having
assets with a Fair Market Value of $10 million or more with an Interested
Stockholder or any corporation which is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested Stockholder; (d) the
issuance or transfer (in one transaction or a series of transactions) of any
securities of DMX or of any of its subsidiaries to an Interested Stockholder or
any Affiliate or Associate of an Interested Stockholder in exchange for cash,
securities or other property (or combination thereof) having an aggregate Fair
Market Value of $10 million or more; (e) the adoption of any plan or proposal
for the liquidation or dissolution of DMX proposed by or on behalf of an
Interested Stockholder or any Affiliate or Associate of an Interested
Stockholder; and (f) any reclassification of securities or recapitalization or
merger or consolidation of DMX with any of its subsidiaries or any other
transaction which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of stock or stock
convertible into stock of DMX or any of its subsidiaries that is beneficially
owned by an Interested Stockholder or any Affiliate or Associate of an
Interested Stockholder.

The term "beneficial owner" is defined as any person that individually or
with or through his or its Affiliates or Associates, among other things,
beneficially owns such stock, or has the right to acquire such stock (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement or understanding or upon the exercise of warrants or
options or otherwise or has the right to vote or direct the vote of such stock
pursuant to any agreement or understanding, or has an agreement or understanding
with the beneficial owner of such stock for the purpose of acquiring, holding,
voting or disposing of such stock.

The supermajority voting requirements described above do not apply to any
transaction otherwise meeting the definition of a Business Combination if each
of the following applicable provisions are met: (i) the transaction was approved
by a majority of the Disinterested Directors (as defined below) and the
Interested Stockholder involved in such Business Combination had acquired the
status of an Interested Stockholder in a manner substantially consistent with an
agreement or memorandum of understanding approved by the Board of Directors
prior to the time such Interested Stockholder acquired such status and the
Interested Stockholder has complied with all requirements imposed by such
agreement or memorandum of understanding; (ii) the Business Combination (other
than a sale or merger described in clause (c) and a liquidation or dissolution
of DMX described in clause (e) of the definition of Business Combination) was
approved by a majority of the Disinterested Directors; or (iii) the Business
Combination meets the fair price and procedural requirements described below. A
"Disinterested Director" is defined as any member of DMX's Board of Directors
who is not affiliated with and not a nominee of an Interested Stockholder or any
Affiliate or Associate of an Interested Stockholder and was a director of DMX
prior to the time such Interested Stockholder became an Interested Stockholder
and any director who is a successor to a Disinterested Director, who is
unaffiliated with and not a nominee of, an Interested Stockholder or any
Affiliate or Associate of an Interested Stockholder, and who was recommended for
election or elected to succeed a Disinterested Director by a majority of the
Disinterested Directors then on the Board.

A Business Combination complies with the "fair price" provisions of Article
VI if, among other things, the aggregate of (a) the consideration to be received
per share by holders of DMX Common Stock in the

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Business Combination equals or exceeds the highest of (i) the highest per share
price paid by the Interested Stockholder or any of its Affiliates or Associates
in acquiring any shares of DMX Common Stock during the two years immediately
prior to the date of the first public announcement of the proposed Business
Combination or in any transaction in which the Interested Stockholder became an
Interested Stockholder (whichever is higher) or (ii) the Fair Market Value per
share of DMX Common Stock on the date of the first public announcement of the
proposed Business Combination or the first date on which the Interested
Stockholder became an Interested Stockholder (whichever is higher). Comparable
"fair price" requirements apply to the price to be paid for shares of other
classes or series of DMX's capital stock. The consideration to be received by
holders of a particular class (or series) of capital stock in the Business
Combination must also be either cash or the same type of consideration used by
the Interested Stockholder and its Affiliates and Associates in acquiring the
largest portion of their interest in such class (or series) of capital stock.

A Business Combination complies with the "procedural" requirements of
Article VI if, between the time that the Interested Stockholder became an
Interested Stockholder and the date of the proposed Business Combination, (i)
DMX has not failed to declare and pay the full amount of dividends on any DMX
preferred stock and shall not have reduced the annual rate of dividends paid on
DMX Common Stock, unless such failure or reduction was approved by a majority of
the Disinterested Directors, (ii) the Interested Stockholder has not become the
direct or indirect beneficial owner of any additional shares of Voting Stock,
except as part of the transaction pursuant to which the Interested Stockholder
became an Interested Stockholder, (iii) the Interested Stockholder has not
received, at any time after the Interested Stockholder became an Interested
Stockholder, whether in connection with the Business Combination or otherwise,
the benefit of any loans, advances, guarantees, pledges or other financial
assistance provided by DMX, and (iv) if applicable, a proxy or information
statement describing the proposed Business Combination and complying with the
requirements of the Exchange Act or the proxy rules promulgated under the
Exchange Act or any replacement legislation has been mailed to all of DMX's
stockholders at least 30 days prior to the consummation of the Business
Combination, whether or not such proxy or information statement is required to
be mailed pursuant to the Exchange Act or any such replacement legislation.

Article VI is intended to reduce the risk of certain types of "two-tiered"
acquisitions in which a person or entity could acquire a substantial block of
DMX's capital stock and then proceed to effect a Business Combination with DMX
in which the consideration paid to the remaining stockholders is lower than the
price per share paid to acquire the initial block or is paid in the form of debt
or other less desirable forms of consideration rather than the form of
consideration used to purchase the initial block. Both Section 203 of the DGCL
and Article VI may, however, render more difficult or discourage a takeover of
DMX, whether or not such action might be deemed desirable by a majority of DMX's
stockholders.

The DMX Board has approved, in accordance with the applicable requirements
of Section 203 of the DGCL, certain transactions, including the TCI-E Merger,
between TCI and its respective affiliates and associates and DMX, which
transactions may have resulted in TCI becoming an interested stockholder of DMX,
within the meaning of Section 203 of the DGCL and an "Interested Stockholder,"
within the meaning of Article VI. See "THE MERGER -- Background of the Merger."
Because such transactions were approved by a majority of the Disinterested
Directors, no supermajority vote is required under either Section 203 or Article
VI in connection with the Merger. See "THE SPECIAL MEETING -- Voting Rights;
Votes Required for Approval."

TCI Music. Section 203 will apply to TCI Music, since the TCI Music
Charter does not contain any provision "opting out" of the application of DGCL
Section 203. As a result, the provisions of Section 203 will remain applicable
to transactions between TCI Music and any of its respective "interested
stockholders."

The TCI Music Charter requires, subject to the rights, if any, of any
series of preferred stock of TCI Music, the affirmative vote of the holders of
at least 66 2/3% of the total voting power of the then outstanding shares of TCI
Music Voting Stock, voting together as a single class, to approve (i) a merger
or consolidation of TCI Music with, or into, another corporation, other than a
merger or consolidation which does not require the consent of stockholders under
the DGCL or a merger or consolidation which has been approved by at least 75% of
the members of the TCI Music Board (in which case, in accordance with the

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DGCL, the affirmative vote of a majority of the total voting power of the
outstanding TCI Music Voting Stock would be required for approval), (ii) the
sale, lease or exchange of all or substantially all of the property and assets
of TCI Music or (iii) the dissolution of TCI Music.

AMENDMENTS TO CERTIFICATE OF INCORPORATION

DMX. The DMX Charter provides that the DMX Charter may be amended, altered
or repealed in any manner prescribed by statute, except that the amendment,
alteration or repeal of, or adoption of any provision inconsistent with,
Articles V (Composition of Board of Directors and Stockholder Meetings), VI
(Procedures for Certain Business Transactions), VII (Additional Statutory
Procedures for Business Combinations with Interested Stockholders), X (Right to
Amend Certificate of Incorporation) or XI (Definitions) of the DMX Charter may
only be effected upon the affirmative vote of the holders of at least 66 2/3% of
the then outstanding shares of DMX Common Stock.

TCI Music. The TCI Music Charter requires the affirmative vote of 66 2/3%
of the total voting power of the outstanding shares of TCI Music Voting Stock,
voting together as a single class, to approve any amendment, alteration or
repeal of any provision of the TCI Music Charter or the addition or insertion of
other provisions therein.

AMENDMENTS TO BYLAWS

DMX. The DMX Bylaws provide that they may be amended, altered or repealed,
and new Bylaws may be adopted, from time to time by the affirmative vote of a
majority of the entire Board of Directors as then constituted, provided that at
the next stockholders' meeting after such amendment, alteration, repeal or
adoption, the stockholders may, by a majority vote of those present and entitled
to vote, alter or repeal any newly adopted Bylaws or restore to their original
status any altered or repealed Bylaws. The notice to stockholders of such
meeting shall include notice that the stockholders will be called on to ratify
any action taken by the Board of Directors with regard to the Bylaws.

TCI Music. The TCI Music Charter and TCI Music Bylaws require (a) the
affirmative vote of 66 2/3% of the total voting power of the outstanding TCI
Music Voting Stock, voting together as a single class, or (b) the affirmative
vote of not less than 75% of the members of the TCI Music Board of Directors
then in office, to approve the adoption, amendment or repeal of any provisions
of the TCI Music Bylaws.

LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS

Under Delaware law, a corporation may include in its certificate of
incorporation a provision that would, subject to the limitations described
below, eliminate or limit the personal liability of directors to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision may not eliminate or limit the liability
of a director (i) for any breach of a director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
there which involve intentional misconduct or no violation of law, or (iii)
resulting in the receipt by such person of an improper personal benefit.

The DMX Charter and the TCI Music Charter each contain a provision that
limits a director's liability to the full extent permitted by Delaware law, as
discussed above.

PREFERRED STOCK

Neither DMX nor TCI Music have any outstanding preferred stock.

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APPRAISAL RIGHTS

Any stockholder of record of DMX who objects to the Merger may, as an
alternative to receiving the Merger Consideration, demand appraisal of his or
her DMX Common Stock pursuant to Section 262 of the DGCL ("Section 262") (a copy
of which is included as Appendix III hereto) by demanding in writing that, in
lieu of the Merger Consideration, he or she be paid in cash the fair value of
his or her DMX Common Stock.

Any stockholder contemplating the exercise of such right to demand
appraisal should carefully review Section 262, particularly the procedural steps
required to perfect the right of appraisal. A stockholder who fails to comply
with these procedural requirements may lose his or her right of appraisal. A DMX
stockholder who loses his or her right of appraisal will receive the Merger
Consideration for his or her DMX Common Stock.

Set forth below, to be read in conjunction with the full text of Section
262 included as Appendix III hereto, is a summary of the procedures relating to
the exercise of a right of appraisal. The following summary does not purport to
be complete and is qualified in its entirety by reference to Appendix III. For
purposes of the following summary, references to the "Company" in this section
only mean DMX before the Merger and the Surviving Corporation after the Merger.

A stockholder of record who desires to exercise his or her appraisal rights
under Section 262 must satisfy all of the following conditions. A written demand
for appraisal of his or her common stock must be delivered to the Company before
the taking of the vote on the Merger Agreement. The demand will be sufficient if
it reasonably informs the Company of the identity of the stockholder and that he
or she intends thereby to demand appraisal of his or her DMX Common Stock. This
demand must be in addition to and separate from any proxy or vote against the
Merger Agreement. Voting against or failing to vote on the Merger Agreement will
not constitute a demand for appraisal under Section 262. A demand for appraisal
may be made only by or for a stockholder of record. Beneficial owners whose
shares are held of record by another, such as a nominee, broker or depositary,
must have the appraisal demand made by or for the holder of record.

Stockholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the Merger Agreement. If a stockholder returns a
signed proxy but does not specify a vote against adoption of the Merger
Agreement or a direction to abstain, the proxy will be voted for adoption of the
Merger Agreement, which will have the effect of waiving that stockholder's
appraisal rights.

Within 10 days after the Effective Time, the Surviving Corporation (as
successor to DMX following the Merger) will notify each former stockholder of
DMX who has made such a written demand for appraisal and who has not voted in
favor of the Merger of the date that the Merger became effective.

Within 120 days after the Effective Time, any stockholder who has satisfied
the requirements of Section 262 may deliver to the Company a written demand for
a statement listing the aggregate number of shares of DMX Common Stock not voted
in favor of the Merger and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. The Company must
then mail the statement to the stockholder before the later of (i) 10 days after
such stockholder's written demand for such statement is received by the Company
or (ii) 10 days after the Special Meeting.

Within 120 days after the Effective Time, the Company or any stockholder
who has complied with Section 262 and who is otherwise entitled to appraisal
rights under Section 262 may file a petition in the Delaware Court of Chancery
demanding a determination of the value of the DMX Common Stock of all such
stockholders. The Company does not intend to file such a petition.

Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the Company which shall, within 20 days after such
service, file in the office of the Delaware Register in Chancery in which the
petition was filed a duly verified list of the names and addresses of all
stockholders who have demanded payment for their DMX Common Stock and who have
not reached agreement with the Company as to the value of their shares. If the
petition is filed by the Company, it shall be accompanied by such list. The
Delaware Register in Chancery, if so ordered by the Court, shall give notice of
the time and place fixed for the hearing of such petition by registered or
certified mail to the Company and to the stockholders shown on the

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list at the addresses therein stated. Notice shall also be published at least
one week before the day of the hearing in a newspaper of general circulation
published in the City of Wilmington, Delaware or in such publication as the
Court deems advisable. The Court must approve the forms of the notices by mail
and by publication, and the Company will bear the cost of the notice.

After determining the stockholders entitled to an appraisal, the Court
shall appraise the DMX Common Stock, determining its fair value exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
and the Court shall direct the payment of the appraised value of the DMX Common
Stock together with interest, if any, by the Company to the stockholders
entitled thereto upon surrender to the Company of the certificates representing
such DMX Common Stock. The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may order all or a
portion of the expenses incurred by any stockholder in connection with the
appraisal proceedings, including without limitation, reasonable attorney's fees
and the fees and expenses of experts, to be charged pro rata against the value
of all such DMX Common Stock entitled to an appraisal. Absent such a
determination or assessment, each party bears its own expense.

Stockholders considering seeking appraisal should bear in mind that the
fair value of their DMX Common Stock determined under Section 262 could be more
than, the same as or less than the Merger Consideration they would receive
pursuant to the Merger Agreement if they do not seek appraisal of their stock,
and that investment banking opinions as to fairness are not necessarily opinions
as to fair value under Section 262.

Notwithstanding the foregoing, if no petition has been filed with the
Delaware Court of Chancery within 120 days after the Effective Time, then the
right of appraisal shall cease. Further, if any stockholder delivers to the
Company a written withdrawal of his demand for appraisal, which withdrawal may
be made without the consent of the Company at any time prior to the 60th day
after the Effective Time or with the consent of the Company after such period,
then the right of appraisal shall cease as to such stockholder. Any former DMX
stockholder who withdraws or loses his or her right of appraisal after the
Effective Time will receive the Merger Consideration. Notwithstanding the
foregoing, no appraisal proceeding in the Delaware Court of Chancery may be
dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.

The statements made in this summary are qualified in their entirety by
reference to Section 262 of the DGCL. The provisions of Section 262 of the DGCL
are technical in nature and complex. IT IS SUGGESTED THAT ANY HOLDER OF DMX
COMMON STOCK WHO DESIRES TO AVAIL HIMSELF OR HERSELF OF HIS OR HER RIGHT TO
DISSENT CONSULT HIS OR HER COUNSEL BECAUSE FAILURE TO COMPLY STRICTLY WITH THE
PROVISIONS OF SECTION 262 MAY DEFEAT DISSENTERS' RIGHTS.

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MANAGEMENT OF TCI MUSIC

DIRECTORS AND EXECUTIVE OFFICERS

Information regarding each person who is a director or executive officer of
TCI Music is set forth below.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Leo J. Hindery, Jr................................. 49 Chairman of the Board
Robert R. Bennett.................................. 39 Director and Acting Chief Financial
Officer
Donne F. Fisher.................................... 58 Director
Peter M. Kern...................................... 29 Director
J.C. Sparkman...................................... 64 Director
David B. Koff...................................... 38 Director, President and Chief Executive
Officer
Lon A. Troxel...................................... 49 Director
Stephen M. Brett................................... 56 Vice President, General Counsel and
Secretary
</TABLE>

Leo J. Hindery, Jr. was appointed Chairman of the Board of TCI Music
effective January 1997. He was appointed as a director of TCI in May 1997 and
President and Chief Operating Officer of TCI effective March 1, 1997 and was
appointed Director and President of TCIC in March 1997. Since 1988 has been the
managing general partner of the general partner of InterMedia Partners and its
affiliated entities. InterMedia Partners is a multi-system cable television
operator. Mr. Hindery is a director of DMX.

Robert R. Bennett was appointed a director of TCI Music effective January
1997 and acting Chief Financial Officer in June 1997. He has been an Executive
Vice President of TCI and President, Chief Executive Officer and a director of
Liberty since April 1997. From June 1995 through March 1997, he was Executive
Vice President, Chief Financial Officer, Secretary, Treasurer and a director of
Liberty. He was Senior Vice President of Liberty from September 1991 to June
1995 and Vice President of TCIC from 1990 through March 1991 while also holding
the titles of Treasurer, Secretary and Chief Financial Officer of Liberty. Mr.
Bennett also serves as a director of BET Holdings, Inc., a Delaware corporation,
which is engaged in the distribution of certain programming.

Peter M. Kern was appointed a director of TCI Music effective January 1997.
Mr. Kern has served as President of Gemini Associates LLC, a firm that provides
strategic advisory services primarily to media companies, since April 1996. From
December 1993 to January 1996 he served as Senior Vice President of Strategic
Development and Corporate Finance of Home Shopping Network, Inc. and served as
its Vice President of Strategic Development and Assistant to the CEO from March
1993 to December 1993. Prior to joining Home Shopping Network, Inc., he served
as Vice President of Corporate Finance and Strategic Development for Whittle
Communications, L.P. and worked at the New York investment banking firm, Bear,
Stearns & Co., Inc.

Donne F. Fisher was appointed a director of TCI Music effective January
1997. He has served as a director of TCI since 1994 and a director of TCIC since
1980. Mr. Fisher was Executive Vice President and Treasurer of TCI from January
1994 until January 1, 1996; served as Executive Vice President of TCIC from
December 1991 to October 1994; and was previously Senior Vice President of TCIC
since 1982 and Treasurer since 1970. Since January 1, 1996 he has provided
consulting services to TCI. Mr. Fisher also serves as a director of DMX, General
Communication, Inc. and United Video Satellite Group Inc.

J.C. Sparkman was appointed a director of TCI Music effective May 1997. He
has been a director of TCI since December 1996. He served as Executive Vice
President of TCI from January 1994 through March 1995. Mr. Sparkman retired in
March of 1995 and has provided consulting services to TCI since March 1995. He
served as Executive Vice President of TCIC from 1987 to October 1995. He also
serves as a director of Shaw Communications, Inc., DMX Inc. and United Video
Satellite Group, Inc.

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David B. Koff was appointed a director, President and Chief Executive
Officer of TCI Music effective May 1997. He has been Vice President -- Corporate
Development of Liberty since August 1994. From March 1993 to August 1994, he was
special counsel to Liberty. From August 1992 to March 1993, he was special
counsel at Brownstein Hyatt Farber & Strickland in Denver. Prior to that, Mr.
Koff was an associate in the Los Angeles office of Latham & Watkins.

Lon A. Troxel was appointed a director of TCI Music effective May 1997. He
was appointed Chief Operating Officer of DMX in April 1997 and served as
Executive Vice President, Commercial Division from April 1994 to April 1997. Mr.
Troxel served as Vice President, U.S./Canada Dealer Sales of AEI Music Networks,
Inc. during 1991 and as Chief Executive Officer and President of Protection One
Alarm Services from May 1988 to October 1990.

Stephen M. Brett was appointed Vice President, General Counsel and
Secretary of TCI Music in January 1997. Mr. Brett has served as Executive Vice
President and Secretary of TCI since January 27, 1994 and as Senior Vice
President and General Counsel of TCIC since December of 1991. From August of
1988 through December of 1991, Mr. Brett was Executive Vice President -- Legal
and Secretary of United Artist Entertainment Company and its predecessor, United
Artists Communications, Inc.

BOARD COMPOSITION

The TCI Music Charter provides for a classified Board of Directors
consisting of not less than three members, with the exact number of directors to
be fixed by resolution of the TCI Music Board from time to time. The TCI Music
Board currently consists of seven members.

Members of the TCI Music Board are elected to staggered three-year terms,
with approximately one-third elected annually. Mr. Fisher, Mr. Sparkman and Mr.
Troxel are the Class I Directors whose terms expire in 1998, Mr. Kern and Mr.
Bennett are the Class II Directors whose terms expire in 1999 and Mr. Koff and
Mr. Hindery are the Class III Directors whose terms expire in 2000. Executive
officers of TCI Music are appointed by and serve at the discretion of the TCI
Music Board. There are no family relations, of first cousin or closer, among the
above named individuals, by blood, marriage or adoption.

COMMITTEES OF THE BOARD

In compliance with the Nasdaq Stock Market corporate governance standards,
the TCI Music Board has established an Audit Committee comprised of three
directors, Mr. Bennett, Mr. Kern and Mr. Fisher. The duties of the Audit
Committee will include, but are not limited to, conducting reviews of potential
conflicts of interest situations where appropriate. No other committees of the
TCI Music Board have been established.

COMPENSATION OF DIRECTORS

Members of the TCI Music Board who are also full-time employees of TCI
Music or TCI, or any of its respective subsidiaries, will not receive any
additional compensation for their services as directors. TCI Music has not
established any fees for Directors who are not full-time employees of TCI or any
of its subsidiaries. All members of the TCI Music Board will be reimbursed for
expenses incurred to attend any meetings of the TCI Music Board or committee
thereof.

COMPENSATION OF EXECUTIVE OFFICERS

TCI Music was formed on January 21, 1997 and has conducted no significant
activities other than those incident to its formation, the Contribution
Agreement, the Merger Agreement, and the preparation of this Proxy
Statement/Prospectus. All of the executive officers of TCI Music are currently
employees of TCI or its affiliates. TCI Music has no current compensation
arrangements with such persons to provide compensation in connection with their
services as executive officers of TCI Music.

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<PAGE> 83

THE TCI MUSIC, INC. 1997 STOCK INCENTIVE PLAN

General. It is expected that, on or before the Effective Time, the TCI
Music Board will adopt, and TCI, as the sole stockholder of TCI Music prior to
the Merger, will approve, the TCI Music, Inc. 1997 Stock Incentive Plan (the
"1997 Plan"). The 1997 Plan will provide for awards to be made in respect of a
maximum of 4,000,000 shares of TCI Music Series A Common Stock (subject to
certain anti-dilution adjustments). Awards may be made as grants of stock
options ("Options"), stock appreciation rights ("SARs"), restricted shares
("Restricted Shares"), Stock Units (as defined below), performance awards
("Performance Awards") or any combination thereof (collectively, "Awards").
Awards may be made to employees and to consultants and advisors to TCI Music who
are not employees. No Rights can be issued in connection with any Awards under
the 1997 Plan. Shares of TCI Music Series A Common Stock that are subject to
Awards that expire, terminate or are annulled for any reason without having been
exercised (or deemed exercised, by virtue of the exercise of a related SAR), or
are forfeited prior to becoming vested, will return to the pool of such shares
available for grant under the 1997 Plan.

The 1997 Plan will be administered by the Compensation Committee of the TCI
Music Board, or such other committee as the TCI Music Board may in the future
appoint, which shall comprise of at least two persons (the "Committee"). Each
member of the Committee will be a member of the TCI Music Board who is not a
current employee of TCI Music and is not otherwise disqualified from being (A) a
"non-employee director" with respect to TCI Music for purposes of Rule 16b-3
under the Exchange Act (or any successor rule) or (B) an "outside director" with
respect to TCI Music for purposes of Section 162(m) of the Code (or any
successor statute) and the rules and regulations of the Treasury Department
promulgated thereunder.

The Committee will have broad discretion in administering the 1997 Plan,
and is authorized, subject only to the express provisions of the 1997 Plan, to
determine the eligible persons to whom Awards may be made, to determine the
terms and conditions (which need not be identical) of each Award (including the
timing of the grant, the type of Award granted, the pricing and the amount of
the Award and terms related to vesting, exercisability, forfeiture and
termination), and to interpret the provisions of the 1997 Plan and each
agreement relating to Awards granted under the 1997 Plan. The determinations of
the Committee are final and binding upon all participants.

Stock Options. Options granted pursuant to the 1997 Plan may be either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Code, or nonqualified stock options ("Nonqualified Options"), which do
not qualify under Section 422. The Committee is authorized to determine whether
an Option is an Incentive Option or a Nonqualified Option.

The exercise price of all Options granted under the 1997 Plan will be fixed
by the Committee, and may be more than, less than or equal to the fair market
value of the TCI Music Series A Common Stock on the date the Option is granted.
However, TCI Music does not have any current intention to grant Options with an
exercise price less than the fair market value of the TCI Music Series A Common
Stock on the date of grant.

Subject to the provisions of the 1997 Plan relating to death, retirement
and termination of employment, the term of each Option will be fixed by the
Committee at the time of grant. Options may be exercised in whole or in part at
any time or only after a period of time or in installments, as determined by the
Committee at the time of grant, and the exercisability of Options may be
accelerated by the Committee.

An Option shall be exercised by written notice to the Committee upon the
terms set forth in the agreement relating thereto and in accordance with such
other procedures as the Committee may establish.

The method of payment of the exercise price of an Option will be determined
by the Committee and may consist of cash, a check, a promissory note, the
surrender of already owned shares of TCI Music Series A Common Stock or TCI
Music Series B Common Stock, the withholding of shares of TCI Music Series A
Common Stock issuable upon exercise of such Option, delivery of a properly
executed exercise notice and irrevocable instructions to a broker to deliver
promptly to TCI Music the amount of sale or loan proceeds required to pay the
exercise price, any combination of the foregoing methods of payment or such
other consideration and method of payment as may be permitted for the issuance
of shares under Delaware law, subject, in the case of any permitted method of
payment other than cash, to such conditions as the Committee

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<PAGE> 84

deems appropriate. By way of example, if a holder is permitted to elect to pay
such exercise price by the withholding of shares of TCI Music Series A Common
Stock, the Committee may reserve the discretion to approve or disapprove such
election.

Stock Appreciation Rights. An SAR may be granted under the 1997 Plan to
the holder of an Option (a "related Option") with respect to all or a portion of
the shares of TCI Music Series A Common Stock subject to the related Option (a
"Tandem SAR") or may be granted separately to an eligible participant (a "Free
Standing SAR"). A Tandem SAR may be granted either concurrently with the grant
of the related Option or, if the related Option is a Nonqualified Option, at any
time thereafter and prior to the complete exercise, termination, expiration or
cancellation of the related Option. A Tandem SAR will be exercisable only at the
time and to the extent that the related Option is exercisable and may be subject
to such additional limitations on exercisability as the Committee may determine.
Upon exercise of a Tandem SAR, the related Option will be deemed to have been
exercised to the extent of the number of shares of TCI Music Series A Common
Stock with respect to which such Tandem SAR is exercised. Conversely, upon the
exercise or termination of the related Option, the Tandem SAR will be canceled
automatically to the extent of the number of shares of TCI Music Series A Common
Stock with respect to which the related Option was so exercised or terminated.
Free Standing SARs will be exercisable at the time, to the extent and upon the
terms and conditions determined by the Committee and set forth in the agreement
relating to the Award.

The base price of a Tandem SAR will be the same as the exercise price of
the related Option unless the Committee provides for a higher base price. The
base price of a Free Standing SAR will not be less than the fair market value of
the TCI Music Series A Common Stock on the date of grant of the Free Standing
SAR. Upon exercise of an SAR, the holder will be entitled to receive from TCI
Music, for each share of TCI Music Series A Common Stock with respect to which
the SAR is exercised, an amount equal to the excess of the fair market value of
a share of TCI Music Series A Common Stock on the date of exercise over the base
price per share of such SAR. Such amount shall be paid in cash, shares of TCI
Music Series A Common Stock (valued at their fair market value on the date of
exercise of the SAR) or a combination thereof as specified in the agreement
relating to the Award. Unless the Committee shall otherwise determine, to the
extent a Free Standing SAR is exercisable, it will be exercised automatically
for a cash settlement on its expiration date.

The agreement relating to an Award of SARs may provide for a limit on the
amount payable to a holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the holder
in whole or in part for cash during any specified period, for a limit on the
time periods during which a holder may exercise SARs and for such other limits
on the rights of the holder and other terms and conditions as the Committee may
determine.

Restricted Shares. At the time of any Award of Restricted Shares, the
Committee will designate a period of time which must elapse (the "Restriction
Period") and may impose such other restrictions, terms and conditions that must
be fulfilled, before the Restricted Shares will become vested. The Committee may
determine that (a) Restricted Shares will be issued at the beginning of the
Restriction Period, in which case, such shares will constitute issued and
outstanding shares of TCI Music Series A Common Stock for all corporate purposes
or (b) Restricted Shares will not be issued until the end of the Restriction
Period, in which case the participant receiving the Award will have none of the
rights of a stockholder with respect to the shares of TCI Music Series A Common
Stock covered by such Award until such shares shall have been issued to such
participant at the end of the Restriction Period. The participant will have the
right to vote Restricted Shares issued at the beginning of the Restriction
Period and to receive such dividends and other distributions as the Committee
may, in its sole discretion, designate that are paid or distributed on such
Restricted Shares, and generally to exercise all other rights as a holder of TCI
Music Series A Common Stock, except that, until the end of the Restriction
Period: (i) such participant will not be entitled to take possession of the
stock certificates representing the Restricted Shares; (ii) such participant may
not sell, transfer or otherwise dispose of the Restricted Shares; and (iii)
other than such dividends and other distributions as the Committee may
designate, TCI Music will retain custody of all dividends and distributions made
or declared with respect to the Restricted Shares ("Retained Distributions") and
such Retained Distributions shall not bear interest or be segregated in a
separate account. In the case of Restricted Shares issued at the end of the
Restriction Period, the participant will be entitled to receive, to the extent
specified by the Committee only, cash or property

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<PAGE> 85

corresponding to all dividends and other distributions (or the economic
equivalent thereof) that would have been paid, made or declared on such
Restricted Shares had such shares been issued at the beginning of the
Restriction Period (collectively, "Dividend Equivalents"), and such Dividend
Equivalents will be paid as specified by the Committee in the applicable Award
agreement. A breach of any restrictions, terms or conditions established by the
Committee with respect to any award of Restricted Shares will cause a forfeiture
of such Restricted Shares and any Retained Distributions (including any unpaid
Dividend Equivalents) with respect thereto. The 1997 Plan also provides that the
Committee may authorize awards of cash to a holder of Restricted Shares, payable
at any time after the Restricted Shares become vested.

Upon expiration of the applicable Restriction Period and the satisfaction
of any other applicable conditions, all or part of the Restricted Shares and any
Retained Distributions thereon (including any unpaid Dividend Equivalents) will
become vested and all or part of any cash amount awarded will become payable.
Any Restricted Shares and Retained Distributions thereon (including any unpaid
Dividend Equivalents) which do not so vest will be forfeited.

Stock Units. The 1997 Plan also authorizes the Committee to grant to
eligible participants, either alone or in addition to Options, SARs and
Restricted Shares, awards of TCI Music Series A Common Stock and other awards
that are valued in whole or in part by reference to, or are otherwise based on,
the value of the TCI Music Series A Common Stock ("Stock Units"). The Committee
will determine all terms and conditions of such Awards, including any
restrictions (including restrictions on transfer), deferral periods, or
performance requirements. The provisions of any Award of Stock Units need not be
the same with respect to each recipient and are subject to such rules as the
Committee may establish at the time of grant.

Performance Awards. Performance Awards consist of grants made to an
eligible person subject to the attainment of one or more performance goals. A
Performance Award will be paid, vested or otherwise deliverable solely upon the
attainment of one or more pre-established, objective performance goals
established by the Committee prior to the earlier of (i) 90 days after the
commencement of the period of service to which the performance goals relate, and
(ii) the passage of 25% of the period of service, and in any event while the
outcome is substantially uncertain. A performance goal may be based upon one or
more business criteria that apply to the eligible person, one or more business
units of TCI Music or TCI Music as a whole, and may include any of the
following: revenue, net income, cash flow (as defined for such purpose by the
Committee), stock price, market share, earnings per share, return on equity,
return on assets or decrease in costs. Subject to the foregoing, the terms,
conditions and limitations applicable to any Performance Award will be
determined by the Compensation Committee.

Effect of Termination of Employment. Under the terms of the 1997 Plan, if
the employment of the holder of an Award (which for this purpose includes the
engagement of the holder of an Award as a nonemployee consultant or advisor)
terminates by reason of death or total disability, then, unless the agreement
relating to such Award provides otherwise, (a) all outstanding Options and SARs
granted in such Award will become immediately exercisable in full in respect of
the aggregate number of shares covered thereby, (b) the Restriction Period for
all Restricted Shares granted in such Award will be deemed to have expired and
all such Restricted Shares, any related Retained Distributions and any unpaid
Dividend Equivalents will become vested and any cash amounts payable pursuant to
the related agreement will be adjusted in such manner as may be provided in such
agreement, and (c) all Stock Units granted in such Award will become vested in
full.

Under the terms of the 1997 Plan, if the employment of the holder of an
Award is terminated during the Restriction Period with respect to any Restricted
Shares, or prior to the complete exercise of any Option or SAR or the vesting or
complete exercise of any Stock Units, granted in such Award, then such Options,
SARs and Stock Units will thereafter be exercisable, and the holder's rights to
any such unvested Restricted Shares, Retained Distributions, unpaid Dividend
Equivalents and cash amounts and any such unvested Stock Units will thereafter
vest, only to the extent provided by the Committee in the agreement relating to
such Award, except that (a) if the holder's employment terminates by reason of
death or total disability then any Option or SAR granted in the Award will
remain exercisable for a period of at least one year after such termination (but
not later than the scheduled expiration of such Option or SAR), (b) no Option or
SAR may be exercised after

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<PAGE> 86

the scheduled expiration date thereof, and (c) if the holder's employment is
terminated for cause (as defined) then (i) such participant's rights to all
Restricted Shares, Retained Distributions, unpaid Dividend Equivalents and any
cash amounts covered by such Award will be forfeited immediately, (ii) all
Options and SARs and all unvested or unexercised Stock Units granted in such
Award will immediately terminate and (iii) such participant's interest in all
unvested Performance Awards shall be forfeited immediately.

Additional Provisions. Unless otherwise required by the Committee in the
agreement relating to an Award, each Award will vest and become exercisable in
full upon the occurrence of any of the following change in control transactions:
(a) the TCI Music Board (or stockholders, if TCI Music Board approval is not
required by law) approves any of the following transactions (each an "Approved
Transaction"): (i) a merger, consolidation or binding share exchange to which
TCI Music is a party (x) pursuant to which shares of TCI Music Series A Common
Stock would be converted into or exchanged for cash, securities or other
property (other than a transaction in which the common stockholders of TCI Music
prior to such transaction have the same proportionate ownership of the common
stock of, and voting power with respect to, the surviving corporation
immediately after such transaction) or (y) as a result of which the persons who
are common stockholders of TCI Music prior to such transaction would have less
than a majority of the combined voting power of the outstanding capital stock of
TCI Music immediately following such transaction; (ii) the sale of substantially
all of the assets of TCI Music; or (iii) the liquidation or dissolution of TCI
Music; (b) any person or other entity (other than TCI Music, any subsidiary, any
employee benefit plan sponsored by TCI Music or any subsidiary or any
Controlling Person (as defined)) purchases any common stock of TCI Music
pursuant to a tender or exchange offer, without the prior consent of the TCI
Music Board, or any person or other entity (other than TCI Music, any
subsidiary, any employee benefit plan sponsored by TCI Music or any subsidiary
or any Controlling Person) becomes the beneficial owner of securities of TCI
Music representing 20% or more of the combined voting power of TCI Music's
outstanding securities, other than in a transaction (or series of related
transactions) approved by the TCI Music Board; or (c) during any two-year
period, individuals who at the beginning of such period constitute the entire
TCI Music Board cease to constitute a majority of the TCI Music Board, unless
the election, or nomination for election, of each new director is approved by at
least two-thirds of the directors then still in office who were directors at the
beginning of the period. "Controlling Person" is defined in the 1997 Plan to
mean each of (1) the Chairman of the Board, the President and each of the
directors of TCI Music as of the effective date of the 1997 Plan, and (2) the
respective family members, estates and heirs of each of the persons referred to
in clause (1) and any trust or other investment vehicle for the primary benefit
of any of such persons or their respective family members or heirs. Options,
SARs, or, if applicable, Stock Units not theretofore exercised will terminate
upon consummation of an Approved Transaction. The Committee will have the
discretion, unless otherwise provided in the agreement relating to a particular
Award, to determine that any or all outstanding Awards of any or all types
granted pursuant to the 1997 Plan will not vest or become exercisable on an
accelerated basis in connection with an Approved Transaction or will not
terminate if not exercised prior to consummation of the Approved Transaction, if
action that, in the opinion of the Committee, is equitable and appropriate is
taken by the TCI Music Board or by the surviving or acquiring corporation, as
the case may be, to assume such Award or substitute a new award therefor that
is, as nearly as may be practicable, equivalent to the old Award.

The Committee may require in the agreement relating to an Award that if the
holder acquires any shares of TCI Music Series A Common Stock through the
exercise of Options or SARs or through the vesting of Restricted Shares or Stock
Units granted in the Award, then prior to selling or otherwise transferring any
such shares to a third party, such holder must offer to sell such shares to TCI
Music, at their fair market value, pursuant to a right of first refusal.

No awards may be granted under the 1997 Plan on or after the tenth
anniversary of its effective date. The TCI Music Board or the Committee may at
any time terminate the 1997 Plan and may from time to time suspend or amend the
1997 Plan. Without stockholder approval, no amendment to the 1997 Plan shall
increase the number of shares of TCI Music Series A Common Stock subject to the
1997 Plan, change the class of persons eligible to receive Awards under the 1997
Plan, or otherwise materially increase the benefits accruing to participants
under the 1997 Plan. Termination or amendment of the 1997 Plan may not adversely
affect the rights of any holder of an Award without his or her consent. Subject
to the specific terms of the 1997

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<PAGE> 87

Plan, the Committee may accelerate any Award or waive any conditions or
restrictions pertaining to such Award at any time.

OTHER ARRANGEMENTS

The TCI Music Board of Directors has granted, effective as of the Effective
Time, (i) to each of Messrs. Hindery, Kern and Fisher, options to purchase
833,334 shares of TCI Music Series A Common Stock at a price of $6.25 per share,
(ii) to Messrs. Sparkman and Troxel, options to purchase 100,000 shares of TCI
Music Series A Common Stock at a price of $6.25 per share in exchange for
options granted by DMX that would carry over in the Merger and (iii) to Mr.
Bennett, options to purchase 100,000 shares of TCI Music Series A Common Stock
at a price of $6.25 per share. All such persons are directors of TCI Music and
Messrs. Hindery and Fisher are directors of DMX and Mr. Troxel is Chief
Operating Officer of DMX. Such options will vest in 20% cumulative increments,
with the first increment vesting at the Effective Time, and each additional
increment vesting on the anniversary of the Effective Time and will be
exercisable for up to ten years following the Effective Time. No Rights will be
issued in connection with any TCI Music Series A Common Stock issued upon
exercise of any such option.

SECURITY OWNERSHIP OF TCI MUSIC AND DMX

SECURITY OWNERSHIP OF TCI AND TCI MUSIC

TCI currently owns all of the outstanding shares of TCI Music Common Stock.
The following table sets forth: (i) each person known to TCI Music who is
expected to beneficially own more than 5% of either class of the outstanding
shares of TCI Music Common Stock following the Merger; and (ii) the ownership of
Series A TCI Group Common Stock, Series B TCI Group Common Stock, Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock,
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock, par value
$.01 per share, of TCI ("Class B Preferred Stock"), Series C Preferred Stock,
Redeemable Convertible TCI Group Preferred Stock, Series G, par value $.01 per
share, of TCI ("Series G Preferred Stock") and Redeemable Convertible Liberty
Media Group Preferred Stock, Series H, par value $.01 per share, of TCI ("Series
H Preferred Stock"), held as of January 31, 1997 by (A) each person who is a
director or is expected to be one of the five most highly compensated executive
officers of TCI Music, including the chief executive officer, (B) all of the
directors and executive officers of TCI Music, as a group; and the pro forma
number of shares and ownership percentage of TCI Music Common Stock to be owned
by such persons and groups of persons immediately following the Effective Time,
assuming such persons do not acquire, or dispose of, any shares of DMX Common
Stock during the period commencing January 31, 1997 and ending on the Effective
Time. Effective January 13, 1997, TCI paid a dividend of one share of Series A
Liberty Media Group Common Stock for each two shares of Series A Liberty Media
Group Common Stock held and one share of Series A Liberty Media Group Common
Stock for each two shares of Series B Liberty Media Group Common Stock held (the
"Liberty Stock Distribution"). The numbers of shares (and corresponding
percentages of series) of the Series A Liberty Media Group Common Stock in the
following table and in the footnotes to the table have been adjusted for the
Liberty Stock Distribution. Shares issuable upon exercise or conversion of
convertible securities are deemed to be outstanding for the purpose of computing
the percentage ownership of persons beneficially owning such convertible
securities, but have not been deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Voting power in the
table is computed with respect to a general election of directors and,
therefore, the Class B Preferred Stock is included in the calculation
notwithstanding the fact that the Class B Preferred Stock does not generally
vote with respect to matters submitted to a vote of stockholders. No shares of
Series C Preferred Stock, Series G Preferred Stock or Series H Preferred Stock
are owned by any person whose name is set forth in the table. So far as is known
to TCI or TCI Music, the persons indicated below have sole voting and investment
power with respect to the shares indicated as owned by them except as otherwise
stated in the notes to the table.

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<PAGE> 88

<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT VOTING
NAME AND ADDRESS OF OF BENEFICIAL OF CLASS POWER
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP (1)(2) (1)(2)
- -------------- ------------------- ----------------- -------- ------
<S> <C> <C> <C> <C>
TCI Music Series A Tele-Communications, Inc. 6,812,393 45.7 98.7
TCI Music Series B 62,500,000 100
TCI Music Series A Shaw Communications, Inc. 1,900,000 12.8 *
TCI Music Series B -- --
TCI Music Series A James R. Shaw, Sr. 2,079,600 14.0 *
TCI Music Series B -- --
TCI Music Series A Leo J. Hindery, Jr. 833,334(3) 5.3 *
TCI Music Series B -- --
TCI Series A --(4) -- --
TCI Series B -- --
Liberty Media Series A --(4) --
Liberty Media Series B -- --
TCI Class B Preferred -- --
TCI Music Series A Robert R. Bennett 100,000(5) * *
TCI Music Series B -- --
TCI Series A 74,156(6) * *
TCI Series B -- --
Liberty Media Series A 777,707 *
Liberty Media Series B -- --
TCI Class B Preferred 482 *
TCI Music Series A Donne F. Fisher 833,334(7) 5.3 *
TCI Music Series B (individually and as Co-Personal -- --
Representative to the Estate of
Bob Magness)
TCI Series A 4,110,681(8)(9) * 20.8
TCI Series B 31,034,936(8) 36.7
Liberty Media Series A 5,423,725(8)(9) 2.4
Liberty Media Series B 7,758,734(8) 36.6
TCI Class B Preferred 129,299(8) 8.0
TCI Music Series A Peter M. Kern 833,334(10) 5.3 *
TCI Music Series B -- --
TCI Series A -- -- --
TCI Series B -- --
Liberty Media Series A -- --
Liberty Media Series B -- --
TCI Class B Preferred -- --
TCI Music Series A David B. Koff -- -- --
TCI Music Series B -- --
TCI Series A 25,000(11) * *
TCI Series B -- --
Liberty Media Series A 159,562(11) *
Liberty Media Series B -- --
TCI Class B. Preferred -- --
TCI Music Series A J.C. Sparkman 137,500(12) * *
TCI Music Series B -- --
</TABLE>

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<PAGE> 89

<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT VOTING
NAME AND ADDRESS OF OF BENEFICIAL OF CLASS POWER
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP (1)(2) (1)(2)
- -------------- ------------------- ----------------- -------- ------
<S> <C> <C> <C> <C>
TCI Series A 279,472(13) * *
TCI Series B -- --
Liberty Media Series A 112,001(13) *
Liberty Media Series B -- --
TCI Class B Preferred -- --
TCI Music Series A Lon A. Troxel 100,000(12) * *
TCI Music Series B -- --
TCI Series A -- -- --
TCI Series B -- --
Liberty Media Series A -- --
Liberty Media Series B -- --
TCI Class B Preferred -- --
TCI Music Series A Stephen M. Brett -- -- --
TCI Music Series B -- --
TCI Series A 749,745(14) * *
TCI Series B -- --
Liberty Media Series A 281,120(14) *
Liberty Media Series B -- --
TCI Class B Preferred -- --
All Directors and Executive
Officers as a Group
(8 persons)
TCI Music Series A 2,837,502(15) 16.0 *
TCI Music Series B -- --
TCI Series A 5,239,054(15) * 21.8
TCI Series B 31,034,936 36.7
Liberty Media Series A 6,754,115(15) 2.9
Liberty Media Series B 7,758,734 36.6
TCI Class B Preferred 129,781 8.0
</TABLE>

- ---------------

* Less than 1%

(1) Based upon 14,896,648 shares of Series A TCI Music Common Stock and
62,500,000 shares of Series B TCI Music Common Stock assumed to be
outstanding if the Merger was effective as of January 31, 1997.
(2) Based on 597,497,573 shares of Series A TCI Group Common Stock (after
elimination of shares held by subsidiaries of TCI), 84,647,065 shares of
Series B TCI Group Common Stock, 228,558,926 shares of Series A Liberty
Media Group Common Stock, 21,187,969 shares of Series B Liberty Media Group
Common Stock, 1,620,026 shares of Class B Preferred Stock, 70,575 shares of
Series C Preferred Stock, 6,693,177 shares of Series G Preferred Stock and
6,693,177 shares of Series H Preferred Stock outstanding at January 31,
1997.

(3) Assumes the exercise in full of stock options to be granted at the
Effective Time to acquire 833,334 shares of TCI Music Series A Common
Stock, 166,667 of which will be exercisable at the Effective Time.

(4) Does not include stock options granted in tandem with stock appreciation
rights in February 1997 to acquire 1,000,000 shares of Series A TCI Group
Common Stock and 250,000 shares of Series A Liberty Media Group Common
Stock. None of these stock options are exercisable.

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<PAGE> 90

(5) Assumes the exercise in full of stock options to be granted at the
Effective Time to acquire 100,000 shares of TCI Music Series A Common
Stock, 20,000 of which will be exercisable at the Effective Time.

(6) Assumes the exercise in full of stock options granted in tandem with SARs
in November 1994 to acquire 50,000 shares of Series A TCI Group Common
Stock and 18,750 shares of Series A Liberty Media Group Common Stock.
Options to acquire 20,000 shares of Series A TCI Group Common Stock and
7,500 shares of Series A Liberty Media Group Common Stock were exercisable
as of January 31, 1997. Additionally assumes the exercise in full of stock
options granted in tandem with SARs in December 1995 to acquire 750,000
shares of Series A Liberty Media Group Common Stock. Options to acquire
150,000 shares of Series A Liberty Media Group Common Stock were
exercisable as of January 31, 1997.

(7) Assumes the exercise in full of stock options to be granted at the
Effective Time to acquire 833,334 shares of TCI Music Series A Common
Stock, 166,667 of which will be exercisable at the Effective Time.

(8) Includes 1,524,315 shares of Series A TCI Group Common Stock, 30,785,864
shares of Series B TCI Group Common Stock, 4,419,304 shares of Series A
Liberty Media Group Common Stock, 7,696,466 shares of Series B Liberty
Media Group Common Stock and 125,000 shares of Class B Preferred Stock held
by the Estate of Bob Magness. Mr. Fisher is deemed to have beneficial
ownership over such shares as a Co-Personal Representative to the Estate of
Bob Magness. Included in such beneficial ownership is the assumed exercise
in full of stock options granted in tandem with stock appreciation rights
in November of 1992 to Bob Magness to acquire 1,000,000 shares of Series A
TCI Group Common Stock and 375,000 shares of Series A Liberty Media Group
Common Stock. Additionally assumes the exercise in full of stock options
granted in tandem with stock appreciation rights in December of 1995 to Bob
Magness to acquire 1,000,000 shares of Series A TCI Group Common Stock and
375,000 shares of Series A Liberty Media Group Common Stock. All such
options are currently exercisable.

(9) Assumes the exercise in full of stock options granted in tandem with stock
appreciation rights in November of 1994 to acquire 200,000 shares of Series
A TCI Group Common Stock and 75,000 shares of Series A Liberty Media Group
Common Stock. Options to acquire 80,000 shares of Series A TCI Group Common
Stock and 30,000 shares of Series A Liberty Media Group Common Stock were
exercisable as of January 31, 1997. Additionally assumes the exercise in
full of stock options granted in January of 1996 to acquire 50,000 shares
of Series A TCI Group Common Stock and 18,750 shares of Series A Liberty
Media Group Common Stock. Options to acquire 10,000 shares of Series A TCI
Group Common Stock and 3,750 shares of Series A Liberty Media Group Common
Stock were exercisable as of January 31, 1997.

(10) Assumes exercise in full of stock options to be granted at the Effective
Time to acquire 833,334 shares of TCI Music Series A Common Stock, 166,667
of which will be exercisable at the Effective Time.

(11) Assumes exercise in full of options granted in tandem with stock
appreciation rights in November of 1994 to acquire 25,000 shares of Series
A TCI Group Common Stock and 9,375 shares of Series A Liberty Media Group
Common Stock. Options to acquire 10,000 shares of Series A TCI Group Common
Stock and 3,750 shares of Series A Liberty Media Group Common Stock were
exercisable as of January 31, 1997. Additionally assumes the exercise in
full of stock options granted in tandem with stock appreciation rights in
December of 1995 to acquire 150,000 shares of Series A Liberty Media Group
Common Stock. Options to acquire 30,000 shares of Series A Liberty Media
Group Common Stock were exercisable as of January 31, 1997. Excludes 1,312
shares of Series A Liberty Media Group Common Stock and 200 shares of TCI
Class B Preferred Stock beneficially owned by Judith R. Koff, Mr. Koff's
wife, of which Mr. Koff disclaims beneficial ownership.

(12) Assumes the exercise in full of options to acquire 100,000 shares of TCI
Music Series A Common Stock that will be granted at the Effective Time in
exchange for the cancellation of options to acquire 12,500 shares of TCI
Music Series A Common Stock that would otherwise carry over in the Merger.

(13) Assumes the exercise in full of options granted in tandem with stock
appreciation rights to acquire 100,000 shares of Series A TCI Group Common
Stock and 37,500 shares of Series A Liberty Media Group Common Stock. All
such options are currently exercisable. Also assumes the exercise in full
of options granted in December 1996, pursuant to TCI's Director Stock
Option Plan, to acquire 50,000

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<PAGE> 91

shares of Series A TCI Group Common Stock and 18,750 shares of Series A
Liberty Media Group Common Stock. None of these options are exercisable
until December 13, 1997.

(14) Assumes the exercise in full of stock options granted in tandem with SARs
in November 1992 to acquire 100,000 shares of Series A TCI Group Common
Stock and 37,500 shares of Series A Liberty Media Group Common Stock.
Options to acquire 80,000 shares of Series A TCI Group Common Stock and
30,000 shares of Series A Liberty Media Group Common Stock were exercisable
as of January 31, 1997. Additionally assumes the exercise in full of stock
options granted in tandem with SARs in November 1993 to acquire 100,000
shares of Series A TCI Group Common Stock and 37,500 shares of Series A
Liberty Media Group Common Stock. Options to acquire 75,000 shares of
Series A TCI Group Common Stock and 28,125 shares of Series A Liberty Media
Group Common Stock were exercisable as of January 31, 1997. Also assumes
the exercise in full of stock options granted in tandem with SARs in
November 1994 to acquire 200,000 shares of Series A TCI Group Common Stock
and 75,000 shares of Series A Liberty Media Group Common Stock. Options to
acquire 80,000 shares of Series A TCI Group Common Stock and 30,000 shares
of Series A Liberty Media Group Common Stock were exercisable as of January
31, 1997. Also assumes the exercise in full of stock options granted in
tandem with SARs in December 1995 to acquire 300,000 shares of Series A TCI
Group Common Stock and 112,500 shares of Series A Liberty Media Group
Common Stock. Options to acquire 60,000 shares of Series A TCI Group Common
Stock and 22,500 shares of Series A Liberty Media Group Common Stock were
exercisable as of January 31, 1997. Additionally assumes the vesting in
full of 40,000 restricted shares of Series A TCI Group Common Stock and
15,000 restricted shares of Series A Liberty Media Group Common Stock. None
of such stock was vested as of January 31, 1997.

(15) Assumes the exercise in full of stock options held by such persons to
acquire 2,800,002 shares of TCI Music Series A Common Stock (560,001 of
which will be exercisable at the Effective Time), and 3,175,000 shares of
Series A TCI Group Common Stock and 2,090,625 shares of Series A Liberty
Media Group Common Stock (of which 2,515,000 and 1,123,125, respectively,
were exercisable as of January 31, 1997).

SECURITY OWNERSHIP OF DMX

The following table sets forth as of May 26, 1997, the beneficial ownership
of DMX Common Stock by (i) each person known to DMX to own more than 5% of DMX
Common Stock, (ii) each director and each of the five most highly compensated
executive officers of DMX, including the chief executive officer, (iii) all
executive officers and directors of DMX as a group and (iv) the pro forma number
and ownership percentage of shares of TCI Music Series A Common Stock that will
be owned by such persons immediately after the Effective Time, assuming such
persons do not acquire, or dispose of, any shares of DMX Common Stock during the
period commencing May 26, 1997 and ending on the Effective Time. Voting power in
the table is computed with respect to the vote required to approve the Merger.
So far as is known to DMX, the persons

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<PAGE> 92

indicated below have sole voting and investment power with respect to the shares
indicated as owned by them, except as otherwise stated in the notes to the
table.

<TABLE>
<CAPTION>
POST-MERGER TCI MUSIC
DMX COMMON STOCK SERIES A COMMON STOCK
-------------------------- ------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2) OWNERSHIP CLASS(19)
------------------------------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Tele-Communications, Inc........................ 27,249,575(3) 45.7 6,812,393 45.7
Shaw Communications Inc......................... 7,600,000(4) 12.8 1,900,000 12.8
Jerold H. Rubinstein, Chairman of the Board and
Chief Executive Officer....................... 3,309,161(5) 5.4 384,790(14) 2.6
Kent Burkhart, Director......................... 200,000(6) * 12,500(15) *
Donne F. Fisher, Director....................... -- -- 833,334(16) 5.3
Leo J. Hindery, Jr., Director................... -- -- 833,334(16) 5.3
V. Bhaskar Menon, Director...................... 200,000(7) * 12,500(15) *
James R. Shaw, Sr., Director.................... 8,468,400(8) 14.2 2,079,600 14.0
J.C. Sparkman, Director......................... 350,000(9) * 137,500(17) *
Otis Smith, Executive Vice President............ 100,000(10) * -- --
Douglas G. Talley, Executive Vice President..... 183,333(11) * -- --
Lon Troxel, Chief Operating Officer and
Executive Vice President...................... 150,000(12) * 100,000(17) *
Directors and Executive Officers (a group of 11
persons)...................................... 12,980,894(13) 20.6 4,393,558(18) 26.0
</TABLE>

- ---------------

* Less than 1%
(1) Each named person has sole voting and investment power with respect to the
shares listed, except as noted below and provided by community property
laws, where applicable.

(2) Shares which the person (or group) has the right to acquire within 60 days
after May 26, 1997 or prior to the consummation of the Merger, are deemed
to be outstanding in calculating the percentage ownership of the person (or
group) but are not deemed to be outstanding as to any other person (or
group). As of May 26, 1997, all outstanding options were exercisable at
prices higher than the average sales prices reported by NASDAQ on such
date.

(3) Shares held by Tele-Communications, Inc. and its subsidiaries and
affiliates were based upon a Schedule 13D, Amendment No. 3, filed on June
6, 1996. The business address of Tele-Communications, Inc. is 5619 DTC
Parkway, Englewood, Colorado 80111.
(4) Based upon a Schedule 13D, filed on March 15, 1995, and a Form 4 filed on
January 9, 1996. Does not include 276,080 shares held by James R. Shaw
Securities Limited, 110,580 shares held by Brasha Holdings Ltd., 110,580
shares held by Jay-Shaw Holdings Ltd., 110,580 shares held by Julmar
Holdings Ltd., and 110,580 shares held by Shawana Estates Ltd., which
entities are affiliates of Shaw Communications Inc. Shaw Communications
Inc. is a public company whose non-voting securities are listed on the
Toronto Stock Exchange and the Alberta Stock Exchange. Mr. Shaw, Sr. and
members of his family and members of Leslie E. Shaw's (Mr. Shaw, Sr.'s
brother) family hold directly and indirectly, a majority of the voting
shares of Shaw Communications Inc. and such shares are governed by the
terms of a voting trust. Mr. Shaw, Sr. and members of his family do not,
directly or indirectly, hold a majority of the publicly traded non-voting
shares. The business address of Shaw Communications Inc. is 630-3rd Avenue,
Suite 900, Calgary, Alberta T2P4L4 Canada.

(5) Includes 9,000 shares owned of record by Mr. Rubinstein's wife and minor
child, 1,836,666 shares which Mr. Rubinstein has the right to acquire
within 60 days of May 26, 1997, by the exercise of vested stock options and
333,334 shares which Mr. Rubinstein will have the right to acquire due to
acceleration of options prior to the Effective Time. See "THE MERGER
AGREEMENT -- Certain Personnel Matters." Mr. Rubinstein's business address
is 11400 West Olympic Boulevard, Suite 1100, Los Angeles, California
90064-1507.

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<PAGE> 93

(6) Represents 200,000 shares which Mr. Burkhart has the right to acquire
within 60 days of May 26, 1997, by the exercise of vested stock options.

(7) Represents 200,000 shares which Mr. Menon has the right to acquire within
60 days of May 26, 1997, by the exercise of vested stock options.

(8) Includes the following shares, to which Mr. Shaw, Sr. disclaims beneficial
ownership: 7,600,000 shares held by Shaw Communications Inc., 276,080
shares held by James R. Shaw Securities Limited, 110,580 shares held by
Brasha Holdings Ltd., 110,580 shares held by Julmar Holdings Ltd., 110,580
shares held by Shawana Estates Ltd., and 110,580 shares held by Jay-Shaw
Holdings Ltd. Mr. Shaw, Sr. holds a majority of the shares of Jay-Shaw
Holdings Ltd., Brasha Holdings Ltd. and Shawana Estates Ltd. The remaining
shares of each such entities, other than certain preferred shares held by
Julmar Holdings Ltd., a corporation wholly owned by Mr. Shaw, Sr., are held
by children of Mr. Shaw, Sr. Each of the children has reached the age of
majority. Mr. Shaw, Sr. holds 48% of the voting shares of James R. Shaw
Securities Limited. The balance of voting shares are held by and for the
benefit of Mr. Shaw, Sr.'s family members. Includes 150,000 shares which
Mr. Shaw, Sr. has the right to acquire within 60 days of May 26, 1997, by
the exercise of vested stock options. Mr. Shaw, Sr.'s business address
630-3rd Avenue, Suite 900, Calgary, Alberta T2P4L4 Canada.

(9) Includes 200,000 shares which Mr. Sparkman has the right to acquire within
60 days of May 26, 1997, by the exercise of vested stock options.

(10) Includes 83,333 shares which Mr. Smith has the right to acquire within 60
days of May 26, 1997, by the exercise of vested stock options and 16,667
shares which Mr. Smith will have the right to acquire due to acceleration
of options prior to the Effective Time. See "THE MERGER
AGREEMENT -- Certain Personnel Matters."

(11) Includes 158,333 shares which Mr. Talley has the right to acquire within 60
days of May 26, 1997 by the exercise of vested stock options and 25,000
shares which Mr. Talley will have the right to acquire due to acceleration
of options prior to the Effective Time. See "THE MERGER
AGREEMENT -- Certain Personnel Matters."

(12) Includes 141,666 shares which Mr. Troxel has the right to acquire within 60
days of May 26, 1997, by the exercise of vested stock options and 8,334
shares which Mr. Troxel will have the right to acquire due to acceleration
of options prior to the Effective Time. See "THE MERGER
AGREEMENT -- Certain Personnel Matters."

(13) Includes 2,983,333 shares which members of the group have the right to
acquire within 60 days of May 26, 1997, by the exercise of vested stock
options and 390,000 shares which members of the group will have the right
to acquire due to acceleration of options prior to the Effective Time. See
"THE MERGER AGREEMENT -- Certain Personnel Matters."

(14) Includes 100,000 shares which Mr. Rubinstein will have the right to acquire
within 60 days after the Effective Time by the exercise of vested stock
options that will carry over in the Merger.

(15) Includes 12,500 shares that such person has the right to acquire within 60
days after the Effective Time by the exercise of vested options that will
carry over in the Merger.

(16) Assumes the exercise in full of stock options to be granted at the
Effective Time to acquire 833,334 shares of TCI Music Series A Common
Stock, 166,667 of which will be exercisable at the Effective Time.

(17) Assumes the exercise in full of stock options to be granted at the
Effective Time to acquire 100,000 shares of TCI Music Series A Common
Stock, 20,000 of which will be exercisable at the Effective Time, in
exchange for cancellation of options to acquire 12,500 shares that would
otherwise carry over in the Merger.

(18) Assumes the exercise in full of options to acquire 1,991,668 shares of TCI
Music Series A Common Stock that such persons have the right to acquire
within 60 days after the Effective Time by the exercise of stock options
that will carry over in the Merger or will be granted at the Effective
Time, 498,334 shares of which will be exercisable at the Effective Time.

(19) Shares which the person (or group) will have the right to acquire within 60
days after the Effective Time or prior to the consummation of the Merger
and shares underlying options to be granted at the Effective Time are
deemed to be outstanding in calculating the percentage ownership of the
person (or group) but are not deemed to be outstanding as to any other
person (or group).

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<PAGE> 94

CERTAIN TRANSACTIONS

TCI beneficially owns approximately 45.7% of the outstanding shares of DMX
Common Stock which includes 2,000,000 shares acquired at $2.50 per share in a
private placement on August 29, 1995 and 4,500,000 shares acquired at $2.00 per
share in a private placement on May 17, 1996. As a result of the merger in 1996
of TCI-E into DMX upon the terms set forth in the Agreement and Plan of Merger
among TCI-E, UAPI and DMX, UAPI, an affiliate of TCI, was issued 10,841,624
shares of Common Stock. See "THE MERGER -- Background of the Merger."

DMX under an agreement with WTCI has a capital lease to lease equipment for
its studio and uplinking facility in Littleton, Colorado. The obligation under
the capital lease at September 30, 1996 was $1,492,550 with terms which extend
to 2000 at an interest rate of 9.5%. DMX is also obligated to WTCI under various
operating leases for uplinking and satellite services. The total expense under
those leases for the fiscal year ended September 30, 1996 and 1995 were
$4,831,000 and $4,489,000, respectively.

Total subscriber fee revenue from TCI and its affiliates represented
approximately 56% and 61% of total subscriber fee revenue for the fiscal years
ended September 30, 1996 and 1995, respectively, with accounts receivable due
from TCI and its affiliates at September 30, 1996 and 1995 totaling
approximately $1,829,000 and $1,876,000, respectively.

On December 10, 1996 DMX entered into a letter agreement with Sky
Entertainment Services in Latin America ("Sky-LA") pursuant to which Sky-LA was
granted the right to carry up to 40 DMX music formats on the Mexican, Brazilian,
North South American and South American platforms of Sky-LA. Sky Entertainment
Services is the brand name for the direct-to-home service offered by the
strategic alliance formed by Organzacoes Globo, Brazil's leading entertainment
group; Mexico's Grupo Televisa S.A.; The News Corporation, Limited; and
Tele-Communications International, Inc. (the "Sky Entertainment Alliance").
Tele-Communications International, Inc. is a subsidiary of TCI.

Shaw Communications Inc. ("Shaw"), beneficially owns approximately 12.75%
of the outstanding shares of DMX Common Stock, which includes shares acquired
through various stock purchase agreements, including 1,100,000 shares acquired
at $2.13 per share in a private placement on March 9, 1995, and 2,000,000 shares
acquired at $2.50 per share in a private placement on August 25, 1995. James R.
Shaw, Sr., President and Chief Executive Officer of Shaw Communications Inc., is
a director of DMX. Mr. Sparkman, a director of DMX, is a director of Shaw
Communications Inc. In March 1992, Shaw, the second largest cable operator in
Canada, entered into a licensing and royalty agreement with DMX which provides
DMX with a monthly, per subscriber programming royalty for both residential and
commercial distribution. In addition, Shaw formed a Canadian company, DMX-Canada
Ltd. which is a partner in a partnership with 450714 B.C. Ltd., a subsidiary of
DMX.

During 1995, DMX and Shaw entered into a series of agreements to accomplish
a reorganization by which Shaw could take full advantage of the Canadian tax
losses incurred in Canada, during the market development period and based on
Shaw's commitment to fund such development costs. This was accomplished through
the transfer of each company's respective equity interests, and the formation of
a new Canadian partnership (also referred to herein as DMX-Canada). DMX
continues to hold an equity interest in the new partnership through its wholly
owned subsidiary, a British Columbia corporation, 450714 B.C. Ltd. There is no
impact from the reorganization on the operations of DMX-Canada, other than to
accomplish the tax structure as outlined above. After Shaw recoups its initial
funding, each company will share in the profits based on their respective equity
interests.

In April 1996 DMX entered into two capital leases with DMX Canada the
proceeds of which were used to purchase DMX Disc equipment leased to two DMX
customers, 9-West and Coach. The obligation under the capital lease at September
30, 1996 was $284,461 with terms which extend to May 2001 at an effective
interest rate of 27.21%. The total payments under those leases for the fiscal
year ended September 30, 1996 were $36,889.

In August 1994, the CRTC, which regulates the broadcast industry in Canada,
revoked the license previously granted to DMX-Canada for Canadian distribution
of DMX. DMX-Canada reapplied to the

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<PAGE> 95

CRTC during 1995 for a license to distribute DMX to Canadian residential cable
subscribers. The CRTC issued a favorable ruling in December 1995 and requires a
one to one ratio of Canadian content to non Canadian content. DMX-Canada and DMX
have negotiated an agreement to distribute DMX service to the Canadian
residential cable market. The service will include a total of 30 formats and
will be distributed through Shaw Cable Systems and their affiliates. DMX-Canada
will also license other Canadian third party distributors such as Alpha Star
Canada and Star Choice. The scheduled launch of the DMX service for residential
distribution is expected as early as April 1997.

The CRTC does not regulate programming delivered to commercial
establishments by direct broadcast satellite and DMX-Canada has been
distributing the DMX service to the commercial sector since 1994. DMX and
DMX-Canada have negotiated a new license and distribution agreement which grants
an exclusive license and right to distribute the DMX service to commercial
establishments in Canada. The term of the new agreement coincides with the
original agreement dated March 9, 1992 and terminates March 31, 2012. DMX
received total license fees of approximately $50,000 in the fiscal year ended
September 30, 1996 under the original agreement.

Stephen A. Wynn, Chairman of the Board, President and Chief Executive
Officer, Mirage Resorts, Incorporated, resigned as a director of DMX in May 1996
concurrently with his sale of 5,700,000 shares of Common Stock to TCI at $2.00
per share, which included 2,200,000 shares acquired by him at $2.13 per share in
a private placement on February 21, 1995 and 500,000 shares acquired at $2.00
per share in a private placement on March 15, 1996. In April 1995, DMX entered
into a five year commercial music service agreement with Mirage Resorts, Inc.
where DMX provides its DMX for Business music service for a monthly fee.

DMX has entered into definitive agreements with Jerold H. Rubinstein,
Chairman of the Board and Chief Executive Officer of DMX, which provide for Mr.
Rubinstein to either purchase a 90% interest in DMX-E in a transaction referred
to as the "Reorganization Plan," or if agreement cannot be reached with the
creditors of DMX-E, then Mr. Rubinstein will organize a new company ("NewCo")
that will distribute DMX service in Europe. In that event, DMX Inc. will receive
a 10 percent interest in NewCo and DMX-E will be placed in the hands of a
receiver. See "THE MERGER --Interests of Certain Persons in The Merger --
Disposition of European Companies." Because the European Companies are
insolvent, it is not practicable to place a dollar value on Mr. Rubinstein's
interest in the DMX-E transaction.

Certain transactions involving TCI and its respective officers, directors
or affiliates are described in the TCI Form 10-K, which is incorporated herein
by reference. See "AVAILABLE INFORMATION."

LEGAL MATTERS

The validity of the TCI Music Series A Common Stock to be issued in
connection with the Merger and the federal income tax consequences of the Merger
will be passed upon by Sherman & Howard L.L.C., 633 Seventeenth Street, Denver,
Colorado. Certain members of Sherman & Howard L.L.C. serve as Assistant
Secretaries of TCI.

EXPERTS

The consolidated balance sheets of DMX Inc. and subsidiaries as of
September 30, 1996 and 1995, and the related consolidated statements of
operations, stockholders' deficit, and cash flows for each of the years in the
three-year period ended September 30, 1996, and all related financial statement
schedules, which appear in the September 30, 1996 Annual Report on Form 10-K of
DMX Inc., have been incorporated by reference herein and in the Registration
Statement in reliance upon the reports, dated January 15, 1997, of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the September 30, 1996
statements contains an explanatory paragraph that states that the Company's
recurring losses from operations and net capital deficiency raise substantial
doubt about the entity's ability to

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<PAGE> 96

continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of that uncertainty.

The consolidated balance sheets of DMX -- Europe N.V. and subsidiary as of
September 30, 1996 and 1995, and the related consolidated statements of
operations, stockholders' deficit, and cash flows for each of the years in the
three-year period ended September 30, 1996, which appear in the September 30,
1996 Annual Report on Form 10-K of DMX Inc., have been incorporated by reference
herein and in the Registration Statement in reliance upon the reports, dated
January 9, 1997, of KPMG, chartered accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG covering the September 30, 1996 financial
statements contains an explanatory paragraph that states that the Company's
recurring losses from operations and net capital deficiency raise substantial
doubt about the entity's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.

The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1996, and all related
financial statement schedules, which appear in the December 31, 1996 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein and in the Registration Statement in reliance upon the reports,
dated March 24, 1997, of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.

The combined balance sheets of TCI Group as of December 31, 1996 and 1995,
and the related combined statements of operations, equity, and cash flows for
each of the years in the three-year period ended December 31, 1996, which appear
in the December 31, 1996 Annual Report on Form 10-K of Tele-Communications,
Inc., have been incorporated by reference herein and in the Registration
Statement in reliance upon the report, dated March 24, 1997, of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the combined financial
statements above refers to the effects of not consolidating TCI Group's interest
in Liberty Media Group for all periods that TCI Group has an interest in Liberty
Media Group.

The combined balance sheets of Liberty Media Group as of December 31, 1996
and 1995, and the related combined statements of operations, equity, and cash
flows for each of the years in the three-year period ended December 31, 1996,
which appear in the December 31, 1996 Annual Report on Form 10-K of Tele-
Communications, Inc., have been incorporated by reference herein and in the
Registration Statement in reliance upon the report, dated March 24, 1997, of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.

The consolidated balance sheets of Telewest Communications plc and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1996, which appear in the December 31, 1996 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein and in the Registration Statement in reliance upon the report,
dated March 11, 1997, of KPMG Audit Plc, chartered accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.

The consolidated balance sheets of Sprint Spectrum Holding Company, L.P.
and subsidiaries, development stage enterprises, as of December 31, 1996 and
1995 and the related consolidated statements of operations, changes in partners'
capital and cash flows for each of the two years in the period ended December
31, 1996, for the period from October 24, 1994 (date of inception) to December
31, 1994 and for the cumulative period from October 24, 1994 (date of inception)
to December 31, 1996, incorporated in this Proxy Statement/Prospectus by
reference from Tele-Communications, Inc. Annual Report on Form 10-K for the year
ended December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report (which expresses an unqualified opinion and
includes an explanatory paragraph referring to the developmental stage of Sprint
Spectrum Holding Company, L.P. and subsidiaries) which is incorpo-

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<PAGE> 97

rated herein and in the Registration Statement by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

The financial statements of American PCS, L.P., not separately presented in
this Proxy Statement/ Prospectus, have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon has been incorporated by reference
herein and in the Registration Statement. Such financial statements, to the
extent they have been included in the financial statements of Sprint Spectrum
Holding Company, L.P., have been so included in the Annual Report on Form 10-K
of Tele-Communications, Inc. in reliance on their report given on the authority
of said firm as experts in auditing and accounting.

The combined financial statements of VII Cable which appear in
Tele-Communications, Inc.'s Current Report on Form 8-K dated June 19, 1996, have
been incorporated by reference herein and in the Registration Statement in
reliance on the report dated February 14, 1996 of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

Representatives of KPMG Peat Marwick, DMX's and TCI's independent auditors,
are expected to be present at the Special Meeting and will have the opportunity
to make a statement if they desire to do so. Such representatives are also
expected to be available to respond to appropriate questions.

STOCKHOLDER PROPOSALS

For proposals of stockholders of DMX to be considered for inclusion in the
proxy statement of the 1998 Annual Meeting of Stockholders of DMX (if the Merger
is not consummated), such proposals must be received by the corporate secretary
no later than December 28, 1997.

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<PAGE> 98

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HISTORICAL FINANCIAL STATEMENTS
TCI Music, Inc.
Independent Auditors' Report........................... F-2
Balance Sheet, March 31, 1997.......................... F-3
Note to Balance Sheet.................................. F-4

PRO FORMA FINANCIAL STATEMENTS
TCI Music, Inc.
Condensed Pro Forma Combined Financial Statements
(unaudited)........................................... F-5
Condensed Pro Forma Combined Balance Sheet, March 31,
1997 (unaudited)...................................... F-6
Condensed Pro Forma Combined Statements of Operations:
Three months ended March 31, 1997 (unaudited)........ F-7
Year ended December 31, 1996 (unaudited)............. F-8
Notes to Condensed Pro Forma Combined Financial
Statements (unaudited)................................ F-9
Tele-Communications, Inc.
Condensed Pro Forma Combined Financial Statements
(unaudited)........................................... F-12
Condensed Pro Forma Combined Balance Sheet, March 31,
1997 (unaudited)...................................... F-13
Condensed Pro Forma Combined Statement of Operations:
Three months ended March 31, 1997 (unaudited)........ F-14
Year ended December 31, 1996 (unaudited)............. F-15
Notes to Condensed Pro Forma Combined Financial
Statements (unaudited)................................ F-16
</TABLE>

F-1
<PAGE> 99

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholder
TCI Music, Inc.:

We have audited the accompanying consolidated balance sheet of TCI Music, Inc.
(a wholly-owned subsidiary of TeleCommunications, Inc.) as of March 31, 1997.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit of a balance sheet includes examining, on a test basis, evidence
supporting the amounts and disclosures in that balance sheet. An audit of a
balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.

In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of TCI Music, Inc. as
of March 31, 1997, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado

May 30, 1997

F-2
<PAGE> 100

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

CONSOLIDATED BALANCE SHEET

MARCH 31, 1997

<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 1
===
STOCKHOLDER'S EQUITY
Preferred stock, $.01 par value.
Authorized 5,000,000 shares;
no shares issued....................................... $--
Series A common stock, $.01 par value.
Authorized 295,000,000 shares;
no shares issued....................................... --
Series B common stock, $.01 par value.
Authorized 200,000,000 shares;
issued and outstanding 1 share......................... --
Additional paid-in capital.................................. 1
---
$ 1
===
</TABLE>

See accompanying note to balance sheet.

F-3
<PAGE> 101

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

NOTE TO CONSOLIDATED BALANCE SHEET

MARCH 31, 1997

(1) ORGANIZATION

TCI Music, Inc. ("TCI Music") was incorporated on January 21, 1997, and on
January 24, 1997 one share of Series B TCI Music common stock was issued to
Tele-Communications, Inc. ("TCI") for a capital contribution of $1. Since
its formation, TCI Music has not conducted any significant activities other
than those incident to its formation, the Contribution Agreement (as
defined below) and the Merger Agreement (as defined below).

Pursuant to an Agreement and Plan of Merger, dated as of February 6, 1997,
as amended (the "Merger Agreement"), by and among TCI Music, TCI Merger
Sub, a wholly owned subsidiary of TCI Music ("Merger Sub") and DMX Inc.
("DMX"), Merger Sub will be merged with and into DMX, with DMX as the
surviving corporation (the "Merger"). As a result of the Merger,
stockholders of DMX will become stockholders of TCI Music. In connection
with the Merger, and pursuant to the terms and conditions of a Contribution
Agreement by and between TCI and TCI Music (the "Contribution Agreement"),
effective as of the closing, TCI and TCI Music will effect certain other
transactions that are collectively referred to herein as the
"Contribution."

In connection with the Merger, TCI and TCI Music will enter into a
Contribution Agreement. Pursuant to the Contribution Agreement, effective
as of the closing of the Merger: (i) TCI Music will issue to TCI (as
designee of certain of its indirect subsidiaries), 62,500,000 shares of TCI
Music Series B Common Stock and a promissory note in the amount of $40
million (the "TCI Music Note"), (ii) until December 31, 2006, certain
subsidiaries of TCI will transfer to TCI Music the right to receive all
revenue from sales of DMX music services to their residential and
commercial subscribers, net of an amount equal to the 10% of revenue from
such sales to residential subscribers and net of the revenue otherwise
payable to DMX (which will be a wholly-owned subsidiary of TCI Music
following the Merger) as license fees for DMX music services under
affiliation agreements currently in effect (the "Contributed Net DMX
Revenue"); (iii) TCI will contribute to TCI Music certain commercial
digital DMX tuners that are not in service as of the effective date of the
Merger (the "Contributed Tuners"), and (iv) TCI will grant to each
stockholder who becomes a stockholder of TCI Music pursuant to the Merger,
one right (a "Right") with respect to each whole share of Series A Common
Stock, $.01 par value per share, of TCI Music ("TCI Music Series A Common
Stock") acquired by such stockholder in the Merger pursuant to the terms of
a Rights Agreement among TCI, TCI Music and the rights agent (the "Rights
Agreement"). The foregoing transactions are collectively referred to herein
as the "Contribution." Upon consummation of the Merger, each outstanding
share of DMX Common Stock will be converted into the right to receive (i)
one-quarter of a share of TCI Music Series A Common Stock, (ii) one Right
with respect to each whole share of TCI Music Series A Common Stock and
(iii) cash in lieu of the issuance of fractional shares of TCI Music Series
A Common Stock and Rights. Each Right will entitle the holder to require
TCI to purchase from such holder one share of TCI Music Series A Common
Stock for $8.00 per share (the equivalent of $2.00 per share of DMX Common
Stock), subject to reduction by the aggregate amount per share of any
dividend and certain other distributions, if any, made by TCI Music to its
stockholders, and payable at the election of TCI, in cash, a number of
shares of Tele-Communications, Inc. Series A TCI Group Common Stock, par
value $1.00 per share, having an equivalent value or a combination thereof,
if during the one-year period beginning on the effective date of the
Merger, the price of TCI Music Series A Common Stock does not equal or
exceed $8.00 per share for a period of at least 20 consecutive trading
days.

F-4
<PAGE> 102

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS

MARCH 31, 1997

(UNAUDITED)

Pursuant to an Agreement and Plan of Merger, dated as of February 6, 1997,
as amended (the "Merger Agreement"), by and among Tele-Communications, Inc.
("TCI"), TCI Music, Inc., a wholly-owned subsidiary of TCI ("TCI Music"),
TCI Merger Sub, a wholly owned subsidiary of TCI Music ("Merger Sub") and
DMX Inc. ("DMX"), Merger Sub will be merged with and into DMX, with DMX as
the surviving corporation (the "Merger"). As a result of the Merger,
stockholders of DMX will become stockholders of TCI Music. In connection
with the Merger, and pursuant to the terms and conditions of a Contribution
Agreement by and between TCI and TCI Music (the "Contribution Agreement"),
effective as of the closing, TCI and TCI Music will effect certain other
transactions that are collectively referred to herein as the
"Contribution." See note 1.

Prior to the consummation of the Merger and Contribution, TCI will
beneficially own approximately 45.7% of the outstanding DMX Common Stock,
$0.01 par value ("DMX Common Stock"). Immediately following consummation of
the Merger and Contribution, TCI will beneficially own approximately 45.7%
of the outstanding shares of TCI Music Series A Common Stock $.01 par value
per share ("TCI Music Series A Common Stock"), 100% of the outstanding
shares of TCI Music Series B Common Stock, par value $.01 per share, (the
"TCI Music Series B Common Stock," and together with the TCI Music Series A
Common stock, the "TCI Music Common Stock") and 89.6% of the outstanding
shares of TCI Music Common Stock.

The following unaudited condensed pro forma combined balance sheet of TCI
Music, dated as of March 31, 1997, assumes that the Merger and Contribution
were effective as of such date.

The following unaudited condensed pro forma combined statement of
operations of TCI Music for the three months ended March 31, 1997 and the
year ended December 31, 1996 assumes that the Merger and Contribution were
effective as of January 1, 1996.

The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the Merger and
Contribution were effective as of January 1, 1996. These condensed pro
forma combined financial statements of TCI Music should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of DMX.

F-5
<PAGE> 103

TCI MUSIC, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

CONDENSED PRO FORMA COMBINED BALANCE SHEET

MARCH 31, 1997

(UNAUDITED)

<TABLE>
<CAPTION>
TCI MUSIC DMX PRO FORMA TCI MUSIC
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash -- continuing operations......... $ 1 883,904 -- 883,905
Other current assets -- continuing
operations.......................... -- 5,724,861 -- 5,724,861
--- ------------ ------------ -----------
Total current assets --continuing
operations..................... 1 6,608,765 -- 6,608,766
Current assets -- DMX-Europe N.V...... -- 1,535,685 -- 1,535,685
--- ------------ ------------ -----------
Total current assets........ 1 8,144,450 -- 8,144,451
Property and equipment, net
Continuing operations............... -- 4,186,240 4,500,000(2) 8,686,240
DMX-Europe N.V...................... -- 1,006,972 -- 1,006,972
--- ------------ ------------ -----------
5,193,212 4,500,000 9,693,212
Goodwill, net......................... -- 4,275,264 137,341,678(3) 141,616,942
Other assets.......................... -- 634,430 634,430
--- ------------ ------------ -----------
$ 1 18,247,356 141,841,678 160,089,035
=== ============ ============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities -- continuing
operations.......................... $-- 9,594,285 -- 9,594,285
Current liabilities -- DMX-Europe
N.V................................. -- 12,634,549 -- 12,634,549
--- ------------ ------------ -----------
Total current liabilities... -- 22,228,834 -- 22,228,834
TCI Music Note........................ -- -- 40,000,000(4) 40,000,000
Note payable to TCI................... -- 1,867,791 -- 1,867,791
Capital lease obligation.............. -- 1,170,242 -- 1,170,242
Other liabilities..................... -- 2,031,806 -- 2,031,806
Deferred income taxes................. -- -- 51,878,052(3) 51,878,052
--- ------------ ------------ -----------
Total liabilities........... -- 27,298,673 91,878,052 119,176,725
Stockholders' equity (deficit):
TCI Music Series A Common Stock..... 1 -- 148,966(3) 148,967
TCI Music Series B Common Stock..... -- -- 625,000(2) 625,000
DMX Common Stock.................... -- 596,722 (596,722)(3) --
Additional paid-in capital.......... -- 136,895,686 3,875,000(2) 40,138,343
76,263,343(3)
(136,895,686)(3)
(40,000,000)(4)
Accumulated deficit................. -- (145,909,910) 145,909,910(3) --
Foreign currency translation
reserve.......................... -- (55,812) 55,812(3) --
--- ------------ ------------ -----------
1 (8,473,314) 49,385,623 40,912,310
Treasury stock...................... -- (578,003) 578,003(3) --
--- ------------ ------------ -----------
Total stockholders' equity
(deficit)...................... 1 (9,051,317) 49,963,626 40,912,310
--- ------------ ------------ -----------
$ 1 18,247,356 141,841,678 160,089,035
=== ============ ============ ===========
</TABLE>

See accompanying notes to unaudited condensed pro forma combined financial
statements.

F-6
<PAGE> 104

TCI MUSIC, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1997

(UNAUDITED)

<TABLE>
<CAPTION>
TCI MUSIC DMX PRO FORMA TCI MUSIC
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Continuing operations................. $ -- 4,824,546 --(6) 4,824,546
DMX-Europe N.V........................ -- 753,836 -- 753,836
---------- ----------- ----------- -----------
-- 5,578,382 -- 5,578,382
Operating, selling, general and
administrative expenses:
Continuing operations................. -- (5,814,342) -- (5,814,342)
DMX-Europe N.V........................ -- (2,609,229) -- (2,609,229)
Depreciation and amortization........... -- (602,244) (3,410,227)(7) (4,012,471)
---------- ----------- ----------- -----------
-- (9,025,815) (3,410,227) (12,436,042)

Operating loss........................ -- (3,447,433) (3,410,227) (6,857,660)

Interest expense, net
Continuing operations................. -- (79,063) (1,000,000)(8) (1,079,063)
DMX-Europe N.V........................ -- (55,618) -- (55,618)
Other income, net....................... -- 83,709 -- 83,709
---------- ----------- ----------- -----------
Loss before income tax benefit..... (3,498,405) (4,410,227) (7,908,632)
Income tax benefit...................... -- -- 1,808,193(9) 1,808,193
---------- ----------- ----------- -----------
Net loss........................... $ -- (3,498,405) (2,602,034) (6,100,439)
========== =========== =========== ===========
Loss per share:
Historical............................ $ (.06)
===========
Pro forma............................. $ (.08)(10)
===========
</TABLE>

See accompanying notes to unaudited condensed pro forma combined financial
statements.

F-7
<PAGE> 105

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996

(UNAUDITED)

<TABLE>
<CAPTION>
TCI MUSIC DMX PRO FORMA TCI MUSIC
HISTORICAL HISTORICAL(7) ADJUSTMENTS PRO FORMA
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenue:
Continuing operations................ $ -- 17,280,729 --(6) 17,280,729
DMX-Europe N.V....................... -- 1,529,730 -- 1,529,730
------------ ------------ -------------- ------------
-- 18,810,459 -- 18,810,459
Operating, selling, general and
administrative expenses:
Continuing operations............. -- (24,399,774) -- (24,399,774)
DMX-Europe N.V.................... -- (8,818,462) -- (8,818,462)
Depreciation and amortization.......... -- (2,094,558) (13,836,454)(7) (15,931,012)
Loss on disposal -- DMX-Europe N.V..... -- (7,153,278) -- (7,153,278)
------------ ------------ -------------- ------------
-- (42,466,072) (13,836,454) (56,302,526)
Operating loss....................... -- (23,655,613) (13,836,454) (37,492,067)
Equity in loss of DMX-Europe N.V....... -- (7,345,149) -- (7,345,149)

Interest expense, net:
Continuing operations................ -- (200,051) (4,000,000)(8) (4,200,051)
DMX-Europe N.V....................... -- (97,789) -- (97,789)
Other income, net...................... -- 483,631 -- 483,631
------------ ------------ -------------- ------------
Loss before income tax benefit....... (30,814,971) (17,836,454) (48,651,425)
Income tax benefit..................... -- -- 7,312,946 (9) 7,312,946
------------ ------------ -------------- ------------
Net loss.......................... $ -- (30,814,971) (10,523,508) (41,338,479)
============ ============ ============== ============
Loss per share:
Historical........................... $ (.57)
============
Pro forma............................ $ (.54)(10)
============
</TABLE>

See accompanying notes to unaudited condensed pro forma combined financial
statements.

F-8
<PAGE> 106

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS

MARCH 31, 1997

(UNAUDITED)

(1) In connection with the Merger, TCI and TCI Music will enter into a
Contribution Agreement. Pursuant to the Contribution Agreement, effective
as of the closing of the Merger: (i) TCI Music will issue to TCI (as
designee of certain of its indirect subsidiaries), 62,500,000 shares of TCI
Music Series B Common Stock and a promissory note in the amount of $40
million (the "TCI Music Note"), (ii) until December 31, 2006, certain
subsidiaries of TCI will transfer to TCI Music the right to receive all
revenue from sales of DMX music services to their residential and
commercial subscribers, net of an amount equal to the 10% of revenue from
such sales to residential subscribers and net of the revenue otherwise
payable to DMX (which will be a wholly owned subsidiary of TCI Music
following the Merger) as license fees for DMX music services under
affiliation agreements currently in effect (the "Contributed Net DMX
Revenue"), (iii) TCI will contribute to TCI Music certain commercial
digital DMX tuners that are not in service as of the effective date of the
Merger (the "Contributed Tuners"), and (iv) TCI will grant to each
stockholder who becomes a stockholder of TCI Music pursuant to the Merger,
one right (a "Right") with respect to each whole share of Series A Common
Stock, $.01 par value per share, of TCI Music ("TCI Music Series A Common
Stock") acquired by such stockholder in the Merger pursuant to the terms of
a Rights Agreement among TCI, TCI Music and the rights agent (the "Rights
Agreement"). The foregoing transactions are collectively referred to herein
as the "Contribution." Upon consummation of the Merger, each outstanding
share of DMX Common Stock will be converted into the right to receive (i)
one-quarter of a share of TCI Music Series A Common Stock, (ii) one Right
with respect to each whole share of TCI Music Series A Common Stock and
(iii) cash in lieu of the issuance of fractional shares of TCI Music Series
A Common Stock and Rights. Each Right will entitle the holder to require
TCI to purchase from such holder one share of TCI Music Series A Common
Stock for $8.00 per share (the equivalent of $2.00 per share of DMX Common
Stock), subject to reduction by the aggregate amount per share of any
dividend and certain other distributions, if any, made by TCI Music to its
stockholders (the "Put Price"), and, payable at the election of TCI, in
cash, a number of shares of Tele-Communications, Inc. Series A TCI Group
Common Stock, par value $1.00 per share, having an equivalent value or a
combination thereof, if during the one-year period beginning on the
effective date of the Merger (the "Put Period"), the price of TCI Music
Series A Common Stock does not equal or exceed $8.00 per share for a period
of at least 20 consecutive trading days.

(2) Represents the issuance of TCI Music Series B Common Stock pursuant to the
Contribution Agreement. Such issuance results in an increase in TCI Music's
assets only to the extent of TCI's historical cost basis in the Contributed
Tuners (approximately $4,500,000 at March 31, 1997) since TCI's historical
cost basis in the Contributed Net DMX Revenue is zero. See note 1.

(3) Represents the issuance of TCI Music Series A Common Stock pursuant to the
Merger Agreement and the issuance of associated Rights pursuant to the
Rights Agreement (collectively, the "Merger Consideration"). The estimated
aggregate fair value of the Merger Consideration to be issued to entities
not controlled by TCI (the "Unaffiliated Stockholders") and the carryover
basis of the Merger Consideration to be issued to entities controlled by
TCI (the "TCI Stockholders") has been allocated to goodwill as the net book
values of DMX's assets and liabilities are assumed to approximate their
respective fair values. The estimated aggregate fair value of the Merger
Consideration, and the estimated fair values of DMX's assets and
liabilities are based on information available at the date of the
preparation of these condensed combined pro forma financial statements, and
will be adjusted upon final appraisal of the Merger Consideration, and such
DMX assets and liabilities. Although management is not presently aware of
any circumstances which would cause the final purchase price allocation to
be significantly different from that which is reflected in the accompanying
condensed pro forma combined balance sheet, actual valuations and
allocations may differ from those reflected herein. The number of

F-9
<PAGE> 107

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

shares and Rights assumed to be issued is based upon DMX Common Stock
ownership as of March 31, 1997. The estimated fair value of the Merger
Consideration issued to unaffiliated Stockholders will be accreted to the
Put Price during the Put Period and such accretion will be reflected as an
increase in goodwill with a corresponding increase to additional paid-in
capital. Additional information concerning the assumed valuation of the TCI
Music Series A Common Stock is set forth below:

<TABLE>
<S> <C>
Shares to be issued to TCI, valued at carryover basis at
March 31, 1997 (6,812,393 shares)......................... $ 16,588,824
Shares to be issued to others, valued at estimated fair
value of $7.40 per share (8,084,255 shares)............... 59,823,485
------------
Total value assigned to TCI Music Series A Common
Stock........................................... $ 76,412,309
Increase in deferred income tax liability due to purchase
price allocation.......................................... 51,878,052
Elimination of DMX historical stockholders' deficit at March
31, 1997.................................................. 9,051,317
------------
Excess purchase price to be allocated to goodwill........... $137,341,678
============
</TABLE>

None of DMX's currently outstanding stock options are "in-the-money" and
none are expected to be "in-the-money" at the date of the Merger. As such,
DMX's currently outstanding stock options are not expected to have any
impact on the purchase consideration. Any compensation expense associated
with the exchange of TCI Music options for DMX options is not expected to
be material. See note 1.

(4) Represents the issuance of the TCI Music Note. The TCI Music Note will bear
interest at 10% per annum, payable semiannually, and will provide for the
payment of unpaid principal and accrued interest not earlier than 180 days
after consummation of the Contribution. Due to TCI's controlling interest
in TCI Music, such issuance has been treated as a distribution to TCI. See
note 1.

(5) The fiscal year end of DMX is September 30. The amounts reported in the
"DMX historical" column of the condensed pro forma combined statement of
operations for the year ended December 31, 1996 represent the sum of DMX's
operating results for the three months ended December 31, 1996 and the
fiscal year ended September 30, 1996, less DMX's operating results for the
three months ended December 31, 1995.

(6) If the Contributed Net DMX Revenue payments had been in effect for the
three months ended March 31, 1997 and the year ended December 31, 1996, the
aggregate incremental revenue received by TCI Music would have been
approximately $4,400,000 and $16,400,000, respectively. Due to
uncertainties concerning the amount of the Contributed Net DMX Revenue to
be received by TCI Music in future periods, such incremental revenue has
not been reflected in the condensed pro forma combined statement of
operations. See note 1.

(7) Represents amortization of the additional goodwill recorded in connection
with the Merger. Such amortization is calculated using an estimated useful
life of ten years. If goodwill amortization had been calculated using an
estimated useful life of five years, the depreciation and amortization
reflected in the accompanying condensed combined pro forma statements of
operations would have increased by approximately $3,540,000 and $14,162,000
for the three months ended March 31, 1997 and the year ended December 31,
1996, respectively. Similarly, if goodwill amortization had been calculated
using an estimated useful life of 15 years, the depreciation and
amortization reflected in the accompanying condensed combined pro forma
statements of operations would have decreased by approximately $1,180,000
and $4,721,000 for the three months ended March 31, 1997 and the year ended
December 31, 1996, respectively. See note 1.

(8) Represents interest expense on the TCI Music Note. The pro forma adjustment
has been calculated using the 10% interest rate stipulated by the terms of
the TCI Music Note. Interest on the TCI Music

F-10
<PAGE> 108

TCI MUSIC, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TELE-COMMUNICATIONS, INC.)

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Note will be waived by TCI if principal is paid in full at or before
maturity, which will be 180 days after the close of the Merger.

(9) Represents the income tax effect of the pro forma adjustments related to
the Merger and Contribution.

(10) Represents pro forma loss per share assuming 77,396,648 and 75,923,829
weighted average shares of TCI Music were outstanding during the three
months ended March 31, 1997 and the year ended December 31, 1996,
respectively. Such amounts represents the approximate number of weighted
average shares of TCI Music that would have been outstanding if the Merger
and Contribution had occurred on January 1, 1996.

F-11
<PAGE> 109

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS

MARCH 31, 1997

(UNAUDITED)

The following unaudited condensed pro forma combined balance sheet of
Tele-Communications Inc. ("TCI"), dated as of March 31, 1997, assumes that
the merger (the "Merger") contemplated by an Agreement and Plan of Merger,
dated as of February 6, 1997, as amended (the "Merger Agreement"), by and
among TCI Music, Inc., a subsidiary of TCI ("TCI Music"), TCI Merger Sub, a
wholly owned subsidiary of TCI Music ("Merger Sub") and DMX, Inc. ("DMX"),
and certain related transactions had occurred as of such date. See note 1.

The following unaudited condensed pro forma combined statement of
operations of TCI for the three months ended March 31, 1997 assumes the
Merger and certain related transactions had occurred as of January 1, 1996.
The following unaudited condensed pro form combined statement of operations
for the year ended December 31, 1996 assumes that the Merger and certain
related transactions, the distribution (the "Distribution") by TCI of all
of the outstanding common stock of TCI Satellite Entertainment, Inc.
("Satellite") (see note 2) and the acquisition by TCI of all the common
stock of a subsidiary of Viacom, Inc. ("VII Cable") (the "VII Cable
Acquisition") (see note 3), had occurred as of January 1, 1996.

The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the Merger and
certain related transactions, the Distribution and the VII Cable
Acquisition had occurred as of January 1, 1996. These condensed pro forma
combined financial statements of TCI should be read in conjunction with the
historical financial statements and the related notes thereto of TCI, TCI
Music and DMX.

F-12
<PAGE> 110

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED PRO FORMA COMBINED BALANCE SHEET

MARCH 31, 1997

(UNAUDITED)

<TABLE>
<CAPTION>
TCI DMX PRO FORMA TCI
HISTORICAL HISTORICAL(1) ADJUSTMENTS(1) PRO FORMA
---------- ------------- -------------- ---------
AMOUNTS IN MILLIONS
<S> <C> <C> <C> <C>
ASSETS
Cash, receivables and other operating assets..... $ 1,191 $ 8 $ -- $ 1,199
Investment in affiliates and Time Warner, Inc.,
and related receivables........................ 4,935 -- (16)(4) 4,919
Property and equipment, net of accumulated
depreciation................................... 7,688 5 -- 7,693
Franchise costs, intangibles and other assets,
net of amortization............................ 16,862 5 137(4) 17,004
------- ----- ----- -------
$30,676 $ 18 $ 121 $30,815
======= ===== ===== =======

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Payables and accruals............................ $ 1,502 $ 22 $ -- $ 1,524
Debt............................................. 15,049 3 -- 15,052
Deferred income taxes............................ 5,946 -- 52(4) 5,998
Other liabilities................................ 251 2 -- 253
------- ----- ----- -------
Total liabilities...................... 22,748 27 52 22,827
------- ----- ----- -------
Minority interests............................... 1,349 -- 60(4) 1,409
Redeemable preferred stocks...................... 655 -- -- 655
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely subordinated debt securities of
TCI
Communications, Inc............................ 1,502 -- -- 1,502
Stockholders' equity (deficit):
Preferred stock................................ -- -- -- --
TCI Group Series A common stock................ 715 -- -- 715
TCI Group Series B common stock................ 85 -- -- 85
Liberty Media Group Series A common stock...... 229 -- -- 229
Liberty Media Group Series B common stock...... 21 -- -- 21
DMX common stock............................... -- 1 (1)(4) --
Additional paid-in capital..................... 3,904 137 (137)(4) 3,904
Cumulative foreign currency translation
adjustment.................................. 5 -- -- 5
Unrealized holding gains for available-for-sale
securities.................................. 11 -- -- 11
Accumulated deficit............................ (234) (146) 146(4) (234)
Stock held by subsidiaries/treasury stock...... (314) (1) 1(4) (314)
------- ----- ----- -------
Total stockholders' equity (deficit)... 4,422 (9) 9 4,422
------- ----- ----- -------
$30,676 $ 18 $ 121 $30,815
======= ===== ===== =======
</TABLE>

See accompanying notes to unaudited condensed pro forma combined financial
statements.

F-13
<PAGE> 111

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1997

(UNAUDITED)

<TABLE>
<CAPTION>
TCI DMX PRO FORMA TCI
HISTORICAL HISTORICAL(1) ADJUSTMENTS(1) PRO FORMA
---------- ------------- -------------- ---------
AMOUNTS IN MILLIONS
<S> <C> <C> <C> <C>
Revenue..................................... $ 1,827 $ 6 $-- $ 1,833
Operating expenses, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights.................... (1,104) (8) -- (1,112)
Depreciation and amortization............... (374) (1) (3)(11) (378)
------- --- --- -------
Operating income (loss)................... 349 (3) (3) 343
Interest expense............................ (289) -- -- (289)
Interest and dividend income................ 21 -- -- 21
Share of losses of affiliates, net.......... (156) -- 2(12) (154)
Other expense, net.......................... (21) -- --(13) (21)
------- --- --- -------
Loss before income taxes.................. (96) (3) (1) (100)
Income tax benefit.......................... 38 -- --(14) 38
------- --- --- -------
Net loss.................................. (58) (3) (1) (62)
Dividend requirement on redeemable preferred
stocks.................................... (10) -- -- (10)
------- --- --- -------
Net earnings (loss) attributable
to common stockholders.......... $ (68) $(3) $(1) $ (72)
======= === === =======
Net earnings (loss) attributable to common
stockholders per common share:
TCI Group Series A and Series B common
stock.................................. $ (.12) $ (.13)(9)
======= =======
Liberty Media Group Series A and Series B
common stock........................... $ .06 $ .06(10)
======= =======
</TABLE>

See accompanying notes to unaudited condensed pro forma combined financial
statements.

F-14
<PAGE> 112

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
CONSUMMATED TRANSACTIONS TCI
------------------------------------------------ PRO FORMA-
TCI SATELLITE VII CABLE PRO FORMA CONSUMMATED
HISTORICAL DISTRIBUTION(2) HISTORICAL(3) ADJUSTMENTS(3) TRANSACTIONS
---------- --------------- ------------- -------------- ------------
AMOUNTS IN MILLIONS
<S> <C> <C> <C> <C> <C>
Revenue....................... $ 8,022 $(377) $ 280 $ -- $ 7,925
Operating expenses, cost of
sales, selling, general and
administrative expenses,
compensation relating to
stock appreciation rights
and restructuring charges... (5,774) 373 (176) -- (5,577)
Depreciation and
amortization................ (1,616) 166 (52) (14)(5) (1,516)
------- ----- ----- ---- -------
Operating income (loss)..... 632 162 52 (14) 832
Interest expense.............. (1,096) -- (31) (44)(6) (1,171)
Interest and dividend
income...................... 64 -- 2 -- 66
Share of losses of affiliates,
net......................... (473) -- -- -- (473)
Gain on disposition of
assets...................... 1,593 -- -- -- 1,593
Other income (expense), net... (180) -- 1 (18)(7) (197)
------- ----- ----- ---- -------
Earnings (loss) before
income taxes.............. 540 162 24 (76) 650
Income tax benefit
(expense)................... (262) (53) (13) 11(8) (317)
------- ----- ----- ---- -------
Net earnings (loss)......... 278 109 11 (65) 333
Dividend requirement on
redeemable preferred
stocks...................... (35) -- -- -- (35)
------- ----- ----- ---- -------
Net earnings (loss)
attributable to
common
stockholders........ $ 243 $ 109 $ 11 $(65) $ 298
======= ===== ===== ==== =======
Primary earnings (loss)
attributable to common
stockholders per common and
common equivalent share:
TCI Group Series A and
Series B common stock..... $ (1.22) $ (1.14)(9)
======= =======
Liberty Media Group Series A
and Series B common
stock..................... $ 3.97 $ 3.97(10)
======= =======
Fully diluted net earnings
(loss) attributable to
common stockholders per
common and common equivalent
share:
TCI Group Series A and
Series B common stock..... $ (1.22) $ (1.14)(9)
======= =======
Liberty Media Group Series A
and Series B common stock... $ 3.88 $ 3.88(10)
======= =======

<CAPTION>
PROPOSED TRANSACTIONS
------------------------------
DMX PRO FORMA TCI
HISTORICAL(1) ADJUSTMENTS(1) PRO FORMA
------------- -------------- ---------
AMOUNTS IN MILLIONS
<S> <C> <C> <C>
Revenue....................... $ 18 $ -- $ 7,943
Operating expenses, cost of
sales, selling, general and
administrative expenses,
compensation relating to
stock appreciation rights
and restructuring charges... (33) -- (5,610)
Depreciation and
amortization................ (9) (14)(11) (1,539)
---- ---- -------
Operating income (loss)..... (24) (14) 794
Interest expense.............. -- -- (1,171)
Interest and dividend
income...................... -- -- 66
Share of losses of affiliates,
net......................... (7) 21(12) (459)
Gain on disposition of
assets...................... -- -- 1,593
Other income (expense), net... -- --(13) (197)
---- ---- -------
Earnings (loss) before
income taxes.............. (31) 7 626
Income tax benefit
(expense)................... -- (3)(14) (320)
---- ---- -------
Net earnings (loss)......... (31) 4 306
Dividend requirement on
redeemable preferred
stocks...................... -- -- (35)
---- ---- -------
Net earnings (loss)
attributable to
common
stockholders........ $(31) $ 4 $ 271
==== ==== =======
Primary earnings (loss)
attributable to common
stockholders per common and
common equivalent share:
TCI Group Series A and
Series B common stock..... $ (1.19)(9)
=======
Liberty Media Group Series A
and Series B common
stock..................... $ 4.00(10)
=======
Fully diluted net earnings
(loss) attributable to
common stockholders per
common and common equivalent
share:
TCI Group Series A and
Series B common stock..... $ (1.19)(9)
=======
Liberty Media Group Series A
and Series B common stock... $ 3.91(10)
=======
</TABLE>

See accompanying notes to unaudited condensed pro forma combined financial
statements.

F-15
<PAGE> 113

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS

MARCH 31, 1997

(UNAUDITED)

(1) Pursuant to the Merger Agreement, Merger Sub, and DMX, Merger Sub will be
merged with and into DMX, with DMX as the surviving corporation. As a
result of the Merger, stockholders of DMX will become stockholders of TCI
Music. In connection with the Merger, and pursuant to the terms and
conditions of a Contribution Agreement by and between TCI and TCI Music
(the "Contribution Agreement"), effective as of the closing, TCI and TCI
Music will effect certain other transactions that are collectively referred
to herein as the "Contribution."

In connection with the Merger, TCI and TCI Music will enter into a
Contribution Agreement. Pursuant to the Contribution Agreement, effective
as of the closing of the Merger: (i) TCI Music will issue to TCI (as
designee of certain of its indirect subsidiaries), 62,500,000 shares of TCI
Music Series B Common Stock and a promissory note in the amount of $40
million (the "TCI Music Note"), (ii) until December 31, 2006, certain
subsidiaries of TCI will transfer to TCI Music the right to receive all
revenue from sales of DMX music services to their residential and
commercial subscribers, net of an amount equal to 10% of revenue from such
sales to residential subscribers and net of the revenue otherwise payable
to DMX (which will be a wholly-owned subsidiary of TCI Music following the
Merger) as license fees for DMX music services under affiliation agreements
currently in effect (the "Contributed Net DMX Revenue"), (iii) TCI will
contribute to TCI Music certain commercial digital DMX tuners that are not
in service as of the effective date of the Merger (the "Contributed
Tuners"), and (iv) TCI will grant to each stockholder who becomes a
stockholder of TCI Music pursuant to the Merger, one right (a "Right") with
respect to each whole share of Series A Common Stock, $.01 par value per
share, of TCI Music ("TCI Music Series A Common Stock") acquired by such
stockholder in the Merger pursuant to the terms of a Rights Agreement among
TCI, TCI Music and the rights agent (the "Rights Agreement"). The foregoing
transactions are collectively referred to herein as the "Contribution."
Upon consummation of the Merger, each outstanding share of DMX Common Stock
will be converted into the right to receive (i) one-quarter of a share of
TCI Music Series A Common Stock, (ii) one Right with respect to each whole
share of TCI Music Series A Common Stock and (iii) cash in lieu of the
issuance of fractional shares of TCI Music Series A Common Stock and
Rights. Each Right will entitle the holder to require TCI to purchase from
such holder one share of TCI Music Series A Common Stock for $8.00 per
share (the equivalent of $2.00 per share of DMX Common Stock), subject to
reduction by the aggregate amount per share of any dividend and certain
other distributions, if any, made by TCI Music to its stockholders (the
"Put Price"), and, payable at the election of TCI, in cash, a number of
shares of Tele-Communications, Inc. Series A TCI Group Common Stock, par
value $1.00 per share, having an equivalent value or a combination thereof,
if during the one-year period beginning on the effective date of the Merger
(the "Put Period"), the price of TCI Music Series A Common Stock does not
equal or exceed $8.00 per share for a period of at least 20 consecutive
trading days.

The fiscal year end of DMX is September 30. The amounts reported in the
"DMX historical" column of the condensed pro forma combined statement of
operations for the year ended December 31, 1996 represent the sum of DMX's
operating results for the three months ended December 31, 1996 and the
fiscal year ended September 30, 1996, less DMX's operating results for the
three months ended December 31, 1995.

(2) On December 4, 1996, TCI distributed to the holders of shares of TCI Group
common stock of all of the issued and outstanding common stock of
Satellite. At the time of the Distribution, Satellite was a Delaware
corporation and a direct wholly-owned subsidiary of TCI. The Distribution
was effected as a tax-free dividend to, and did not involve the payment of
any consideration by, the holders of TCI Group common stock. Prior to the
Distribution, TCI caused to be transferred to Satellite, or one or more of
Satellite's subsidiaries, certain assets and businesses (and the related
liabilities) of the TCI Group

F-16
<PAGE> 114

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

constituting all of TCI's interests in the business of distributing
multichannel programming services in the United States direct to the home
via medium power or high power broadcast satellite, including the rental
and sale of customer premises equipment relating thereto.

(3) On July 31, 1996, pursuant to certain agreements entered into among TCI
Communications, Inc. ("TCIC"), a subsidiary of TCI, TCI, Viacom
International Inc. and Viacom, Inc. ("Viacom"), TCIC acquired all of the
common stock of VII Cable which, at the time of such acquisition, owned
Viacom's cable systems and related assets.

The transaction was structured as a tax-free reorganization in which VII
Cable initially transferred all of its non-cable assets, as well as all of
its liabilities other than current liabilities, to a new subsidiary of
Viacom ("New Viacom Sub"). VII Cable also transferred to New Viacom Sub the
proceeds (the "Loan Proceeds") of a $1.7 billion loan facility (the "Loan
Facility") arranged by TCIC, TCI and VII Cable. Following these transfers,
VII Cable retained cable assets with a value at closing of approximately
$2.326 billion and the obligation to repay the Loan Proceeds borrowed under
the Loan Facility. Neither Viacom nor New Viacom Sub has any obligation
with respect to repayment of the Loan Proceeds.

Prior to the consummation of the VII Cable Acquisition, Viacom offered to
the holders of shares of Viacom Class A Common Stock and Viacom Class B
Common Stock (collectively, "Viacom Common Stock") the opportunity to
exchange (the "Exchange Offer") a portion of their shares of Viacom Common
Stock for shares of Class A Common Stock, par value $100 per share, of VII
Cable ("VII Cable Class A Stock"). Immediately following the completion of
the Exchange Offer, TCIC acquired from VII Cable shares of VII Cable Class
B Common Stock (the "Share Issuance") in exchange for $350 million (which
was used to reduce VII Cable's obligations under the Loan Facility). At the
time of the Share Issuance, the VII Cable Class A Stock received by Viacom
stockholders pursuant to the Exchange Offer automatically converted into 5%
Class A Senior Cumulative Exchangeable Preferred Stock (the "Exchangeable
Preferred Stock") of VII Cable with a stated value of $100 per share.

The cost to acquire VII Cable was approximately $2.326 billion, consisting
of the Loan Proceeds and the $626 million aggregate par value of the VII
Cable Exchangeable Preferred Stock. The accompanying unaudited pro forma
condensed combined statements of operations do not reflect potential cost
savings attributable to (i) economics of scale which may be realized in
connection with purchases of programming and equipment or (ii)
consolidation of certain operating and administrative functions including
the elimination of duplicative facilities and personnel.

(4) Represents the estimated aggregate fair value of the Merger Consideration
to be issued to entities not controlled by TCI (the "Unaffiliated
Stockholders"). Such estimated aggregate fair value has been allocated to
goodwill as the net book values of DMX's assets and liabilities are assumed
to approximate their respective fair values. The estimated aggregate fair
value of the Merger Consideration, and the estimated fair values of DMX's
assets and liabilities are based on information available at the date of
the preparation of these condensed combined pro forma financial statements,
and will be adjusted upon final appraisal of the Merger Consideration, and
such DMX assets and liabilities. Although management is not presently aware
of any circumstances which would cause the final purchase price allocation
to be significantly different from that which is reflected in the
accompanying condensed pro forma combined balance sheet, actual valuations
and allocations may differ from those reflected herein. The number of
shares and Rights assumed to be issued is based upon DMX Common Stock
ownership as of March 31, 1997. See note 1. The estimated fair value of the
Merger consideration issued to Unaffiliated Stockholders will be accreted
to the Put Price during the Put Period and such accretion will be reflected
as an increase in goodwill with a corresponding increase to minority
interest. Additional information

F-17
<PAGE> 115

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

concerning the assumed valuation of the TCI Music Series A Common Stock is
set forth below (dollars in millions):

<TABLE>
<S> <C>
Shares to be issued to TCI, valued at carryover basis
at March 31, 1997 (6,812,393 shares).................. $ 16
Shares to be issued to others, valued at estimated fair
value of $7.40 per share (8,084,255 shares)........... 60
----
Total value assigned to TCI Music Series A
Common Stock................................ 76
Increase in deferred income tax liability due to
purchase price allocation............................. 52
Elimination of DMX historical stockholders' deficit at
March 31, 1997........................................ 9
----
Excess purchase price to be allocated to goodwill...... $137
====
</TABLE>

(5) Represents depreciation and amortization of VII Cable's allocated purchase
price based upon a weighted average life of 12.5 years for property and
equipment and a 40 year life for franchise costs.

(6) Represents assumed additional interest expense (after taking into
consideration interest expense reflected in the historical VII Cable
operations) incurred by TCI on the borrowings of the Loan Proceeds. Solely
for the purposes of this presentation, TCI has assumed an interest rate of
7.5% for the year ended December 31, 1996, based upon historical interest
rates adjusted for terms of the Loan Facility.

(7) Reflects a 5.0% cumulative annual dividend on the $626 million of VII Cable
Exchangeable Preferred Stock included in minority share of losses of
consolidated subsidiaries.

(8) Reflects the estimated income tax effect of the VII Cable pro forma
adjustments. The effective income tax rate on a pro forma basis is
adversely affected by the amortization of excess acquisition costs, which
are assumed not to be deductible for tax purposes.

(9) Reflects loss per common share based upon 678.0 million and 664.8 million
weighted average shares of TCI Group common stock for the three months
ended March 31, 1997 and the year ended December 31, 1996. Such amount
represents the weighted average shares disclosed in TCI's historical
financial statements.

(10) Reflects earnings per common share based upon 249.7 million weighted
average shares of Liberty Media Group common stock outstanding for the
three months ended March 31, 1997, and 266.3 million (primary) and 272.4
million (fully diluted) weighted average shares of Liberty Media Group
common stock for the year ended December 31, 1996. Such amounts represent
the weighted average shares disclosed in TCI's historical financial
statements.

(11) Represents amortization of additional goodwill recorded in connection with
the Merger. Such amortization is calculated using an estimated useful life
of ten years. If goodwill amortization had been calculated using an
estimated useful life of five years, the depreciation and amortization
reflected in the accompanying condensed combined pro forma statements of
operations would have increased by approximately $4 million and $14 million
for the three months ended March 31, 1997 and the year ended December 31,
1996, respectively. Similarly, if goodwill amortization had been calculated
using an estimated useful life of 15 years, the depreciation and
amortization reflected in the accompanying condensed combined pro forma
statements of operations would have decreased by approximately

F-18
<PAGE> 116

TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

$1 million and $5 million for the three months ended March 31, 1997 and the
year ended December 31, 1996, respectively.

(12) Represents the elimination of TCI's share of DMX's historical net loss.

(13) No losses have been allocated to minority shareholders of TCI Music due to
TCI's put obligation pursuant to the Rights Agreement.

(14) Represents the income tax effect of the pro forma adjustments related to
the Merger and Contribution.

F-19
<PAGE> 117

APPENDIX I

AGREEMENT AND PLAN OF MERGER

DATED AS OF

FEBRUARY 6, 1997

AMONG

TELE-COMMUNICATIONS, INC.,

TCI MUSIC, INC.,

TCI MERGER SUB, INC.

AND

DMX INC.
<PAGE> 118

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions................................................. 1
SECTION 1.2 Other Definitions........................................... 2
SECTION 1.3 Use of Terms................................................ 3
ARTICLE II
THE MERGER AND RELATED MATTERS
SECTION 2.1 The Merger.................................................. 3
SECTION 2.2 Effective Time of the Merger................................ 4
ARTICLE III
CONVERSION OF CAPITAL STOCK
SECTION 3.1 Conversion of Stock......................................... 4
SECTION 3.2 [Intentionally omitted]..................................... 5
SECTION 3.3 Exchange of Certificates.................................... 5
SECTION 3.4 Distribution With Respect to Shares Represented by
Unsurrendered Company Stock Certificates.................... 6
SECTION 3.5 No Fractional Shares........................................ 6
SECTION 3.6 No Liability................................................ 7
SECTION 3.7 Lost Certificates........................................... 7
SECTION 3.8 Dissenting Shares........................................... 7
SECTION 3.9 Treatment of Stock Options and Other Company Benefit
Plans....................................................... 7
SECTION 3.10 Stockholders' Approval...................................... 7
SECTION 3.11 Closing of the Company's Transfer Books..................... 8
SECTION 3.12 Assistance in Consummation of the Merger.................... 8
SECTION 3.13 Closing..................................................... 8
ARTICLE IV
THE CONTRIBUTION; THE RIGHTS
SECTION 4.1 Contribution to MusicCo..................................... 8
SECTION 4.2 Consideration for Contribution.............................. 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TCI, MUSICCO AND MERGER SUB
SECTION 5.1 Organization and Qualification.............................. 9
SECTION 5.2 Capitalization.............................................. 9
SECTION 5.3 Authority Relative to this Agreement........................ 9
SECTION 5.4 No Breach; Required Consents................................ 9
SECTION 5.5 Governmental Consents and Approvals......................... 9
SECTION 5.6 Operations of MusicCo and Merger Sub........................ 10
SECTION 5.7 No Broker................................................... 10
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 6.1 Organization and Qualification.............................. 10
SECTION 6.2 Capitalization.............................................. 10
SECTION 6.3 Subsidiaries................................................ 10
SECTION 6.4 Authority Relative to this Agreement........................ 11
SECTION 6.5 No Breach; Required Consents................................ 11
SECTION 6.6 Consents and Approvals...................................... 11
</TABLE>

i
<PAGE> 119
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 6.7 Reports and Financial Statements............................ 11
SECTION 6.8 Compliance with Law; Litigation............................. 12
SECTION 6.9 Title to Assets............................................. 13
SECTION 6.10 Labor and Employee Matters.................................. 13
SECTION 6.11 ERISA....................................................... 13
SECTION 6.12 Approval.................................................... 14
SECTION 6.13 Financial Advisor........................................... 14
SECTION 6.14 Taxes....................................................... 14
SECTION 6.15 Environmental Laws.......................................... 15
SECTION 6.16 Transactions with Affiliates................................ 15
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.1 Conduct of Business of the Company.......................... 15
SECTION 7.2 Conduct of Business of TCI.................................. 16
SECTION 7.3 Remedies for Breach......................................... 16
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1 Access and Information...................................... 16
SECTION 8.2 SEC Filings................................................. 16
SECTION 8.3 Meeting of Stockholders of the Company...................... 19
SECTION 8.4 Compliance with the Securities Act.......................... 19
SECTION 8.5 Listing..................................................... 19
SECTION 8.6 Reasonable Best Efforts..................................... 19
SECTION 8.7 Public Announcements........................................ 19
SECTION 8.8 Notification................................................ 20
SECTION 8.9 HSR Act Filings............................................. 20
SECTION 8.10 Further Assurances.......................................... 20
SECTION 8.11 Employee Benefits........................................... 20
SECTION 8.12 No Solicitation............................................. 20
SECTION 8.13 Indemnification of Executives............................... 21
ARTICLE IX
CONDITIONS PRECEDENT
SECTION 9.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... 22
SECTION 9.2 Conditions to Obligation of the Company to Effect the
Merger...................................................... 22
SECTION 9.3 Conditions to Obligations of TCI, MusicCo and Merger Sub to
Effect the Merger........................................... 22
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1 Termination................................................. 23
SECTION 10.2 Effect of Termination....................................... 23
SECTION 10.3 Amendment................................................... 23
SECTION 10.4 Waiver...................................................... 23
</TABLE>

ii
<PAGE> 120
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE XI
GENERAL PROVISIONS; DEFINITIONS
SECTION 11.1 Non-Survival of Representations, Warranties and
Agreements.................................................. 33
SECTION 11.2 Notices..................................................... 24
SECTION 11.3 Fees and Expenses........................................... 24
SECTION 11.4 Specific Performance........................................ 24
SECTION 11.5 Third Party Beneficiaries................................... 25
SECTION 11.6 Entire Agreement............................................ 25
SECTION 11.7 Miscellaneous............................................... 25
</TABLE>

iii
<PAGE> 121

AGREEMENT AND PLAN OF MERGER

EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
A Form of Contribution Agreement
B Form of Rights Agreement
C Form of Opinion of TCI Counsel
D Form of Opinion of Company Counsel
</TABLE>

SCHEDULES

<TABLE>
<CAPTION>
SCHEDULE NO. DESCRIPTION
- ------------ -----------
<S> <C>
5.4 TCI Consents
6.2(b) Rights To Acquire Company Common Stock
6.3 Subsidiaries and Equity Affiliates
6.5 Company Consents
6.7(c) Certain Changes
6.7(d) Undisclosed Liabilities
6.8(a) Legal Requirements
6.8(b) Litigation
6.9 Liens
6.10 Employment Agreements
6.11(a) Company Benefit Plans
6.11(g) Benefits to Former Employees
6.14 Taxes
6.15 Environmental Matters
6.16 Affiliate Transactions
7.1 Conduct of Business Pending the Merger
</TABLE>

iv
<PAGE> 122

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of February
6, 1997, by and among Tele-Communications, Inc., a Delaware corporation ("TCI"),
TCI Music, Inc., a Delaware corporation and wholly owned subsidiary of TCI
("MusicCo"), TCI Merger Sub, Inc., a Delaware corporation and wholly owned
subsidiary of MusicCo ("Merger Sub") and DMX Inc., a Delaware corporation (the
"Company"):

RECITALS

A. Pursuant to the form of Contribution Agreement attached to this
Agreement as Exhibit A (the "Contribution Agreement"), (i) TCI will cause
certain of its wholly owned subsidiaries to contribute to MusicCo the right to
receive a substantial portion of the revenues attributable to the distribution
and sale by those subsidiaries of the Company's digital music services and (ii)
TCI will grant to each stockholder who becomes a stockholder of MusicCo pursuant
to the Merger, with respect to each whole share of MusicCo stock acquired by
such stockholder in the Merger, one right (a "Right") requiring TCI to purchase
from the holder thereof, at such holder's election, such stock for the price and
at the time specified in the form of Rights Agreement attached to this Agreement
as Exhibit B (the "Rights Agreement") in consideration of the issuance of shares
of Series B Common Stock, par value $.01 per share, of MusicCo ("MusicCo Series
B Common Stock") and a promissory note in the amount of $40,000,000.

B. TCI and MusicCo have proposed that MusicCo will acquire the Company in a
transaction in which: (i) simultaneously with the Contribution, Merger Sub will
merge with and into the Company, as a result of which the Company will become a
wholly owned subsidiary of MusicCo and the stockholders of the Company
immediately prior to such merger will become stockholders of MusicCo; and (ii)
TCI will issue to each stockholder who becomes a stockholder of MusicCo pursuant
to the Merger, with respect to each whole share of MusicCo stock acquired by
such stockholder in the Merger, one Right.

C. The Boards of Directors of TCI, MusicCo, Merger Sub and the Company have
each determined that the Merger is in the best interests of their respective
corporations and stockholders.

NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement the
parties to this Agreement agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions. As used in this Agreement, the following terms
with initial capital letters will have the meanings set forth below:

"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, controls, is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlling," "controlled by" and "under common
control with") means possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a Person
(whether through the ownership of voting securities, by contract or
otherwise).

"Code" means the Internal Revenue Code of 1986, as amended.

"Environmental Law" means any applicable Legal Requirement relating to
the protection, preservation or restoration of the environment (including,
air, water vapor, surface water, ground water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource).

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
<PAGE> 123

"Knowledge" means the actual present personal knowledge of any
director or any officer of the Company.

"Legal Requirement" means any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted,
adopted or applied by any Governmental Entity, including judicial decisions
applying common law or interpreting any other Legal Requirement or any
agreement entered into with a Governmental Entity in resolution of a
dispute or otherwise.

"Lien" means any lien, security interest, pledge, charge, claim,
option, right to acquire, restriction on transfer, voting restriction or
encumbrance of any nature.

"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, condition (financial or otherwise),
liabilities or operations of a Person and its Subsidiaries, taken as a
whole, or on the ability of such Person to perform its obligations under
this Agreement.

"MusicCo Series A Common Stock Value" means the product of (a) $4.00
and (b) a fraction, the numerator of which is 59,586,594 and the
denominator of which is the total number of shares of MusicCo Series A
Common Stock issuable to stockholders of the Company at the Effective Time,
assuming no Dissenting Shares.

"NASDAQ" means the over-the-counter market of the National Association
of Securities Dealers, Inc.

"PBGC" means the Pension Benefit Guaranty Corporation.

"Person" means any human being or any partnership, limited liability
company, corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Entity or other
entity.

"SEC" means the United States Securities and Exchange Commission.

"Subsidiary" means, with respect to any Person, any corporation or
partnership more than 50% of whose outstanding voting securities or
partnership interests, as the case may be, are directly or indirectly owned
by such Person.

SECTION 1.2 Other Definitions. The following terms are defined in the
Sections indicated:

<TABLE>
<CAPTION>
TERM SECTION
---- -----------
<S> <C>
Acquisition Proposal............................ 8.12
Agreement....................................... Preamble
Antitrust Division.............................. 8.9
Certificate of Incorporation of the Company..... 2.1(a)
Certificate of Merger........................... 2.2
Closing......................................... 3.13
Closing Date.................................... 3.13
Company......................................... Preamble
Company Benefit Plans........................... 6.11(a)
Company Common Stock............................ 3.1(a)
Company Permits................................. 6.8(a)
Company Stock Certificates...................... 3.3(a)
Contribution.................................... 4.1
Contribution Agreement.......................... Recital A
DGCL............................................ 2.1
Dissenting Shares............................... 3.8
Effective Time.................................. 2.2
Equity Affiliate................................ 6.3
ERISA Affiliate................................. 6.11(a)
</TABLE>

2
<PAGE> 124
<TABLE>
<CAPTION>
TERM SECTION
---- -----------
<S> <C>
Exchange Act.................................... 5.5
Exchange Agent.................................. 3.3(a)
Executive....................................... 8.13(a)
FTC............................................. 8.9
Governmental Entity............................. 6.8(a)
HSR Act......................................... 5.5
Indemnified Party............................... 8.2(h)(iii)
Indemnifying Party.............................. 8.2(h)(iii)
Joint Proxy Statement/Prospectus................ 8.2(a)
Losses.......................................... 8.2(h)(i)
Meeting......................................... 8.3
Merger.......................................... 2.1
Merger Sub...................................... Preamble
Most Recent Balance Sheet....................... 6.7(c)
MusicCo......................................... Preamble
MusicCo Certificates............................ 3.3(a)
MusicCo Series A Common Stock................... 3.1(a)
MusicCo Series B Common Stock................... Recital A
Other Filings................................... 8.2(b)
Preliminary Joint Proxy Statement/Prospectus.... 8.2(a)
Right........................................... Recital A
Rights Agreement................................ Recital A
SEC Filings..................................... 8.2(c)
SEC Reports..................................... 6.7(a)
Securities Act.................................. 5.5
Surviving Corporation........................... 2.1
Tax............................................. 6.14
TCI............................................. Preamble
Termination Date................................ 10.1(b)
</TABLE>

SECTION 1.3 Use of Terms. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. All pronouns (and any variations) will be deemed to
refer to the masculine, feminine or neuter, as the identity of the Person may
require. The singular or plural includes the other, as the context requires or
permits. The word include (and any variation) is used in an illustrative sense
rather than a limiting sense. The word day means a calendar day. All accounting
terms not otherwise defined in this Agreement will have the meanings ascribed to
them under GAAP.

ARTICLE II

THE MERGER AND RELATED MATTERS

SECTION 2.1 The Merger. Subject to the terms and conditions of this
Agreement and the Delaware General Corporation Law (the "DGCL"), at the
Effective Time: (i) Merger Sub will be merged with and into the Company (the
"Merger"); (ii) the separate existence of Merger Sub will cease and the Company
will continue as the surviving corporation in the Merger (the "Surviving
Corporation"); and the name of the Surviving Corporation will be DMX Inc. From
and after the Effective Time, and without any further action on the part of any
Person, the Merger will have all the effects provided by applicable Legal
Requirements, including Section 262 of the DGCL, the effects described in
Section 3.1 with respect to the capital stock of Merger Sub and the Company and,
subject to applicable Legal Requirements, the following additional effects:

(a) Certificate of Incorporation. At the Effective Time, the Amended
and Restated Certificate of Incorporation of the Company, as amended (the
"Certificate of Incorporation of the Company"), as in

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<PAGE> 125

effect immediately prior to the Effective Time, will become the Certificate
of Incorporation of the Surviving Corporation, and such Certificate of
Incorporation may thereafter be amended as provided therein and by the
DGCL.

(b) Bylaws. At the Effective Time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, will become the Bylaws of
the Surviving Corporation, and such Bylaws may thereafter be amended or
repealed in accordance with their terms and the Certificate of
Incorporation of the Surviving Corporation and as provided by the DGCL.

(c) Directors. At the Effective Time, the directors of Merger Sub
immediately prior to the Effective Time will become the directors of the
Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation and
the DGCL and until the earlier of such director's resignation or removal or
such director's successor is duly elected and qualified, as the case may
be.

(d) Officers. At the Effective Time, the officers of Merger Sub
immediately prior to the Effective Time will become the officers of the
Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation and
the DGCL and until the earlier of such officer's resignation or removal or
such officer's successor is duly appointed and qualified, as the case may
be.

(e) Properties and Liabilities. At the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and
Merger Sub will vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub will become the debts,
liabilities and duties of the Surviving Corporation.

SECTION 2.2 Effective Time of the Merger. Subject to the terms and
conditions in this Agreement, the parties will prepare, sign and acknowledge, in
accordance with the DGCL, a certificate of merger (the "Certificate of Merger")
and deliver the Certificate of Merger to the Secretary of State of the State of
Delaware for filing pursuant to the DGCL on the Closing Date. The Merger will
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware. As used in this Agreement, the "Effective
Time" means the time at which the Certificate of Merger is filed with the
Secretary of State of the State of Delaware.

ARTICLE III

CONVERSION OF CAPITAL STOCK

SECTION 3.1 CONVERSION OF STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of capital
stock of any corporation:

(a) Each share of Common Stock, $.01 par value per share, of the
Company ("Company Common Stock") issued and outstanding immediately prior
to the Effective Time (except shares subject to Section 3.1(b) and, to the
extent provided in Section 3.8, Dissenting Shares) will be converted into
and will thereafter evidence and become: (i) .5 of a share of Series A
common stock, $.01 par value per share, of MusicCo ("MusicCo Series A
Common Stock"); (ii) one Right with respect to each whole share of MusicCo
Series A Common Stock; and (iii) the right to receive cash in lieu of
fractional shares of MusicCo Series A Common Stock and Rights in accordance
with Section 3.5.

(b) Each share of the capital stock of the Company issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by the Company, if any, will be canceled and retired, and no
MusicCo Series A Common Stock, Rights or other consideration will be
delivered in exchange therefor.

(c) Each share of Common Stock, $.01 par value per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time (except
shares subject to Section 3.1(d)) will be converted into

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<PAGE> 126

and will thereafter evidence and become one validly issued, fully paid, and
nonassessable share of Common Stock, $.01 par value per share, of the
Surviving Corporation.

(d) Each share of the capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by Merger Sub, if any, will be canceled and retired, and no
Common Stock of the Surviving Corporation or other consideration will be
delivered in exchange therefor.

SECTION 3.2 [Intentionally omitted]

SECTION 3.3 Exchange of Certificates.

(a) Exchange Agent. Prior to the Closing Date, TCI will select The Bank of
New York or another bank or trust company reasonably acceptable to the Company
to act as exchange agent (the "Exchange Agent") in connection with the surrender
of certificates that, prior to the Effective Time, evidenced outstanding shares
of Company Common Stock ("Company Stock Certificates"). Prior to the Closing
Date, MusicCo and TCI will deposit with the Exchange Agent for exchange in
accordance with this Section 3.3 certificates evidencing the shares of MusicCo
Series A Common Stock and the Rights to be issued in the Merger ("MusicCo
Certificates"), which shares of MusicCo Common Stock and Rights will be deemed
to be issued at the Effective Time. At and following the Effective Time, MusicCo
will deliver to the Exchange Agent such cash as may be required from time to
time to make payments of cash in lieu of fractional shares in accordance with
Section 3.5.

(b) Exchange. As soon as practicable after the Effective Time, MusicCo will
cause the Exchange Agent to mail to each Person who was a holder of record of
Company Common Stock at the Effective Time: (i) a letter of transmittal (which
will specify that delivery will be effective, and risk of loss and title to any
Company Stock Certificates will pass, only upon delivery of the Company Stock
Certificates to the Exchange Agent and will be in such form and will have such
other provisions that are specified by MusicCo and reasonably acceptable to the
Company); and (ii) instructions for use in effecting the surrender of Company
Stock Certificates in exchange for MusicCo Certificates (together with any
dividend or distribution with respect thereto made after the Effective Time and
any cash to be paid in lieu of fractional shares pursuant to Section 3.5). Upon
surrender of a Company Stock Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by TCI, together with such
letter of transmittal, duly executed, and such other documents as may be
required by the Exchange Agent or such other agent, the holder of such Company
Stock Certificate will be entitled to receive in exchange therefor MusicCo
Certificates representing the number of whole shares of MusicCo Series A Common
Stock and one Right with respect to each whole share of MusicCo Series A Common
Stock that such holder has the right to receive pursuant to this Agreement
(together with any dividend or distribution with respect thereto made after the
Effective Time and any cash to be paid in lieu of fractional shares pursuant to
Section 3.5) and the Company Stock Certificate so surrendered will be canceled.
In the event of a transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, MusicCo Certificates
representing the proper number of shares of MusicCo Series A Common Stock and
Rights may be issued to a Person other than the Person in whose name the
surrendered Company Stock Certificate is registered if the Company Stock
Certificate representing such Company Common Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and effect such transfer
and by evidence reasonably satisfactory to MusicCo that any applicable stock
transfer tax has been paid. MusicCo will not directly or indirectly pay or
reimburse any Person for any transfer taxes of the type referred to in the
preceding sentence. If any MusicCo Certificates are to be delivered to a Person
other than the Person in whose name the Company Stock Certificates surrendered
in exchange therefor are registered, it will be a condition to the delivery of
such MusicCo Certificates that the Company Stock Certificates so surrendered are
properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise is proper and that the
Person requesting such transfer pay to the Exchange Agent any transfer or other
taxes payable by reason of the foregoing or establishes to the satisfaction of
the Exchange Agent that such taxes have been paid or are not required to be
paid.

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<PAGE> 127

(c) Certificates Not Exchanged. After the Effective Time, each outstanding
Company Stock Certificate will, until surrendered for exchange in accordance
with this Section 3.3, be deemed for all purposes to evidence ownership of the
number of whole shares of MusicCo Series A Common Stock and the whole number of
Rights into which the shares of Company Common Stock (which, prior to the
Effective Time, were represented thereby) are converted in accordance with
Section 3.1, together with the right to receive any dividend or distribution
with respect thereto made after the Effective Time and any cash to be paid in
lieu of fractional shares pursuant to Section 3.5.

(d) Expenses. Except as otherwise expressly provided in this Agreement,
MusicCo will pay all charges and expenses, including those of the Exchange
Agent, in connection with the exchange of shares of MusicCo Series A Common
Stock and Rights for shares of Company Common Stock, except any charges or
expenses that are otherwise solely the liability of one or more holders of
Company Common Stock. Any MusicCo Certificates deposited with the Exchange Agent
that remain unclaimed by the former stockholders of the Company after six months
following the Effective Time will be delivered to MusicCo upon its demand, and
any former stockholders of the Company who have not then complied with the
instructions for exchanging their Company Stock Certificates will thereafter
look only to MusicCo for exchange of Company Stock Certificates and for any
dividend or distribution with respect thereto made after the Effective Time and
any cash to be paid in lieu of fractional shares pursuant to Section 3.5.

SECTION 3.4 Distribution With Respect to Shares Represented by
Unsurrendered Company Stock Certificates. No dividends or other distributions
declared or made after the Effective Time with respect to MusicCo Series A
Common Stock with a record date after the Effective Time will be paid to the
holder of any unsurrendered Company Stock Certificate with respect to the shares
of MusicCo Series A Common Stock issuable upon surrender thereof until the
holder of such Company Stock Certificate surrenders such Company Stock
Certificate in accordance with Section 3.3. Subject to the effect of applicable
Legal Requirements, following surrender of any such Company Stock Certificate,
MusicCo will pay or cause to be paid, without interest, to the record holder of
MusicCo Certificates issued in exchange therefor, (a) at the time of such
surrender, the amount of cash in lieu of fractional shares to which such holder
is entitled pursuant to Section 3.5 and the amount of dividends or other
distributions by MusicCo with a record date after the Effective Time theretofore
paid with respect to such whole shares of MusicCo Series A Common Stock and (b)
at the appropriate payment date, the amount of dividends or other distributions
by MusicCo with a record date after the Effective Time but prior to surrender of
such Company Stock Certificate and a payment date subsequent to such surrender
payable with respect to such whole shares of MusicCo Series A Common Stock.

SECTION 3.5 No Fractional Shares.

(a) Cash Payment in Lieu of Fractional Shares. No certificates or scrip
representing fractional shares of MusicCo Series A Common Stock and Rights will
be issued upon the surrender of Company Stock Certificates pursuant to Section
3.3. Such fractional share interests will not entitle the owner thereof to any
rights as a security holder of MusicCo. In lieu of any such fractional shares of
MusicCo Series A Common Stock and any fractional Rights, each holder of Company
Common Stock entitled to receive shares of MusicCo Series A Common Stock and
Rights in the Merger, upon surrender of a Company Stock Certificate for exchange
pursuant to Section 3.3, will be entitled to receive an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying the MusicCo
Series A Common Stock Value by the fractional interest in MusicCo Series A
Common Stock and Rights to which such holder would otherwise be entitled (after
taking into account all shares of Company Common Stock held of record by such
holder immediately prior to the Effective Time).

(b) Deposit with Exchange Agent. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of MusicCo
Series A Common Stock in lieu of any fractional share interests, MusicCo will
promptly deposit with the Exchange Agent cash in the required amounts and the
Exchange Agent will mail such amounts without interest to such holders; provided
however, that no such amount will be paid to any holder with respect to any
Company Stock Certificate prior to the surrender by such holder of such Company
Stock Certificate.

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<PAGE> 128

SECTION 3.6 No Liability. None of TCI, MusicCo, Merger Sub, the Company,
the Surviving Corporation or the Exchange Agent will be liable to any holder of
shares of Company Common Stock for any shares of MusicCo Series A Common Stock,
Rights, dividends or distributions with respect thereto or cash payable in lieu
of fractional shares delivered to a state abandoned property administrator or
other public official pursuant to any applicable abandoned property, escheat or
similar law.

SECTION 3.7 Lost Certificates. If any Company Stock Certificate is lost,
stolen or destroyed, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Company Stock Certificate the shares of MusicCo Series A
Common Stock and Rights (and any dividend or distribution with respect thereto
made after the Effective Time and any cash payable in lieu of fractional shares
pursuant to Section 3.5) deliverable in respect thereof as determined in
accordance with the terms of this Agreement, subject to the condition that the
Person to whom the MusicCo Series A Common Stock and Rights (and any dividend or
distribution with respect thereto made after the Effective Time and any cash
payable in lieu of fractional shares pursuant to Section 3.5) are to be issued,
shall have (a) delivered to MusicCo an affidavit claiming such Company Stock
Certificate to be lost, stolen, or destroyed and (b) if required by MusicCo,
given MusicCo an indemnity satisfactory to MusicCo against any claim that may be
made against MusicCo with respect to the Company Stock Certificate alleged to
have been lost, stolen or destroyed.

SECTION 3.8 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time that are held by holders of such shares who have not voted in
favor of the Merger or consented thereto in writing and who have demanded
appraisal rights with respect thereto in accordance with Section 262 of the DGCL
(the "Dissenting Shares") will not be converted into or be exchangeable for the
right to receive MusicCo Series A Common Stock, Rights or any dividend or
distribution with respect thereto made after the Effective Time or any cash
payable in lieu of fractional shares pursuant to Section 3.5, but holders of
Dissenting Shares will be entitled to receive payment of the fair value of their
Dissenting Shares in accordance with the provisions of the DGCL and this Section
3.8. Any shares of Company Common Stock held by a stockholder who, prior to the
Effective Time, withdraws a demand for appraisal of such shares or loses the
right to appraisal as provided in the DGCL will not be considered Dissenting
Shares. The Company will give MusicCo and TCI prompt notice of any written
demands for appraisal of any shares of Company Common Stock, attempted
withdrawals of such demand and any other notices or other documents received by
the Company pursuant to the DGCL relating to stockholders' rights of appraisal.
The Company will make all payments required by the DGCL to be made in respect of
Dissenting Shares, including any costs assessed against the Company pursuant to
Section 262 of the DGCL, and none of TCI, MusicCo or any of their Affiliates
will directly or indirectly reimburse or otherwise provide funds to the Company
with respect to such payments.

SECTION 3.9 Treatment of Stock Options and Other Company Benefit Plans. The
Company will use its best efforts to cause each option that is outstanding prior
to the Effective Time that is not terminable pursuant to its terms upon
consummation of the transactions contemplated by this Agreement to be canceled
prior to or at the Effective Time and the Company will take all action necessary
to cause each such other option to be canceled if not otherwise exercised prior
to or at the Effective Time; provided however that the Company will not pay any
amount of cash or other consideration to the holder of any option in
consideration of the cancellation or termination of such option; and provided
further that with respect to each such option that remains outstanding after the
Effective Time (other than as a result of a breach by the Company of the
provisions of this Section) any Rights issued upon exercise of such option after
the Effective Time will terminate (or have terminated) at the time set forth in
the Rights Agreement. At or prior to the Effective Time, DMX will terminate all
Company Benefit Plans and the DMX Inc. Employee Handbook.

SECTION 3.10 Stockholders' Approval. Subject to the fiduciary duty
obligations under applicable Legal Requirements, the Company will take all
action necessary, in accordance with applicable Legal Requirements and the
Certificate of Incorporation and Bylaws of the Company, to have this Agreement,
the Merger and the transactions contemplated by this Agreement approved by the
holders of capital stock of the Company. The Company will notify TCI of the date
set for any stockholder action to be taken in connection with approval of the
Merger not later than 30 days prior to such date. The Board of Directors of the
Company will, subject to fiduciary duty obligations under applicable Legal
Requirements, recommend that holders of Company

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<PAGE> 129

Common Stock vote to adopt this Agreement and approve the Merger, and will use
reasonable best efforts to solicit from such holders proxies in favor of such
approval and adoption and take all other action necessary or helpful to secure
such favorable vote. Such efforts will include causing the Joint Proxy
Statement/Prospectus to include the recommendation of the Board of Directors of
the Company that its stockholders approve the Merger and related transactions;
provided however, that the Board of Directors of the Company may modify or
withdraw its recommendation if it determines, with the advice of outside
counsel, that it may be required to do so in the exercise of its fiduciary
duties. Unless the Company's Board of Directors releases TCI from such
obligation, TCI will cause all shares of Company Common Stock beneficially owned
(within the meaning of Rule 13d-3 under the Exchange Act) by it on the record
date for the Meeting to be voted in favor of the Merger.

SECTION 3.11 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company will be closed and no transfer of
shares of Company Common Stock will be made thereafter. In the event that, after
the Effective Time, Company Stock Certificates are presented to the Surviving
Corporation, they will be canceled and exchanged for the MusicCo Certificates
(and, if required, cash) as provided in Section 3.3(b) and Section 3.5.

SECTION 3.12 Assistance in Consummation of the Merger. Each of TCI,
MusicCo, Merger Sub and the Company will provide all reasonable assistance to,
and will cooperate with, each other to bring about the consummation of the
Merger as soon as possible in accordance with the terms and conditions of this
Agreement. TCI will cause MusicCo and Merger Sub to perform all of their
respective obligations in connection with this Agreement.

SECTION 3.13 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place (i) at the offices of Sherman & Howard
L.L.C., 633 Seventeenth Street, Suite 3000, Denver, Colorado, at 9:00 A.M. local
time on the date that is the first business day after the day on which the last
of the conditions set forth in Article VIII (excluding delivery of opinions and
certificates) is fulfilled or waived or (ii) at such other place and time as TCI
and the Company agree in writing. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date."

ARTICLE IV

THE CONTRIBUTION; THE RIGHTS

SECTION 4.1 Contribution to MusicCo. Subject to the satisfaction of the
conditions to the parties' obligations to effect the Merger, as set forth in
Article IX of this Agreement, at the Closing, TCI will execute and deliver the
Contribution Agreement and the Rights Agreement substantially in the forms
attached as Exhibits A and B, respectively, and pursuant thereto, issue the
Rights in accordance with the terms and conditions of the Rights Agreement and
cause each TCI System Owner (as defined in the Contribution Agreement) to assign
and contribute to MusicCo the right to receive Net DMX Revenues (as defined in
the Contribution Agreement) of such TCI System Owner pursuant to the terms and
conditions of the Contribution Agreement. The foregoing transactions by TCI and
the TCI System Owners pursuant to the Contribution Agreement are referred to in
this Agreement as the "Contribution."

SECTION 4.2 Consideration for Contribution. In consideration for the
Contribution, MusicCo will, concurrently with the Contribution, issue and
deliver to TCI, as designee of the TCI System Owners, 125,000,000 validly
issued, fully paid and nonassessable shares of MusicCo Series B Common Stock and
the Company Note (as defined in the Contribution Agreement).

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<PAGE> 130

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF TCI, MUSICCO AND MERGER SUB

TCI, MusicCo and Merger Sub jointly and severally represent and warrant to
the Company as follows:

SECTION 5.1 Organization and Qualification. Each of TCI, MusicCo and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as it is now being conducted. Each of TCI,
MusicCo and Merger Sub is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities make
such qualification necessary, except where the failure to be so qualified will
not, individually or in the aggregate, have a Material Adverse Effect on it.

SECTION 5.2 Capitalization.

(a) As of the date of this Agreement, the authorized capital stock of
MusicCo consists of: (i) 495,000,000 shares of common stock, par value $.01 per
share, divided into the following classes: 295,000,000 shares of common stock
designated as Series A Common Stock none of which are issued and outstanding and
200,000,000 shares of common stock, designated as Series B Common Stock one
share of which is issued and outstanding; and (ii) 5,000,000 shares of preferred
stock, par value $.01 per share, none of which are issued and outstanding.

(b) All shares of MusicCo Series A Common Stock to be issued in connection
with the Merger, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.

(c) Merger Sub is a direct, wholly owned subsidiary of MusicCo. MusicCo
will own all the issued and outstanding stock of (i) Merger Sub immediately
prior to the Effective Time and (ii) Surviving Corporation immediately after the
Effective Time.

SECTION 5.3 Authority Relative to this Agreement. Each of TCI, MusicCo and
Merger Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement by TCI, MusicCo and Merger Sub
have been duly authorized by the Boards of Directors of TCI, MusicCo and Merger
Sub and by MusicCo as the sole stockholder of Merger Sub, and no other corporate
proceedings on the part of TCI, MusicCo or Merger Sub are necessary to authorize
this Agreement and the transactions contemplated by this Agreement. This
Agreement constitutes a valid and binding obligation of each of TCI, MusicCo and
Merger Sub enforceable against each of them in accordance with its terms,
except, (i) as enforcement may be limited by bankruptcy, insolvency or other
similar Legal Requirements affecting the enforcement of creditors' rights
generally, (ii) as the availability of indemnification and other remedies may be
limited by federal and state securities laws and (iii) for limitations imposed
by general principles of equity.

SECTION 5.4 No Breach; Required Consents. The execution and delivery of
this Agreement by TCI, MusicCo and Merger Sub do not, and the consummation of
the transactions contemplated by this Agreement by TCI, MusicCo and Merger Sub
will not: (a) violate or conflict with the Certificate of Incorporation or
Bylaws of TCI, MusicCo or Merger Sub; (b) except as set forth on Schedule 5.4,
constitute a breach or default (or an event that with notice or lapse of time or
both would become a breach or default) or give rise to any Lien, third-party
right of termination, cancellation, modification or acceleration under any
agreement or undertaking to which TCI, MusicCo or Merger Sub is a party or by
which any of them is bound, except where such breach, default, Lien, third-party
right of termination, cancellation, modification or acceleration would not have
a Material Adverse Effect on TCI, MusicCo or Merger Sub; or (c) subject to
obtaining the approvals and making the filings described in Section 5.5,
constitute a violation of any applicable Legal Requirement, except where such
violation would not have a Material Adverse Effect on TCI, MusicCo or Merger
Sub.

SECTION 5.5 Governmental Consents and Approvals. Neither the execution and
delivery of this Agreement by TCI, MusicCo and Merger Sub nor the consummation
of the transactions contemplated by this Agreement by TCI, MusicCo and Merger
Sub will require any filing or registration with, or authorization, consent or
approval of, any Governmental Entity, except those required in connection, or in
compliance, with

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the provisions of (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (ii) the Securities Act of 1933, as amended (the
"Securities Act"), (iii) the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and (iv) the corporation, securities or blue sky laws or
regulations, or similar Legal Requirements, of various states of the United
States, and other than such filings, registrations, authorizations, consents or
approvals the failure of which to make or obtain would not have a Material
Adverse Effect on TCI, MusicCo or Merger Sub or prevent the consummation of the
transactions contemplated by this Agreement.

SECTION 5.6 Operations of MusicCo and Merger Sub. As of the date of this
Agreement, each of MusicCo and Merger Sub has engaged in no other business
activities other than this Agreement and the transactions contemplated by this
Agreement and has no material assets or liabilities other than its rights and
obligations under this Agreement.

SECTION 5.7 No Broker. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of TCI, MusicCo or Merger Sub.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to TCI, MusicCo and Merger Sub as
follows:

SECTION 6.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not, individually or in the aggregate, have
a Material Adverse Effect on the Company.

SECTION 6.2 Capitalization.

(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock. As of the date of this Agreement, 59,586,594
shares of Company Common Stock were issued and outstanding.

(b) Except as set forth on Schedule 6.2(b), there are no options, warrants,
calls, subscriptions or other rights, agreements or commitments of any kind, to
which the Company or any of its Subsidiaries is a party, relating to the issued
or unissued capital stock or other securities of the Company.

(c) All issued and outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable, are not
subject to, and have not been issued in violation of, any preemptive rights, and
have not been issued in violation of any federal or state securities laws or any
other Legal Requirement.

SECTION 6.3 Subsidiaries. The only Persons in which the Company directly or
through one or more of its Subsidiaries holds a 5% or greater equity interest
(each an "Equity Affiliate") are those listed on Schedule 6.3 to this Agreement,
which Schedule reflects the percentage and nature of the Company's ownership of
each Subsidiary and Equity Affiliate of the Company. Each of the Company's
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
formation and has the corporate or partnership power to carry on its business as
it is now being conducted or currently proposed to be conducted. Each of the
Company's Subsidiaries is duly qualified as a foreign corporation or partnership
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary except where the failure to be so
qualified will not have a Material Adverse Effect on such Subsidiary. All the
outstanding shares of capital stock of each of the Company's Subsidiaries that
is a corporation are validly issued, fully paid and nonassessable. The shares of
capital stock or partnership or other ownership interests in each of the
Company's Subsidiaries or Equity Affiliates that are owned by the Company

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or by a Subsidiary of the Company are owned free and clear of any Liens, are not
subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any federal or state securities laws or any
other Legal Requirement. Except as set forth on Schedule 6.3, there are not, as
of the date hereof, and at the Effective Time there will not be, any outstanding
options, warrants, calls or other rights, agreements or commitments of any
character, to which the Company or any of its Subsidiaries is a party, relating
to the issued or unissued capital stock, other securities or partnership or
other ownership interests in any of the Subsidiaries or Equity Affiliates of the
Company.

SECTION 6.4 Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement by the holders of the Company Common
Stock, to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by the
Company's Board of Directors, including at least a majority of the Disinterested
Directors (as defined in the Certificate of Incorporation of the Company).
Except for the approval of the holders of Company Common Stock, no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the transactions contemplated by this Agreement. The Board of
Directors of the Company has received the opinion of Houlihan Lokey Howard &
Zukin as financial advisor to the Company, to the effect that, as of the date of
this Agreement, the consideration to be received in the Merger by the Company's
stockholders is fair from a financial point of view. Subject to approval of the
stockholders of the Company in accordance with the DGCL, this Agreement
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms except (i) as enforcement may be limited by
bankruptcy, insolvency or other similar Legal Requirements affecting the
enforcement of creditors' rights generally, (ii) as the availability of
indemnification and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general principles of
equity.

SECTION 6.5 No Breach; Required Consents. The execution and delivery of
this Agreement by the Company does not, and the consummation of the transactions
contemplated by this Agreement by the Company will not: (a) subject to the
approval of holders of Company Common Stock, violate or conflict with the
Certificate of Incorporation or Bylaws of the Company; (b) except as set forth
on Schedule 6.5, constitute a breach or default (or an event that with notice or
lapse of time or both would become a breach or default) or give rise to any
Lien, third-party right of termination, cancellation, modification or
acceleration under any agreement or undertaking to which the Company is a party
or by which it is bound, except where such breach, default, Lien, third-party
right of termination, cancellation, modification, or acceleration would not have
a Material Adverse Effect on the Company; or (c) subject to obtaining the
consents, approvals or authorizations and making the filings or registrations
described in Section 6.6, constitute a violation of any Legal Requirement,
except where such violation would not have a Material Adverse Effect on the
Company.

SECTION 6.6 Consents and Approvals. Neither the execution and delivery of
this Agreement by the Company nor the consummation of the transactions
contemplated by this Agreement by the Company will require any filing or
registration with, or authorization, consent or approval of, any Governmental
Entity or any other Person, except those required in connection, or in
compliance, with the provisions of (i) the HSR Act, (ii) the Securities Act,
(iii) the Exchange Act and (iv) the corporation, securities or blue sky laws or
regulations, or similar Legal Requirements, of the various states of the United
States, and other than such other filings, registrations, authorizations,
consents or approvals the failure of which to make or obtain would not have a
Material Adverse Effect on the Company or prevent the consummation of the
transactions contemplated by this Agreement.

SECTION 6.7 Reports and Financial Statements.

(a) SEC Reports. The Company has filed all required forms, reports and
documents required to be filed with the SEC since October 1, 1994 (collectively,
the "SEC Reports"). As of their respective dates or effective dates and except
as the same may have been corrected, updated or superseded by means of a
subsequent filing with the SEC prior to the date of this Agreement, none of the
SEC Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by

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reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The Company has
delivered to TCI, in the forms filed with the SEC, all the SEC Reports.

(b) Financial Statements. The audited consolidated financial statements of
the Company contained in the SEC Reports comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and present fairly the Company's consolidated financial
condition and the results of its operations as of the relevant dates thereof and
for the periods covered thereby. The unaudited consolidated interim financial
statements of the Company contained in the SEC Reports comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared on a basis
consistent with prior interim periods (except as required by applicable changes
in GAAP or in SEC accounting policies) and include all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
Company's consolidated financial condition and results of operations for such
periods.

(c) Absence of Certain Changes. Except as set forth on Schedule 6.7(c),
since the date of the most recent balance sheet of the Company included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1996 (the "Most Recent Balance Sheet"), there has not been any: (i) transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) that, individually
or in the aggregate, has had, or would have, a Material Adverse Effect on the
Company (other than as a result of changes in laws or regulations of general
applicability or any changes resulting from general economic, financial, market
or industry-wide conditions); (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of the Company; or (iii) entry into any commitment
or transaction material to the Company and its Subsidiaries taken as a whole
(including any borrowing or sale of assets) except in the ordinary course of
business consistent with past practice.

(d) Absence of Undisclosed Liabilities. Except as disclosed on Schedule
6.7(d), the Company does not have any indebtedness, liability or obligation
required by GAAP to be reflected on a balance sheet that is not reflected or
reserved against in the Most Recent Balance Sheet other than liabilities,
obligations and contingencies that (i) were incurred after the date of the Most
Recent Balance Sheet in the ordinary course of business or (ii) would not, in
the aggregate, have a Material Adverse Effect on the Company.

SECTION 6.8 Compliance with Law; Litigation.

(a) Except as disclosed on Schedule 6.8(a), the Company and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
concessions, leases, instruments, orders and approvals (the "Company Permits")
of all courts, administrative agencies or commissions or other governmental
authorities or instrumentalities, domestic or foreign (each, a "Governmental
Entity") required to be held under applicable Legal Requirements, except such
Company Permits the failure of which to hold, individually or in the aggregate,
does not have and, in the future is not likely to have, a Material Adverse
Effect on the Company. To the Company's Knowledge, the Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
such failures to comply that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. To the Company's Knowledge, the
businesses of the Company and its Subsidiaries are not being conducted in
violation of any Legal Requirement, except such violations which, individually
or in the aggregate, would not have a Material Adverse Effect on the Company. No
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending, or, to the Knowledge of the Company,
threatened, nor has any Governmental Entity indicated to the Company in writing
an intention to conduct the same, other than those the outcome of which would
not have a Material Adverse Effect on the Company.

(b) Except as set forth on Schedule 6.8(b) to this Agreement, there is no
suit, action or proceeding pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries that has
had or is likely to have a Material Adverse Effect on the Company nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the

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Company or any of its Subsidiaries that has had or is likely to have a Material
Adverse Effect on the Company.

SECTION 6.9 Title to Assets. The Company has good and merchantable title to
all material assets reflected on the Most Recent Balance Sheet, free and clear
of any Lien except: (a) landlord's Liens and Liens for property taxes not
delinquent; (b) statutory Liens that were created in the ordinary course of
business and do not materially detract from the value of such assets or
materially impair the use thereof in the operation of the Company's business;
(c) the Liens listed on Schedule 6.9; (d) leased interests in property owned by
others; and leased interests in property leased to others; and (e) zoning,
building or similar restrictions, easements, rights-of-way, reservations of
rights, conditions, or other restrictions or encumbrances relating to or
affecting real property that do not, individually or in the aggregate,
materially interfere with the use of such real property in the operation of the
Company's business.

SECTION 6.10 Labor and Employee Matters. The Company is not a party to any
contract with any labor organization and has not agreed to recognize any union
or other collective bargaining unit. As of the date of this Agreement, no union
or other collective bargaining unit has been certified as representing any of
the Company's employees. To the Company's Knowledge, as of the date of this
Agreement, there is no representation or organizing effort pending or threatened
against or affecting or involving the Company. The Company and its Subsidiaries
are in compliance with all applicable Legal Requirements relating to the
employment of employees, including any obligations relating to employment
standards legislation, pay equity, occupational health and safety, labor
relations and human rights legislation except for such failures to comply as do
not have, and are not likely to have, a Material Adverse Effect on the Company.
Schedule 6.10 sets forth all agreements or arrangements with any employee of the
Company, whether oral or in writing, with respect to such employee's employment
with the Company other than agreements or arrangements otherwise disclosed on
Schedule 6.11(a).

SECTION 6.11 ERISA.

(a) Schedule 6.11(a) sets forth all "employee benefit plans," as defined in
ERISA, and all other material employee benefit arrangements, programs or payroll
practices, including severance pay, sick leave, vacation pay, salary
continuation for disability, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement,
employee assistance and employee discounts, that the Company or any trade or
business (whether or not incorporated) that is treated as a single employer with
the Company under Section 414(b), (c), (m) or (o) of the Code ("ERISA
Affiliate") maintains or has an obligation to make contributions (the "Company
Benefit Plans").

(b) Neither the Company nor any ERISA Affiliate has incurred any
unsatisfied withdrawal liability, as defined in Section 4201 of ERISA, with
respect to any multiemployer plan, nor has any of them incurred any liability
due to the termination or reorganization of any multiemployer plan, except any
such liability that would not have a Material Adverse Effect on the Company. To
the Knowledge of the Company, neither the Company nor any of its ERISA
Affiliates reasonably expects to incur any liability due to a withdrawal from or
termination or reorganization of a multiemployer plan, except any such liability
that would not have a Material Adverse Effect on the Company.

(c) Each Company Benefit Plan that is intended to qualify under Section 401
of the Code and the trust maintained pursuant thereto has been determined to be
exempt from federal income taxation under Section 501 of the Code by the
Internal Revenue Service, and to the Knowledge of the Company, nothing has
occurred with respect to any such plan since such determination that is likely
to result in the loss of such exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code. Each Company Benefit Plan has
at all times been maintained in all material respects, by its terms and in
operation, in accordance with all applicable Legal Requirements.

(d) All contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under the Company
Benefit Plans or pursuant to applicable Legal Requirements (without regard to
any waivers granted under Section 412 of the Code) to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any

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valid extension or grace period) and no accumulated funding deficiency exists
with respect to any of the Company Benefit Plans subject to Section 412 of the
Code.

(e) To the Knowledge of the Company, there have been no violations of ERISA
or the Code with respect to the filing of applicable reports, documents and
notices regarding the Company Benefit Plans with the Secretary of Labor and the
Secretary of the Treasury or the furnishing of such reports, documents and
notices to the participants or beneficiaries of the Company Benefit Plans,
except such violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.

(f) There are no pending actions, claims or lawsuits that have been
asserted or instituted against the Company Benefit Plans, the assets of any of
the trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Company Benefit Plans, with respect to the
operation of such plans (other than routine benefit claims), nor does the
Company have Knowledge of facts that reasonably could be expected to form the
basis for any such action, claim or lawsuit, except any such actions, claims or
lawsuits that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.

(g) Except as provided in Schedule 6.11(g) and as may be required under
Section 4980B of the Code, neither the Company nor any ERISA Affiliate maintains
any Company Benefit Plan that provides medical or welfare benefits to former
employees.

SECTION 6.12 Approval.

(a) The Board of Directors of the Company at a meeting duly called and
held: (i) determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders; (ii) approved the Merger and this
Agreement and the transactions contemplated by this Agreement in accordance with
the provisions of Section 251 of the DGCL; (iii) recommended the approval of
this Agreement and the Merger by the holders of the Company Common Stock and
directed that the Merger be submitted for consideration by the Company's
stockholders at the Meeting; and (iv) adopted a resolution having the effect of
causing the Company not to be subject (A) to the super majority voting
provisions of the Certificate of Incorporation of the Company and (B) to the
extent applicable, and if applicable, to the extent permitted by applicable
Legal Requirements, to Section 203 of the DGCL.

(b) The vote of a majority of the outstanding shares of Company Common
Stock is the vote required for the adoption and approval of this Agreement, the
Merger, and the other transactions contemplated by this Agreement.

SECTION 6.13 Financial Advisor. Except for Houlihan Lokey Howard & Zukin,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. There has been delivered to TCI a true and complete copy of the
agreement pursuant to which Houlihan Lokey Howard & Zukin has been retained to
act as financial advisor to the Company in connection with the Merger.

SECTION 6.14 Taxes. Except as set forth on Schedule 6.14, the Company and
each of its Subsidiaries have timely filed all Tax returns required to be filed
by any of them and have timely paid (or the Company has paid on its behalf) or
have established an adequate reserve for the payment of, all Taxes owed in
respect of the periods covered by such returns. The information contained in
such Tax returns is complete and accurate in all material respects. Except as
set forth on Schedule 6.14, neither the Company nor any Subsidiary of the
Company is delinquent in the payment of any material Tax or other amount owed to
any Governmental Entity. Except as set forth on Schedule 6.14, there are no
claims or investigations pending or, to the Company's Knowledge, threatened
against the Company for past Taxes, except claims and investigations that would
not have a Material Adverse Effect on the Company, and adequate provision for
the claims or investigations set forth on Schedule 6.14 has been made as
reflected on the Most Recent Balance Sheet. Except as set forth on Schedule
6.14, the Company has not waived or extended any applicable statute of
limitations relating to the assessment of any Taxes that would be payable by the
Company. For the purposes of this Agreement, the term "Tax" includes all
federal, state, local and foreign income, profits, estimated, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties

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and assessments of any nature whatsoever together with all interest, penalties
and additions imposed with respect to such amounts.

SECTION 6.15 Environmental Laws. Except as described on Schedule 6.15:

(a) each of the Company and its Subsidiaries is in compliance in all
respects with all Environmental Laws, except where the failure to so comply
would not have a Material Adverse Effect on the Company; and

(b) no orders, directions or notices have been issued pursuant to any
Environmental Law and no Governmental Entity has submitted to any of the Company
and its Subsidiaries any request for information pursuant to any Environmental
Law.

SECTION 6.16 Transactions with Affiliates. Except as set forth on Schedule
6.16, there is no lease, sublease, indebtedness, contract, agreement,
commitment, understanding or other arrangement of any kind entered into by the
Company with any officer, director or stockholder of the Company or any
"affiliate" or "associate" of any of them (as those terms are defined in the
Exchange Act), except, in each case, for compensation paid to directors and
officers consistent with previously established policies (including normal merit
increases in such compensation in the ordinary course of business),
reimbursements of ordinary and necessary expenses incurred in connection with
their employment and amounts paid pursuant to Company Benefit Plans.

ARTICLE VII

CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 7.1 Conduct of Business of the Company. Prior to the Effective
Time, except as set forth on Schedule 7.1 to this Agreement, without the prior
consent of TCI:

(a) The Company will conduct, and will cause each of its Subsidiaries
to conduct, its business in the ordinary course, and will use, and will
cause each of its Subsidiaries to use, its reasonable best efforts to
preserve intact its present business organization and to preserve
relationships with customers, suppliers and others having business dealings
with them.

(b) Except as required or permitted by this Agreement the Company will
not, and will not permit any of its Subsidiaries to: (i) sell or pledge or
agree to sell or pledge any capital stock or other ownership interest in
any of its Subsidiaries; (ii) amend or propose to amend the Certificate or
Articles of Incorporation or Bylaws of the Company or any of its
Subsidiaries; (iii) split, combine or reclassify its outstanding capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of capital stock
of, or other ownership interests in, the Company or any of its
Subsidiaries, or declare, set aside or pay any dividend or other
distribution to stockholders of the Company; (iv) directly or indirectly
redeem, purchase or otherwise acquire or agree to redeem, purchase or
otherwise acquire any shares of capital stock of, or other ownership
interests in, the Company or any of its Subsidiaries; or (v) agree to do
any of the foregoing.

(c) The Company will not, and will not permit any of its Subsidiaries
to: (i) issue, deliver or sell or agree to issue, deliver or sell any
shares of capital stock of, or other ownership interests in, the Company or
any of its Subsidiaries, or any option, warrant or other right to acquire,
or any security convertible into, shares of capital stock of, or other
ownership interests in, the Company or any of its Subsidiaries, except as
required or permitted by this Agreement; (ii) acquire, lease or dispose of
any assets, other than in the ordinary course of business consistent with
past practice; (iii) create, assume or incur any additional indebtedness
for borrowed money or mortgage, pledge or subject to any Lien any of its
assets or enter into any other material transaction other than in each case
in the ordinary course of business consistent with past practice; (iv) make
any payments with respect to any indebtedness of the Company or its
Subsidiaries except such payments that are scheduled to come due prior to
the Effective Time; (v) acquire by merging or consolidating with, or by
purchasing a substantial ownership interest in, or by any other method, any
business or any other Person, in each case in this clause (v) that are
material,

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individually or in the aggregate, to the Company and its Subsidiaries taken
as a whole; or (vi) agree to do any of the foregoing.

(d) Except as required to comply with applicable Legal Requirements or
existing Company Benefit Plans or as otherwise contemplated by this
Agreement, the Company will not, and will not permit any of its
Subsidiaries to: (i) adopt or terminate or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other Company Benefit Plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any
director, officer or current or former employee; (ii) increase in any
manner the compensation or benefits of any director, officer or employee
(except normal increases in the ordinary course of business consistent with
past practice); (iii) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Company Benefit
Plan; (iv) take any action to fund or in any other way secure the payment
of compensation or benefits under any employee plan, agreement, contract or
arrangement or Company Benefit Plan (except in the ordinary course of
business consistent with past practice); or (v) agree to do any of the
foregoing.

(e) The Company will not take or agree to take, and will cause its
Subsidiaries not to take or agree to take, any action that would: (i) make
any representation or warranty of the Company set forth in this Agreement
untrue or incorrect so as to cause the condition set forth in Section
9.3(a) of this Agreement not to be fulfilled as of the Effective Time; or
(ii) result in any of the other conditions of this Agreement set forth in
Section 9.1 or Section 9.3 of this Agreement not to be satisfied as of the
Effective Time.

SECTION 7.2 Conduct of Business of TCI. Prior to the Effective Time, except
as contemplated or permitted by this Agreement TCI will not take or agree to
take, and will cause its Subsidiaries not to take or agree to take, any action
that would (i) make any representation or warranty of TCI, MusicCo or Merger Sub
set forth in this Agreement untrue or incorrect so as to cause the condition set
forth in Section 9.2(a) of this Agreement not to be fulfilled as of the
Effective Time or (ii) result in any of the other conditions set forth in
Section 9.1 or Section 9.2 of this Agreement not to be satisfied as of the
Effective Time.

SECTION 7.3 Remedies for Breach. The sole remedies (i) of TCI, MusicCo and
Merger Sub for any breach by the Company of Section 7.1(e), and (ii) of the
Company for any breach by TCI of Section 7.2, will be injunctive relief or
termination of this agreement pursuant to Article X.

ARTICLE VIII

ADDITIONAL AGREEMENTS

SECTION 8.1 Access and Information. Except as otherwise required pursuant
to a contractual obligation that exists as of the date of this Agreement, each
of the Company and TCI and their respective Subsidiaries will afford to the
other and to the other's accountants, counsel and other representatives full
access during normal business hours (and at such other times as the parties may
mutually agree) throughout the period prior to the Effective Time to all of its
properties, books, contracts, commitments, records and personnel. Each of the
Company and TCI will hold, and will cause their respective Subsidiaries to hold
in confidence all such information in accordance with the terms of the
Confidentiality Agreement dated October 2, 1996 between TCI and the Company.

SECTION 8.2 SEC Filings.

(a) The Company, MusicCo and TCI will prepare jointly, and, as soon as
reasonably practicable after the date of this Agreement, file with the SEC a
joint proxy statement/registration statement (the "Preliminary Joint Proxy
Statement/Prospectus") comprising preliminary proxy materials of the Company
under the Exchange Act with respect to the Merger and a Registration Statement
on Form S-4 and preliminary prospectus of MusicCo and TCI under the Securities
Act with respect to the MusicCo Series A Common Stock to be issued in the Merger
and the Rights to be granted pursuant to the Rights Agreement, and will
thereafter use their respective reasonable best efforts to respond to any
comments of the SEC with respect thereto and to cause a definitive joint proxy
statement/registration statement (including all supple-

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ments and amendments thereto, the "Joint Proxy Statement/Prospectus") and proxy
to be mailed to the Company's stockholders as promptly as practicable.

(b) As soon as reasonably practicable after the date hereof, the Company,
MusicCo and TCI will prepare and file any other filings relating to the Merger
and the other transactions contemplated hereby that are required to be filed by
each under the Exchange Act and other applicable Legal Requirements, including,
if required, in the case of TCI, a registration statement on Form 8-A under the
Exchange Act with respect to the Rights and, in the case of MusicCo, a
registration statement on Form 8-B under the Exchange Act with respect to the
MusicCo Series A Common Stock (collectively "Other Filings"), and will use their
reasonable best efforts to respond to any comments of the SEC or any other
appropriate government official with respect thereto.

(c) The Company, on the one hand, and MusicCo and TCI, on the other, will
cooperate with each other and provide all information necessary in order to
prepare the Preliminary Joint Proxy Statement/Prospectus, the Joint Proxy
Statement/Prospectus and the Other Filings (collectively "SEC Filings") and will
provide promptly to the other party any information that such party may obtain
that could necessitate amending any such document.

(d) Each of the Company and TCI will notify the other promptly of the
receipt of any comments from the SEC or its staff or any other government
official and of any requests by the SEC or its staff or any other government
official for amendments or supplements to any of the SEC Filings or for
additional information and will supply the other with copies of all
correspondence between the Company or any of its representatives or TCI or
MusicCo or any of their respective representatives, as the case may be, on the
one hand, and the SEC or its staff or any other government official, on the
other hand, with respect thereto. If at any time prior to the Effective Time,
any event occurs that should be set forth in an amendment of, or a supplement
to, any of the SEC Filings, the Company, MusicCo and TCI promptly will prepare
and file such amendment or supplement and will distribute such amendment or
supplement as required by applicable Legal Requirements, including, in the case
of an amendment or supplement to the Joint Proxy Statement/Prospectus, mailing
such supplement or amendment to the Company's stockholders.

(e) TCI covenants that the SEC Filings (other than any information provided
by the Company for inclusion in the SEC Filings) (i) will comply in all material
respects with the Securities Act and the Exchange Act and (ii) will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading.

(f) The Company covenants that the SEC Filings (other than any information
provided by TCI for inclusion in the SEC Filings) (i) will comply in all
material respects with the Securities Act and the Exchange Act and (ii) will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

(g) Expenses. Each party will be responsible for all expenses incurred by
it in complying with this Section 8.2, including all registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel,
applicable blue-sky fees and expenses and the expense of any special audit
incident to or required by the registration or proxy solicitation contemplated
by this Agreement.

(h) Indemnification.

(i) TCI and MusicCo, jointly and severally, will indemnify, defend,
and hold harmless the Company, its officers, directors, employees and
agents and each other Person, if any, who controls any of the foregoing
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities
(collectively, "Losses"), joint or several, to which any of the foregoing
may become subject under the Securities Act or the Exchange Act or
otherwise, insofar as such Losses (or actions in respect thereof) arise out
of or are based upon (A) an untrue statement or alleged untrue statement of
a material fact contained in any SEC Filing, or (B) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements

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<PAGE> 139

therein, in light of the circumstances under which they were made, not
misleading, provided that such misstatement or omission was based on or
omitted from information provided by TCI or MusicCo in writing for
inclusion in the SEC Filings or was made in reliance upon and in conformity
with such information. TCI promptly will reimburse the Company and each
such officer, director, employee, agent and controlling Person for any
legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such Losses (or action in
respect thereof).

(ii) If this Agreement is terminated prior to the consummation of the
Merger, the Company will indemnify, defend and hold harmless each of TCI,
MusicCo and Merger Sub and their officers and directors and each other
Person, if any, who controls any of the foregoing within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against
any Losses, joint or several, to which any of the foregoing may become
subject under the Securities Act or the Exchange Act or otherwise, insofar
as such Losses (or actions in respect thereof) arise out of or are based
upon (A) an untrue statement or alleged untrue statement of a material fact
contained in any SEC Filing or (B) the omission or alleged omission to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that the misstatement or omission was based
on or omitted from information provided by the Company in writing for use
in the SEC Filings or was made in reliance upon and in conformity with such
information. The Company promptly will reimburse TCI, MusicCo and Merger
Sub and each such officer, director and controlling Person for any legal or
any other expenses reasonably incurred by any of them in connection with
investigating or defending any such Losses (or action in respect thereof).

(iii) For purposes of this Section 8.2, (A) "Indemnifying Party" means
the Person having an obligation hereunder to indemnify any other Person
pursuant to this Section 8.2, (B) "Indemnified Party" means the Person
having the right to be indemnified pursuant to this Section 8.2 and (C) any
information concerning the Company that is included in any SEC Filing that
is provided to the Company or its counsel for review within a reasonable
period before filing or use thereof and to which the Company has not
provided written notice of objection to MusicCo or TCI will be deemed to
have been provided by the Company for inclusion in such SEC Filing.
Whenever any claim for indemnification arises under this Section 8.2, the
Indemnified Party will promptly notify the Indemnifying Party in writing of
such claim and, when known, the facts constituting the basis for such claim
(in reasonable detail). Failure by the Indemnified Party so to notify the
Indemnifying Party will not relieve the Indemnifying Party of any liability
hereunder except to the extent that such failure materially prejudices the
Indemnifying Party.

(iv) After such notice, if the Indemnifying Party undertakes to defend
any such claim, then the Indemnifying Party will be entitled, if it so
elects, to take control of the defense and investigation with respect to
such claim and to employ and engage attorneys of its own choice to handle
and defend such claim, at the Indemnifying Party's cost, risk and expense,
upon notice to the Indemnified Party of such election, which notice
acknowledges the Indemnifying Party's obligation to provide indemnification
hereunder. The Indemnifying Party will not settle any third-party claim
that is the subject of indemnification without the written consent of the
Indemnified Party, which consent will not be unreasonably withheld;
provided however, that the Indemnifying Party may settle a claim without
the Indemnified Party's consent if the settlement (A) makes no admission or
acknowledgment of liability or culpability with respect to the Indemnified
Party, (B) includes a complete release of the Indemnified Party and (C)
does not require the Indemnified Party to make any payment or forego or
take any action. The Indemnified Party will cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the
investigation, trial and defense of any lawsuit or action with respect to
such claim and any appeal arising therefrom (including the filing in the
Indemnified Party's name of appropriate cross claims and counterclaims) and
the Indemnifying Party will reimburse the Indemnified Party for all
reasonable direct out-of-pocket expenses incurred by the Indemnified Party
in connection with such cooperation. The Indemnified Party may, at its own
expense, participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal
arising therefrom. If, after receipt of a claim notice pursuant to Section
8.2(h)(iii), the Indemnifying Party does not undertake to defend any such
claim, the Indemnified Party may, but will have no obligation to, contest
any lawsuit or action

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<PAGE> 140

with respect to such claim and the Indemnifying Party will be bound by the
result obtained with respect thereto by the Indemnified Party (including
the settlement thereof without the consent of the Indemnifying Party). If
there are one or more defenses available to the Indemnified Party that
conflict with those available to the Indemnifying Party, the Indemnified
Party will have the right, at the expense of the Indemnifying Party, to
participate in the defense of the lawsuit or action; provided however, that
the Indemnified Party may not settle such lawsuit or action without the
consent of the Indemnifying Party, which consent will not be unreasonably
withheld.

(v) If the indemnification provided for in this Section 8.2(h) is for
any reason unavailable to the Indemnified Party in respect of any Losses
(or action in respect thereof) then the Indemnifying Party will, in lieu of
indemnifying the Indemnified Party, contribute to the amount paid or
payable by the Indemnified Party as a result of such Losses (or action in
respect thereof), in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other with respect to the statement or omission
that resulted in such Losses (or action in respect thereof) as well as any
other relevant equitable considerations. Relative fault with respect to an
untrue or alleged untrue statement or omission of a material fact will be
determined by reference to whether the untrue or alleged untrue statement
or omission of a material fact related to information supplied by the
Indemnifying Party on the one hand or the Indemnified Party on the other,
the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by the Indemnified Party as a result
of the Losses (or action in respect thereof) referred to above will be
deemed to include any legal or other expenses reasonably incurred by the
Indemnified Party in connection with investigating, trying or defending any
such action or claim. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

SECTION 8.3 Meeting of Stockholders of the Company. The Company will take
all action necessary, in accordance with the DGCL and the Certificate of
Incorporation and Bylaws of the Company, to duly call, give notice of, convene
and hold a meeting of its stockholders as promptly as practicable, to consider
and vote upon the adoption and approval of this Agreement (as a plan of merger
under Section 251 of the DGCL), the Merger and the other transactions
contemplated by this Agreement (the "Meeting"), to the extent such approval is
required by the DGCL and the Certificate of Incorporation of the Company.

SECTION 8.4 Compliance with the Securities Act. Prior to the Closing Date,
the Company will cause to be delivered to TCI a letter from the Company,
identifying all Persons who were, in its opinion, at the time of the Meeting,
"affiliates" of the Company as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act. TCI may cause the MusicCo Certificates
evidencing MusicCo Series A Common Stock issued to such Persons to bear a legend
referring to the applicability of paragraphs (c) and (d) of Rule 145 under the
Securities Act.

SECTION 8.5 Listing. TCI will use its reasonable best efforts to cause the
shares of MusicCo Series A Common Stock issued in connection with the Merger to
be quoted on NASDAQ, subject to official notice of issuance.

SECTION 8.6 Reasonable Best Efforts. Subject to the fiduciary duty
obligations of the Board of Directors of the Company, each of the parties to
this Agreement will use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements to consummate
and make effective the transactions contemplated by this Agreement in the most
expeditious manner practicable, including the satisfaction of all conditions to
the Merger.

SECTION 8.7 Public Announcements. No party to this Agreement will make any
public announcements or otherwise communicate with any news media with respect
to this Agreement or any of the transactions contemplated by this Agreement
without prior consultation with the other parties as to the timing and contents
of any such announcement as may be reasonable under the circumstances; provided
however, that nothing contained herein will prevent any party from promptly
making all filings with Governmental Entities

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<PAGE> 141

that may, in its reasonable judgment, be required or advisable in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement so long as such party gives timely
notice to the other parties of the anticipated disclosure and cooperates with
the other parties in designing reasonable procedural and other safeguards to
preserve, to the maximum extent possible, the confidentiality of all information
furnished by the other parties pursuant to this Agreement.

SECTION 8.8 Notification. In the event of, or after obtaining knowledge of
the occurrence or threatened occurrence of, any fact or circumstance that would
cause or constitute a breach of any of its representations and warranties set
forth herein, each party to this Agreement promptly will give notice thereof to
the other parties and will use its best efforts to prevent or remedy such
breach.

SECTION 8.9 HSR Act Filings. TCI and the Company will each make an
appropriate filing of a Notification and Report Form pursuant to the HSR Act no
later than 15 business days after the date of this Agreement. Each such filing
will request early termination of the waiting period imposed by the HSR Act. The
Company and TCI each will use its reasonable best efforts to respond as promptly
as reasonably practicable to any inquiries received from the Federal Trade
Commission (the"FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Entity in connection with antitrust
matters; provided however, that nothing contained herein will be deemed to
preclude either the Company or TCI from negotiating reasonably with any
Governmental Entity regarding the scope and content of any such requested
information or documentation. The Company and TCI each will use their respective
reasonable best efforts to overcome any objections that may be raised by the
FTC, the Antitrust Division or any other Governmental Entity having jurisdiction
over antitrust matters. Notwithstanding the foregoing, TCI will not be required
to make any significant change in the operations or activities of the business
(or any material assets employed therein) of TCI or any of its Affiliates if TCI
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of TCI or any of its Affiliates.

SECTION 8.10 Further Assurances. Each of the parties to this Agreement will
execute such documents and other instruments and take such further actions as
may be reasonably necessary or desirable to carry out the provisions of this
Agreement and to consummate the transactions contemplated by this Agreement or,
at and after the Closing Date, to evidence the consummation of the transactions
contemplated by this Agreement. Upon the terms and subject to the conditions of
this Agreement, each of the parties to this Agreement will take or cause to be
taken all actions and to do or cause to be done all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement and to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings.

SECTION 8.11 Employee Benefits.

(a) To the extent permitted under TCI's employee benefits plans, each
employee of the Surviving Corporation who was an employee of the Company
immediately prior to the Effective Time (i) will receive credit for past service
with the Company for purposes of eligibility and vesting under the Surviving
Corporation's employee benefit plans, as defined in Section 3(3) of ERISA, to
the extent such service was credited under the Company Benefit Plans on the
Closing Date, (ii) will not be subject to any waiting periods or limitations on
benefits for pre-existing conditions under the Surviving Corporation's employee
benefit plans, including any group health and disability plans, except to the
extent such employees were subject to such limitations under the Company Benefit
Plans and (iii) will receive credit for past service with the Company for
purposes of eligibility and vesting under the Surviving Corporation's plans and
policies with respect to seniority benefits, including vacation and sick leave.

SECTION 8.12 No Solicitation. Subject to the fiduciary duties of the Board
of Directors of the Company, neither the Company nor any of its Subsidiaries or
any of their respective officers, directors, representatives or agents will take
any action to (i) initiate the submission of any Acquisition Proposal, (ii)
enter into any agreement with respect to any Acquisition Proposal or (iii)
participate in negotiations with any Person in connection with any Acquisition
Proposal. The Company will promptly communicate to TCI any solicitation

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<PAGE> 142

or inquiry received by the Company and the terms of any proposal or inquiry that
it may receive in respect of any Acquisition Proposal, or of any such
information requested from it or of any such negotiations or discussions being
sought to be initiated with it. Nothing in this Section 8.12 shall be construed
as prohibiting the Board of Directors of the Company from (i) making any
disclosure to the Company's stockholders, or (ii) responding to any unsolicited
proposal or inquiry by advising the Person making such proposal or inquiry of
the terms of this Section 8.12. "Acquisition Proposal" means any proposed (i)
merger, consolidation or similar transaction involving the Company, (ii) sale,
lease or other disposition directly or indirectly by merger, consolidation,
share exchange or otherwise of all or any substantial part of the assets of the
Company or its Subsidiaries, (iii) issue, sale or other disposition of
securities representing 50% or more of the voting power of the Company Common
Stock or (iv) transaction in which any Person acquires beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of, or the right to
acquire beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act) shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 50% or more of the outstanding Company
Common Stock.

SECTION 8.13 Indemnification of Executives.

(a) Indemnification. MusicCo will cause the Surviving Corporation to, and,
should the Surviving Corporation fail or be unable to do so, MusicCo shall,
indemnify, defend, and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer or director of the Company (each, an "Executive"), against all
losses, expenses, damages, liabilities, costs, judgments, and amounts paid in
settlement in connection with any claim, action, suit, proceeding, or
investigation based on or arising out of, in whole or in part, any actions or
omissions of such Executive as an officer or director of the Company on or prior
to the Effective Time, including actions or omissions relating to any of the
transactions contemplated by this Agreement until the expiration of the
applicable statutes of limitation, to the fullest extent permitted under the
DGCL and the Certificate of Incorporation and Bylaws of the Company as in effect
on the date of this Agreement. MusicCo will cause the Surviving Corporation to
pay expenses in advance of the final disposition of any such claim, action,
suit, proceeding, or investigation to each Executive to the fullest extent
permitted by applicable Legal Requirements upon receipt of any undertaking
required or contemplated by applicable Legal Requirements. Without limiting the
foregoing, in any case in which approval of or a determination by the Surviving
Corporation is required to effectuate any indemnification, (i) the Executives
will conclusively be deemed to have met the applicable standards for
indemnification with respect to any actions or omissions of such Executives as
an officer or director of the Company on or prior to the Effective Time relating
to any of the transactions contemplated by this Agreement (including actions
relating to the Company's European operations) and (ii) MusicCo shall cause the
Surviving Corporation to direct, at the election of any Executive, that the
determination of any such approval shall be made by independent counsel selected
by the Executive and reasonably acceptable to MusicCo, it being agreed that
Irell & Manella LLP shall be acceptable to MusicCo. If any such claim, action,
suit, proceeding, or investigation is brought against any Executive (whether
arising before or after the Effective Time), (i) the Executive may retain
counsel satisfactory to him or her that is reasonably acceptable, and (ii)
MusicCo will pay or will cause the Surviving Corporation to pay all reasonable
fees and expenses of such counsel for the Executive. Neither MusicCo nor the
Surviving Corporation shall have any obligation hereunder to any Executive when
and if a court of competent jurisdiction shall ultimately determine, after
exhaustion of all avenues of appeal, that such Executive is not entitled to
indemnification hereunder.

(b) Successors. If MusicCo or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
will not be the continuing or surviving Person of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provisions will be made so that the
successors and assigns of MusicCo or the Surviving Corporation assume the
obligations set forth in this Section 8.13.

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ARTICLE IX

CONDITIONS PRECEDENT

SECTION 9.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger will be subject to the
fulfillment at or prior to the Effective Time of the following conditions:

(a) This Agreement, the Merger and the transactions contemplated by
this Agreement shall have been duly approved by the holders of the Company
Common Stock.

(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been earlier terminated and any
other notices or approvals or consents required by or of any Governmental
Entity with respect to the transactions contemplated by this Agreement
noted with an asterisk on Schedule 5.4 or Schedule 6.5 shall have been
either filed or obtained.

(c) The Registration Statement on Form S-4 that includes the Joint
Proxy Statement/Prospectus shall have become effective in accordance with
the provisions of the Securities Act and any necessary state securities law
approvals shall have been obtained and no stop orders with respect thereto
shall have been issued by the SEC and remain in effect.

(d) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any Legal Requirement that remains in effect and has
the effect of making the transactions contemplated by this Agreement
illegal or otherwise prohibiting the transactions contemplated by this
Agreement, or that questions the validity or the legality of the
transactions contemplated by this Agreement and that could reasonably be
expected to materially and adversely affect the value of the business of
the Company, it being agreed that each party will use its reasonable best
efforts to have any such injunction lifted.

SECTION 9.2 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger will be subject to the
fulfillment at or prior to the Effective Time of the additional following
conditions:

(a) TCI, MusicCo and Merger Sub shall have performed in all material
respects their agreements contained in this Agreement required to be
performed by them at or prior to the Effective Time and the representations
and warranties of TCI, MusicCo and Merger Sub set forth in this Agreement
if qualified by materiality are true in all respects and if not so
qualified are true in all material respects when made and at and as of the
Effective Time as if made at and as of such time and the Company shall have
received a certificate of TCI, MusicCo and Merger Sub executed on behalf of
each such corporation by the President or a Vice President of such
corporation to that effect.

(b) MusicCo Series A Common Stock issued in connection with the Merger
shall have been authorized for quotation on NASDAQ upon official notice of
issuance.

(c) The Company shall have received the opinion of counsel to TCI,
MusicCo and Merger Sub (which counsel may be an employee of TCI)
substantially to the effect set forth in Exhibit C.

(d) The transactions contemplated by the Contribution Agreement shall
have been consummated on the terms and conditions set forth therein.

SECTION 9.3 Conditions to Obligations of TCI, MusicCo and Merger Sub to
Effect the Merger. The obligations of TCI, MusicCo and Merger Sub to effect the
Merger will be subject to the fulfillment at or prior to the Effective Time of
the additional following conditions:

(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed by it at or
prior to the Effective Time and, except as contemplated or permitted by
this Agreement, the representations and warranties of the Company set forth
in this Agreement if qualified by materiality are true in all respects and
if not so qualified are true in all material respects when made and at and
as of the Effective Time as if made at and as of such time, and TCI,

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<PAGE> 144

MusicCo and Merger Sub shall have received a certificate of the Company
executed on behalf of the Company by the President or an Executive Vice
President of the Company to that effect.

(b) Those consents of third parties noted with an asterisk on Schedule
5.4 or Schedule 6.5 shall have been obtained.

(d) There shall have been no material adverse change in the financial
condition, results of operations, assets, liabilities or business of the
Company since the date of this Agreement.

(e) TCI and MusicCo shall have received the opinion of Irell & Manella
LLP substantially to the effect set forth in Exhibit D.

ARTICLE X

TERMINATION, AMENDMENT AND WAIVER

SECTION 10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:

(a) by mutual consent of the Board of Directors of TCI and the Board
of Directors of the Company;

(b) by either TCI or the Company (i) if at the Meeting (including any
postponement or adjournment thereof), this Agreement, the Merger and the
transactions contemplated by this Agreement are not approved and adopted by
the affirmative vote specified herein or (ii) so long as the terminating
party has not breached its obligations hereunder in any material respect,
after July 31, 1997 (the "Termination Date") if the Merger shall not have
been consummated on or before such date;

(c) by the Company, provided the Company has not breached any of its
obligations hereunder in any material respect, if any of the conditions
specified in Section 9.1 or Section 9.2 have not been satisfied or waived
by the Company (or, in the case of Section 9.1, waived by the Company, TCI,
MusicCo and Merger Sub) at such time as such condition is no longer capable
of satisfaction; or

(d) by TCI, provided that none of TCI, MusicCo or Merger Sub has
breached any of its obligations hereunder in any material respect, if any
of the conditions specified in Section 9.1 or Section 9.3 have not been met
or waived by TCI (or, in the case of Section 9.1, waived by TCI, MusicCo,
Merger Sub and the Company) at such time as such condition is no longer
capable of satisfaction.

SECTION 10.2 Effect of Termination. In the event of termination of this
Agreement by either TCI or the Company, as provided above, this Agreement will
forthwith become void and (except for the willful breach of this Agreement by
any party to this Agreement) there will be no liability on the part of any of
the Company, TCI, MusicCo or Merger Sub.

SECTION 10.3 Amendment. This Agreement may be amended by the parties to
this Agreement, by or pursuant to action taken by all of their Boards of
Directors, at any time before or after approval of this Agreement by the
stockholders of the Company and prior to the Effective Time, but, after such
approval, no amendment will be made that alters the indemnification provisions
of Section 8.2 or changes the ratio at which Company Common Stock is to be
converted into MusicCo Series A Common Stock as provided in Section 3.2 or that
in any way materially adversely affects the rights of such stockholders, without
the further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.

SECTION 10.4 Waiver. At any time prior to the Effective Time, the parties
to this Agreement, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for performance of any of the obligations or
other acts of the other parties to this Agreement, (ii) waive any inaccuracies
in the representations and warranties set forth in this Agreement or in any
documents delivered pursuant to this Agreement and (iii) waive compliance with
any of the agreements or conditions set forth in this Agreement.

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<PAGE> 145

Any agreement on the part of a party to this Agreement to any such extension or
waiver will be valid if set forth in an instrument in writing signed on behalf
of such party.

ARTICLE XI

GENERAL PROVISIONS; DEFINITIONS

SECTION 11.1 Non-Survival of Representations, Warranties and Agreements. No
representations and warranties contained in this Agreement will survive beyond
the Closing Date. This Section 11.1 will not limit any covenant or agreement of
the parties to this Agreement that by its terms requires performance after the
Closing Date.

SECTION 11.2 Notices. All notices or other communications under this
Agreement will be in writing and will be given (and will be deemed to have been
duly given upon receipt) by delivery in person, by cable, telegram, telex or
other standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:

<TABLE>
<S> <C>
If to the Company:....................... 11400 West Olympic Boulevard
Suite 1100
Los Angeles, California 90064-1501
Attention: President
Telecopy No.: (310) 444-1717
With a copy to:.......................... Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Attention: Alvin G. Segel, Esq.
Telecopy No.: (310) 203-7199
If to TCI, MusicCo or Merger Sub:........ Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: Legal Department
Telecopy No.: (303) 488-3217
With a copy to:.......................... Sherman & Howard L.L.C.
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
Attention: Charles Y. Tanabe, Esq.
Telecopy No.: (303) 298-0940
</TABLE>

or to such other addresses as any party may have furnished to the other parties
in writing in accordance with this Section.

SECTION 11.3 Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement will be paid by the party incurring
such expenses. The Company's expenses relating to the transactions contemplated
by this Agreement, including fees of Irell & Manella LLP, counsel to the
Company, will be paid or accrued by the Company prior to the Effective Time.

SECTION 11.4 Specific Performance. The parties to this Agreement agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties will be entitled
to enforce specifically the terms and provisions of this Agreement in any court
of the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.

24
<PAGE> 146

SECTION 11.5 Third Party Beneficiaries. The parties to this Agreement agree
that the Company's stockholders, officers, directors and employees are intended
third party beneficiaries of the terms of this Agreement, to the extent such
terms refer expressly to such Persons, with full rights hereunder as if each of
them were a party to this Agreement.

SECTION 11.6 Entire Agreement. This Agreement will be of no force or effect
until executed and delivered by all of the parties to this Agreement.

SECTION 11.7 Miscellaneous. This Agreement (including the documents and
instruments referred to in this Agreement) (a) when executed and delivered,
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter of this Agreement (other than as provided in the
Confidentiality Agreement dated as of October 2, 1996, between the Company and
TCI as the same may be amended) and (b) will be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflicts
of law). This Agreement may be executed in two or more counterparts which
together will constitute a single agreement. Any certificate delivered pursuant
to this Agreement will be made without personal liability on the part of the
officer or employee of the Person giving such certificate.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunder duly authorized all as of the date first
written above.

TELE-COMMUNICATIONS, INC.
By: /s/ BRENDAN R. CLOUSTON
----------------------------------
Name: Brendan R. Clouston
Title: Executive Vice President and
Chief Operating Officer

TCI MUSIC, INC.

By: /s/ JOHN D. REARDON
----------------------------------
Name: John D. Reardon
Title: President and CEO

TCI MERGER SUB, INC.

By: /s/ JOHN D. REARDON
----------------------------------
Name: John D. Reardon
Title: President and CEO

DMX INC.

By: /s/ JEROLD H. RUBINSTEIN
----------------------------------
Name: Jerold H. Rubinstein
Title: Chief Executive Officer

25
<PAGE> 147

AMENDMENT ONE TO

AGREEMENT AND PLAN OF MERGER

This Amendment One (this "Amendment") to the Agreement and Plan of Merger
dated as of February 6, 1997 is entered into by and among Tele-Communications,
Inc., a Delaware corporation ("TCI"), TCI Music, Inc., a Delaware corporation
and wholly owned subsidiary of TCI ("MusicCo"), TCI Merger Sub, Inc., a Delaware
corporation and wholly owned subsidiary of MusicCo ("Merger Sub") and DMX Inc.,
a Delaware corporation (the "Company") dated May 29, 1997.

RECITALS

A. TCI, MusicCo, Merger Sub and DMX (collectively, the "Parties")
previously entered into the Agreement and Plan of Merger dated as of February 6,
1997 (the "Merger Agreement"), pursuant to which TCI and MusicCo will enter into
the Contribution Agreement and the Rights Agreement in connection with the
consummation of the transactions described in the Merger Agreement.

B. The Parties have determined that certain amendments be made to the
Merger Agreement as set forth in this Amendment.

AGREEMENT

Now, therefore, in consideration of the foregoing premises and the
agreements contained in this Amendment, the Parties agree to the following. This
Amendment may be executed in counterparts.

1. Recital A of the Merger Agreement shall be amended and restated as
follows:

A. Pursuant to the form of Contribution Agreement attached to this
Agreement as Exhibit A (the "Contribution Agreement"), (i) TCI will cause
certain of its subsidiaries to contribute to MusicCo the right to receive a
substantial portion of the revenues attributable to the distribution and
sale by those subsidiaries of the Company's digital music services, (ii)
TCI will cause all of the commercial tuners then indirectly owned by it
that are not in service to be contributed to MusicCo, and (iii) TCI will
grant to each stockholder who becomes a stockholder of MusicCo pursuant to
the Merger, with respect to each whole share of MusicCo stock acquired by
such stockholder in the Merger, one right (a "Right") requiring TCI to
purchase from the holder thereof, at such holder's election, such stock for
the price and at the time specified in the form of Rights Agreement
attached to this Agreement as Exhibit B (the "Rights Agreement") in
consideration of the issuance of shares of Series B Common Stock, par value
$.01 per share, of MusicCo ("MusicCo Series B Common Stock") and a
promissory note in the amount of $40,000,000.

2. Section 1.1 of the Merger Agreement shall be amended to restate the
definition of "MusicCo Series A Common Stock Value" as follows:

"MusicCo Series A Common Stock Value" means the product of (a) $8.00
and (b) a fraction, the numerator of which is 59,586,594 and the
denominator of which is the total number of shares of MusicCo Series A
Common Stock issuable to stockholders of the Company at the Effective Time,
assuming no Dissenting Shares.

3. Section 3.1(a) of the Merger Agreement shall be amended and restated as
follows:

(a) Each share of Common Stock, $.01 par value per share, of the
Company ("Company Common Stock") issued and outstanding immediately prior
to the Effective Time (except shares subject to Section 3.1(b) and, to the
extent provided in Section 3.8, Dissenting Shares) will be converted into
and will thereafter evidence and become: (i) .25 of a share of Series A
common stock, $.01 par value per share, of MusicCo ("MusicCo Series A
Common Stock"); (ii) one Right with respect to each whole share of MusicCo
Series A Common Stock; and (iii) the right to receive cash in lieu of
fractional shares of MusicCo Series A Common Stock and Rights in accordance
with Section 3.5.

<PAGE> 148

4. The form of Contribution Agreement attached as Exhibit A to the Merger
Agreement and the form of Rights Agreement attached as Exhibit B to the Merger
Agreement shall be substituted with the revised form of Contribution Agreement
attached as Exhibit A to this Amendment and the revised form of Rights Agreement
attached as Exhibit B to this Amendment, and any and all references to the
Contribution Agreement or the Rights Agreement in the Merger Agreement shall
refer to the applicable revised form attached to this Amendment.

5. Section 10.3 of the Merger Agreement shall be amended and restated as
follows:

Section 10.3 Amendment. This Agreement may be amended by the parties
to this Agreement, by or pursuant to action taken by all of their Boards of
Directors, at any time before or after approval of this Agreement by the
stockholders of the Company and prior to the Effective Time, but, after
such approval, no amendment will be made that alters the indemnification
provisions of Section 8.2 or changes the ratio at which Company Common
Stock is to be converted into MusicCo Series A Common Stock as provided in
Section 3.1 or that in any way materially adversely affects the rights of
such stockholders, without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties to this Agreement.

6. Subject to the terms and provisions of this Amendment, all of the
provisions of the Merger Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, each of the Parties have caused this Amendment to be
signed by its respective officer, duly authorized all as of the date first
written above.

TELE-COMMUNICATIONS, INC.

By: /s/ STEPHEN M. BRETT

----------------------------------

Name: Stephen M. Brett

Title: Executive Vice President and
Secretary

TCI MUSIC, INC.

By: /s/ STEPHEN M. BRETT

----------------------------------

Name: Stephen M. Brett

Title: Vice President and Secretary

TCI MERGER SUB, INC.

By: /s/ STEPHEN M. BRETT

----------------------------------

Name: Stephen M. Brett

Title: Vice President and Secretary

DMX INC.

By: /s/ JEROLD H. RUBINSTEIN

----------------------------------

Name: Jerold H. Rubinstein

Title: Chief Executive Officer

-2-
<PAGE> 149

APPENDIX II

[HOULIHAN LOKEY HOWARD & ZUKIN LETTERHEAD]

February 6, 1997

To The Independent Committee of
The Board of Directors
DMX Inc.

Gentlemen:

We understand that pursuant to the Agreement and Plan of Merger dated
February 6, 1997 (the "Merger Agreement"), among Tele-Communications, Inc., TCI
Music, Inc., TCI Merger Sub, Inc. and DMX Inc., TCI Music, Inc. ("MusicCo") will
merge with DMX Inc. ("DMX" hereinafter). In the transaction the issued and
outstanding shares of common stock of DMX will be exchanged for shares of the
common stock of MusicCo on the basis set forth in the Merger Agreement. Such
transaction is referred to herein as the "Merger." It is our understanding that
the Company has formed a special independent committee (the "Committee") to
consider certain matters relating to the Merger.

You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Merger. We have not been requested to, and did not, solicit third
party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Merger or advised you
with respect to alternatives to it.

In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:

1. reviewed the Company's annual report on Form 10-K for the fiscal
year ended 1996, which the Company's management has identified as being the
most current financial statements available;

2. reviewed copies of the following agreements:

Agreement and Plan of Merger dated as of February 6, 1997 among
Tele-Communications, Inc., TCI Music, Inc., TCI Merger Sub, Inc. and DMX
Inc.;

Rights Agreement among Tele-Communications, Inc., TCI Music, Inc. and
the Rights Agent for the Company's right issued pursuant thereto;

Contribution Agreement by and between Tele-Communications, Inc. and TCI
Music, Inc.;

Loan and Security Agreement between DMX Inc. and Tele-Communications,
Inc. dated February 6, 1997; and

The Agreements respecting DMX Inc.'s European operations between DMX
Inc. and Jerry Rubinstein;

3. met with, or held discussions with, certain members of the senior
managements of the Company and MusicCo to discuss the operations, financial
condition, future prospects and projected operations and performance of the
Company and MusicCo, and met with representatives of the Company's counsel
to discuss certain matters;

4. visited certain facilities and business offices of the Company;

5. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the fiscal year ended September
30, 1997 through 2000;

6. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
<PAGE> 150

To The Independent Committee of
The Board of Directors
DMX Inc.
February 6, 1997

7. reviewed certain other publicly available financial data for
certain companies that we deem comparable to the Company, and publicly
available prices and premiums paid in other transactions that we considered
similar to the Merger;

8. conducted such other studies, analyses and inquiries as we have
deemed appropriate.

We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and conditions of the Company, and that there has been no material
change in the assets, financial condition, business or prospects of the Company
since the date of the most recent financial statements made available to us.

We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.

Based upon the foregoing, and in reliance thereon, it is our opinion that
the consideration to be received by the public stockholders of the Company in
connection with the Merger is fair to them from a financial point of view.

HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.

-2-
<PAGE> 151

APPENDIX III

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPRAISAL RIGHTS

262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an Appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:

(1) Provided, however, that no Appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
Appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, Appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
secs.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, Appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
<PAGE> 152

(c) Any corporation may provide in its certificate of incorporation
that Appraisal rights under this section shall be available for the
shares of any class or series of its stock as a result of an amendment
to its certificate of incorporation, any merger or consolidation in
which the corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate
of incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and (e) of this
section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which Appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which Appraisal
rights are available pursuant to subsection (b) or (c) hereof that
Appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the Appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for Appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the Appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to Appraisal rights
of the approval of the merger or consolidation and that Appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
Appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to Appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the Appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
Appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to Appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to Appraisal rights
and who has demanded Appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date

2
<PAGE> 153

is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is
otherwise entitled to Appraisal rights, may file a petition in the Court
of Chancery demanding a determination of the value of the stock of all
such stockholders. Notwithstanding the foregoing, at any time within 60
days after the effective date of the merger or consolidation, any
stockholder shall have the right to withdraw his demand for Appraisal
and to accept the terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a)
and (d) hereof, upon written request, shall be entitled to receive from
the corporation surviving the merger or resulting from the consolidation
a statement setting forth the aggregate number of shares not voted in
favor of the merger or consolidation and with respect to which demands
for Appraisal have been received and the aggregate number of holders of
such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days
after expiration of the period for delivery of demands for Appraisal
under subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service file in the
office of the Register in Chancery in which the petition was filed a
duly verified list containing the names and addresses of all
stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by
the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if
so ordered by the Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the
list at the addresses therein stated. Such notice shall also be given by
1 or more publications at least 1 week before the day of the hearing, in
a newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of
the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting
corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to Appraisal rights. The Court may require the stockholders who
have demanded an Appraisal for their shares and who hold stock
represented by certificates to submit their certificates of stock to the
Register in Chancery for notation thereon of the pendency of the
Appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.

(h) After determining the stockholders entitled to an Appraisal,
the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair
value. In determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest, the
Court may consider all relevant factors, including the rate of interest
which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the Appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the Appraisal prior to the final determination of
the stockholder entitled to an Appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required,
may participate fully in all proceedings until it is finally determined
that he is not entitled to Appraisal rights under this section.

3
<PAGE> 154

(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple
or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by certificates
upon the surrender to the corporation of the certificates representing
such stock. The Court's decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may order
all or a portion of the expenses incurred by any stockholder in
connection with the Appraisal proceeding, including, without limitation,
reasonable attorney's fees and the fees and expenses of experts, to be
charged pro rata against the value of all the shares entitled to an
Appraisal.

(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his Appraisal rights as
provided in subsection (d) of this section shall be entitled to vote
such stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions
payable to stockholders of record at a date which is prior to the
effective date of the merger or consolidation); provided, however, that
if no petition for an Appraisal shall be filed within the time provided
in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his
demand for an Appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right
of such stockholder to an Appraisal shall cease. Notwithstanding the
foregoing, no Appraisal proceeding in the Court of Chancery shall be
dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems
just.

(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting
corporation.

<PAGE> 155
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law (the "DGCL")
provides, generally, that a corporation shall have the power to indemnify any
person who was or is a party or is threatened to be made a party to any action,
suit, or proceeding (except actions by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation against all expenses, judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A corporation may
similarly indemnify such person for expenses actually and reasonably incurred
by him in connection with the defense or settlement of an action or suit by or
in the right of the corporation if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, in the case of claims, issues, and matters as to which
such person shall have been adjudged liable to the corporation, provided that a
court shall have determined, upon application, that, despite the adjudication
of liability, but in view of all of the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses that such
court shall deem proper.

Section 102(b)(7) of the DGCL provides, generally, that the
certificate of incorporation may contain a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision may not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of Title 8, or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision may eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision became effective.

Article V, Section E of the Restated Certificate of Incorporation, as
amended (the "TCI Charter"), of Tele-Communications, Inc. ("TCI") provides as
follows:

A. Limitation on Liability.

II-1
<PAGE> 156
shall be prospective only and shall not adversely affect any
limitation, right or protection of a director of the Corporation
existing at the time of such repeal or modification.

B. Indemnification.

a. RIGHT TO INDEMNIFICATION. The Corporation shall
indemnify and hold harmless, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended, any
person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by reason
of the fact that he, or a person for whom he is the legal
representative, is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability
and loss suffered and expenses (including attorneys' fees) reasonably
incurred by such person. Such right of indemnification shall inure
whether or not the claim asserted is based on matters which antedate
the adoption of this Section E. The Corporation shall be required to
indemnify a person in connection with a proceeding (or part thereof)
initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.

b. PREPAYMENT OF EXPENSES. The Corporation shall pay
the expenses (including attorneys' fees) incurred in defending any
proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a director or officer in
advance of the final disposition of the proceeding shall be made only
upon receipt of an undertaking by the director or officer to repay all
amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this
paragraph or otherwise.

c. CLAIMS. If a claim for indemnification or payment of
expenses under this paragraph is not paid in full within 60 days after
a written claim therefor has been received by the Corporation, the
claimant may file suit to recover the unpaid amount of such claim and,
if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to
the requested indemnification or payment of expenses under applicable
law.

d. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on
any person by this paragraph shall not be exclusive of any other
rights which such person may or hereafter acquire under any statute,
provision of this Certificate, the Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.

II-2
<PAGE> 157
e. OTHER INDEMNIFICATION. The Corporation's obligation,
if any, to indemnify any person who was or is serving at its request
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity
shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit entity.

Article II, Section 2.9 of TCI's By-laws also contains an indemnity
provision, requiring TCI to indemnify members of the Board of Directors and
officers of TCI and their respective heirs, personal representatives and
successors in interest for or on account of any action performed on behalf of
TCI, to the fullest extent provided by the laws of the State of Delaware and
the TCI Charter.

TCI has entered into indemnification agreements with each person who
is a director of TCI (each director, an "indemnitee"). The indemnification
agreements provide (i) for the prompt indemnification to the fullest extent
permitted by law against any and all expenses, including attorneys' fees and
all other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness or participating in (including on
appeal), or in preparing for ("Expenses"), any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation ("Claim"), related
to the fact that such indemnitee is or was a director, officer, employee, agent
or fiduciary of TCI or is or was serving at TCI's request as a director,
officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
or by reason of anything done or not done by a director or officer in any such
capacity, and against any and all judgments, fines, penalties and amounts paid
in settlement (including all interest, assessments and other charges paid or
payable in connection therewith) of any Claim, unless the Reviewing Party (one
or more members of the Board of Directors or other person appointed by the
Board of Directors, who is not a party to the particular claim, or independent
legal counsel) determines that such indemnification is not permitted under
applicable law and (ii) for the prompt advancement of Expenses, and for
reimbursement to TCI if the Reviewing Party determines that such indemnitee is
not entitled to such indemnification under applicable law. In addition, the
indemnification agreements provide (i) a mechanism through which an indemnitee
may seek court relief in the event the Reviewing Party determines that the
indemnitee would not be permitted to be indemnified under applicable law (and
therefore is not entitled to indemnification or expense advancement under the
indemnification agreement) and (ii) indemnification against all expenses
(including attorneys' fees), and advancement thereof if requested, incurred by
the indemnitee in seeking to collect an indemnity claim or advancement of
expenses from TCI or incurred in seeking to recover under a directors' and
officers' liability insurance policy, regardless of whether successful or not.
Furthermore, the indemnification agreements provide that after there has been a
"change in control" of TCI (as defined in the indemnification agreements),
other than a change in control approved by a majority of directors who were
directors prior to such change, then, with respect to all determinations
regarding a right to indemnity and the right to advancement of Expenses, TCI
will seek legal advice only from independent legal counsel selected by the
indemnitee and approved by TCI.

II-3
<PAGE> 158
The indemnification agreements impose upon TCI the burden of proving
that an indemnitee is not entitled to indemnification in any particular case
and negate certain presumptions that may otherwise be drawn against an
indemnitee seeking indemnification in connection with the termination of
actions in certain circumstances. Indemnitees' rights under the
indemnification agreements are not exclusive of any other rights they may have
under the DGCL, TCI By-laws or otherwise. Although not requiring the
maintenance of directors' and officers' liability insurance, the
indemnification agreements require that indemnitees be provided with the
maximum coverage available for any director or officer of TCI if there is such
a policy.

Article V, Section E of the Certificate of Incorporation (the "TCI
Music Charter"), of TCI Music, Inc. ("TCI Music") provides as follows:

1. Limitation on Liability.

To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this paragraph 1 shall be prospective only and shall not
adversely affect any limitation, right or protection of a director of the
Corporation existing at the time of such repeal or modification.

2. Indemnification.

a. RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable
law as it presently exists or may hereafter be amended, any
person who was or is made or is threatened to be made a party
or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request
of the Corporation as a director, officer, employee or agent
of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and
loss suffered and expenses (including attorneys' fees)
reasonably incurred by such person. Such right of
indemnification shall inure whether or not the claim asserted
is based on matters which antedate the adoption of this
Section E. The Corporation shall be required to indemnify or
make advances to a person in connection with a proceeding (or
part thereof) initiated by such person only if the proceeding
(or part thereof) was authorized by the Board of Directors of
the Corporation.

II-4
<PAGE> 159
receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined
that the director or officer is not entitled to be indemnified
under this paragraph or otherwise.

c. CLAIMS. If a claim for indemnification or payment of expenses
under this paragraph is not paid in full within 60 days after
a written claim therefor has been received by the Corporation,
the claimant may file suit to recover the unpaid amount of
such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of
proving that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.

d. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this paragraph shall not be exclusive of any other rights
which such person may or hereafter acquire under any statute,
provision of this Certificate, the Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.

e. OTHER INDEMNIFICATION. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request
as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or
nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or nonprofit
entity.

Article II, Section 2.9 of TCI Music's By-laws also contains an
indemnity provision, requiring TCI Music to indemnify members of the Board of
Directors and officers of TCI Music and their respective heirs, personal
representatives and successors in interest for or on account of any action
performed on behalf of TCI Music, to the fullest extent provided by the laws of
the State of Delaware and the TCI Music Charter.

TCI and TCI Music may each purchase liability insurance policies
covering their respective directors and officers.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS. See Exhibit Index.

(b) FINANCIAL STATEMENT SCHEDULES.

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the Financial
Statements or notes thereto.

II-5
<PAGE> 160
(c) REPORTS, OPINIONS OR APPRAISALS.

Opinion of Houlihan, Lokey, Howard & Zukin (included in the Proxy
Statement/Prospectus as Appendix II).

ITEM 22. UNDERTAKINGS

TCI and TCI Music each hereby undertakes:

(1) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the Registrant's annual
report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(2) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.

(3) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective, provided, in the case
of a transaction that (but for the possibility of integration with
other transactions) would itself qualify for an exemption from
registration, that (i) such transactions by itself or when aggregated
with other such transactions made since the filing of the most
recently audited financial statements of the Registrant would have a
material financial effect upon the Registrant and (ii) the information
required to be supplied in a post-effective amendment by this
paragraph 6 is not contained in periodic reports filed by the
Registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being

II-6

<PAGE> 161
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Englewood,
State of Colorado, on June 5, 1997.

TELE-COMMUNICATIONS, INC.

By: /s/ Stephen M. Brett
-----------------------------------------
Stephen M. Brett
Executive Vice President and Secretary

KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints and Stephen M. Brett and Leo
J. Hindery, and each of them, his true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including pre-effective and post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John C. Malone Chairman of the Board and Chief June 5, 1997
- ------------------------------------ Executive Officer
John C. Malone (Principal Executive Officer)

</TABLE>

II-7
<PAGE> 162
<TABLE>
<S> <C> <C>
/s/ Bernard W. Schotters Senior Vice President-Finance June 5, 1997
- ----------------------------- and Treasurer
Bernard W. Schotters (Principal Financial Officer)

/s/ Gary K. Bracken Senior Vice President June 5, 1997
- ------------------------------------ and Controller
Gary K. Bracken (Principal Accounting Officer)

/s/ Donne F. Fisher Director June 5, 1997
- ------------------------------------
Donne F. Fisher

Director June _, 1997
- ------------------------------------
John W. Gallivan

/s/ Kim Magness Director June 5, 1997
- ------------------------------------
Kim Magness

Director June _, 1997
- ------------------------------------
Robert A. Naify

/s/ Jerome H. Kern Director June 5, 1997
- -----------------------------------
Jerome H. Kern

/s/ Tony Coelho Director June 5, 1997
- -------------------------------------
Tony Coelho

Director June _, 1997
- ------------------------------------
J.C. Sparkman

/s/ Paul A. Gould Director June 5, 1997
- -------------------------------------
Paul A. Gould

/s/ Leo J. Hindery, Jr. Director June 5, 1997
- -------------------------------------
Leo J. Hindery, Jr.
</TABLE>

II-8
<PAGE> 163
SIGNATURES

TCI MUSIC, INC.

By: /s/ STEPHEN M. BRETT

Stephen M. Brett
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Leo J. Hindery, Jr. Chairman of the Board June 5, 1997
- ---------------------------------- (Principal Executive Officer)
Leo J. Hindery, Jr.

/s/ Robert R. Bennett Director June 5, 1997
- ------------------------------- (Acting Principal Financial Officer and
Robert R. Bennett Acting Principal Accounting Officer)

Director June _, 1997
- -----------------------------
J. C. Sparkman
</TABLE>

II-9
<PAGE> 164
<TABLE>
<S> <C> <C>

/s/ Donne F. Fisher Director June 5, 1997
- ------------------------------
Donne F. Fisher

/s/ Peter M. Kern Director June 5, 1997
- ------------------------------
Peter M. Kern

/s/ David B. Koff Director June 5, 1997
- ----------------------------
David B. Koff

/s/ Lon A. Troxel Director June 5, 1997
- ----------------------------
Lon A. Troxel

</TABLE>

II-10
<PAGE> 165
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of February 6, 1997, as
amended by Amendment One dated May 29, 1997, by and among
Tele-Communications, Inc., TCI Music, Inc., TCI Merger Sub, Inc. and
DMX, Inc. (Included in Proxy Statement/Prospectus as Appendix I)

3.1 Certificate of Incorporation of TCI Music, Inc.

3.2 Bylaws of TCI Music, Inc.

4.1 Specimen Stock Certificate for the Series A Common Stock, par
value $.01 per share, of TCI Music, Inc.*

4.2 Specimen Stock Certificate for the Series B Common Stock, par
value $.01 per share, of TCI Music, Inc.*

4.3 Form of Rights Agreement among Tele-Communications, Inc., TCI
Music, Inc., and The Bank of New York, as Rights Agent

5.1 Form of Opinion of Sherman & Howard L.L.C. regarding legality of
securities being registered

8.1 Opinion of Sherman & Howard L.L.C. regarding tax matters

10.1 Form of Contribution Agreement between Tele-Communications, Inc.
and TCI Music, Inc.

10.2 Form of Services Agreement between Tele-Communications, Inc. and
TCI Music, Inc.

10.3 Tax Sharing Agreement effective July 1, 1995, among Tele-
Communications, Inc., TCI Communications, Inc. and certain other
subsidiaries of Tele-Communications, Inc. (Incorporated by reference
to the Registration Statement on Form 10 of TCI Satellite, Inc.
filed with the SEC on November 15, 1996 (Registration No. 0-21317)).

10.4 First Amendment to Tax Sharing Agreement dated as of October 1995,
among Tele-Communications, Inc., TCI Communications, Inc.

</TABLE>

- ---------------
* to be filed by amendment

<PAGE> 166

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
and certain other subsidiaries of Tele-Communications, Inc.
(Incorporated by reference to the Registration Statement on Form 10
of TCI Satellite, Inc. filed with the SEC on November 15, 1996
(Registration No. 0-21317)).

10.5 Second Amendment to Tax Sharing Agreement dated as of December 3,
1996 among Tele-Communications, Inc., TCI Communications, Inc. and
certain other subsidiaries of Tele-Communications, Inc. (Incorporated
by reference to Exhibit 10.35 of the Annual Report on Form 10-K of TCI
Satellite, Inc. for the year ended December 31, 1996 (Registration No.
0-21317)).

10.6 Form of TCI Music Note

10.7 Loan and Security Agreement dated as of February 6, 1997 (and
Extension Letter)

10.8 Form of TCI Music, Inc. 1997 Stock Incentive Plan

21 Subsidiaries of TCI Music, Inc.

23.1 Consent of KPMG Peat Marwick LLP (DMX)*

23.2 Consent of KPMG Peat Marwick LLP (TCI)

23.3 Consent of KPMG Peat Marwick LLP (TCI Group)

23.4 Consent of KPMG Peat Marwick LLP (Liberty Media Group)

23.5 Consent of KPMG Chartered Accountants (DMX - Europe N.V.)*

23.6 Consent of KPMG Audit Plc (Telewest Communications plc)

23.7 Consent of Deloitte & Touche LLP (Sprint Spectrum Holding Company L.P.)

23.8 Consent of Price Waterhouse LLP (American PCS, L.P.)

23.9 Consent of Price Waterhouse LLP (VII Cable)
</TABLE>

* to be filed by amendment

<PAGE> 167
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
23.10 Consent of Sherman & Howard L.L.C. (legality) (included in Exhibit 5.1)

23.11 Consent of Sherman & Howard L.L.C. (tax matters) (included in Exhibit
8.1)

24.1 Power of Attorney (TCI) (included herein on page II-7)

24.2 Power of Attorney (TCI Music) (included herein on page II-9)

99.1 Form of Proxy for Special Meeting of DMX Inc.
</TABLE>

<PAGE> 1

EXHIBIT 3.1

STATE OF DELAWARE

PAGE 1

OFFICE OF THE SECRETARY OF STATE

----------------------------------------

I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "TCI MUSIC, INC.", FILED IN THIS OFFICE ON THE TWENTY-FIRST
DAY OF JANUARY, A.D. 1997, AT 9 O'CLOCK A.M.

A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.

[SEAL] /s/ EDWARD J. FREEL
--------------------------------------
Edward J. Freel, Secretary of State

AUTHENTICATION: 8294760

DATE: 01-22-97

<PAGE> 2

CERTIFICATE OF INCORPORATION
OF
TCI MUSIC, INC.

________________________

ARTICLE I

NAME

The name of the corporation is TCI Music, Inc. (the "Corporation").

ARTICLE II

REGISTERED AGENT AND OFFICE

The location of the registered office of the Corporation in
the State of Delaware is the office of CSC United States Corporation Company,
1013 Centre Road, New Castle County, Wilmington, Delaware 19805. The name of
the registered agent at such address is Corporation Service Company.

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.

ARTICLE IV

AUTHORIZED STOCK

The total number of shares of capital stock which the
Corporation shall have authority to issue is five hundred million (500,000,000)
shares, of which four hundred ninety five million (495,000,000) shares shall be
common stock ("Common Stock") and five million (5,000,000) shares shall be
preferred stock with a par value of $.01 per share ("Preferred Stock"). The
Common Stock shall be a single class designated as Common Stock with a par
value of $.01 per share and shall be issuable in series as provided in Section
A of this Article IV. A description of the Common Stock and the Preferred
Stock of the Corporation, and the relative rights, preferences and limitations
<PAGE> 3
thereof, or the method of fixing and establishing the same, are as hereinafter
in this Article IV set forth:

SECTION A

SERIES A COMMON STOCK AND SERIES B COMMON STOCK

Two hundred ninety five million (295,000,000) shares of Common
Stock shall be of a series designated as Series A Common Stock (the "Series A
Common Stock") and two hundred million (200,000,000) shares of Common Stock
shall be of a series designated as Series B Common Stock (the "Series B Common
Stock"). Each share of the Series A Common Stock and each share of the Series
B Common Stock shall, except as otherwise provided in this Section A, be
identical in all respects and shall have equal rights and privileges.

1. Voting Rights.

Holders of Series A Common Stock shall be entitled to
one vote for each share of such stock held, and holders of Series B Common
Stock shall be entitled to ten votes for each share of such stock held, on all
matters presented to such stockholders. Except as may otherwise be required by
the laws of the State of Delaware or, with respect to any series of Preferred
Stock, in any resolution or resolutions providing for the establishment of such
series pursuant to authority vested in the Board of Directors by this
Certificate, the holders of shares of Series A Common Stock and the holders of
shares of Series B Common Stock and the holders of shares of each series
Preferred Stock entitled to vote thereon, if any, shall vote as one class with
respect to the election of directors and with respect to all other matters to
be voted on by stockholders of the Corporation (including, without limitation,
any proposed amendment to this Certificate of Incorporation (as it may from
time to time hereafter be amended or restated, this "Certificate") that would
increase the number of authorized shares of Series A Common Stock, of Series B
Common Stock or of any other class or series of stock or decrease the number of
authorized shares of any such class or series of stock (but not below the
number of shares thereof then outstanding)), and no separate vote or consent of
the holders of shares of Series A Common Stock, the holders of shares of Series
B Common Stock or the holders of shares of any such series of Preferred Stock
shall be required for the approval of any such matter.

2. Conversion Rights.

Each share of Series B Common Stock shall be
convertible, at the option of the holder thereof, into one share of Series A
Common Stock. Any such conversion may be effected by any holder of Series B
Common Stock by surrendering such holder's certificate or certificates for the
Series B Common Stock to be converted, duly endorsed, at the office of the
Corporation or any transfer agent for the Series B Common Stock, together with
a written notice to the Corporation at such office that such holder elects to
convert all or a specified number of shares of Series B Common

- 2 -
<PAGE> 4
Stock represented by such certificate and stating the name or names in which
such holder desires the certificate or certificates for Series A Common Stock
to be issued. If so required by the Corporation, any certificate for shares
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder of such
shares or the duly authorized representative of such holder. Promptly
thereafter, the Corporation shall issue and deliver to such holder or such
holder's nominee or nominees, a certificate or certificates for the number of
shares of Series A Common Stock to which such holder shall be entitled as
herein provided. Such conversion shall be deemed to have been made at the
close of business on the date of receipt by the Corporation or any such
transfer agent of the certificate or certificates, notice and, if required,
instruments of transfer referred to above, and the person or persons entitled
to receive the Series A Common Stock issuable on such conversion shall be
treated for all purposes as the record holder or holders of such Series A
Common Stock on that date. A number of shares of Series A Common Stock equal
to the number of shares of Series B Common Stock outstanding from time to time
shall be set aside and reserved for issuance upon conversion of shares of
Series B Common Stock. Shares of Series B Common Stock that have been
converted hereunder shall become treasury shares that may be issued or retired
by resolution of the Board of Directors. Shares of Series A Common Stock shall
not be convertible into shares of Series B Common Stock.

3. Dividends. Subject to paragraph 4 of this Section A,
whenever a dividend is paid to the holders of Series A Common Stock, the
Corporation also shall pay to the holders of Series B Common Stock a dividend
per share equal to the dividend per share paid to the holders of the Series A
Common Stock, and whenever a dividend is paid to the holders of Series B Common
Stock, the Corporation also shall pay to the holders of Series A Common Stock a
dividend per share equal to the dividend per share paid to the holders of the
Series B Common Stock. Dividends shall be payable only as and when declared by
the Board of Directors of the Corporation out of assets of the Corporation
legally available therefor.

4. Share Distributions. If at any time a distribution
paid in Series A Common Stock or Series B Common Stock or any other securities
of the Corporation or any other corporation, partnership, limited liability
company, trust or other legal entity ("Person") (hereinafter sometimes called a
"share distribution") is to be made with respect to the Series A Common Stock
or Series B Common Stock, such share distribution may be declared and paid only
as follows:

(a) a share distribution consisting of shares of
Series A Common Stock (or Convertible Securities that are convertible into,
exercisable or exchangeable for, or evidence the right to purchase any shares
of Series A Common Stock) to holders of Series A Common Stock and Series B
Common Stock, on an equal per share basis; or consisting of shares of Series B
Common Stock (or Convertible Securities that are convertible into, exercisable
or exchangeable for, or evidence the right to purchase any shares of Series B
Common Stock) to holders of Series A Common Stock and Series B Common Stock, on
an equal per share basis; or consisting of shares of Series A Common Stock (or
Convertible Securities that are convertible into, exercisable or exchangeable
for, or evidence the right to purchase any shares of Series A Common Stock) to
holders of Series A Common Stock and, on an equal per share basis, shares of
Series B Common Stock (or

- 3 -
<PAGE> 5
Convertible Securities that are convertible into, exercisable or exchangeable
for, or evidence the right to purchase any shares of Series B Common Stock) to
holders of Series B Common Stock; and

(b) a share distribution consisting of any class
or series of securities of the Corporation or any other Person other than
Series A Common Stock or Series B Common Stock (or other Convertible Securities
that are convertible into, exercisable or exchangeable for, or evidence the
right to purchase any shares of Series A Common Stock or Series B Common Stock)
either on the basis of a distribution of identical securities, on an equal per
share basis, to holders of Series A Common Stock and Series B Common Stock or
on the basis of a distribution of one class or series of securities to holders
of Series A Common Stock and another class or series of securities to holders
of Series B Common Stock, provided that the securities so distributed (and, if
applicable, the securities into which the distributed securities are
convertible, or for which they are exercisable or exchangeable, or which the
distributed securities evidence the right to purchase) do not differ in any
respect other than their relative voting rights and related differences in
designation, conversion and share distribution provisions with holders of
shares of Series B Common Stock receiving the class or series having the higher
relative voting rights (without regard to whether such rights differ to a
greater or lesser extent than the corresponding differences in voting rights
and related differences in designation, conversion and share distribution
provisions between the Series A Common Stock and the Series B Common Stock)
provided that if the securities so distributed constitute capital stock of a
Subsidiary of the Corporation, such rights shall not differ to a greater extent
than the corresponding differences in voting rights, designation, conversion
and share distribution provisions between the Series A Common Stock and the
Series B Common Stock, and provided in each case that such distribution is
otherwise made on an equal per share basis.

As used herein, the term "Convertible Securities"
means any securities of the Corporation (other than any series of Common Stock)
that are convertible into, exchangeable for or evidence to right to purchase
any shares of any series of Common Stock, whether upon conversion, exercise,
exchange, pursuant to anti-dilution provisions of such securities or otherwise.
As used herein, the term "Subsidiary" means, when used with respect to any
Person, (i) a corporation in which such Person and/or one or more Subsidiaries
of such Person, directly or indirectly, owns capital stock having a majority of
the voting power of such corporation's capital stock to elect directors under
ordinary circumstances, and (ii) any other Person (other than a corporation) in
which such Person and/or one or more Subsidiaries of such Person, directly or
indirectly, has (x) a majority ownership interest or (y) the power to elect or
direct the election of a majority of the members of the governing body of such
first-named Person.

The Corporation shall not reclassify, subdivide or
combine the Series A Common Stock without reclassifying, subdividing or
combining the Series B Common Stock, on an equal per share basis, and the
Corporation shall not reclassify, subdivide or combine the Series B Common
Stock without reclassifying, subdividing or combining the Series A Common
Stock, on an equal per share basis.

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<PAGE> 6
5. Liquidation and Dissolution. In the event of a
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and
liabilities of the Corporation and subject to the prior payment in full of the
preferential amounts to which any series of Preferred Stock is entitled, the
holders of Series A Common Stock and the holders of Series B Common Stock shall
share equally, on a share for share basis, in the assets of the Corporation
remaining for distribution to its common stockholders. Neither the
consolidation or merger of the Corporation with or into any other Person or
Persons nor the sale, transfer or lease of all or substantially all of the
assets of the Corporation shall itself be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
paragraph 5.

SECTION B

PREFERRED STOCK

The Preferred Stock may be issued, from time to time, in one
or more series, with such powers, designations, preferences and relative,
participating, optional or other rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in a resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors (a "Preferred Stock Designation"). The Board of Directors, in such
Preferred Stock Designation (a copy of which shall be filed and recorded as
required by law), is also expressly authorized to fix the rights, powers and
preferences with respect to each series, including without limitation the
following:

(i) the distinctive serial designations and the
division of such shares into series and the number of
shares of a particular series, which may be increased
or decreased, but not below the number of shares
thereof then outstanding, by a certificate made,
signed, filed and recorded as required by law;

(ii) the dividend rate or amounts, if any, for the
particular series, the date or dates from which
dividends on all shares of such series shall be
cumulative, if dividends on stock of the particular
series shall be cumulative and the relative rights of
priority, if any, or participation, if any, with
respect to payment of dividends on shares of that
series;

(iii) the rights of the shares of each series in
the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of
shares of each series;

(iv) the right, if any, of the holders of a
particular series to convert or exchange such stock
into or for other classes or series of a class of
stock or indebtedness of the Corporation, and the
terms and conditions of such conversion or exchange,
including provision for the adjustment of the

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<PAGE> 7
conversion or exchange rate in such events as the
Board of Directors shall determine;

(v) the voting rights, if any, of the holders of
a particular series; and

(vi) the terms and conditions, if any, for the
Corporation to purchase or redeem shares of a
particular series.

All shares of any one series of the Preferred Stock shall be
alike in every particular. Except to the extent otherwise provided in the
resolution or resolutions providing for the issue of any series of Preferred
Stock, the holders of shares of such series shall have no voting rights except
as may be required by the laws of the State of Delaware. Further, unless
otherwise expressly provided in the Preferred Stock Designation for a series of
Preferred Stock, no consent or vote of the holders of shares of Preferred Stock
or any series thereof shall be required for any amendment to this Certificate
that would increase the number of authorized shares of Preferred Stock or the
number of authorized shares of any series thereof or decrease the number of
authorized shares of Preferred Stock or the number of authorized shares of any
series thereof (but not below the number of authorized shares of Preferred
Stock or such series, as the case may be, then outstanding).

Except as may be provided by the Board of Directors in a
Preferred Stock Designation or by law, shares of any series of Preferred Stock
that have been redeemed (whether through the operation of a sinking fund or
otherwise) or purchased by the Corporation, or which, if convertible or
exchangeable, have been converted into or exchanged for shares of stock of any
other class or classes shall have the status of authorized and unissued shares
of Preferred Stock and may be reissued as a part of the series of which they
were originally a part or may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors or
as part of any other series of Preferred Stock.

SECTION C

UNCLAIMED DIVIDENDS

Any and all right, title, interest and claim in or to any
dividends declared by the Corporation, whether in cash, stock or otherwise,
which are unclaimed for a period of four years after the close of business on
the payment date, shall be and be deemed extinguished and abandoned; and such
unclaimed dividends in the possession of the Corporation, its transfer agent or
other agents or depositories, shall at such time become the absolute property
of the Corporation, free and clear of any and all claims of any Persons
whatsoever.

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<PAGE> 8
ARTICLE V

DIRECTORS

SECTION A

NUMBER OF DIRECTORS

The governing body of the Corporation shall be a Board of
Directors. Subject to any rights of the holders of any series of Preferred
Stock to elect additional directors, the number of directors shall not be less
than three and the exact number of directors shall be fixed by the Board of
Directors by resolution. Election of directors need not be by written ballot.

SECTION B

CLASSIFICATION OF THE BOARD

Except as otherwise fixed by or pursuant to the provisions of
Article IV hereof relating to the rights of the holders of any series of
Preferred Stock to separately elect additional directors, which additional
directors are not required to be classified pursuant to the terms of such
series of Preferred Stock, the Board of Directors of the Corporation shall be
divided into three classes: Class I, Class II and Class III. Each class shall
consist, as nearly as possible, of a number of directors equal to one-third of
the then authorized number of members of the Board of Directors. The term of
office of the initial Class I directors shall expire at the annual meeting of
stockholders in 1998; the term of office of the initial Class II directors
shall expire at the annual meeting of stockholders in 1999; and the term of
office of the initial Class III directors shall expire at the annual meeting of
stockholders in 2000. At each annual meeting of stockholders of the
Corporation the successors of that class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election. The directors of each class will hold office until their respective
successors are elected and qualified.

SECTION C

REMOVAL OF DIRECTORS

Subject to the rights of the holders of any series of
Preferred Stock, directors may be removed from office only for cause (as
hereinafter defined) upon the affirmative vote of the holders of at least 66
2/3% of the total voting power of the then outstanding Voting Securities (as
hereinafter defined), voting together as a single class. Except as may
otherwise be provided by law, "cause" for removal, for purposes of this Section
C, shall exist only if: (i) the director whose removal is proposed

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<PAGE> 9
has been convicted of a felony, or has been granted immunity to testify in an
action where another has been convicted of a felony, by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal; (ii)
such director has become mentally incompetent, whether or not so adjudicated,
which mental incompetence directly affects his ability as a director of the
Corporation, as determined by at least 66 2/3% of the members of the Board of
Directors then in office (other than such director); or (iii) such director's
actions or failure to act have been determined by at least 66 2/3% of the
members of the Board of Directors then in office (other than such director) to
be in derogation of the director's duties. The term "Voting Securities" shall
include the Series A Common Stock, the Series B Common Stock and any series of
Preferred Stock entitled to vote with the holders of Common Stock generally
upon all matters which may be submitted to a vote of stockholders at any annual
meeting or special meeting thereof.

SECTION D

NEWLY CREATED DIRECTORSHIPS AND VACANCIES

Vacancies on the Board of Directors resulting from death,
resignation, removal, disqualification or other cause, and newly created
directorships resulting from any increase in the number of directors on the
Board of Directors, shall be filled by the affirmative vote of a majority of
the remaining directors then in office (even though less than a quorum) or by
the sole remaining director. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the vacancy occurred or to which the new
directorship is apportioned, and until such director's successor shall have
been elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director, except as may be provided in a Preferred Stock Designation with
respect to any additional director elected by the holders of the applicable
series of Preferred Stock.

SECTION E

LIMITATION ON LIABILITY AND INDEMNIFICATION

1. Limitation on Liability.

To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this paragraph 1 shall be prospective only and
shall not adversely affect any limitation, right or protection of a director of
the Corporation existing at the time of such repeal or modification.

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<PAGE> 10
2. Indemnification.

(a) RIGHT TO INDEMNIFICATION. The Corporation
shall indemnify and hold harmless, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended, any person
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by such
person. Such right of indemnification shall inure whether or not the claim
asserted is based on matters which antedate the adoption of this Section E.
The Corporation shall be required to indemnify or make advances to a person in
connection with a proceeding (or part thereof) initiated by such person only if
the proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.

(b) PREPAYMENT OF EXPENSES. The Corporation
shall pay the expenses (including attorneys' fees) incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this paragraph or otherwise.

(c) CLAIMS. If a claim for indemnification or
payment of expenses under this paragraph is not paid in full within 60 days
after a written claim therefor has been received by the Corporation, the
claimant may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the Corporation shall have the
burden of proving that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.

(d) NON-EXCLUSIVITY OF RIGHTS. The rights
conferred on any person by this paragraph shall not be exclusive of any other
rights which such person may or hereafter acquire under any statute, provision
of this Certificate, the Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.

(e) OTHER INDEMNIFICATION. The Corporation's
obligation, if any, to indemnify any person who was or is serving at its
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such person may collect as indemnification from such
other corporation, partnership, joint venture, trust, enterprise or nonprofit
entity.

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<PAGE> 11
3. Amendment or Repeal.

Any repeal or modification of the foregoing provisions of this
Section E shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.

SECTION F

AMENDMENT OF BYLAWS

In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors, by action taken
by the affirmative vote of not less than 75% of the members of the Board of
Directors then in office, is hereby expressly authorized and empowered to
adopt, amend or repeal any provision of the Bylaws of this Corporation.

ARTICLE VI

TERM

The term of existence of this Corporation shall be perpetual.

ARTICLE VII

STOCK NOT ASSESSABLE

The capital stock of this Corporation shall not be assessable.
It shall be issued as fully paid, and the private property of the stockholders
shall not be liable for the debts, obligations or liabilities of this
Corporation. This Certificate shall not be subject to amendment in this
respect.

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<PAGE> 12
ARTICLE VIII

MEETINGS OF STOCKHOLDERS

SECTION A

ANNUAL AND SPECIAL MEETINGS

Subject to the rights of the holders of any series of
Preferred Stock, stockholder action may be taken only at an annual or special
meeting. Except as otherwise provided in the terms of any series of Preferred
Stock or unless otherwise prescribed by law or by another provision of this
Certificate, special meetings of the stockholders of the Corporation, for any
purpose or purposes, shall be called by the Secretary of the Corporation (i)
upon the written request of the holders of not less than 66 2/3% of the total
voting power of the outstanding Voting Securities (as defined in Section C of
Article V of this Certificate) or (ii) at the request of at least 75% of the
members of the Board of Directors then in office.

SECTION B

ACTION WITHOUT A MEETING

Except as otherwise provided in the terms of any series of
Preferred Stock, no action required to be taken or which may be taken at any
annual meeting or special meeting of stockholders may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, is specifically denied.

ARTICLE IX

ACTIONS REQUIRING SUPERMAJORITY STOCKHOLDER VOTE

Subject to the rights of the holders of any series of
Preferred Stock, the affirmative vote of the holders of at least 66 2/3% of the
total voting power of the then outstanding Voting Securities (as defined in
Section C of Article V of this Certificate), voting together as a single class
at a meeting specifically called for such purpose, shall be required in order
for the Corporation to take any action to authorize:

(a) the amendment, alteration or repeal of any provision
of this Certificate or the addition or insertion of other provisions herein;

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<PAGE> 13
(b) the adoption, amendment or repeal of any provision of
the Bylaws of the Corporation; provided, however, that this clause (b) shall
not apply to, and no vote of the stockholders of the Corporation shall be
required to authorize, the adoption, amendment or repeal of any provision of
the Bylaws of the Corporation by the Board of Directors in accordance with the
power conferred upon it pursuant to Section F of Article V of this Certificate;

(c) the merger or consolidation of this Corporation with
or into any other corporation; provided, however, that this clause (c) shall
not apply to any merger or consolidation (i) as to which the laws of the State
of Delaware, as then in effect, do not require the consent of this
Corporation's stockholders, or (ii) which at least 75% of the members of the
Board of Directors then in office have approved;

(d) the sale, lease or exchange of all, or substantially
all, of the property and assets of the Corporation; or

(e) the dissolution of the Corporation.

All rights at any time conferred upon the stockholders of the
Corporation pursuant to this Certificate are granted subject to the provisions
of this Article IX.

ARTICLE X

INCORPORATOR

The name and address of the incorporator of the Corporation
are set forth below.

Leslie A. Nichols Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202

DATED: January 20th, 1997.

/s/ LESLIE A. NICHOLS
---------------------------------
Leslie A. Nichols, Incorporator

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<PAGE> 1

EXHIBIT 3.2

TCI MUSIC, INC.
A DELAWARE CORPORATION

BYLAWS

--------------------

ARTICLE I
STOCKHOLDERS

Section 1.1 Annual Meeting.

An annual meeting of stockholders for the purpose of electing
directors and of transacting such other business as may come before it shall be
held each year at such date, time, and place, either within or without the
State of Delaware, as may be specified by the Board of Directors in the notice
of meeting.

Section 1.2 Special Meetings.

Except as otherwise provided in the terms of any class or series of
preferred stock or unless otherwise provided by law or by the Certificate of
Incorporation, special meetings of stockholders of the Corporation, for any
purpose or purposes, shall be called by the Secretary of the Corporation (i)
upon written request of the holders of not less than 66 2/3% of the total
voting power of the shares of outstanding capital stock of the Corporation
entitled to vote at such meeting or (ii) at the request of not less than 75% of
the members of the Board of Directors then in office. Special meetings of
stockholders for any purpose or purposes may be held at such time and place
either within or without the State of Delaware as may be stated in the notice
of meeting.

Section 1.3 Notice of Meetings.

Written notice of stockholders meetings, stating the place, date, and
hour thereof, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by the Chairman of the Board,
the President, any Vice President, the Secretary, or an Assistant Secretary, to
each stockholder entitled to vote thereat at least ten days but not more than
sixty days before the date of the meeting, unless a different period is
prescribed by law.
<PAGE> 2
Section 1.4 Notice of Nominations for the Election of Directors.

1.4.1 Annual Meetings of Stockholders.

(a) Nominations of persons for election to the Board of Directors
of the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice of meeting delivered pursuant to Section 1.3 of these
Bylaws, (ii) by or at the direction of the Chairman of the Board or the Board
of Directors or (iii) by any stockholder of the Corporation who is entitled to
vote at the meeting, who complied with the procedures set forth in this Bylaw
and who was a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation.

(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of Section
1.4.1(a) of this Bylaw, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices
of the Corporation not less that seventy days nor more than ninety days prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than twenty days, or delayed by more than seventy days, from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the day of such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected; (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, (ii) the class or series and
number of shares of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner and (iii) a representation that
such stockholder is entitled to vote at the meeting and intends to appear in
person or proxy at the meeting to nominate the person specified in the notice.

(c) Notwithstanding anything in the second sentence of Section
1.4.1(b) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the

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<PAGE> 3
Corporation at least eighty days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this Bylaw
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary
at the principal executive offices of the Corporation not later than the close
of business on the tenth day following the day on which such public
announcement is first made by the Corporation.

1.4.2 Special Meetings of Stockholders.

Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting pursuant to Section 1.3 of these Bylaws.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant
to the Corporation's notice of meeting (a) by or at the direction of the Board
of Directors or (b) by any stockholder of the Corporation who is entitled to
vote at the meeting, who complies with the notice procedures set forth in this
Bylaw and who is a stockholder of record at the time such notice is delivered
to the Secretary of the Corporation. Nominations by stockholders of persons
for election to the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by Section 1.4.1(b) of
this Bylaw shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the ninetieth day prior to such
special meeting and not later than the close of business on the later of the
seventieth day prior to such special meeting or the tenth day following the day
on which public announcement is first made of the date of the special meeting
and of the nominees proposed by the Board of Directors to be elected at such
meeting.

1.4.3 General.

(a) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set
forth in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.

(b) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.

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<PAGE> 4
(c) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 1.5 Quorum.

Subject to the rights of the holders of any class or series of
preferred stock and except as otherwise provided by law or in the Certificate
of Incorporation or these Bylaws, at any meeting of stockholders, the holders
of a majority in total voting power of the outstanding shares of capital stock
entitled to vote at the meeting shall be present or represented by proxy in
order to constitute a quorum for the transaction of any business. In the
absence of a quorum, the holders of a majority in total voting power of the
shares that are present in person or by proxy or the chairman of the meeting
may adjourn the meeting from time to time in the manner provided in Section 1.6
of these Bylaws until a quorum shall attend.

Section 1.6 Adjournment.

Any meeting of stockholders, annual or special, may adjourn from time
to time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At the adjourned meeting,
the Corporation may transact any business which might have been transacted at
the original meeting. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.

Section 1.7 Organization.

The Chairman of the Board, or in his absence the President, or in
their absence any Vice President, shall call to order meetings of stockholders
and shall act as chairman of such meetings. The Board of Directors or, if the
Board fails to act, the stockholders, may appoint any stockholder, director, or
officer of the Corporation to act as chairman of any meeting in the absence of
the Chairman of the Board, the President, and all Vice Presidents.

The Secretary shall act as secretary of all meetings of stockholders,
but, in the absence of the Secretary, the chairman of the meeting may appoint
any other person to act as secretary of the meeting.

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<PAGE> 5
Section 1.8 Voting

Subject to the rights of the holders of any class or series of
preferred stock and except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws and except for the election of directors, at any
meeting duly called and held at which a quorum is present, the affirmative vote
of the majority of the combined voting power of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. Subject to the rights of the holders of
any class or series of preferred stock, at any meeting duly called and held for
the election of directors at which a quorum is present, directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.

Section 1.9 Voting List.

(a) A complete list of the stockholders of the Corporation
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number and class or series of shares
registered in the name of each stockholder shall be prepared by the officer who
has charge of the stock ledger of the Corporation at least 10 days before every
meeting of stockholders. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any stockholder who is present.

(b) Upon the willful neglect or refusal of the directors to
produce such a list at any meeting for the election of directors, they shall be
ineligible for election to any office at such meeting.

(c) The stock ledger shall be the only evidence as to the identity
of the stockholders entitled to examine the stock ledger, the list required by
this section or the books of the Corporation or to vote in person or by proxy
at any meeting of stockholders.

Section 1.10 Stockholder Action Without a Meeting.

Subject to the rights of the holders of any class or series of
preferred stock, stockholder action may be taken only at an annual or special
meeting. Except as otherwise provided in the terms of any class or series of
preferred stock, no action required to be taken or which may be taken at any
annual meeting or special meeting of stockholders may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, is specifically denied.

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<PAGE> 6
Section 1.11 Inspectors of Election. The Corporation may, and
shall if required by law, in advance of any meeting of stockholders, appoint
one or more inspectors of election, who may be employees of the Corporation, to
act at the meeting or any adjournment thereof and to make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. In the event that no
inspector so appointed or designated is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to
the best of his or her ability. The inspector or inspectors so appointed or
designated shall (i) ascertain the number of shares of capital stock of the
Corporation outstanding and the voting power of each such share, (ii) determine
the shares of capital stock of the Corporation represented at the meeting and
the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares of capital stock of the Corporation
represented at the meeting and such inspectors' count of all votes and ballots.
Such certification and report shall specify such other information as may be
required by law. In determining the validity and counting of proxies and
ballots cast at any meeting of stockholders of the Corporation, the inspectors
may consider such information as is permitted by applicable law. No person who
is a candidate for an office at an election may serve as an inspector at such
election.

ARTICLE II
BOARD OF DIRECTORS

Section 2.1 Number and Term of Office.

(a) The governing body of the Corporation shall be a Board of
Directors. Subject to any rights of the holders of any class or series of
preferred stock to elect additional directors, the Board of Directors shall be
comprised of not less than three members. The Board of Directors, by
resolution adopted by the affirmative vote of at least 75% of the members of
the Board of Directors then in office, may increase or decrease the number of
directors. Directors need not be stockholders of the Corporation.

(b) Except as otherwise fixed by the Certificate of Incorporation
relating to the rights of the holders of any class or series of preferred stock
to separately elect additional directors, which additional directors are not
required to be classified pursuant to the terms of such class or series of
preferred stock, the Board of Directors shall be divided into three classes:
Class I, Class II and Class III. Each class shall consist, as nearly as
possible, of a number of directors equal to one-third of the then authorized
number of members of the Board of Directors. The term of office of the initial
Class I directors shall expire at the annual meeting of stockholders in 1998;
the term of office of the initial Class II directors shall expire at the annual
meeting of stockholders in 1999; and the term of office of the initial Class
III directors shall expire at the annual meeting of stockholders in 2000. At
each annual meeting of stockholders of the Corporation, the successors of that
class of directors

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<PAGE> 7
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. The directors of each class will serve until their
respective successors are elected and qualified.

Section 2.2 Resignations.

Any director of the Corporation, or any member of any committee, may
resign at any time by giving written notice to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time be not specified therein, then upon receipt thereof. The acceptance of
such resignation shall not be necessary to make it effective unless otherwise
stated therein.

Section 2.3 Removal of Directors.

Subject to the rights of the holders of any class or series of
preferred stock, directors may be removed from office only for cause (as
hereinafter defined), but not without cause, upon the affirmative vote of the
holders of not less than 66 2/3% of the total voting power of the then
outstanding capital stock of the Corporation entitled to vote thereon, voting
together as a single class. Except as may otherwise be provided by law,
"cause" for removal, for purposes of this Bylaw, shall exist only if: (i) the
director whose removal is proposed has been convicted of a felony, or has been
granted immunity to testify in an action where another has been convicted of a
felony, by a court of competent jurisdiction and such conviction is no longer
subject to direct appeal; (ii) such director has become mentally incompetent,
whether or not so adjudicated, which mental incompetence directly affects his
ability as a director of the Corporation, as determined by not less than 66
2/3% of the members of the Board of Directors then in office (other than such
director); or (iii) such director's actions or failure to act have been
determined by not less than 66 2/3% of the members of the Board of Directors
then in office (other than such director) to be in derogation of the director's
duties.

Section 2.4 Newly Created Directorships and Vacancies.

Subject to the rights of the holders of any class or series of
preferred stock, vacancies on the Board of Directors resulting from death,
resignation, removal, disqualification or other cause, and newly created
directorships resulting from any increase in the number of directors on the
Board of Directors, shall be filled by the affirmative vote of a majority of
the remaining directors then in office (even though less than a quorum) or by
the sole remaining director. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the vacancy occurred or to which the new
directorship is apportioned, and until such director's successor shall have
been elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director, except

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<PAGE> 8
as may be provided in the terms of any class or series of preferred stock with
respect to any director elected by the holders of such class or series of
preferred stock.

Section 2.5 Chairman of the Board.

The directors shall elect one of their members to be Chairman of the
Board of Directors. He shall perform such duties as may from time to time be
assigned to him by the Board of Directors.

Section 2.6 Meetings.

Notice of each regular meeting shall be furnished in writing to each
member of the Board of Directors not less than five days in advance of said
meeting, unless such notice requirement is waived in writing by each member.

Special meetings of the Board of Directors shall be held at such time
and place as shall be designated in the notice of the meeting. Special
Meetings of the Board of Directors may be called by the Chairman of the Board,
and shall be called by the President or Secretary of the Corporation upon the
written request of not less than 75% of the members of the Board of Directors
then in office.

Section 2.7 Notice of Special Meetings.

The Secretary, or in his absence any other officer of the Corporation,
shall give each director notice of the time and place of holding of special
meetings of the Board of Directors by mail at least 10 days before the meeting,
or by telegram, cable, radiogram, or personal service at least 3 days before
the meeting unless such notice requirement is waived in writing by each member.
Unless otherwise stated in the notice thereof, any and all business may be
transacted at any meeting without specification of such business in the notice.

Section 2.8 Quorum and Organization of Meetings.

A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or not
adjourned from a previous meeting) there shall be less than a quorum present, a
majority of those present may adjourn the meeting to another time and place,
and the meeting may be held as adjourned without further notice or waiver.
Except as otherwise provided by law, the Certificate of Incorporation or these
Bylaws, a majority of the directors present at any meeting at which a quorum is
present may decide any question brought before such meeting.

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<PAGE> 9
Meetings shall be presided over by the Chairman of the Board, or in his absence
by such other person as the directors may select. The Board of Directors shall
keep written minutes of its meetings. The Secretary of the Corporation shall
act as secretary of the meeting, but in his absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.

Section 2.9 Indemnification.

The Corporation shall indemnify members of the Board of Directors and
officers of the Corporation and their respective heirs, personal
representatives and successors in interest for or on account of any action
performed on behalf of the Corporation, to the fullest extent permitted by the
laws of the State of Delaware and the Certificate of Incorporation, as now or
hereafter in effect.

Section 2.10 Executive Committee of the Board of Directors.

The Board of Directors, by the affirmative vote of not less than 75%
of the members of the Board of Directors then in office, may designate an
executive committee, all of whose members shall be directors, to manage and
operate the affairs of the Corporation or particular properties or enterprises
of the Corporation. Subject to the limitations of the laws of the State of
Delaware, the Certificate of Incorporation and these Bylaws, such executive
committee shall exercise all powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation including, but
not limited to, the power and authority to authorize the issuance of shares of
common stock in an amount not in excess of such number of shares as shall be
specifically authorized from time to time by the Board of Directors in respect
of a particular transaction. The executive committee shall keep minutes of its
meetings and report to the Board of Directors not less often than quarterly on
its activities and shall be responsible to the Board of Directors for the
conduct of the enterprises and affairs entrusted to it.

Section 2.11 Other Committees of the Board of Directors.

The Board of Directors may by resolution establish committees other
than an executive committee and shall specify with particularity the powers and
duties of any such committee. Subject to the limitations of the laws of the
State of Delaware, the Certificate of Incorporation and these Bylaws, any such
committee shall exercise all powers and authority specifically granted to it by
the Board of Directors, which powers may include the authority to authorize the
issuance of shares of common stock in an amount not in excess of such number of
shares as shall be specifically authorized from time to time by the Board of
Directors in respect of a particular transaction. Such committees shall serve
at the pleasure of the Board; keep minutes of their meetings; and have such
names as the Board of Directors by resolution may determine and shall be
responsible to the Board of Directors for the conduct of the enterprises and
affairs entrusted to them.

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<PAGE> 10
Section 2.12 Committees Generally.

The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member of any meeting of such committee. In the absence or disqualification of
a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member. Each
committee which may be established by the Board of Directors pursuant to these
Bylaws may fix its own rules and procedures. Notice of meetings of committees,
other than of regular meetings provided for by such rules, shall be given to
committee members.

Section 2.13 Directors' Compensation.

Directors shall receive such compensation for attendance at any
meetings of the Board of Directors and any expenses incidental to the
performance of their duties as the Board of Directors shall determine by
resolution. Such compensation may be in addition to any compensation received
by the members of the Board of Directors in any other capacity.

Section 2.14 Action Without Meeting.

Nothing contained in these Bylaws shall be deemed to restrict the
power of members of the Board of Directors or any committee designated by the
Board of Directors to take any action required or permitted to be taken by them
without a meeting.

Section 2.15 Telephone Meetings.

Nothing contained in these Bylaws shall be deemed to restrict the
power of members of the Board of Directors, or any committee designated by the
Board of Directors, to participate in a meeting of the Board of Directors, or
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.

ARTICLE III
OFFICERS

Section 3.1 Executive Officers.

The officers of the Corporation shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Treasurer, and a Secretary, each of
whom shall be elected by the Board of

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<PAGE> 11
Directors. The Chairman of the Board shall be elected from among the members
of the Board of Directors. The Board of Directors may elect or appoint from
time to time such other or additional officers as in its opinion are desirable
for the conduct of the business of the Corporation. Each officer shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of stockholders following their respective election. Any person
may hold at one time two or more offices.

Section 3.2 Powers and Duties of Officers.

The Chairman of the Board shall have overall responsibility for the
management and direction of the business and affairs of the Corporation and
shall exercise such duties as customarily pertain to the office of Chairman of
the Board and such other duties as may be prescribed from time to time by the
Board of Directors. He shall be the senior officer of the Corporation and in
case of the inability or failure of the President to perform his duties, he
shall perform the duties of the President. He may appoint and terminate the
appointment or election of officers, agents, or employees other than those
appointed or elected by the Board of Directors. He may sign, execute and
deliver, in the name of the Corporation, powers of attorney, contracts, bonds
and other obligations which implement policies established by the Board of
Directors. The Chairman of the Board shall preside at all meetings of
stockholders and of the Board of Directors at which he is present, and shall
perform such other duties as may be prescribed from time to time by the Board
of Directors or these Bylaws.

The President shall be the chief executive officer of the Corporation
and shall be responsible for the active direction of the daily business of the
Corporation and shall exercise such duties as customarily pertain to the office
of President and chief executive officer and such other duties as may be
prescribed from time to time by the Board of Directors. He may appoint and
terminate the appointment or election of officers, agents, or employees other
than those appointed or elected by the Board of Directors or the Chairman of
the Board. The President may sign, execute and deliver, in the name of the
Corporation, powers of attorney, contracts, bonds and other obligations which
implement policies established by the Board of Directors. In the absence or
disability of the Chairman of the Board, the President shall perform the duties
and exercise the powers of the Chairman of the Board.

Vice Presidents shall have such powers and perform such duties as may
be assigned to them by the Chairman of the Board, the President, the executive
committee, if any, or the Board of Directors. A Vice President may sign and
execute contracts and other obligations pertaining to the regular course of his
duties which implement policies established by the Board of Directors.

The Treasurer shall be the chief financial officer of the Corporation.
Unless the Board of Directors otherwise declares by resolution, the Treasurer
shall have general custody of all the funds and securities of the Corporation
and general supervision of the collection and disbursement of funds of the
Corporation. He shall endorse for collection on behalf of the Corporation
checks, notes and

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<PAGE> 12
other obligations, and shall deposit the same to the credit of the Corporation
in such bank or banks or depository as the Board of Directors may designate.
He may sign, with the Chairman of the Board, the President, or such other
person or persons as may be designated for the purpose by the Board of
Directors, all bills of exchange or promissory notes of the Corporation. He
shall enter or cause to be entered regularly in the books of the Corporation a
full and accurate account of all moneys received and paid by him on account of
the Corporation; shall at all reasonable times exhibit his books and accounts
to any director of the Corporation upon application at the office of the
Corporation during business hours; and, whenever required by the Board of
Directors or the President, shall render a statement of his accounts. He shall
perform such other duties as may be prescribed from time to time by the Board
of Directors or by these Bylaws. He may be required to give bond for the
faithful performance of his duties in such sum and with such surety as shall be
approved by the Board of Directors. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.

The Secretary shall keep the minutes of all meetings of the
stockholders and of the Board of Directors. The Secretary shall cause notice
to be given of meetings of stockholders, of the Board of Directors, and of any
committee appointed by the Board of Directors. He shall have custody of the
corporate seal, if any, minutes and records relating to the conduct and acts of
the stockholders and Board of Directors, which shall, at all reasonable times,
be open to the examination of any director. The Secretary or any Assistant
Secretary may certify the record of proceedings of the meetings of the
stockholders or of the Board of Directors or resolutions adopted at such
meetings; may sign or attest certificates, statements or reports required to be
filed with governmental bodies or officials; may sign acknowledgments of
instruments; may give notices of meetings; and shall perform such other duties
and have such other powers as the Board of Directors may from time to time
prescribe.

Section 3.3 Bank Accounts.

In addition to such bank accounts as may be authorized in the usual
manner by resolution of the Board of Directors, the Treasurer, with approval of
the Chairman of the Board or the President, may authorize such bank accounts to
be opened or maintained in the name and on behalf of the Corporation as he may
deem necessary or appropriate, provided payments from such bank accounts are to
be made upon and according to the check of the Corporation, which may be signed
jointly or singularly by either the manual or facsimile signature or signatures
of such officers or bonded employees of the Corporation as shall be specified
in the written instructions of the Treasurer or Assistant Treasurer of the
Corporation with the approval of the Chairman of the Board or the President of
the Corporation.

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<PAGE> 13
Section 3.4 Proxies.

Unless otherwise provided in the Certificate of Incorporation or
directed by the Board of Directors, the Chairman of the Board or the President
or their designees shall have full power and authority on behalf of the
Corporation to attend and to vote upon all matters and resolutions at any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, whether
regular or special, and at all adjournments thereof, and shall have power and
authority to execute and deliver proxies and consents on behalf of the
Corporation in connection with the exercise by the Corporation of the rights
and powers incident to the ownership of such stock, with full power of
substitution or revocation.

ARTICLE IV
CAPITAL STOCK

Section 4.1 Stock Certificates.

Each stockholder of the Corporation shall be entitled to a certificate
certifying the class or series and number of shares represented thereby and in
such form, not inconsistent with the laws of the State of Delaware, the
Certificate of Incorporation or these Bylaws, as the Board of Directors may
from time to time prescribe.

The certificates of stock shall be signed by the Chairman of the Board
or the President and by the Secretary or the Treasurer, and sealed with the
seal of the Corporation. Such seal may be a facsimile, engraved or printed.
Where any certificate is manually signed by a transfer agent or by a registrar,
the signatures of any officers upon such certificate may be facsimiles,
engraved or printed. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon any certificate shall
have ceased to be such before the certificate is issued, it may be issued by
the Corporation with the same effect as if such officer, transfer agent or
registrar had not ceased to be such at the time of its issuance.

Section 4.2 Transfer of Shares.

(a) Shares of the capital stock of the Corporation may be
transferred on the books of the Corporation only by the holder of such shares
or by his duly authorized attorney, upon the surrender to the Corporation or
its transfer agent of the certificate representing such stock properly
endorsed.

(b) The person in whose name shares of stock stand on the books of
the Corporation shall be deemed by the Corporation to be the owner thereof for
all purposes, and the Corporation shall not be bound to recognize any equitable
or other claim to or interest in such share

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<PAGE> 14
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Delaware.

Section 4.3 Fixing Record Date.

In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, not be more
than sixty nor less than ten days before the date of such meeting; (2) in the
case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the Board
of Directors; and (3) in the case of any other action, shall not be more than
sixty days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day
immediately preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day immediately preceding the day on
which the meeting is held; (2) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action of the Board of Directors is required by law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in accordance with
applicable law, or, if prior action by the Board of Directors is required by
law, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (3) the record
date for determining stockholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.

Section 4.4 Lost Certificates.

The Board of Directors or any transfer agent of the Corporation may
direct a new certificate or certificates representing stock of the Corporation
to be issued in place of any certificate or certificates theretofore issued by
the Corporation, alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to
be lost, stolen, or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors (or any transfer agent of
the Corporation authorized to do so by a resolution of the Board of

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<PAGE> 15
Directors) may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as the Board of Directors (or any transfer agent so authorized) shall
direct to indemnify the Corporation against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost,
stolen, or destroyed or the issuance of such new certificates, and such
requirement may be general or confined to specific instances.

Section 4.5 Transfer Agent and Registrar.

The Board of Directors may appoint one or more transfer agents and one
or more registrars, any may require all certificates for shares to bear the
manual or facsimile signature or signatures of any of them.

Section 4.6 Regulations.

The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issuance,
transfer, registration, cancellation, and replacement of certificates
representing stock of the Corporation.

ARTICLE V
GENERAL PROVISIONS

Section 5.1 Offices.

The Corporation shall maintain a registered office in the State of
Delaware as required by law. The Corporation may also have offices in such
other places, either within or without the State of Delaware, as the Board of
Directors may from time to time designate or as the business of the Corporation
may require.

Section 5.2 Corporate Seal.

The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization, and the words "Corporate Seal" and
"Delaware."

Section 5.3 Fiscal Year.

The fiscal year of the Corporation shall be determined by resolution
of the Board of Directors.

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<PAGE> 16
Section 5.4 Notices and Waivers Thereof.

Whenever any notice whatever is required by law, the Certificate of
Incorporation or these Bylaws to be given to any stockholder, director or
officer, such notice, except as otherwise provided by law, may be given
personally, or by mail, or, in the case of directors or officers, by telegram,
cable or facsimile transmission, addressed to such address as appears on the
books of the Corporation. Any notice given by telegram, cable or facsimile
transmission shall be deemed to have been given when it shall have been
transmitted, and any notice given by mail shall be deemed to have been given
three business days after it shall have been deposited in the United States
mail with postage thereon prepaid.

Whenever any notice is required to be given by law, the Certificate of
Incorporation, or these Bylaws, a written waiver thereof signed by the person
entitled to such notice, whether before or after the meeting or the time stated
therein, shall be deemed equivalent in all respects to such notice to the full
extent permitted by law.

Section 5.5 Saving Clause.

These Bylaws are subject to the provisions of the Certificate of
Incorporation and applicable law. In the event any provision of these Bylaws
is inconsistent with the Certificate of Incorporation or the corporate laws of
the State of Delaware, such provision shall be invalid to the extent only of
such conflict, and such conflict shall not affect the validity of any other
provision of these Bylaws.

Section 5.6 Amendments.

In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than 75% of the members of the Board of Directors
then in office, is hereby expressly authorized and empowered to adopt, amend or
repeal any provision of these Bylaws.

Subject to the rights of the holders of any class or series of
preferred stock, these Bylaws may be adopted, amended or repealed by the
affirmative vote of the holders of not less than 66 2/3% of the total voting
power of the then outstanding capital stock of the Corporation entitled to vote
thereon; provided, however, that this paragraph shall not apply to, and no vote
of the stockholders of the Corporation shall be required to authorize, the
adoption, amendment or repeal of any provision of these Bylaws by the Board of
Directors in accordance with the preceding paragraph.

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<PAGE> 1

EXHIBIT 4.3

FORM OF RIGHTS AGREEMENT

AGREEMENT, dated as of ______________________, 1997, among
TELE-COMMUNICATIONS, INC., a Delaware corporation ("TCI" or the "Company"), TCI
Music, Inc., a Delaware corporation ("MusicCo"), and ________________________,
as Rights Agent for the Company's rights issued pursuant hereto (the "Rights").

BACKGROUND

Pursuant to the Agreement and Plan of Merger dated as of February 6,
1997, as amended by Amendment One dated May __, 1997, (the "Merger Agreement"),
the outstanding shares of Common Stock of DMX Inc., were converted on the date
of this Agreement into shares of Series A Common Stock of MusicCo upon
effectiveness of the merger contemplated by the Merger Agreement (the
"Merger").

In connection with the Merger, TCI has agreed that if, during the
one-year period beginning on the date of the Merger, the price of MusicCo's
Series A Common Stock does not equal or exceed $8.00 per share for a period of
at least 20 consecutive trading days, holders of MusicCo Series A Common Stock
will have the right, exercisable during the 30-day period beginning on the
first anniversary of the Merger, to require TCI to purchase such Common Stock
at a price of $8.00 per share, payable at TCI's election in cash or shares of
Tele-Communications, Inc. Series A TCI Group Common Stock (or a combination
thereof). Each Right will entitle the registered holder thereof (the
"Holders") to sell one share of MusicCo Series A Common Stock (subject to
adjustment) to the Company for the consideration described herein upon exercise
thereof in accordance with the terms and conditions of this Agreement.

The Company wishes the Rights Agent to act on behalf of the Company,
and the Rights Agent is willing so to act, in connection with the issuance,
division, transfer, exchange and exercise of the Rights.

AGREEMENT

In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Rights, the respective rights and obligations
thereunder of the Company and the holders and certain obligations of MusicCo,
the parties agree as follows:

ARTICLE I
DEFINITIONS

1.01 Certain Definitions. As used herein, the following terms have
the meanings assigned to them in this Section 1.01 (or in the applicable
Section to which reference is made) and include the singular as well as the
plural:
<PAGE> 2
"Aggregate Consideration Amount Per Distributed Entity Share": As of
any date of determination, the sum of the Consideration Amount Per Distributed
Entity Share for each Distributed Entity then existing.

"Applicable Entity": As the context may require, MusicCo and each
Distributed Entity, as applicable.

"Bankruptcy Event": Pursuant to or within the meaning of any
Bankruptcy Law, the Company:

(a) commences a voluntary case;

(b) consents to the entry of an order for relief against
it in an involuntary case;

(c) consents to the appointment of a Custodian of it or
for all or substantially all of its property (other than for its subsidiaries
or property of its subsidiaries);

(d) makes a general assignment for the benefit of its
creditors;

(e) admits in writing its inability to pay its debts
generally as they become due;

(f) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:

(i) is for relief against the Company in an
involuntary case;

(ii) appoints a Custodian of the Company or for
all or substantially all of its property (other than its subsidiaries
or property of its subsidiaries);

(iii) orders the liquidation of the Company, and
any such order or decree remains unstayed and in effect for 90 days;
or

(g) the Company takes any corporate action to authorize
any of the foregoing.

The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.

"Beneficial Owner": A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities of which such
person has "Beneficial Ownership" within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934 (or any successor

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statute or rule). Any Person's percentage beneficial ownership of any class of
securities shall be determined in accordance with such rule.

"Business Day": Any day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York or Los Angeles, California are
authorized or required to close.

"Capital Stock": With respect to each Applicable Entity, any and all
shares (however designated) of capital stock or other equity interests of such
Applicable Entity, now or hereafter authorized, that, upon the liquidation of
such Applicable Entity, entitle the holder thereof to share, without limitation
as to amount, in the liquidating distribution of the assets of such Applicable
Entity to its stockholders. In determining the number and kind of shares of
Capital Stock of each Applicable Entity outstanding for purposes of the
definitions of "Per Share Value" and "Fair Market Value", any shares of capital
stock or of other equity interests of such Applicable Entity that, without
payment of additional consideration, are convertible into or exchangeable
("Convertible Shares") for shares of any other class or series of corporate
stock or of other equity interests of such Applicable Entity ("Conversion
Shares") shall be deemed to have been so converted or exchanged if the
aggregate amount that would be payable, if such Applicable Entity were then
being liquidated, to the holders of such Conversion Shares exceeds the
aggregate amount that would be payable (determined on a class by class basis),
if such Applicable Entity were then being liquidated, to the holders of the
Convertible Shares. The calculation of the aggregate amount payable upon
liquidation of such Applicable Entity to holders of Conversion Shares or
Convertible Shares, as the case may be, shall take into account any fixed
amounts payable in liquidation with respect to such shares and shall otherwise
assume that liquidating distributions will be made on the basis of the Fair
Market Value of such Applicable Entity (calculated, in the case of the
Conversion Shares, on a pro forma basis assuming the issuance of such
Conversion Shares).

"Certificates": As defined in Section 2.02.

"Change in Control Transaction": As defined in Section 4.17.

"Component": Each of the MusicCo Component and each Distributed Entity
Component, if any, of each Right.

"Consideration Amount Per Distributed Entity Share": The amount
determined in accordance with Section 4.16.

"Consideration Amount Per MusicCo Share": The amount determined in
accordance with Section 4.16.

"Current Market Price": As defined in Section 4.05.

"Deposit Date": As defined in Section 4.14.

"Disposition": Any sale, conveyance, transfer or other disposition by
the Company of Beneficial Ownership of any shares of Capital Stock of MusicCo
during the term of this

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Agreement, but excluding (i) a pledge of Capital Stock of MusicCo as collateral
security for bona fide indebtedness, (ii) a disposition of Capital Stock of
MusicCo after giving effect to which the Company continues to be the beneficial
owner of the Capital Stock so disposed of and (iii) a disposition of Capital
Stock of MusicCo in connection with a merger, consolidation or combination of
the Company with or into another corporation. The term "dispose" means to make
a disposition.

"Distributed Entity": Any entity the shares of Capital Stock of which
are distributed or sold in a Subject Distribution. The term "Distributed
Entity Stock" means the class or series of Capital Stock of each Distributed
Entity that is distributed or sold in a Subject Distribution.

"Distributed Entity Component": As defined in Section 6.04.

"Distribution Value": With respect to each distribution by an
Applicable Entity to all holders of shares of MusicCo Series A Common Stock or
Distributed Entity Stock, as the case may be, of shares of the Capital Stock of
any entity or of rights or warrants entitling such holders (for a period
expiring within 45 days after the effective date of such distribution) to
purchase shares of the Capital Stock of any entity, the positive difference, if
any, between (a) the Fair Market Value of such entity or, if the shares of
Capital Stock so distributed or sold pursuant to the distributed rights or
warrants represent less than 100% of the outstanding shares of Capital Stock of
such entity, then the portion of the Fair Market Value of such entity
represented by the shares so distributed or sold, and (b) the aggregate
consideration paid for the shares sold pursuant to the distributed rights or
warrants, if any.

"Early Expiration Event": With respect to MusicCo Series A Common
Stock and the Capital Stock of each other Applicable Entity, when the sum of
the Fair Market Values of one share of MusicCo Series A Common Stock and one
share of the Capital Stock of each other Applicable Entity shall have equaled
or exceeded $8.00 for at least 20 consecutive trading days.

"Excluded Stock": With respect to each Applicable Entity, any and all
shares (however designated) of capital stock or of other equity interests of
such Applicable Entity now or hereafter authorized that, upon the liquidation
of such Applicable Entity, do not entitle the holder thereof to share, without
limitation as to amount, in the liquidating distribution of the assets of such
Applicable Entity to its equity holders, except that any of such shares that,
without payment of additional consideration, are convertible into or
exchangeable for shares of any other class or series of capital stock or of
other equity interests that are not so limited with respect to participation in
liquidating distributions shall not constitute Excluded Stock if such shares
would be deemed to have been so converted in accordance with the definition of
"Capital Stock".

"Exercise Period": As defined in Section 4.01, subject to Section
4.17.

"Fair Market Value": With respect to each Applicable Entity as of any
date of determination, the fair market value of such Applicable Entity on a
going concern basis (as if such Applicable Entity were being sold by a sale of
stock or, if applicable, of other equity interests) or on a liquidation basis
(whichever method would yield the highest valuation), (i) reduced by the
aggregate amount that would be payable, if such Applicable Entity were then
being liquidated,

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<PAGE> 5
(x) on any Excluded Stock of the Applicable Entity and (y) on any shares of its
Capital Stock then outstanding (or deemed to be outstanding in accordance with
the definition of "Capital Stock") that entitle their holders to payment of a
fixed amount upon liquidation in addition to their participation in liquidating
distributions payable with respect to other shares of Capital Stock (but the
reduction pursuant to this clause (y) shall be limited to such fixed amount)
and (ii) increased by the aggregate exercise or conversion price payable to
such Applicable Entity upon the exercise or conversion of all warrants, rights
and options to purchase or acquire Capital Stock of such Applicable Entity and
convertible securities the exercise or conversion of which is taken into
account in determining the Per Share Value of such Applicable Entity. The fair
market value of an Applicable Entity on a going concern basis shall take into
account such considerations (including but not limited to tax considerations
which are specific to a sale of stock or, if applicable, of other equity
interests) as would customarily affect the price at which a willing seller
would sell and a willing buyer would buy a comparable business as a going
concern in an arm's length transaction. The fair market value of an Applicable
Entity on a liquidation basis shall take into account tax liabilities that
would be incurred in a liquidation assuming the most tax efficient and
practical plan of liquidation and all other liabilities that would be required
to be paid or reserved against before the making of liquidating distributions
to equity holders.

"Holders": As defined in the preamble.

"MusicCo Series A Common Stock": Series A Common Stock, par value
$.01 per share of MusicCo, and Capital Stock of any other class into which such
Series A Common Stock may thereafter have been changed. "MusicCo Series A
Shares" means shares of MusicCo Series A Common Stock.

"MusicCo Common Stock": Capital Stock of MusicCo including MusicCo
Series A Common Stock.

"MusicCo Component": As defined in Section 6.04.

"MusicCo Dividend": Any distribution of cash or property (other than
securities specified in Section 6.03) on MusicCo Series A Common Stock.

"Notice": As defined in Section 4.07.

"Per Share Value": With respect to each Applicable Entity, the
quotient of (x) the Fair Market Value of such Applicable Entity as of the
applicable date, divided by (y) the total number of shares of Capital Stock of
such Applicable Entity outstanding (or deemed to be outstanding in accordance
with the definition of "Capital Stock") as of such date (or shares equivalent
to (i) in the case of MusicCo, MusicCo Common Stock, or (ii) in the case of any
Distributed Entity, Distributed Entity Stock, if any shares of Capital Stock of
such Applicable Entity then outstanding or deemed to be outstanding entitle
their holders to participate in liquidating distributions on a basis different
from that which is applicable to shares of MusicCo Common Stock or Distributed
Entity Stock, as the case may be) plus the number of such shares or share
equivalents (to the extent not already treated as outstanding pursuant to the
definition of "Capital Stock")

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<PAGE> 6
issuable upon the exercise of outstanding warrants, rights and options to
purchase or acquire Capital Stock of such Applicable Entity and the conversion
of outstanding convertible securities to the extent that any such exercise or
conversion would result in a profit to the holder of the related warrant,
right, option or convertible security given the Per Share Value so determined.

"Person": Any human being, corporation, partnership, limited
liability company, trust, association or other entity.

"Rights": As defined in the preamble.

"Significant Corporate Transaction": The occurrence of a Terminating
Event with respect to an Applicable Entity the Fair Market Value of which
represents a greater percentage of the Undistributed Value of MusicCo than the
percentage thereof represented by the Fair Market Value of any other Applicable
Entity, as determined by the Board of Directors of MusicCo (whose good faith
determination will be conclusive) as of the date the agreement of merger or
consolidation is executed or the vote of the Board of Directors of such
Applicable Entity to dissolve or liquidate such Applicable Entity is taken.

"Subject Distribution": As defined in Section 6.03.

"TCI Series A Common Stock": As defined in Section 4.04.

"TCI Series A Shares": As defined in Section 4.04.

"Terminating Event": Each of the following events: (a) an Applicable
Entity is a constituent party in any merger or consolidation (other than a
merger or consolidation in which such Applicable Entity is the surviving
corporation and that does not result in any reclassification or change in the
outstanding Capital Stock of such Applicable Entity, other than a change in par
value or a reclassification or other change to which Article VI is applicable
and other than a merger the sole purpose of which is to change such Applicable
Entity's domicile within the United States) or (b) such Applicable Entity is
dissolved or liquidated.

"Triggering Event": As defined in Section 4.18.

"Underlying Number": As defined in Section 6.04.

"Undistributed Value of MusicCo": As of any date as of which the
determination thereof is to be made pursuant to Section 6.03, the sum of the
respective Fair Market Values of MusicCo and of each Distributed Entity as of
such date.

"Valuation Date": The last day of the most recent quarter ended prior
to the Exercise Period or, with respect to any accelerated Exercise Period, the
applicable date determined in accordance with Section 4.17.

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<PAGE> 7
ARTICLE II.
RIGHTS AGENT

2.01 Appointment of Rights Agent. The Company appoints the Rights
Agent to act as agent for the Company in accordance with the terms set forth in
this Agreement and the Rights Agent accepts such appointment.

2.02 No Rights Certificates. The rights will be evidenced only by
certificates for MusicCo Series A Shares registered in the names of holders of
MusicCo Series A Shares ("Certificates"), which Certificates will be deemed
also to be certificates for the Rights. As soon as practicable following the
Closing Date (as defined in the Merger Agreement), the Rights Agent will send a
summary of the terms of the Rights (the "Rights Summary") by first-class,
postage paid mail to each record Holder of MusicCo Series A Shares as of the
close of business on the Closing Date (as defined in the Merger Agreement), at
the address of the Holder as shown on the records of MusicCo. The Rights will
be evidenced by certificates for MusicCo Series A Shares together with the
Rights Summary and the registered Holders of MusicCo Series A Shares will also
be registered Holders of the associated Rights.

2.03 Registration. The Company and the Rights Agent shall be
entitled to treat the registered Holders(s) of the certificates representing
MusicCo Series A Shares as the absolute owner(s) of the Rights represented
thereby (notwithstanding any notation of ownership or other writing on the
Certificates made by anyone or any other notice to the contrary) for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Rights on the part of any other Person.

ARTICLE III.
TRANSFERS, EXCHANGES AND SUBSTITUTIONS

3.01 Transfers. The Rights will be transferable only in connection
with the transfer of the associated MusicCo Series A Shares. The surrender
for transfer of any certificates evidencing MusicCo Series A Shares, even
without a copy of the Rights Summary attached thereto, will also constitute a
transfer of the Rights associated with the MusicCo Series A Common Stock
represented by such certificate. Under no circumstances may any Right be
separated from, or transferred or assigned apart from, the associated MusicCo
Series A Share.

3.02 Legend. Certificates issued for MusicCo Series A Shares on
or after the date of this Agreement and before expiration of the Rights, which
MusicCo Series A Shares initially were issued pursuant to the Merger
Agreement, will be deemed also to be certificates for the Rights, and will have
impressed, printed or stamped on them the following legend:

This certificate also evidences and entitles the holder to certain
Rights as set forth in a Rights Agreement between TCI Music, Inc. (the
"Corporation"), Tele-Communications, Inc., and ______________
_______________________ (the "Rights Agent") dated as of

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<PAGE> 8
__________________, 1997 (the "Rights Agreement"), the terms of which
are hereby incorporated by reference and a copy of which is on file at
the principal offices of the Corporation. The Corporation will mail
to the holder of this certificate without charge a copy of the Rights
Agreement upon written request therefor.

ARTICLE IV.
EXERCISE OF RIGHTS

4.01 Exercise Period. During the period commencing at the opening
of business on [date of first anniversary of closing] and ending at the close
of business, ___________ time, on the 30th day after such date or the
succeeding Business Day if such date is not a Business Day (the "Exercise
Period"), and during any accelerated Exercise Period required by Section 4.17,
each Holder of Rights may irrevocably exercise all or any number of its Rights
in accordance with Section 4.08. If the Rights have one or more Distributed
Entity Components at the time such Rights are exercisable, the Holder may, in
accordance with Section 4.08, irrevocably exercise such Right as to its MusicCo
Component, any or all of its Distributed Entity Components, or any combination
thereof. Notwithstanding anything to the contrary herein, the Exercise Period
shall be conducted in compliance with all applicable laws, including all
federal and state securities laws. The foregoing notwithstanding, if an Early
Expiration Event shall have occurred prior to the commencement of the Exercise
Period, the Rights shall expire as of the date of the Early Expiration Event
without ever becoming exercisable by the Holder.

4.02 Expiration. In the Exercise Period and, subject to Section
4.20, any accelerated Exercise Period, the Company shall be obligated to honor
in accordance with Section 4.08 any and all exercises of the Rights then issued
and outstanding. All Rights (and fractions thereof) not theretofore exercised
shall expire and cease to be exercisable upon the expiration of the Exercise
Period (subject to earlier expiration pursuant to the last sentence of the
preceding Section and pursuant to Section 4.17). Upon the exercise of any
Right (or fraction thereof), in whole or in part, such Right (including any
Component thereof not exercised or not exercised in full) shall thereupon
expire and cease to be exercisable. Upon the consummation of a Terminating
Event with respect to any Applicable Entity, that Component of each Right (and
fractional Right) that relates to the Capital Stock of such Applicable Entity
shall expire and cease to be exercisable.

4.03 Extension.

(a) If the Company for any reason fails to give the
Notice in accordance with Section 4.07, the Exercise Period shall be extended
for a period of time equal to the delay in giving the Notice.

(b) If the record date for a Subject Distribution occurs
prior to the Exercise Period, or an accelerated Exercise Period, and the
Distributed Entity Stock with respect to such Subject Distribution is not
delivered to stockholders entitled thereto prior to the beginning of the

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<PAGE> 9
applicable Exercise Period, such Exercise Period shall be extended for a period
of time equal to the number of days from the beginning of such Exercise Period
and the date such Distributed Entity Stock is mailed to such stockholders.

4.04 Consideration To Be Received Upon Exercise of Rights. Subject
to Section 4.20, upon the valid exercise of Rights, the Holder shall be
entitled to receive from the Company, at the Company's sole option (subject
only to Section 4.05 and Section 4.15), cash or shares of the Company's TCI
Group Series A Common Stock, $1.00 par value per share ("TCI Series A Common
Stock" or "TCI Series A Shares"), or any combination of cash and TCI Series A
Shares determined in such proportions or on such other basis as the Company
shall elect in the Notice given pursuant to Section 4.07, in consideration of
the sale to the Company of:

(a) if the MusicCo Component of any or all of such
exercised Rights has been exercised, a number of whole shares of MusicCo Series
A Common Stock equal to the number of whole Rights of which the MusicCo
Component has been so exercised and honored; and

(b) if any Distributed Entity Component of any or all of
such exercised Rights has been exercised, a number of whole shares of the
Distributed Entity Stock to which such Distributed Entity Component relates not
in excess of the product of (i) the number of whole Rights of which such
Distributed Entity Component has been exercised and honored and (ii) the
Underlying Number for such Distributed Entity Component of a whole Right.

4.05 Consideration Amount. The amount of cash or the number of TCI
Series A Shares to be paid or delivered by the Company shall be determined as
follows (subject to adjustments required by Section 4.11 in the determination
of the number of whole TCI Series A Shares to be delivered):

(a) for the number of such shares of MusicCo Series A
Common Stock that the Company has elected to purchase for cash, an aggregate
amount in cash equal to the product of (i) the number of such shares and (ii)
the Consideration Amount Per MusicCo Series A Share for the applicable
Exercise Period;

(b) for the number of such shares of MusicCo Series A
Common Stock that the Company has elected to purchase for TCI Series A Shares
an aggregate number of TCI Series A Shares equal to the product of (i) the
number of such shares of MusicCo Series A Common Stock and (ii) the quotient
of (A) the Consideration Amount Per MusicCo Series A Share for the applicable
Exercise Period, divided by (B) the Current Market Price of a TCI Series A
Share;

(c) for the number of such shares of Distributed Entity
Stock that the Company has elected to purchase for cash, an aggregate amount in
cash equal to the product of (i) the number of such shares and (ii) the
Consideration Amount Per Distributed Entity Share for the applicable Exercise
Period; and

(d) for the number of such shares of Distributed Entity
Stock that the Company has elected to purchase for TCI Series A Shares, an
aggregate number of TCI Series A

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<PAGE> 10
Shares equal to the product of (i) the number of such shares of Distributed
Entity Stock and (ii) the quotient of (A) the Consideration Amount Per
Distributed Entity Share for the applicable Exercise Period, divided by (B) the
Current Market Price of a TCI Series A Share.

As used herein, the "Current Market Price" of a TCI Series A Share
shall be the average of the daily closing prices for a share of TCI Series A
Common Stock for 30 consecutive trading days commencing 45 trading days before
the date of determination. The closing price for a share of TCI Series A
Common Stock is the last reported sale price on the National Association of
Securities Dealers, Inc. Automated Quotation System (or the average of the
quoted closing bid and asked prices if no sale is reported) or if the TCI
Series A Common Stock is listed on an exchange, the closing sale price on the
principal exchange on which the TCI Series A Common Stock is listed (or the
average of the reported closing bid and asked prices if no sale is reported).
In the absence of one or more of such quotations, the Board of Directors of the
Company shall in good faith determine the Current Market Price on the basis of
such quotation as it considers appropriate.

4.06 Condition to Delivery of TCI Series A Shares. The Company
shall deliver TCI Series A Shares in full or partial payment for the sale of
shares of MusicCo Series A Common Stock (or Distributed Entity Stock) only if
such TCI Series A Shares are then quoted on the National Association of
Securities Dealers, Inc. National Market System or listed on a national
securities exchange and have been registered with the Securities and Exchange
Commission on an appropriate form under the Securities Act of 1933 or an
exemption from such registration is available and such shares are freely
tradable. The Company may not elect to deliver any other security of the
Company or any security of any other issuer.

4.07 Notice to Rights Holders. The Company shall publish in The
Wall Street Journal (national edition, or if The Wall Street Journal shall
cease publication, in another national financial publication), not less than 20
nor more than 30 days prior to the commencement of an Exercise Period, a notice
(the "Notice") as to: the number of Rights outstanding on the date of such
Notice; the Consideration Amount Per MusicCo Share for such Exercise Period, if
applicable, as to each Distributed Entity Component of the Rights; the number
of shares of Distributed Entity Stock to which such Distributed Entity
Component relates and the applicable Consideration Amount Per Distributed
Entity Share for such Exercise Period; and the form of consideration pursuant
to Section 4.04 the Company has elected to deliver (and if the Company has
elected to deliver both such forms of consideration, the relative proportions
thereof or any other basis on which the relative amounts of cash to be paid and
numbers of TCI Series A Shares to be issued shall be determined). The Notice
shall contain such other information as may be required by applicable federal
or state securities laws or regulations. At, or immediately prior to the time
of the publication of the Notice, the Company will deliver to the Rights Agent
such number of copies as the Rights Agent may request of the Notice, of a
Letter of Transmittal to be used by Holders in tendering stock certificates and
of such other documents as the Company may then be required to deliver to the
Holders in accordance with applicable federal and state securities laws and
regulations. The Rights Agent shall promptly mail by first class mail, postage
prepaid to the registered Holders of the Certificates, at their respective
addresses as they appear on the register of Holders, a copy of the Notice, such
Letter of Transmittal and such other documents, if any. The Company will also
provide additional copies of the Letter of Transmittal to any registered Holder
requesting the same.

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4.08 Exercise of Rights. Rights may be exercised (in whole or as
to any Component) upon surrender to the Rights Agent at its office of the
following, together with a duly completed and signed Letter of Transmittal:
(i) if the MusicCo Component of any of such Rights is being exercised, a stock
certificate or certificates representing a number of shares of MusicCo Series
A Common Stock equal to or greater than the number of Rights of which the
MusicCo Component is being exercised, duly endorsed and in proper form for
transfer, guaranteed by a bank or trust company or a broker who is a member of
a national securities exchange with such endorsements; (ii) if a Distributed
Entity Component of any of such Rights is being exercised, a stock certificate
or certificates representing a number of shares of the Distributed Entity Stock
to which the Distributed Entity Component relates equal to or greater than the
product of the number of whole Rights of which such Distributed Entity
Component is being exercised, multiplied by the Underlying Number for such
Distributed Entity Component of a whole Right; and (iii) payment in United
States currency of an amount equal to any stamp or other tax or governmental
charge required to be paid in connection with the transfer of such shares of
MusicCo Series A Common Stock or Distributed Entity Stock in connection with
the exercise of the Rights. The Rights Agent will hold such stock certificates
in trust for the Holder until payment shall have been made in accordance with
Section 4.12 hereof and, upon such payment, shall, subject to Section 4.09 and
4.10, deliver such stock certificates to the Company.

4.09 MusicCo Certificates. Rights may be exercised only in
integral amounts. If the MusicCo Component of a Right is being exercised and
if the Holder shall tender certificates for shares of MusicCo Series A Common
Stock that are, in the aggregate, greater than the number of Rights of which
the MusicCo Component is being exercised, the Holder shall also designate in
the Letter of Transmittal the stock certificates for the MusicCo Series A
Common Stock enclosed therewith and the number of whole shares being
surrendered from each such stock certificate. In such event, the Rights Agent
shall, as agent for such Holder, deliver the stock certificates to the transfer
agent for the MusicCo Series A Common Stock (the "Transfer Agent", which term
shall include any subsequent transfer agent for any shares of MusicCo's
capital stock issued upon reclassification of the MusicCo Series A Common
Stock), with instructions to issue a new stock certificate to the Company for
the number of shares of MusicCo Series A Common Stock surrendered to and
accepted by the Company and to issue a new stock certificate or certificates to
or in accordance with the instructions of such Holder for the balance of such
shares of MusicCo Series A Common Stock. MusicCo hereby irrevocably
authorizes and directs its present and any future Transfer Agent to issue such
new certificates in accordance herewith. MusicCo will keep a copy of this
Agreement on file with the Transfer Agent.

4.10 Distributed Entity Certificates. If a Distributed Entity
Component of a Right is being exercised, then for each Distributed Entity
Component so exercised the Holder shall designate in the Letter of Transmittal
tendered upon exercise thereof, the aggregate number of whole Shares of
Distributed Entity Stock to which such Distributed Entity Component relates
that are being surrendered upon the exercise of such Component of the Rights
(not in excess of the product of the number of whole Rights of which such
Distributed Entity Component is being exercised, multiplied by the Underlying
Number for such Distributed Entity Component of a whole Right). If a Holder
shall tender certificates for shares of Distributed Entity stock that are, in
the aggregate, greater than the number of shares of Distributed Entity Stock
being so surrendered, the Holder shall also

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<PAGE> 12
designate in the Letter of Transmittal the stock certificates for the
Distributed Entity Stock enclosed therewith and the number of whole shares of
Distributed Entity Stock surrendered from each such stock certificate. In such
event, the Rights Agent shall, as agent for the Holder, deliver the stock
certificates to the transfer agent for the Distributed Entity Stock, with
instructions to issue a new stock certificate to the Company for the number of
shares of Distributed Entity Stock surrendered to and accepted by the Company
and to issue a new stock certificate or certificates to or in accordance with
the instructions of such Holder for the balance of such shares of Distributed
Entity Stock. Each Distributed Entity, by its execution of a supplement to
this Agreement as contemplated by Section 6.07, irrevocably authorizes and
directs the transfer agent for the Distributed Entity Stock to issue such new
certificates in accordance herewith, and covenants and agrees to keep a copy of
this Agreement (as so supplemented) on file with such transfer agent.

4.11 Notices. No later than the fifth Business Day after the end
of the Exercise Period, the Rights Agent will notify the Company and MusicCo of
the following (as to each Holder individually and as to all Holders in the
aggregate): (i) the number of Rights validly exercised in the Exercise Period;
(ii) the number of shares of MusicCo Series A Common Stock surrendered upon
such exercise; and (iii) as to each Distributed Entity Component of the Rights
that has been validly exercised, the number of shares of the applicable
Distributed Entity Stock surrendered upon such exercise. Subject to Sections
4.13 and 4.14, on the later of (x) the tenth Business Day after the end of the
Exercise Period and (y) the fifth Business Day after receipt of such notice
from the Rights Agent, the Company shall deposit with the Rights Agent the
amount of cash or number of TCI Series A Shares required to make full payment
of the purchase price for the shares of MusicCo Series A Common Stock and
Distributed Entity Stock being purchased by it pursuant to such exercised
Rights. In the case of payments in TCI Series A Shares, the certificates
evidencing the same shall be registered in the names and denominations
specified by the Rights Agent in its notice to the Company. The Company shall
not be required to issue fractional TCI Series A Shares to any Holder after
taking into account all Rights exercised by such Holder. In lieu of fractional
TCI Series A Shares, the Company shall make payments in cash for the value,
based upon the Current Market Price, of such fractional shares. The Rights
Agent will promptly mail to each Holder the purchase price for the shares of
MusicCo Series A Common Stock and Distributed Entity Stock sold by him.
Payment of any cash purchase price and any cash in lieu of fractional interests
shall be made by check.

4.12 Payment. If the Company has elected in accordance with
Section 4.04 to offer a combination of cash and TCI Series A Shares in
consideration for the sale of MusicCo Series A Common Stock upon the valid
exercise of the MusicCo Component of the Rights during the Exercise Period, the
Rights Agent shall pay or deliver such consideration to all Holders who have
validly exercised the MusicCo Component of the Rights during the Exercise
Period pro rata with respect to the respective aggregate numbers of Rights the
MusicCo Component of which has been so exercised by them (subject to rounding
or other adjustments made by the Rights Agent and the payment of cash as
provided in Section 4.11 in lieu of the issuance of fractional TCI Series A
Shares). Similarly, if the Company has elected in accordance with Section 4.04
to offer a combination of cash and TCI Series A Shares in consideration for the
sale of shares of Distributed Entity Stock upon the valid exercise of a
Distributed Entity Component of the Rights during the Exercise Period, the
Rights Agent shall pay or deliver such consideration to all Holders who have

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validly exercised such Distributed Entity Component during such Exercise Period
pro rata with respect to the respective aggregate numbers of shares of such
Distributed Entity Stock surrendered by them upon such exercise (subject to
rounding or other adjustments made by the Rights Agent and the payment of cash
as provided in Section 4.11 in lieu of the issuance of fractional TCI Series A
Shares).

4.13 Payment Deferral. Notwithstanding Section 4.17, if the
Exercise Period for each Right is accelerated due to a proposed Significant
Corporate Transaction or Change in Control Transaction and such transaction has
not been consummated prior to the expiration of such accelerated Exercise
Period, the Company may defer depositing the cash or TCI Series A Shares
required to effect the purchase of the MusicCo Series A Common Stock and
Distributed Entity Stock surrendered upon exercise of the Rights, pending
receipt of an officers' certificate in accordance with this Section 4.13.
Notwithstanding anything to the contrary contained herein, any such deferral of
the purchase of the surrendered shares of MusicCo Series A Common Stock and
Distributed Entity Stock shall be conducted in compliance with all applicable
laws, including federal and state securities laws. Not less than 10 Business
Days prior to the effective date of the proposed Significant Corporate
Transaction, unless a shorter period is acceptable to the Company, the
Applicable Entity shall deliver an officers' certificate (an "Applicable Entity
Officers' Certificate") signed by its Chairman of the Board and its President
to the Company and the Rights Agent, certifying that all conditions precedent
to the consummation of the Significant Corporate Transaction have been
satisfied or waived and setting forth the effective date of the proposed
Significant Corporate Transaction. Not less than 10 Business Days prior to the
effective date of the proposed Change in Control Transaction, the Company shall
deliver to the Rights Agent an officer's certificate (a "Company Officer's
Certificate") signed by its Chairman of the Board, President or a Vice
President, certifying that all conditions precedent to the consummation of the
Change in Control Transaction have been satisfied or waived and setting forth
the effective date of the proposed Change in Control Transaction. Promptly
following receipt by the Company of an Applicable Entity Officers' Certificate
or the delivery by the Company of a Company Officer's Certificate, as the case
may be, but in no event later than the effective date specified therein, the
Company shall make the deposit of cash or TCI Series A Shares with the Rights
Agent required by Section 4.11. Promptly following such deposit, the Rights
Agent shall distribute the cash or TCI Series A Shares so deposited to the
Persons entitled to the same as provided in Section 4.11, and deliver the
certificates for the MusicCo Common Stock and Distributed Entity Stock to the
Company as provided in Section 4.08. If the Board of Directors of the
Applicable Entity determines to terminate or abandon the proposed Significant
Corporate Transaction or that such transaction will otherwise not be
consummated, the Applicable Entity shall promptly following such determination
deliver to the Company and the Rights Agent an Applicable Entity Officers'
Certificate to such effect. If the proposed Change in Control Transaction is
terminated or abandoned or the Company otherwise determines that such proposed
transaction will not be consummated, then the Company shall promptly so notify
the Rights Agent by delivering to the Rights Agent a Company Officer's
Certificate to such effect. Promptly following receipt by the Rights Agent of
such Applicable Entity Officers' Certificate or Company Officer's Certificate,
as the case may be, the Rights Agent shall mail to each Holder by first class
mail the certificates evidencing the shares of MusicCo Series A Common Stock,
the shares of Distributed Entity Stock and the Rights surrendered by such
Holder to the Rights Agent in connection with such accelerated Exercise Period
and, if the Company has

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<PAGE> 14
made a deposit of cash or TCI Series A Shares with the Rights Agent in
connection with such accelerated Exercise Period, the Rights Agent shall
deliver the cash or TCI Series A Shares so deposited to the Company.

4.14 Abandonment or Termination. Notwithstanding Section 4.11, if
the Exercise Period for each Right is accelerated and the proposed transaction
which resulted in the acceleration is abandoned or terminated on or before the
last day (the "Deposit Date") on which the Company is required to make the
deposit pursuant to Section 4.11 of cash or TCI Series A Shares to effect the
purchase of shares of MusicCo Series A Common Stock and Distributed Entity
Stock surrendered in connection with such accelerated Exercise Period, or the
Company otherwise determines in good faith on or before the Deposit Date that
such proposed transaction will not be consummated, then the Company shall so
notify the Rights Agent by delivering to the Rights Agent an officer's
certificate to such effect signed by its Chairman of the Board, President or a
Vice President promptly following the termination or abandonment of such
proposed transaction or such determination by the Company, but in no event
later than the fifth Business Day following the Deposit Date. Upon delivery of
such officer's certificate, the Company shall be relieved of its obligation to
make the deposit otherwise required by Section 4.11 or, if such deposit has
theretofore been made, shall be entitled to the return thereof. Promptly
following receipt of such officer's certificate, the Rights Agent shall mail to
each Holder the certificates evidencing the shares of MusicCo Series A Common
Stock, the shares of Distributed Entity Stock and the Rights surrendered by
such Holder to the Rights Agent in connection with such accelerated Exercise
Period and, if the Company has made a deposit of cash or TCI Series A Shares
with the Rights Agent in connection with such accelerated Exercise Period, the
Rights Agent shall deliver the cash or TCI Series A Shares so deposited to the
Company.

4.15 Certain Covenants of the Company and Each Applicable Entity.
If the Company chooses to issue TCI Series A Shares upon the exercise of any
Component of the Rights, the Company will pay all documentary stamp and other
taxes, if any, attributable to the exercise of the Rights, other than any such
taxes payable by the Holder as provided in Section 4.08. Each of MusicCo and
each Distributed Entity shall cooperate with and assist the Company in the
preparation and filing of all applications, reports, statements, notices and
other documents or forms with, and use its reasonable best efforts to obtain
and to assist the Company in obtaining all consents and approvals of or waivers
from, all governmental and regulatory agencies and authorities having
jurisdiction (including, without limitation, the Securities and Exchange
Commission, Department of Justice and Federal Trade Commission) and shall take
such other actions, including supplying all information necessary for any
required filing, as the Company may reasonably request, all as and to the
extent necessary or advisable in order for the Company to comply with
applicable laws, rules, regulations, orders and decrees in connection with the
performance of its obligations under this Agreement and the Rights.

4.16 Consideration Amount. The Consideration Amount Per MusicCo
Share shall be equal to the difference between (i) $8.00 and (ii) the sum of
the aggregate per share amount of any MusicCo Dividends and the Aggregate
Consideration Amount Per Distributed Entity Share. The Consideration Amount
Per Distributed Entity Share shall be equal to the Per Share Value of the
applicable Distributed Entity as of the Valuation Date. The Fair Market Value
of each Distributed

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<PAGE> 15
Entity as of such date shall be determined in good faith by the Board of
Directors of MusicCo. Promptly following the determination of the Fair Market
Value of each Applicable Entity, MusicCo shall deliver to the Company, with a
copy to the Rights Agent, an officers' certificate signed by the Chairman of
the Board and the President of MusicCo, certifying the Per Share Value of each
Applicable Entity and setting forth, in reasonable detail, the computation
thereof. Each Distributed Entity, by its execution of a supplement to this
Agreement as contemplated by Section 6.07, covenants and agrees to provide
MusicCo with such information with respect to the Capital Stock of such
Distributed Entity as may be necessary to the computation of the Per Share
Value of such Distributed Entity. Anything in this Agreement to the contrary
notwithstanding, in no event will the sum of the Consideration Amount Per
MusicCo Share, the aggregate amount of any MusicCo Dividends, and the Aggregate
Consideration Amount Per Distributed Entity Share for each Distributed Entity,
exceed $8.00.

4.17 Acceleration of Exercise Period. Subject to the last sentence
of Section 4.01, if prior to the [anniversary date of closing] (i) a
Significant Corporate Transaction is proposed, (ii) the Company proposes to
make a disposition of all or any number of the shares of Capital Stock of
MusicCo beneficially owned by it and as a result of such disposition the
Company will cease to be the beneficial owner of at least 30% (in voting power)
of the shares of Capital Stock of MusicCo then outstanding (a "Change in
Control Transaction"), (iii) a Bankruptcy Event occurs or (iv) the Company is
dissolved or liquidated, then the Exercise Period for each Right shall be
accelerated as provided herein and the Company shall be obligated to honor all
Rights validly exercised in accordance with Section 4.08 prior to the
expiration of such accelerated Exercise Period.

4.18 Consideration on Acceleration. For purposes of determining
the Consideration Amount Per MusicCo Share and the Consideration Amount Per
Distributed Entity Share payable in connection with the accelerated Exercise
Period, the applicable Valuation Date shall be the last day of the fiscal
quarter of MusicCo immediately preceding the fiscal quarter in which (i) in the
case of a Significant Corporate Transaction, the agreement of merger or
consolidation is executed, or the vote of the Board of Directors of the
Applicable Entity to dissolve or liquidate the Applicable Entity is taken or
(ii) in the case of a Change in Control Transaction, a binding agreement to
make the related disposition is entered into by the Company or, if such
disposition is to be effected pursuant to a dividend or distribution to the
stockholders of the Company or otherwise than pursuant to a binding agreement,
the vote of the Board of Directors of the Company approving the making of such
dividend, distribution or other disposition is taken, or (iii) in the case of a
Bankruptcy Event, the Bankruptcy Event occurs, or (iv) in the case of the
dissolution or liquidation of the Company, the vote of the Board of Directors
of the Company to dissolve or liquidate the Company is taken. (The execution
of such agreement by the Applicable Entity or the taking of such vote by the
Board of Directors of the Applicable Entity in connection with a Significant
Corporate Transaction, the giving to the Acceptance Notice by MusicCo in the
case of a MusicCo Purchase Transaction, the execution of such binding agreement
by the Company or the taking of such vote by the Board of the Company in
connection with a Change in Control Transaction, the occurrence of a Bankruptcy
Event or the taking of such vote by the Board of Directors of the Company to
dissolve or liquidate the Company, are each referred to as a "Triggering
Event"). Promptly following the occurrence of a Triggering Event, the
applicable of MusicCo or the Company shall give written notice thereof to the
other (or in the case of a Triggering Event for

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<PAGE> 16
a Significant Corporate Transaction with respect to which a Distributed Entity
is the Applicable Entity, such Applicable Entity shall give such notice to the
Company and MusicCo), with a copy to the Rights Agent. Publication of the
Notice contemplated by Section 4.07 shall be made as promptly as practicable
(in light of applicable requirements of federal and state securities laws and
regulations) following the final determination of the Consideration Amount Per
MusicCo Share and the Consideration Amount Per Distributed Entity Share. In
the case of a Significant Corporate Transaction, the Applicable Entity shall
furnish the Rights Agent with such number of copies as the Rights Agent may
request of the proxy or information statement and other material to be
delivered to the Applicable Entity's stockholders in connection with the
stockholders' meeting to approve the Significant Corporate Transaction. The
Rights Agent shall distribute such material to the registered Holders of the
Certificates by first class mail, postage prepaid, at their respective
addresses as they appear on the Register of Holders prior to or
contemporaneously with the publication of the Notice, and such publication
shall be delayed, if necessary, until such material has been delivered to the
Rights Agent.

4.19 Exercise Period on Acceleration. The accelerated Exercise
Period shall commence at the opening of business on not earlier than the 30th
day, nor later than the 60th day, following the publication of the Notice, and
shall expire at the close of business, ___________ time, on the 20th Business
Day after the commencement thereof (or such later date as may be required by
applicable federal or state securities laws and regulations). Subject to
Section 4.20 below, all Rights (and fractions thereof) (including all
Components of such Rights (and of all fractional Rights)) not validly exercised
prior to the expiration of such accelerated Exercise Period shall thereupon
expire and cease to be exercisable thereafter.

4.20 Rescission. If a proposed Significant Corporate Transaction
or Change in Control Transaction that causes an accelerated Exercise Period is
terminated or abandoned before consummation or the Company otherwise determines
in good faith on or before the Deposit Date that such proposed transaction will
not be consummated, then in any such event such acceleration of the Exercise
Period and all exercises of Rights during such accelerated Exercise Period
shall, without any requirement of action by any party, be deemed rescinded and
annulled, and any Rights that have expired by virtue of the failure of the
Holder to validly exercise the same prior to the expiration of such accelerated
Exercise Period (or by virtue of the partial exercise thereof during such
accelerated Exercise Period) shall thereupon be reinstated. The Rights Agent,
upon receipt of the officers' certificate contemplated by the applicable of
Section 4.13 or 4.14, shall make the distributions to the Holders and the
Company required by the last sentence of the applicable of such Sections.

ARTICLE V.
PURCHASE AND CANCELLATION OF RIGHTS

5.01 Purchase of Rights by the Company. The Company shall have the
right to purchase or otherwise acquire Rights by purchasing the associated
MusicCo Series A Common Stock or Distributed Entity Stock at such times, in
such manner and for such consideration as it may determine.

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<PAGE> 17
ARTICLE VI.
ADJUSTMENT OF RIGHTS

6.01 Adjustment of Rights. The number of Rights represented by
each Certificate shall be subject to adjustment from time to time upon the
happening of certain events as hereinafter provided.

6.02 Mechanical Adjustment. If MusicCo shall: (a) pay a dividend
or make a distribution on the outstanding shares of MusicCo Series A Common
Stock in shares of MusicCo Common Stock, (b) subdivide the outstanding shares
of MusicCo Series A Common Stock into a larger number of shares, (c) combine
the outstanding shares of MusicCo Series A Common Stock into a smaller number
of shares or (d) issue any shares of its Capital Stock by reclassification of
the outstanding shares of MusicCo Common Stock (including any such
reclassification in connection with a consolidation or merger in which MusicCo
is the surviving corporation), the number of Rights outstanding immediately
prior to the date such dividend or distribution is paid or made or the
effective date of such subdivision, combination or reclassification shall be
adjusted to the aggregate number of shares of MusicCo Series A Common Stock
(or shares of MusicCo's Capital Stock issued in such reclassification)
outstanding immediately after the taking of such action. Such adjustment shall
be made successively whenever any event listed above shall occur. If a
reclassification described in clause (d) above occurs, each reference in this
Agreement and the Certificates to a share of MusicCo Series A Common Stock
shall be deemed to refer to the number and kind of shares of MusicCo's Capital
Stock that a Holder of one share of MusicCo Series A Common Stock would hold
immediately following such reclassification. If MusicCo takes any action
requiring an adjustment to the number of Rights prior to payment in full of the
Consideration Amount Per MusicCo Share upon exercise thereof, such
Consideration Amount Per MusicCo Share shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of Rights outstanding
immediately prior to such action and the denominator of which is the number of
Rights outstanding as a result of the taking of such action.

6.03 Adjustment for Distributions of MusicCo Securities. If (i)
MusicCo makes a distribution to all Holders of shares of MusicCo Series A
Common Stock of shares of the Capital Stock of any entity or of rights or
warrants entitling them (for a period expiring within 45 days after the
effective date of such distribution) to purchase shares of the Capital Stock of
any entity and (ii) the Distribution Value of such distribution represents 10%
or more of the Undistributed Value of MusicCo immediately prior to such
distribution, then the provisions of this Section 6.03 shall apply to such
distribution (a "Subject Distribution"). The determination of whether a
distribution meets each of the criteria referred to in the immediately
preceding sentence and is therefore a Subject Distribution shall be made by the
Board of Directors of MusicCo (whose good faith determination will be
conclusive). In making any determination of Fair Market Value for purposes of
determining the Distribution Value of such distribution and the Undistributed
Value of MusicCo, the Board of Directors of MusicCo shall apply the same
criteria as are applicable to a determination of the Fair Market Value of
MusicCo and each Distributed Entity in accordance with Section 4.16.

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<PAGE> 18
6.04 Subject Distribution Adjustment. If MusicCo makes a Subject
Distribution, then following the effective date referred to below, each whole
Right shall represent, in addition to the right to sell to the Company one
share of MusicCo Series A Common Stock (the "MusicCo Component"), the right
(the "Distributed Entity Component") to sell to the Company at the time, for
the consideration and subject to the terms and conditions set forth in this
Agreement, that number of shares of Distributed Entity Stock obtained by
multiplying one by a fraction, the numerator of which is the aggregate number
of shares of Distributed Entity Stock distributed in the Subject Distribution
or sold pursuant to the rights or warrants distributed in the Subject
Distribution, and the denominator of which is the aggregate number of shares of
MusicCo Series A Common Stock outstanding on the record date for such
distribution. The number of shares of Distributed Entity Stock (or fraction
thereof) to which the Distributed Entity Component of each whole Right applies
(the "Underlying Number") shall be determined as of and be effective
(retroactively in the case of a distribution that pursuant to Section 6.03 is
subsequently deemed to be a Subject Distribution) as of the effective date of
the distribution in the case of a distribution of shares of Distributed Entity
Stock, and shall be determined as of and be effective (retroactively in the
case of a distribution that pursuant to Section 6.03 is subsequently deemed to
be a Subject Distribution) as of the day following the distribution of rights
or warrants in the case of a distribution of rights or warrants to purchase
Distributed Entity Stock (the applicable of such dates herein referred to as
the "effective date"). In the case of fractional Rights, the Underlying Number
for the Distributed Entity Component of such fractional Right shall equal the
same fraction of the Underlying Number for the Distributed Entity Component of
a whole Right. The foregoing provisions shall apply to each Subject
Distribution and a new Distributed Component will be created with respect to
the Distributed Entity Stock distributed in each such Subject Distribution. No
Component of a Right shall be separable from the Components of such Right.

6.05 Adjustment to Underlying Number. If MusicCo takes any action
requiring an adjustment to the number of Rights pursuant to Section 6.02 at a
time when each Right has one or more Distributed Entity Components, then the
Underlying Number for each Distributed Entity Component of each Right after
giving effect to such adjustment to the number of Rights shall equal the number
obtained by multiplying the Underlying Number for such Distributed Entity
Component immediately before giving effect to such adjustment by a fraction the
numerator of which is one and the denominator of which is the number (or
fraction) to which one whole Right is adjusted as a result of the taking of
such action by MusicCo.

6.06 Distributed Entity Adjustment. If a Distributed Entity shall
(i) pay a dividend or make a distribution on the outstanding shares of
Distributed Entity Stock in shares of Distributed Entity Stock, (ii) subdivide
the outstanding shares of Distributed Entity Stock into a larger number of
shares, (iii) combine the outstanding shares of Distributed Entity Stock into a
smaller number of shares or (iv) issue any shares of its Capital Stock by
reclassification of the outstanding shares of Distributed Entity Stock
(including any such reclassification in connection with a merger or
consolidation in which the Distributed Entity is the surviving corporation),
then the Underlying Number for the applicable Distributed Entity Component of
each Right immediately prior to the date such dividend or distribution is paid
or made or the effective date of such subdivision, combination or
reclassification shall be adjusted (to the nearest one-hundredth of a share),
effective immediately after the applicable of such dates, by multiplying the
Underlying Number for such Distributed Entity

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<PAGE> 19
Component immediately prior to such adjustment by a fraction the numerator of
which is the aggregate number of shares of Distributed Entity Stock (or shares
of the Distributed Entity's Capital Stock issued in such reclassification)
outstanding immediately after the taking of such action, and the denominator of
which is the aggregate number of shares of Distributed Entity Stock outstanding
immediately prior to the taking of such action. Such adjustment to the
Underlying Number shall be made successively whenever any event listed above
shall occur. If a reclassification described in clause (iv) above occurs, each
reference in this Agreement to a share of Distributed Entity Stock shall be
deemed to refer to the number and kind of shares of the Capital Stock of the
Distributed Entity that a holder of one share of Distributed Entity Stock would
hold immediately following such reclassification. If a Distributed Entity
takes any action requiring an adjustment to the Underlying Number for the
applicable Distributed Entity Component of each Right prior to payment in full
of the Consideration Amount Per Distributed Entity Share upon exercise thereof,
such Consideration Amount Per Distributed Entity Share shall be adjusted by
multiplying such amount by a fraction the numerator of which is the Underlying
Number for such Distributed Entity Component immediately before giving effect
to such adjustment and the denominator of which is the Underlying Number for
such Distributed Entity Component immediately after giving effect to such
adjustment.

6.07 Distributions by Distributed Entity. If (i) a Distributed
Entity makes a distribution to all holders of shares of Distributed Entity
Stock of shares of the Capital Stock of any entity or of rights or warrants
entitling them (for a period expiring within 45 days after the effective date
of such distribution) to purchase shares of the Capital Stock of any entity and
(ii) the Distribution Value of such distribution represents 10% or more of the
Undistributed Value of MusicCo immediately prior to such distribution, then
such distribution shall be a Subject Distribution, the entity the shares of
Capital Stock of which are distributed or sold in such Subject Distribution
shall be a Distributed Entity, and the class of Capital Stock of the
Distributed Entity that is distributed or sold in the Subject Distribution
shall be Distributed Entity Stock, with the same effect for all purposes of
this Agreement as if MusicCo had made such distribution, except that the
Underlying Number for the Distributed Entity Component of each whole Right
created pursuant to Section 6.04 by virtue of such Subject Distribution shall
be the number obtained by multiplying one by a fraction the numerator of which
is the aggregate number of shares of Capital Stock of such entity distributed
or sold in the Subject Distribution and the denominator of which is the
aggregate number of shares of Distributed Entity Stock of the Distributed
Entity making the Subject Distribution outstanding on the record date for such
distribution. The determination of whether a distribution meets each of the
criteria referred to in the immediately preceding sentence and is therefore a
Subject Distribution shall be made by the Board of

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Directors of MusicCo (whose good faith determination will be conclusive). The
Distribution Value of any such distribution shall be made in good faith by the
Board of Directors of MusicCo. If MusicCo or any Distributed Entity makes a
distribution which individually is not a Subject Distribution solely by virtue
of clause (ii) of the first sentence of Section 6.03 or this Section 6.07, but
would be a Subject Distribution if aggregated with any other distribution or
distributions previously made by MusicCo or any Distributed Entity that also
were not Subject Distributions when made solely by virtue of that clause (ii)
(and were not thereafter deemed to be Subject Distributions pursuant to this
sentence), then upon the making of the later of such distributions such
distributions shall be deemed to be a single Subject Distribution. The
determination of whether any combination of distributions would constitute a
Subject Distribution pursuant to the immediately preceding sentence shall be
made by the Board of Directors of MusicCo (whose good faith determination will
be conclusive) on the basis of the Distribution Values of such distributions
and the Undistributed Value of MusicCo calculated in each case immediately
prior to the time the first of such distributions was made.

6.08 MusicCo Covenants. MusicCo covenants and agrees with the
Company and the Rights Agent and, in the case of clause (i) and clause (iv)
solely with respect to the obligations relating to clause (i), below, for the
benefit of the Holders, as follows:

(i) neither it nor any Distributed Entity will distribute
to all Holders of MusicCo Series A Common Stock rights or warrants to
purchase the Capital Stock of any entity that would expire more than
45 days after the effective date of such distribution;

(ii) neither it nor any Distributed Entity will make a
distribution to all Holders of any class of its Capital Stock of any
entity or of rights or warrants to purchase the Capital Stock of any
entity at any time during the period (or the record date or effective
date of which is at any time during the period) commencing with the
Exercise Period and ending with the date on which the Company (or its
assignee) becomes the record owner of the shares surrendered in such
Exercise Period, nor will it or any Distributed Entity, without the
prior written consent of the Company, make, pay or declare to all
Holders of any class of its Capital Stock any other dividend or
distribution or take any other action at any time during the period
(or the record date or effective date of which is at any time during
the period) commencing with the Exercise Period and ending with the
date on which the Company (or its assignee) becomes the record owner
of the shares surrendered in such Exercise Period, the reasonably
foreseeable effect of which would be to reduce or otherwise adversely
affect the Fair Market Value or the Per Share Value of MusicCo or such
Distributed Entity, other than the actions specifically enumerated in
Sections 6.02 through Section 6.06 for which an express adjustment to
the Consideration Amount Per MusicCo Share and Consideration Amount
Per Distributed Entity Share payable by the Company is provided;

(iii) without the prior written consent of the Company,
neither MusicCo nor any Distributed Entity will, at any time during
the term of this Agreement, take or recommend to their respective
shareholders any action the reasonably foreseeable effect of which
would be to adversely affect the relative rights, powers or
preferences of the shares of MusicCo Common Stock or Distributed
Entity Stock to be acquired by the Company upon the exercise of Rights
or the exercise by the Company of such rights, powers and preferences
and of full rights of ownership of such shares; and

(iv) prior to making any distribution of the Capital Stock
of any entity or of rights or warrants to purchase the Capital Stock
of any entity, the Applicable Entity making such distribution will
cause such entity to execute and deliver a supplement to this
Agreement pursuant to which such entity shall accept and agree to be
bound by and comply with the provisions of this Agreement that relate
to such entity (or will relate to such

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entity if it is thereafter deemed to be a Distributed Entity pursuant
to this Article VI) and shall agree to cooperate with the Board of
Directors of MusicCo and provide such Board with such information as
it may from time to time reasonably request in connection with its
determination of the Distributed Value of any distribution and the
Undistributed Value of MusicCo from time to time in accordance with
this Article VI and the definition of Significant Corporate
Transaction.

6.09 Notice of Adjustment. Whenever MusicCo takes any action that
would require an adjustment to the number of Rights represented by each
Certificate (and the consequent adjustment of the Underlying Number for each
Distributed Entity Component, if any) or the Consideration Amount Per MusicCo
Share, or that would require the creation of a Distributed Entity Component,
and whenever any Distributed Entity takes any action that would require an
adjustment to the Underlying Number of the applicable Distributed Entity
Component or the Consideration Amount Per Distributed Entity Share, or that
would require the creation of a Distributed Entity Component, the Applicable
Entity shall promptly notify the Company and MusicCo in writing (with a copy to
the Rights Agent) of the action taken and of all information relevant to the
computation pursuant to this Article VI of the required adjustments to the
number of Rights, the Underlying Number, the Consideration Amount Per MusicCo
Share or the Consideration Amount Per Distributed Entity Share, as the case may
be, and in the case of the creation of a Distributed Entity Component, all
information relevant to the computation of the Underlying Number of such
Distributed Entity Component. Promptly thereafter, the Company shall deliver
to the Rights Agent a certificate of a firm of independent public accountants
(who may be the regular accountants employed by MusicCo or the Company) setting
forth, as applicable:

(i) If an action requiring an adjustment to the number of
Rights is taken, the number of Rights represented by a Certificate
before and after such adjustment and, if applicable, the Consideration
Amount Per MusicCo Share and the Underlying Number for each
Distributed Entity Component of a Right, in each case before and after
such adjustment.

(ii) If an action requiring the creation of a Distributed
Entity Component is taken, the Underlying Number for the Distributed
Entity Component of each Right so created.

(iii) If an action requiring an adjustment to the
Underlying Number of a Distributed Entity Component is taken, the
Underlying Number of such Distributed Entity Component before and
after such adjustment and, if applicable, the Consideration Amount Per
Distributed Entity Share before and after such adjustment. Such
certificate shall also contain a brief statement of the facts
requiring such adjustment and the computation by which such adjustment
was made, or, if applicable, the facts requiring the creation of such
Distributed Entity Component and the computation of such Underlying
Number. The Company shall also cause the Rights Agent to send
promptly by first class mail, postage prepaid, to each Holder notice
of such adjustment or adjustments or of the creation of such
Distributed Entity

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<PAGE> 22
Component. The certificate delivered to the Rights Agent pursuant to
this Section 6.09 shall be conclusive evidence of the correctness of
the matters set forth therein in the absence of manifest error. The
Rights Agent shall be entitled to rely on such certificate and shall
be under no duty or responsibility with respect to any such
certificate, except to exhibit the same, from time to time, to any
Holder desiring an inspection thereof during regular business hours.
The Rights Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist that
may require any adjustment or the creation of any Distributed Entity
Component hereunder, or with respect to the nature or extent of any
such adjustment when made or of any such Distributed Entity Component
when created, or with respect to the method employed in making such
adjustment or calculating the Underlying Number of such Distributed
Entity Component.

6.10 Statement on Certificates. Irrespective of any adjustments in
the number of Rights represented by each Certificate or the creation of any
Distributed Entity Component or any adjustments to the Underlying Number
thereof, Certificates theretofore or thereafter issued may continue to express
solely the number of Rights as are stated in the Certificates initially
issuable pursuant to this Agreement.

6.11 No Rights as Stockholders. Nothing contained in this
Agreement or in the Certificates shall be construed as conferring upon the
Holders or their transferees any rights whatsoever as stockholders of MusicCo
or the Company or any Distributed Entity.

ARTICLE VII.
RIGHTS AGENT

7.01 Inspection of Rights Agreement. The Rights Agent shall keep
copies of this Agreement and any notices given or received hereunder available
for inspection by the Holders during normal business hours at its Office. The
Company shall supply the Rights Agent from time to time with such numbers of
copies of this Agreement as the Rights Agent may request.

7.02 Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent, shall be the successor to the
Rights Agent hereunder without the execution, filing or delivery of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provision of Section 7.16 hereof. If at the time such successor to the
Rights Agent shall succeed to the agency created by this Agreement, any of the
Certificates shall have been countersigned but not delivered, any such
successor to the Rights Agent may adopt the countersignature of the original
Rights Agent and deliver such Certificates so countersigned, and if at any time
any of the Certificates shall not have been countersigned, any successor to the
Rights Agent may countersign such Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Certificates shall have the full force provided in such
Certificates and in this Agreement. If at any time the name of the Rights
Agent shall be changed and at such time any of the Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignatures under its prior name and deliver such Certificates so
countersigned; and if at any time any of the Certificates shall not have been
countersigned, the Rights Agent may countersign such Certificates either in its
prior name or in its changed name; and in all such cases such

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Certificates shall have the full force provided in the Certificates and in this
Agreement.

7.03 Concerning the Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Certificates shall be bound.

7.04 Correctness of Statements. The statements contained herein
and in the Certificates shall be taken as statements, of the Company, and the
Rights Agent assumes no responsibility for the correctness of any of the same
except such as describe the Rights Agent or actions taken by it. The Rights
Agent assumes no responsibility with respect to the distribution of the
Certificates except as herein otherwise provided.

7.05 Breach of Covenants. The Rights Agent shall not be
responsible for any failure of the Company, MusicCo or any Distributed Entity
to comply with any of the covenants or conditions contained in this Agreement
or in the Certificates to be complied with or satisfied by the Company, MusicCo
or any Distributed Entity.

7.06 Performance of Duties. The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys, agents and employees.

7.07 Reliance on Counsel. The Rights Agent may consult at any time
with legal counsel reasonably satisfactory to it (who may be counsel for the
Company) and the Rights Agent shall incur no liability or responsibility to the
Company or to any Holder in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.

7.08 Proof of Actions Taken. Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed
conclusively to be proved and established by a certificate signed by the
Chairman of the Board, the President or a Vice President of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken, suffered or omitted in good faith by
it under the provisions of this Agreement in reliance upon such certificate.

7.09 Compensation, Indemnity and Reimbursement. The Company agrees
to pay the Rights Agent reasonable compensation for all services rendered by
the Rights Agent in the performance of its duties under this Agreement, to
reimburse the Rights Agent for all expenses, taxes

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<PAGE> 24
and governmental charges and other charges of any kind and nature incurred by
the Rights Agent in the performance of its duties under this Agreement, and to
indemnify the Rights Agent and save it harmless against any and all claims and
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Rights Agent in the performance of its duties under this
Agreement except as a result of the Rights Agent's negligence or bad faith.

7.10 Legal Proceedings. The Rights Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company shall furnish the
Rights Agent with reasonable security and indemnity for any costs and expenses
that may be incurred in taking such action, but this provision shall not affect
the power of the Rights Agent to take such action as the Rights Agent may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Rights may be
enforced by the Rights Agent without the possession of any of the Certificates
or the production thereof at any trial or other proceeding relative thereto,
and any such action, suit or proceeding instituted by the Rights Agent shall be
brought in its name as Rights Agent.

7.11 Other Transactions in Securities of Company. The Rights Agent
in its individual and other capacities and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights, or
other securities of the Company, MusicCo or any Distributed Entity or become
pecuniarily interested in any transaction in which the Company, MusicCo or any
Distributed Entity may be interested or contract with or lend money to the
Company, MusicCo or any Distributed Entity or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company,
MusicCo or any Distributed Entity or for any other Person, including without
limitation, acting as transfer agent or registrar for other securities issued
by the Company, MusicCo or any Distributed Entity.

7.12 Liability of Rights Agent. The Rights Agent shall act
hereunder solely as agent, and its duties shall be determined solely by the
provisions hereof. The Rights Agent shall not be liable for anything that it
may do or refrain from doing in connection with this Agreement except for its
own negligence or bad faith.

7.13 Reliance on Documents. The Rights Agent will not incur any
liability or responsibility to the Company or to any Holder for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument reasonably believed by it
to be genuine and to have been signed, sent or presented by the proper parties.

7.14 Validity of Agreement. The Rights Agent shall not be under
any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution and delivery hereof by
the Rights Agent) or in respect of the validity or execution of any Certificate
(except its countersignature thereof).

7.15 Instructions from Company. The Rights Agent is hereby
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from any two of the Chairman of the Board, the
President or a Vice President of the Company, and to apply to

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<PAGE> 25
such officers for advice or instructions in connection with its duties, and
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or officers.

7.16 Change of Rights Agent. The Rights Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30
days' prior notice in writing. The Rights Agent may be removed by like notice
to the Rights Agent from the Company and by notice to the Holders. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by any Holder (who
shall with such notice submit his Certificate for inspection by the Company),
then any Holder may apply to any court of competent jurisdiction for the
appointment of a successor to the Rights Agent. Pending appointment of a
successor to the Rights Agent, the duties of the Rights Agent shall be carried
out by the Company. Any successor Rights Agent, whether appointed by the
Company or such a court, shall be a bank or trust company, in good standing,
incorporated under the laws of the United States of America or any state
thereof and having at the time of its appointment as Rights Agent a combined
capital and surplus of at least $50,000,000. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the former Rights Agent shall deliver and transfer to
the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Failure to give any notice provided for in this Section 7.16,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be. In the event of such resignation or
removal the successor Rights Agent shall mail, by first class mail, postage
prepaid, to each Holder, written notice of such removal or resignation and the
name and address of such successor Rights Agent.

ARTICLE VIII.
MISCELLANEOUS

8.01 Obtaining of Governmental Approvals. The Company will from
time to time take all action that may be necessary to obtain and keep effective
any and all permits, consents and approvals of governmental agencies and
authorities and securities acts filings under federal and state securities laws
and regulations that may be or become required in connection with the issuance,
sale, transfer and delivery of the Certificates, the exercise of the Rights and
the purchase of MusicCo Common Stock or Distributed Entity Stock upon exercise
of the Rights.

8.02 Notices. Any notice or other communication required or
permitted to be given pursuant to this Agreement to the Company, MusicCo or the
Rights Agent, shall be in writing and shall be deemed given and received on the
date delivered in person or by telecopy (answer back received) or 24 hours
after delivery to a courier service which guarantees overnight delivery or five

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<PAGE> 26
days after the date mailed by registered or certified mail, return receipt
requested, postage prepaid, to the intended recipient at the address specified
below:

If to the Company:

Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111

Telecopier No.: (303) 488-3217

Attention:

With a copy similarly addressed to the
attention of the Legal Department

If to MusicCo:

Telecopier No.: ________________________

Attention: President

With a copy similarly addressed to the
attention of the Legal Department

If to the Rights Agent:

Telecopier No.: ________________________

Attention:

Any party may from time to time change the address to which notices to
it are to be given or mailed hereunder by notice given to the other parties in
the manner provided above.

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<PAGE> 27
Any notice or other communication pursuant to this Agreement to the
Holders shall be in writing and shall be mailed first class mail, postage
prepaid, or otherwise delivered, to such Holders at their respective addresses
on the Register of Holders of the Rights Agent.

8.03 Amendments Without Consent of Holders. The Company and the
Rights Agent may from time to time supplement or amend this Agreement without
the approval of any Holder, in order to cure any ambiguity or to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder that the Company and the Rights Agent
may deem necessary or desirable and that shall not be inconsistent with the
provisions of the Rights and that shall not adversely affect the interests of
the Holders.

8.04 Amendments With Consent of Holders. The Company and the
Rights Agent may from time to time amend or supplement this Agreement without
notice to any Holder but with the written consent of the Holders (other than
the Company or its subsidiaries, or the officers, directors or affiliates of
the Company or any of its subsidiaries (other than MusicCo)) of a majority in
number of the outstanding Rights. The Holders of a majority of the outstanding
Rights may waive compliance by the Company with any provision of this Agreement
without notice to any Holder. Without the consent of each Holder affected,
however, an amendment, supplement or waiver may not:

(a) alter or modify the terms of the definition of Early
Expiration Event in Section 1.01, Sections 2.03, 4.01, 4.16, 4.17, 4.18, 4.19,
4.20, or Article VI hereof in any way that adversely affects the rights of any
Holder in any material respect; or

(b) waive a default in payment of the purchase price for
the MusicCo Common Stock and Distributed Entity Stock to be purchased upon
exercise of any Rights.

It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplement, but it shall
be sufficient if such consent approves the substance thereof.

8.05 Successors. All covenants and provisions of this Agreement by
or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

8.06 Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without giving effect to principles of conflict of laws.

8.07 Benefits of this Agreement; Limitation of Liability. Nothing
in this Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the Holders any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the Holders. Neither
MusicCo nor any Distributed Entity, nor any director, officer, employee or
stockholder, as

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<PAGE> 28
such, of the Company, MusicCo or any Distributed Entity shall have any
liability hereunder to the Holders for any obligations of the Company under
this Agreement and the Rights or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Certificate waives and releases such liability, such waiver and release being
part of the consideration for the issue of the Rights.

8.08 Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterpart shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

8.09 Captions. The captions of the Sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.

8.10 Termination. This Agreement shall terminate at such time as
the outstanding Rights are no longer exercisable under the terms of this
Agreement and the parties to this Agreement shall have discharged all of their
duties hereunder

8.11 Severability. In case any one or more of the provisions
contained in this Agreement or in the Rights shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement or
of such Rights, but this Agreement and such Rights shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.

8.12 Calculation of Time Periods. All periods of time referred to
in this Agreement (other than references to Business Days) shall include all
calendar days; provided that if the date or last date to perform the act or
give any notice with respect to this Agreement shall fall on a day that is not
a Business Day, such act or notice may be timely performed or given if
performed or given on the next succeeding Business Day.

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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.

TELE-COMMUNICATIONS, INC.

By:
------------------------------
Name:
------------------------------
Title:
------------------------------

TCI MUSIC, INC.

By:
------------------------------
Name:
------------------------------
Title:
------------------------------

THE BANK OF NEW YORK, as Rights Agent

By:
------------------------------
Name:
------------------------------
Title:
------------------------------

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<PAGE> 1
EXHIBIT 5.1

[SHERMAN & HOWARD L.L.C. LETTERHEAD]

June ___, 1997

The Board of Directors
TCI Music, Inc.
5619 DTC Parkway
Englewood, Colorado 80111

Re: Validity of Common Stock and Rights

Gentlemen:

We have acted as special counsel to TCI Music, Inc., a Delaware
corporation ("TCI Music") and Tele-Communications, Inc., a Delaware
corporation ("TCI"), in connection with its Registration Statement on Form S-4
(Registration No. 333-______) relating to approximately 14,896,648 shares of
TCI Music's Series A Common Stock, $.01 par value per share ("Common Stock")
and Rights issuable by TCI, issuable pursuant to an Agreement and Plan of
Merger dated as of February 6, 1996, as amended by Amendment One to Merger
Agreement dated May 29, 1997 among TCI Music, TCI, TCI Merger Sub, Inc. and DMX
Inc. (the "Merger Agreement"), in the form filed as Appendix I to the Proxy
Statement/Prospectus included as part of such Registration Statement. Terms
used in this letter and not defined have the meanings ascribed to them in the
Merger Agreement.

We have examined the Certificate of Incorporation and Bylaws of TCI
Music and TCI, and minutes of the proceedings of the Boards of Directors of TCI
Music and TCI authorizing the issuance of the Common Stock and the Rights,
respectively, and the execution, delivery and performance of the Merger
Agreement.

Based upon the foregoing examination, we advise you that in our
opinion the shares of Common Stock and the Rights being offered pursuant to the
Registration Statement have been duly authorized and when issued as
contemplated in the Merger Agreement, will be validly issued, fully paid and
nonassessable.

We consent to the filing of this letter as an exhibit to the
Registration Statement referred to above and to the reference to our firm under
the heading "Legal Matters" in the
<PAGE> 2
The Board of Directors
TCI Music, Inc.
June ___, 1997
Page 2

Registration Statement. In giving this consent, we do not thereby admit that
we are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the Rules of the Securities and Exchange
Commission thereunder.

Very truly yours,

/s/ SHERMAN & HOWARD L.L.C.

<PAGE> 1

EXHIBIT 8.1

[SHERMAN & HOWARD L.L.C. LETTERHEAD]

June 3, 1997

The Board of Directors
Tele-Communications, Inc.
TCI Music, Inc.
5619 DTC Parkway
Englewood, CO 80111

Gentlemen:

Reference is made to the information set forth under the heading "The
Merger -- Certain Federal Income Tax Consequences" contained in the Proxy
Statement/Prospectus included in the Registration Statement on Form S-4 of
TeleCommunications, Inc. and TCI Music, Inc. ("TCI Music") relating to
14,896,648 shares of TCI Music's Common Stock and 14,896,648 rights to sell
shares of TCI Music that may be issued in connection with the proposed merger
(the "Merger") of a subsidiary of TCI Music with and into DMX, Inc. It is our
opinion that the discussion under that heading, to the extent it represents
matters of law or legal conclusions, accurately summarizes the material
anticipated Federal income tax consequences of the Merger to the holders of DMX
Common Stock.

Our opinion set forth in this letter is based on the case law, Internal
Revenue Code, Treasury Regulations and Internal Revenue Service rulings as of
the above date. Our opinion is based on such authorities now in existence. These
authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinions would not be different. We undertake no responsibility to update or
supplement our opinion.

We consent to the filing with the Securities and Exchange Commission of
this letter as an exhibit to the Registration Statement of which the Proxy
Statement/Prospectus is a part and to the reference to our firm under the
headings "The Merger -- Certain Federal Income Tax Consequences" and "Legal
Matters" contained therein. In giving such consent, we do not thereby admit that
we are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the Rules of the Securities and Exchange
Commission thereunder.

Very truly yours,

/s/ SHERMAN & HOWARD L.L.C.

<PAGE> 1
EXHIBIT 10.1

FORM OF CONTRIBUTION AGREEMENT

This Contribution Agreement (this "Agreement") is made on the
____ day of __________________, 1997, by and between Tele-Communications, Inc.,
a Delaware corporation ("TCI"), and TCI Music, Inc., a Delaware corporation
(the "Company").

RECITALS

TCI desires to cause various of its indirect subsidiaries to
contribute to the Company the right to receive a substantial portion of the
revenues attributable to the distribution and sale by those subsidiaries of
digital music services of DMX Inc., a Delaware corporation ("DMX"), to
residential and commercial subscribers of such subsidiaries. In consideration
of such contribution and of the agreement of TCI to grant to stockholders of
DMX the right to require TCI to purchase shares of the Company issued to them
pursuant to the Agreement and Plan of Merger dated as of February 6, 1997, as
amended by Amendment One dated ___________, 1997, to which TCI, the Company and
DMX are parties, the Company desires to deliver to TCI shares of the Company's
Series B Common Stock and a promissory note in the amount of $40,000,000.

In consideration of the mutual covenants set forth in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:

I. DEFINITIONS

As used in this Agreement, terms with initial capital letters
will have the meanings ascribed to them below, unless the context clearly
requires otherwise:

Affiliate means, with respect to any Person, any other Person
Controlling, Controlled by, or under common Control with, such Person.

Business Day means any day other than a Saturday or Sunday or
a day on which banks in New York, New York or Denver, Colorado are authorized
to be closed.

Closing has the meaning set forth in Section 2.1.

Company has the meaning set forth in the preamble to this
Agreement.

Company Note means a promissory note in the principal amount
of $40,000,000 payable to the order of TCI, (i) principal payable in full 180
days after the Closing, (ii) if principal is not paid in full 180 days after
the Closing, bearing interest at 10% per annum accruing on unpaid principal
from the date first above written through and including the date of payment in
full of unpaid principal; (iii) providing for the prepayment of principal
without penalty by the Company at any time after the Closing; and (iv)
including such other terms and conditions as TCI and the Company may agree.
<PAGE> 2
interest not earlier than 180 days after the Closing and (iii) will include
such other terms and conditions as TCI and the Company may agree.

Contributed Tuners means all of the commercial tuners
indirectly owned and held in inventory by TCI at the Closing.

Control means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the Controlled Person, whether by the ownership of
voting securities, by contract or otherwise.

DMX has the meaning set forth in the Recitals to this
Agreement.

DMX Affiliation Agreement means an affiliation agreement
between DMX and Satellite Services, Inc., an Owned Subsidiary of TCI (including
its successors and assigns, "SSI"), pursuant to which TCI System Owners are
granted rights to distribute and sell DMX Services, as such agreement may from
time to time be in effect.

DMX Revenues means all revenues of a TCI System Owner, as
determined in accordance with GAAP, that are attributable to the distribution
and sale of DMX Services, including charges for DMX Services and equipment
rental, installation and other charges payable by subscribers to DMX Services.
In calculating DMX Revenues, revenues attributable to the distribution and sale
of DMX Services on a tier or as part of a package that includes other audio or
video programming services and as to which there is no separate charge for DMX
Services will be deemed to be equal to the license fees payable to DMX on
account of such sales, as prescribed by the DMX Affiliation Agreement.

DMX Services means the digital music services offered for sale
to the public by DMX.

Fiscal Year means a year beginning January 1 and ending
December 31.

GAAP means generally accepted accounting principles as in
effect from time to time in the United States, applied on a basis consistent
with that applied by TCI in the preparation of its financial statements.

Merger means the merger of TCI Music Merger Sub, Inc. with and
into DMX pursuant to the Merger Agreement.

Merger Agreement means the Agreement and Plan of Merger, dated
as of February 6, 1997, among DMX, the Company, TCI and TCI Music Merger Sub,
Inc.

Music Business means the business of acquiring, producing,
packaging or compiling audio or video programming the content of which is
primarily music or music-related, and the marketing and sale of such
programming by any method of distribution.

2
<PAGE> 3
Net DMX Revenues means, for any period of determination, all
DMX Revenues of a TCI System Owner for such period, minus (i) the Retained
Percentage for such period and (ii) license fees for such period that are
payable to DMX pursuant to the DMX Affiliation Agreement.

Owned Subsidiary means, with respect to any Person, any other
Person that such Person Controls and in which all the outstanding common stock,
in the case of a corporation, or, in the case of a Person that is not a
corporation, all ownership interests, are owned, directly or indirectly, by
such Person, including with respect to such Person any other Person that
pursuant to the preceding clause would be an Owned Subsidiary of any other
Owned Subsidiary.

Person means a human being or a corporation, general or
limited partnership, limited or unlimited liability company, trust,
association, unincorporated organization, governmental authority or other
entity.

Residential DMX Revenues means, for any period of
determination, that portion of DMX Revenues of a TCI System Owner for such
period that is attributable to the distribution and sale of DMX Services to
residential subscribers.

Retained Percentage means, for any period of determination, an
amount equal to 10% of Residential DMX Revenues of a TCI System Owner for such
period, subject to adjustment as provided in Section 8.2.

Shares means 62,500,000 shares of Series B Common Stock, par
value $.01 per share, of the Company.

TCI System Owner means each Owned Subsidiary of TCI that
offers DMX Services to its subscribers.

Termination Date has the meaning set forth in Section 2.3.

TCI has the meaning set forth in the preamble to this
Agreement.

II. CONTRIBUTION OF NET DMX REVENUES AND
CONTRIBUTED TUNERS; ISSUANCE OF SHARES

2.1 Rights Agreement; Assignment of Net DMX Revenues to
the Company. At the closing of the transactions contemplated by this Agreement
(the "Closing"):

(a) TCI will execute and deliver a Rights
Agreement, in the form prescribed by the Merger Agreement, granting to
stockholders of DMX who are entitled to receive shares of stock of the Company
pursuant to the Merger Agreement the right to require TCI to purchase such
shares, subject to the terms and conditions of such Rights Agreement.

3
<PAGE> 4
(b) TCI will cause each Person that is a TCI
System Owner as of the date of this Agreement to assign and contribute to the
Company, effective as of the Closing, the right to receive Net DMX Revenues of
such TCI System Owner for a period beginning on the effective date of such
assignment and ending on the Termination Date. Payments of Net DMX Revenues
will be remitted to the Company as provided in Section 8.3.

(d) The Company will deliver to TCI, as the
designee of the TCI System Owners, (i) the Shares and (ii) the Company Note.

2.2 New TCI System Owners. Promptly after any Person
becomes a TCI System Owner, TCI will cause such TCI System Owner to assign to
the Company the right to receive such TCI System Owner's Net DMX Revenues.

2.3 Effective Term of Assignment. Anything in this
Agreement to the contrary notwithstanding, the Company's right to receive Net
DMX Revenues of any TCI System Owner pursuant to this Agreement will continue
in effect until the first to occur of the following dates (the "Termination
Date"): (i) the date such TCI System Owner ceases to be a TCI System Owner and
(ii) December 31, 2006.

III. REPRESENTATIONS AND WARRANTIES OF TCI

TCI represents and warrants to the Company that:

3.1 Organization, Good Standing and Authority. Each of
TCI and the TCI System Owners is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has all requisite corporate power and authority to enter into and to
perform its obligations under this Agreement and the other agreements to be
executed and delivered by it pursuant to this Agreement.

3.2 Authorization and Validity; Consents; No Conflicts.
The execution and delivery by each of TCI and the TCI System Owners of, and the
performance by each of them of its obligations under, this Agreement and the
other agreements to be executed and delivered by it pursuant to this Agreement
have been duly authorized by all requisite corporate action of TCI or such TCI
System Owner. This Agreement constitutes, and when executed and delivered by
it pursuant to this Agreement, the other agreements to be executed and
delivered by it pursuant to this Agreement will constitute, the legal, valid
and binding obligations of each of TCI and the TCI System Owners, enforceable
in accordance with their terms, except as such enforceability may be affected
by applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally or by general equitable principles.
No consent or approval of, notice to, or filing with, any other Person is
required in connection with the execution, delivery and performance by TCI

4
<PAGE> 5
or any of the TCI System Owners of this Agreement or any other agreement to be
executed and delivered by it pursuant to this Agreement, or the consummation by
it of the transactions contemplated hereby or thereby, the failure of which to
be obtained, given or made would have a material adverse effect on TCI and the
TCI System Owners, taken as a whole, or on their ability to perform their
obligations under this Agreement. The execution and delivery by TCI or any of
the TCI System Owners of, and the performance by each of them of its
obligations under, this Agreement and any other agreement to be executed and
delivered by it pursuant to this Agreement will not violate its certificate or
articles of incorporation or bylaws or any material agreement to which it is a
party or by which it is bound or affected.

3.3 Investment Intent. TCI is acquiring the Shares for
investment only and acknowledges that they may not be sold without registration
under the Securities Act of 1933, as amended, and applicable state securities
laws, or unless an exemption therefrom is available, and agrees that a legend
to the foregoing effect may be placed on the certificate representing the
Shares.

IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

4.1 Organization, Good Standing and Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to enter into and to perform its obligations
under this Agreement and the other agreements to be executed and delivered by
it pursuant to this Agreement.

4.2 Authorization and Validity; Consents; No Conflicts.
The execution and delivery by the Company of, and the performance by it of its
obligations under, this Agreement and the other agreements to be executed and
delivered by it pursuant to this Agreement have been duly authorized by all
requisite corporate action of the Company. This Agreement constitutes, and
when executed and delivered by the Company pursuant to this Agreement, the
other agreements to be executed and delivered by it pursuant to this Agreement
will constitute, its legal, valid and binding obligations, enforceable in
accordance with their terms, except as such enforceability may be affected by
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles. No
consent or approval of, notice to, or filing with, any other Person is required
in connection with the execution, delivery and performance by the Company of
this Agreement or any other agreement to be executed and delivered by the
Company pursuant to this Agreement, or the consummation by it of the
transactions contemplated hereby or thereby, the failure of which to be
obtained, given or made would have a material adverse effect on the Company or
on its ability to perform its obligations under this Agreement. The execution
and delivery by the Company of, and the performance by it of its obligations
under, this Agreement and any other agreement to be executed and delivered by
it pursuant to this Agreement will not violate its certificate of incorporation
or bylaws or any material agreement to which it is a party or by which it is
bound or affected.

5
<PAGE> 6
4.3 No Lien on Shares. When issued and delivered by it
at the Closing, the Shares to be issued by the Company hereunder will be
validly issued, fully paid and nonassessable and will be owned by TCI (or, if
applicable, TCI 's designee) free and clear of any lien, charge, encumbrance,
security interest or any other similar right of any third party.

V. CONDITIONS TO OBLIGATIONS OF THE COMPANY

The obligations of the Company to consummate the transactions
contemplated by this Agreement to take place at the Closing are subject to
satisfaction or the waiver by it, at or prior to the Closing, of each of the
following conditions:

5.1 Truth of Representations and Warranties. All
representations and warranties of TCI set forth in this Agreement, if qualified
by a reference to materiality, are true and, if not so qualified, are true in
all material respects, in each case at the time of the Closing with the same
effect as if made at that time, except for changes permitted or contemplated by
this Agreement.

5.2 Performance of Agreements. All agreements of TCI set
forth in this Agreement that are required to be performed by it at or before
the Closing have been performed in all material respects.

5.3 Merger Completed. The Merger is completed
contemporaneously with the Closing.

VI. CONDITIONS TO OBLIGATIONS OF TCI

The obligations of TCI to consummate the transactions
contemplated by this Agreement to take place at the Closing are subject to
satisfaction or the waiver by it, at or prior to the Closing, of each of the
following conditions:

6.1 Truth of Representations and Warranties. All
representations and warranties of the Company set forth in this Agreement, if
qualified by a reference to materiality, are true and, if not so qualified, are
true in all material respects, in each case at the time of the Closing with the
same effect as if made at that time, except for changes permitted or
contemplated by this Agreement.

6.2 Performance of Agreements. All agreements of the
Company set forth in this Agreement that are required to be performed by it at
or before the Closing have been performed in all material respects.

6.3 Merger Completed. The Merger is completed
contemporaneously with the Closing.

6
<PAGE> 7
VII. CLOSING

7.1 Closing. The Closing will take place on the date of
this Agreement, contemporaneously with the Merger.

7.2 Items Delivered by TCI System Owners. At the
Closing, TCI will cause each TCI System Owner to deliver to the Company (i) an
assignment transferring the rights of such TCI System Owner in and to its Net
DMX Revenues and (ii) such other assignments, bills of sale or other
instruments as are sufficient to transfer to the Company all the legal and
beneficial interests in such rights.

7.3 Items Delivered by the Company. At the Closing:

(a) The Company will deliver to the TCI System
Owners (or their designee) immediately available funds in the amount prescribed
by Section 2.1(c) of this Agreement or, if so elected by TCI, the Company Note.

(b) The Company will deliver to TCI one or more
duly executed certificates representing the Shares.

VIII. COVENANTS

8.1 Right to Compete.

(a) TCI and any Affiliate of TCI may engage in or
possess interests in one or more other businesses or ventures of any nature or
description, without regard to whether any of such businesses or ventures are
or may be deemed to be competitive in any way with any business of the Company
or any person in which the Company has an interest. Without limiting the
generality of the foregoing, none of TCI or any of its Affiliates or any
director, officer or employee of TCI or any of its Affiliates (including any
such director, officer or employee who serves as a director, officer or
employee of the Company) will be obligated to present to the Company any
particular investment or business opportunity, regardless of whether such
opportunity is of a character that the Company could pursue it if it were
presented to the Company, but instead, TCI and its Affiliates will have the
right to take such opportunity for their own account or for the account of any
other Person without any obligation whatsoever to the Company.

(b) Although the Company and TCI agree to be
bound by the provisions of subsection (a) of this Section for purposes of
defining their respective legal rights and obligations, TCI acknowledges that,
subject to such provisions, TCI intends to use commercially reasonable efforts
to expand the involvement of the Company in the Music Business and to cause the
Company to pursue future business activities in the Music Business.

7
<PAGE> 8
8.2 Adjustment of Retained Percentage. Beginning at
least 60 days before the third anniversary of the Merger, and every third
anniversary thereafter, TCI, acting on behalf of the TCI System Owners, and the
Company will engage in good faith negotiations concerning the adjustment of the
Retained Percentage, taking into account, among other things, total sales of
DMX Services by TCI System Owners and the need to provide appropriate
incentives to the TCI System Owners and their personnel to maximize sales of
DMX Services. Notwithstanding the foregoing, the Retained Percentage
prescribed by this Agreement or as most recently adjusted by agreement of the
parties will continue to be applicable until a new agreement adjusting the
Retained Percentage has been reached.

8.3 Payment of Net DMX Revenues.

(a) Net DMX Revenues will be remitted to the
Company monthly in arrears for each calendar month. Each monthly payment will
be made by the end of the calendar month immediately following the calendar
month for which Net DMX Revenues are being remitted. At the time of each
payment, the Company will be given a statement setting forth in reasonable
detail TCI's calculation of Net DMX Revenues for the month in question.

(b) TCI will keep and maintain (or will cause to
be kept and maintained) books and records (the "System Books and Records") with
respect to revenues from the sale of DMX Services by TCI System Owners, which
books and records will be accurate and complete in all material respects. Upon
at least 15 Business Days' prior notice and during TCI's normal business hours,
the Company (or its authorized employees, agents, accountants and
representatives) will have the right, at the expense of the Company, to examine
and audit the System Books and Records and such other evidence of the DMX
Revenues of the TCI System Owners as the Company may reasonably request to the
extent reasonably necessary to verify the accuracy of TCI's calculation of Net
DMX Revenues. The rights granted to the Company in this Section 8.3(b) may be
exercised not more frequently than once a year and the period as to which such
right is exercised will be limited to a period beginning not more than two
years before the date such notice is given and ending as of the end of the most
recent calendar month for which information regarding DMX Revenues is
available.

(c) After receipt of a statement setting forth
the calculation of the Net DMX Proceeds in accordance with Section 8.3(b), the
Company will have two years within which to notify TCI of any disagreement with
respect to TCI's calculation of the Net DMX Revenues set forth in that
statement, which notice will specify in reasonable detail the basis for such
disagreement.

(d) If the Company notifies TCI that it agrees
with TCI's calculation of Net DMX Revenues for any period, that calculation
will be final and conclusive as of the date of delivery of such notification.
If the Company fails to provide notice of disagreement with any calculation by
TCI of Net DMX Revenues within the two-year period prescribed by Section
8.3(c), TCI's calculation will be final and conclusive as of the end of such
period.

8
<PAGE> 9
(e) If within such two-year period the Company
provides notice of disagreement with TCI's calculation of Net DMX Revenues for
any month, the Company and TCI will negotiate in good faith to resolve any such
dispute for a period of 30 days following receipt of such notice of
disagreement. If the dispute is not resolved within such period, the dispute
will be referred to KPMG Peat Marwick (or, if such accounting firm is for any
reason unwilling or unable to act in such capacity, such other nationally
recognized accounting firm as may be designated by KPMG Peat Marwick), which
accounting firm will render its decision (together with a reasonably detailed
explanation therefor) as soon as possible following submission of the dispute
to it, which decision will be final and conclusive. The fees and expenses of
the accounting firm relating to services rendered pursuant to this Section
8.3(e) will be paid by the Company and TCI in equal shares.

IX. MISCELLANEOUS

9.1 Notices. All notices, requests, demands and other
communications called for or contemplated hereunder will be in writing and will
be deemed to have been duly given if delivered in person or by United States
certified or registered mail, prepaid, addressed to the parties, their
permitted successors in interest or assignees, or sent by courier or
telecopier:

To TCI at:

Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Brendan Clouston
Telecopy: (303) 488-3200

with a copy similarly addressed, Attention: Legal
Department

and another copy to:

Sherman & Howard L.L.C.
3000 First Interstate Tower North
633 Seventeenth Street
Denver, Colorado 80202
Attention: Charles Y. Tanabe, Esq.
Telecopy: (303) 298-0940

9
<PAGE> 10
To the Company at:

TCI Music, Inc.
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: President
Telecopy: (303) 267-5376

Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section. All
notices will be deemed to have been received on the date of delivery or on the
third Business Day after the mailing thereof, except that any notice of a
change of address will be effective only upon actual receipt.

9.2 Expenses. Whether or not the transactions
contemplated hereby are consummated, each of the parties will bear the fees and
expenses relating to its compliance with the various provisions of this
Agreement, and each of the parties will pay all of its own expenses (including
all attorneys' fees and expenses) incurred in connection with this Agreement,
the transactions contemplated hereby, the negotiations leading to the same and
the preparation made for carrying the same into effect.

9.3 Modification; Waiver. This Agreement may be
modified or terminated by mutual agreement only by a writing signed by each of
the parties, and no provision or condition herein may be waived other than by a
writing signed by the party waiving such provision or condition.

9.4 Headings. Article and Section headings in this
Agreement are for the sole purpose of convenient reference and in no way
define, limit or prescribe the scope or intent of this Agreement or any part
hereof, and such headings will not be considered in interpreting or construing
this Agreement.

9.5 Assignment. Neither party may assign any of its
rights under this Agreement or delegate its duties hereunder unless it obtains
the prior written consent of the other party, which consent may be withheld at
such party's absolute discretion. Notwithstanding the preceding sentence, any
party may assign its rights under this Agreement to any Affiliate of such party
without the consent of any other party.

9.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which may be deemed to be an original, and all
of which taken together will constitute one instrument.

9.7 Additional Documents. At the Closing and from time
to time after Closing, at either party's request and without further
consideration, the other party will execute and deliver (or cause to be
executed and delivered) such other instruments of conveyance and transfer and
will

10
<PAGE> 11
take such other actions as may reasonably be required effectively to carry out
the transactions contemplated by this Agreement.

9.8 Other. This Agreement constitutes the entire
agreement of the parties regarding the subject matter hereof, and all prior or
contemporaneous agreements, understandings, representations and statements,
oral or written, are merged into this Agreement. This Agreement will be
binding upon and inure to the benefit of the parties and, subject to the
limitations set forth in Section 9.5, their respective successors and assigns.
The provisions of this Agreement are for the exclusive benefit of the parties
and their permitted successors and assigns, and no other Person is intended to
be a third-party beneficiary or to have any rights by virtue of this Agreement.

9.9 Governing Law. This Agreement will be governed by
the laws of the State of Colorado, without regard to the conflicts of laws
rules thereof.

9.10 Interpretation. Terms used with initial capital
letters will have the meanings specified, applicable to both singular and
plural forms, for all purposes of this Agreement. All pronouns (and any
variation) will be deemed to refer to the masculine, feminine or neuter, as the
identity of the Person may require. The singular or plural includes the other,
as the context requires or permits. The word "include" (and any variation) is
used in an illustrative sense rather than a limiting sense. The word "day"
means a calendar day, and if the last day for the giving of any notice or the
taking of any other action is a day that is not a Business Day, the time for
giving such notice or taking such action will be deemed extended to the next
Business Day.

IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

TELE-COMMUNICATIONS, INC.

By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------

TCI MUSIC, INC.

By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------

<PAGE> 1
EXHIBIT 10.2

FORM OF SERVICES AGREEMENT

Services Agreement (this "Agreement"), dated as of ___________,
1997, between Tele-Communications, Inc., a Delaware corporation ("TCI"), and TCI
Music, Inc., a Delaware corporation (the "Company").

RECITALS

A. TCI owns all the issued and outstanding capital stock
of the Company (the "Company Stock").

B. TCI and the Company are parties to an Agreement and
Plan of Merger dated as of February 6, 1997 among TCI, the Company, TCI Merger
Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company
("Merger Sub"), and DMX Inc., a Delaware corporation ("DMX"), pursuant to which
Merger Sub will merge with and into DMX (the "Merger").

C. As a result of the Merger, the Company will cease to
be a wholly owned subsidiary of TCI, and TCI and the Company will be separate
public companies.

D. This Agreement sets forth the general terms upon
which TCI will provide to the Company certain facilities, services, benefits,
and personnel to the Company after consummation of the Merger.

In consideration of the mutual covenants contained in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, TCI and the Company hereby agree
as follows:

SECTION 1. SERVICES. At the request of the Company, TCI shall provide
services to the Company for the administration and operation of the businesses
of the Company and its subsidiaries and affiliates and shall devote thereto
such time as may be necessary for the proper and efficient administration and
operation of such businesses. The services to be provided by TCI to the
Company pursuant to this Agreement (collectively, the "Services") shall include
such of the following services as the Company may request from time to time:

(i) tax reporting, financial reporting, payroll,
employee benefit administration, workers' compensation
administration, telephone, fleet management, package delivery,
management information systems, billing, lock box, remittance
processing and risk management services;

(ii) other services typically performed by TCI's
executive, accounting, finance, treasury, corporate, legal,
tax, benefits, insurance, facilities, purchasing, fleet
management and advanced information technology department
personnel;
<PAGE> 2

(iii) use of telecommunications and data facilities
and of systems and software developed, acquired or licensed by
TCI from time to time for financial forecasting, budgeting and
similar purposes, including without limitation any such
software for use on personal computers, in any case to the
extent available under copyright law or any applicable
third-party contract;

(iv) technology support and consulting services;
and

(v) such other management, supervisory, strategic
planning or other services as the Company may from time to
time request.

SECTION 2. SUPPLY COMMITMENTS.

(a) Certain Definitions. As used in this Agreement, the
capitalized terms listed below have the following meanings (with the singular
including the plural and vice versa):

"Equipment": Any equipment and materials that are
available for purchase by TCI and its O&O Subsidiaries on terms that include
volume discounts and would not restrict TCI or the applicable O&O Subsidiary
from complying with Section 2(b).

"O&O Subsidiaries": those of TCI's subsidiaries in
which TCI owns, directly or indirectly, all of the common equity.

"Territory": The United States and Canada

(b) Equipment Purchase Commitment. TCI shall, and shall
cause its O&O Subsidiaries to, make available to the Company in the manner
provided below the benefit of the volume discounts, if any, that are available
to TCI and its O&O Subsidiaries in purchasing Equipment and can be made
available to the Company (the foregoing being referred to herein as, TCI's
"Equipment Commitment"). The Company shall give TCI notice from time to time,
as much in advance as is practicable, of its intention to purchase Equipment
and, promptly after receipt of such notice. If TCI or an O&O Subsidiary can
make such Equipment available TCI shall give notice to the Company stating the
price and the terms on which TCI, or its applicable O&O Subsidiary, can make
such Equipment available to the Company (the "Terms Notice"). If the Company
determines to purchase the requested Equipment on the terms specified in the
Terms Notice, it shall deliver a purchase order for such Equipment to TCI and,
upon receipt thereof, (i) TCI shall use commercially reasonable efforts to
cause its supplier to sell such Equipment directly to the Company at the price
and on the terms specified in the Terms Notice or (ii) at TCI's sole election,
TCI shall, or shall cause the applicable O&O Subsidiary, to purchase such
Equipment and resell it to the Company at the price and on the terms specified
in the Terms Notice. If TCI elects the option set forth in clause (ii) of the
preceding sentence, it shall take all action necessary to assure that all
warranties and other rights available to the original purchaser of such
Equipment are assigned and extend to, or otherwise

2
<PAGE> 3

enforce such warranties and rights on behalf of, the Company. TCI shall in no
event have, or be required to incur, any liability to any of its suppliers for
any Equipment ordered by the Company unless (and then only to the extent that)
it has elected the option set forth in clause (ii) of the second preceding
sentence.

(c) Termination of Commitments. TCI's obligations under
this Section 2 shall terminate immediately and without any requirement of
notice if any of the events described in clause (iii) of the first sentence of
Section 5(b) shall occur with respect to the Company. If the Company delivers
an executed purchase order for Equipment to TCI pursuant to Section 2(a) and
fails to purchase the same in accordance with the terms and conditions
specified in the Terms Notice, then TCI may terminate the Equipment Commitment
and its obligations under Section 2(b) by giving notice to such effect to the
Company within 30 days thereafter.

SECTION 3. COMPENSATION FOR SERVICES. As a compensation for Services
rendered to the Company pursuant to this Agreement, the Company shall reimburse
TCI for (i) all direct expenses incurred by TCI in providing the Services,
provided that the incurrence of such expenses is consistent with practices
generally followed by TCI in managing or operating its own business and the
businesses of its subsidiaries and affiliates and (ii) the Company's pro rata
share of TCI's indirect overhead expenses based on an annual determination by
TCI management of the usage by the Company of such services during the prior
year. Such indirect expenses shall include (i) the salaries and other
compensation of TCI's officers and employees who perform the Services for the
Company, (ii) general and administrative overhead expenses and (iii) the costs
and expenses of TCI's physical facilities that are utilized by the Company.
TCI shall keep true, complete and accurate books of account containing such
particulars as may be necessary for the purpose of calculating the above costs.

SECTION 4. EMPLOYEE BENEFIT PLANS. Subject to Section 5 hereunder, TCI
shall permit the present and future employees of the Company and its
majority-owned subsidiaries (collectively, the "TCI Music Employees") to
continue to participate in each of the benefit plans listed on Schedule A
hereto (the "TCI Plans"). Notwithstanding the foregoing, nothing in this
Agreement shall impair TCI's right to terminate one or more of the TCI Plans or
to modify or amend their terms and conditions, including those that determine
the right to participate in such plans, provided that such modification or
amendment is applicable to all employees of TCI and its subsidiaries, including
the Company. For so long as the Company shall remain a participating employer
in the TCI Plans, the Company shall make the required employer contributions to
such plans with respect to the TCI Music Employees and shall, where applicable,
deduct and accumulate from applicable sources the required employee
contributions to such plans. The determination of the total amount of
contributions required under each such TCI Plan shall be made by the Company
from time to time, and the Company shall remit such contributions in the manner
and at the times prescribed by TCI, consistent with TCI's normal practices for
determining, collecting or otherwise charging out the respective benefit plan
costs of its participating subsidiary corporations.

3
<PAGE> 4

SECTION 5. TERM.

(a) Commencement. This Agreement shall become effective
immediately at the Effective Time of the Merger.

(b) Termination. Except as otherwise expressly provided
herein, this Agreement and the rights and obligations of the parties hereunder
shall remain in effect until terminated as provided below or, with respect to
the parties' rights and obligations under Section 2(b), as provided in Section
2(c).

(i) The obligation of TCI to provide the Services
as provided in Section 1 of this Agreement shall remain in
effect until terminated by actions of one of the parties as
follows: (A) by TCI at any time after three years from the
effective date of this Agreement on not less than six months
prior written notice to the Company; and (B) by the Company at
any time on not less than 60 days' prior written notice to
TCI.

(ii) The obligation of TCI to permit the TCI Music
Employees to participate in the TCI Plans pursuant to Section
4 hereof shall remain in effect until TCI no longer
beneficially owns shares of the Company's Series A Common
Stock and Series B Common Stock representing at least a
majority in voting power of the outstanding shares of capital
stock of the Company entitled to vote generally in the
election of directors.

(iii) Either party may terminate this Agreement
upon written notice to the other party if such other party
shall file a petition in bankruptcy or insolvency, or a
petition for reorganization or adjustment of debts or for the
appointment of a receiver or trustee of all or a substantial
portion of its property, or shall make an assignment for the
benefit of creditors, or if a petition in bankruptcy or other
petition described in this paragraph shall be filed against
such other party and shall not be discharged within 120 days
thereafter.

(c) Effect of Termination. In the event of any
termination of this Agreement, each party shall remain liable for all
obligations of such party accrued hereunder prior to the date of such
termination, including, without limitation, all obligations of the Company (i)
to reimburse TCI for the Services provided hereunder through the termination
date, in each case as provided in Section 3 hereof, and (ii) to pay for any
Equipment supplied pursuant hereto. The provisions of Section 6 of this
Agreement shall survive indefinitely, notwithstanding any termination hereof.

SECTION 6. LIMITATION OF LIABILITY. TCI, its affiliates, directors,
officers, employees, agents and permitted assigns (each, a "TCI Party" and,
together, the "TCI Parties") shall not be liable (whether such liability is
direct or indirect, in contract or tort or otherwise) to the Company or any of
the Company's affiliates, directors, officers, employees, agents,
securityholders, creditors or permitted

4
<PAGE> 5

assigns, for any liabilities, claims, damages, losses or expenses (including,
without limitation, any special, indirect, incidental or consequential damages)
("Losses") arising out of, related to, or in connection with the Services, the
Equipment Commitment or this Agreement except to the extent that such Losses
result from the gross negligence or willful misconduct of TCI, in which case
TCI's liability with respect to the Services shall be limited to a refund of
that portion of the amounts actually paid by the Company hereunder which, as
determined by TCI, represented the cost to the Company of the Services in
question. The remedies, if any, available with respect to any Equipment
supplied shall be as provided in the applicable purchase. The Company hereby
agrees to indemnify and hold harmless the TCI Parties from and against any and
all Losses (including, without limitation, reasonable fees and expenses of
counsel) incurred by any TCI Party arising out of or in connection with or by
reason of the Services provided under this Agreement, other than any liability
of TCI to the Company as contemplated by the foregoing provisions of this
Section 6.

SECTION 7. MISCELLANEOUS.

(a) Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all previous agreements, negotiations, understandings and
commitments with respect to such subject matter, whether or not in writing.

(b) Governing Law. This Agreement and the legal
relations between the parties with respect hereto shall be governed by and
construed in accordance with the laws of the State of Colorado, without regard
to conflicts of laws rules thereof.

(c) Notices. All notices, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given: (i) on the day of delivery if delivered personally to
the party to whom notice is to be given; (ii) on the day of transmissions if
sent via facsimile transmission to the facsimile number given below (answer
back received); (iii) on the day of delivery by Federal Express or similar
overnight courier; or (iv) on the third day after mailing, if mailed to the
party to whom notice is to be given, by United States first class mail,
registered or certified, postage prepaid and properly addressed, to the party
as follows:

If to TCI:

Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: General Counsel
Facsimile: (303) 488-3245

5
<PAGE> 6

If to the Company:

TCI Music, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: John D. Reardon, President and CEO
Facsimile: (303) 488-3200

Any party may change its address for the purpose of this Section by giving the
other party written notice of its new address in the manner set forth above.

(d) Amendment. This Agreement may not be amended or
modified in any respect except by a written agreement signed by the parties
hereto.

(e) Successors and Assigns; No Third-Party Beneficiaries.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interests and
obligations hereunder shall be assigned by either party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
Nothing contained in this Agreement, except as expressly set forth, is intended
to confer upon any other persons other than the parties hereto and their
respective successors and permitted assigns, any rights or remedies.

(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

(g) No Waiver. No waiver by either party hereto of any
term or condition of this Agreement, in any one or more instances, shall
operate as a waiver of such term or condition at any other time. No waiver of
any term or condition hereof shall be effective unless in a writing signed by
the party entitled to give such waiver.

(h) Relations Between the Parties. The parties are
independent contractors. Nothing in this Agreement shall constitute either
party, or any of such party's officers, directors, agents or employees, a
partner, agent or employee of, or joint venturer with, the other party.

(i) Severability. If any provision of this Agreement or
the application thereof to any person or circumstances shall be held to be
invalid or unenforceable, the remainder of this Agreement, or the application
of such provision to persons or circumstances other than those to which it was
held to be invalid or unenforceable, shall not be affected thereby, provided
that the parties shall negotiate in good faith with respect to an equitable
modification of the provision or application thereof held to be invalid.

6
<PAGE> 7

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.

TELE-COMMUNICATIONS, INC.

By:
---------------------------------------
Name:
Title:

TCI MUSIC, INC.

By:
---------------------------------------
Name:
Title:

<PAGE> 1
EXHIBIT 10.6

FORM OF TCI MUSIC NOTE

$40,000,000 July __, 1997

FOR VALUE RECEIVED, TCI Music, Inc., a Delaware corporation, whose
address is 5619 DTC Parkway, Englewood, Colorado 80111 (the "Borrower"),
unconditionally promises to pay to the order of Tele-Communications, Inc., a
Delaware corporation (the "Lender") the principal amount of Forty Million
Dollars (the "Principal"), with interest on the outstanding Principal balance
from and after July __, 1997 at the rate of 10% per annum. Interest shall
accrue on a daily basis and shall be computed for the actual number of days
elapsed on the basis of a year consisting of 365 days. This Note is made
pursuant to the terms of the Contribution Agreement dated July __, 1997 by and
between the Borrower and the Lender.

The outstanding Principal and all accrued interest thereon shall be
due and payable in full on January __, 1998 (the "Termination Date"); provided
that Lender will waive interest accrued from July __, 1997 through the
Termination Date if all outstanding Principal is paid in full as of such
Termination Date. If all outstanding Principal is not paid as of the
Termination Date, any and all interest accrued beginning July __, 1997 and
through the date of payment shall be due and payable. All payments of
Principal and interest shall be paid in lawful money of the United States in
immediately available funds at 5619 DTC Parkway, Englewood, Colorado 80111 or
such place as may hereafter be designated by written notice from the Lender to
the Borrower. All payments made on this Note shall be credited, first, to
interest due on the outstanding Principal balance of this Note and, second, to
the reduction of the Principal balance under this Note.

The Borrower may prepay amounts owed under this Note, in whole or in
part, at any time without premium or penalty. Any partial prepayment shall
first be applied to any unpaid interest accrued at the time of prepayment on
the outstanding Principal and then to Principal.

The Borrower waives presentment, demand, protest and notice of any
kind.

In the event of any action at law or suit in equity with respect to
this Note, the Borrower, in addition to all other sums which it may be required
to pay hereunder, will pay a reasonable sum for attorneys' fees and expenses
incurred by the Lender in connection with such action or suit and all other
costs and expenses of collection.

In the absence of manifest error, the unpaid Principal balance and
unpaid accrued interest from time to time applicable to such balance shall be
determined from the records of the Lender or the holder of this Note.

This Note is executed and delivered in, and shall in all respects be
governed by and construed in accordance with, the laws of the State of
Colorado, including all matters of construction,
<PAGE> 2
validity and performance, shall bind the Borrower, its successors and assigns,
and shall inure to the benefit of any holder hereof, its successors and
assigns.

TCI MUSIC, INC.

By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------

- 2 -

<PAGE> 1

EXHIBIT 10.7

LOAN AND SECURITY AGREEMENT

BETWEEN

DMX INC.,

a Delaware corporation,

as Borrower

AND

TELE-COMMUNICATIONS, INC.,

a Delaware corporation,

as Lender

DATED AS OF FEBRUARY 6, 1997

$3,500,000
<PAGE> 2
LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2
Loan and Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Payment of Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE 3
Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Reports, Certificates and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Representations and Warranties Correct; Compliance with Covenants . . . . . . . . . . . . . . . . . . 5
3.5 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Affiliation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Verification of Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE 4
Representations and Warranties of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Representative Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Binding Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Litigation and Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.8 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.9 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.10 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.11 Accurate and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.12 Title and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.13 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

i
<PAGE> 3
<TABLE>
<S> <C>
4.14 No Other Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.15 Priority of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE 5
Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Qualifications To Do Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.8 Records of Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Protection of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Continuing Obligations of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE 6
Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 No Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Type of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 No Other Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE 7
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Other Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE 8
Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.3 Remedies upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>

ii
<PAGE> 4
<TABLE>
<S> <C>
8.4 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 Locations of Collateral; Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 9
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 No Implied Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.3 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.10 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.11 Additional Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Statutes of Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Demands for Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) No Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.14 Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>

iii
<PAGE> 5
LIST OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
A Form of Promissory Note
</TABLE>

LIST OF SCHEDULES

<TABLE>
<CAPTION>
Schedule Description
-------- -----------
<S> <C>
8.5 Location of Collateral
</TABLE>

iv
<PAGE> 6
LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT is entered into as of
February 6, 1997, between DMX Inc., a Delaware corporation ("Borrower"), and
TELE-COMMUNICATIONS, INC., a Delaware corporation ("Lender").

RECITAL

Lender desires to lend to Borrower, and Borrower desires to
borrow from Lender, up to $3,500,000 on the terms and conditions set forth in
this Agreement.

NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:

ARTICLE 1

Definitions

In addition to any terms defined elsewhere in this Agreement,
the following terms have the meanings indicated for purposes of this Agreement:

1.1 "Acceleration" means that the Loan (i) shall not have
been paid at the Maturity Date or (ii) shall have become due and payable prior
to the Maturity Date pursuant to Section 7.2.

1.2 "Advance Date" has the meaning set forth in Section
2.1.
1.3 "Affiliate" means, with respect to any Person, any
other Person Controlling, Controlled by or under common Control with such
Person; Control for this purpose means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities or voting
interests, by contract or otherwise.

1.4 "Agreement" means this Loan and Security Agreement,
as amended from time to time.

1.5 "Business Day" means a day when banks in Los Angeles,
California, New York, New York and Denver, Colorado are open for business.

1.6 "Closing Date" means the date first above written.

1.7 "Collateral" has the meaning set forth in Section
8.1.

1.8 "Commitment Period" has the meaning set forth in
Section 2.1(a).
<PAGE> 7
1.9 "Commitment Termination Date" means May 31, 1997.

1.10 "Event of Default" has the meaning set forth in
Article 7.

1.11 "Exchange Act" means the Securities Exchange Act of
1934, as amended.

1.12 "GAAP" means generally accepted accounting principles
as in effect in the United States, as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which
principles are applicable to the circumstances as of the date of determination.

1.13 "Indebtedness" means, with respect to any Person,
without duplication, (a) all obligations of such Person for borrowed money, or
with respect to advances of any kind (including repurchase obligations), (b)
all obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (d)
all obligations of such Person incurred or assumed as the deferred purchase
price of property or services (other than accounts payable to suppliers
incurred in the ordinary course of business and paid in the ordinary course of
business of such Person), (e) all indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (f)
all capitalized lease obligations of such Person, (g) all guaranties of such
Person and (h) all obligations of such Person as an account party in respect of
letters of credit and bankers acceptances.

1.14 "Legal Requirements" means all legal requirements in
effect from time to time including all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
notices, demand letters, directions and requirements of all governments,
departments, commissions, boards, courts, authorities and agencies, foreseen or
unforeseen, ordinary or extraordinary, including any change in any law,
regulation or the interpretation thereof by any governmental authority (whether
or not having the force of law).

1.15 "Lien" means any lien, security interest, pledge,
mortgage, deed of trust, encumbrance, right of first refusal or other right to
purchase or any right or claim in the nature of any of the foregoing.

1.16 "Loan" means the loan by Lender to Borrower of the
principal sum of up to $3,500,000 as described in Section 2.1.

1.17 "Material Adverse Effect" means a material adverse
effect on (i) the business, assets, operations, prospects or financial
condition of Borrower, (ii) the ability of Borrower to pay

2
<PAGE> 8
the Obligations in accordance with their terms or (iii) the enforceability of
Borrower's obligations under this Agreement.

1.18 "Maturity" means any date on which the Loan or any
portion thereof, or any interest, fee, expense or other payment becomes due and
payable, whether as stated or by virtue of mandatory prepayment, by
Acceleration or otherwise.

1.19 "Maturity Date" means June 1, 2000, or such earlier
date as all Outstanding Principal and accrued but unpaid interest on the Note
becomes due.

1.20 "Note" has the meaning set forth in Section 2.1.

1.21 "Obligations" means the Loan and any other loans,
advances, debts, interest, liabilities, obligations, fees, expenses, covenants
and duties owing to Lender by Borrower, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
arising under this Agreement.

1.22 "Outstanding Principal" means, as determined from
time to time, the unpaid principal amount of the Loan made by Lender to
Borrower pursuant to this Agreement.

1.23 "Person" means any human being or any corporation,
partnership, trust, association or other entity or organization, including any
governmental authority.

1.24 "Potential Default" means any event or condition
which with notice, passage of time or a determination by Lender, or any
combination of the foregoing, would constitute an Event of Default.

ARTICLE 2

Loan and Note

2.1 Loan.

(a) Subject to the terms and conditions of this
Agreement, at any time and from time to time during the period (the "Commitment
Period") beginning on the Closing Date and ending on the Commitment Termination
Date, Lender shall make the Loan to Borrower in the principal amount of up to
$3,500,000. Borrower shall use the proceeds of the Loan solely for the
purposes described in Section 5.7.

(b) Subject to satisfaction of the conditions set
forth in Article 3, during the Commitment Period Lender shall disburse proceeds
of the Loan to Borrower on each date (an "Advance Date") that is designated by
Borrower by a notice requesting such disbursement given to Lender at least
three Business Days before such Advance Date. Such notice shall state the
principal

3
<PAGE> 9
amount requested to be disbursed and must be accompanied by (i) a certificate
of Borrower signed on its behalf by its Chief Executive Officer or Chief
Financial Officer certifying that the conditions to the obligation of Lender to
make such advance, as set forth in Article 3, will be satisfied as of the
Advance Date and (ii) the items prescribed by Section 3.7 to the extent
applicable to such advance.

(c) Borrower's obligation to repay the Loan shall
be evidenced by a promissory note of Borrower (the "Note") in the form attached
as Exhibit A. On the Closing Date, Borrower shall deliver to Lender the Note,
executed by Borrower.

2.2 Interest.

(a) Interest. The Loan shall bear interest from
the Closing Date on the Outstanding Principal until such amount is repaid at
the rate of 12 1/2% per annum. Borrower shall, on the Commitment Termination
Date, pay Lender all accrued interest on Outstanding Principal accrued through
such date. Any payment of principal, interest or any fee, expense or other
payment payable by Borrower hereunder that is not paid when due shall bear
interest from the due date thereof until the date such payment is made in full
at the rate of 15% per annum.

(b) Computation of Interest. Interest shall be
computed for the actual number of days elapsed on the basis of a 360-day year.
If the amount of interest payable on any interest payment date in respect of
the immediately preceding interest computation period would exceed the maximum
amount permitted by applicable Legal Requirements to be charged by Lender, the
amount of interest payable on such interest payment date shall automatically be
reduced to such maximum permissible amount. If the amount of interest payable
in respect of any interest computation period is reduced pursuant to the
foregoing sentence and the amount of interest payable for Lender's account in
respect of any subsequent interest computation period would be less than the
maximum amount permitted by applicable Legal Requirements to be charged by
Lender, then the amount of interest payable in respect of such subsequent
interest computation period shall be automatically increased to such maximum
permissible amount; provided that at no time shall the aggregate amount by
which interest paid has been increased exceed the aggregate amount by which
interest paid has theretofore been reduced.

2.3 Payments.

(a) Payment of Loan. Borrower (i) shall pay
interest accrued on the Loan as provided in Section 2.2(a) and (ii) shall pay
the Outstanding Principal as of the Commitment Termination Date and all
interest thereon in 36 equal monthly installments, commencing on July 1, 1997
and thereafter on the first day of each month until the Maturity Date. All
payments on the Loan shall be applied first to the payment of unpaid interest
and the balance, if any, to Outstanding Principal. Amounts repaid by Borrower
may not be reborrowed.

(b) Optional Prepayment. Borrower may, at any
time, prepay the Loan in whole or in part, without penalty or premium.

4
<PAGE> 10
(c) Payments. All payments made to Lender under
this Agreement, whether for interest, principal, fees, expenses or late charges
shall be made in immediately available funds by wire transfer to the account
designated by Lender or, if no such account is designated, by delivery to
Lender at Lender's address for notices as set forth in this Agreement and shall
be made prior to noon Colorado time on the date of the scheduled payment. All
payments received after noon Colorado time shall be considered to have been
received on the next Business Day. If the due date of any payment falls on a
day that is not a Business Day, such payment shall instead be due the next
succeeding Business Day.

ARTICLE 3

Conditions Precedent

The obligation of Lender to make the Loan (or any advance
thereof) shall be subject to the satisfaction, on the Closing Date and on each
Advance Date, as applicable, of each of the following conditions:

3.1 Note. Lender shall have received the Note duly
executed and delivered by Borrower.

3.2 Reports, Certificates and Other Information. Lender
shall have received such instruments or documents as Lender may reasonably
request relating to the existence and good standing of Borrower, the authority
for execution, delivery and performance of this Agreement or the creation and
perfection of the security interest set forth in Article 8 hereof.

3.3 No Existing Default. No Event of Default or
Potential Default shall exist.

3.4 Representations and Warranties Correct; Compliance
with Covenants. The representations and warranties set forth in Article 4
shall be true and correct in all material respects and Borrower shall have
complied in all material respects with its covenants and agreements in this
Agreement.

3.5 No Material Adverse Effect. Since December 31, 1996,
no event shall have occurred that has had, or reasonably could be expected to
have, a Material Adverse Effect, other than with respect to, or as a result of,
the disposition of Borrower's European operations.

3.6 Affiliation Agreement. Borrower and Satellite
Services, Inc. shall have entered into an affiliation agreement (or an
amendment to the affiliation agreement currently in effect) providing, among
other things, for the inclusion of Borrower's music services in the digital
cable television services offered by Lender's Affiliates.

5
<PAGE> 11
3.7 Verification of Use of Proceeds. Borrower shall have
provided to Lender invoices, purchase orders or other evidence reasonably
satisfactory to Lender as to compliance by Borrower with its covenant in
Section 5.7 as to each advance of the Loan.

ARTICLE 4

Representations and Warranties of Borrower

To induce Lender to enter into this Agreement and to make the
Loan, Borrower makes the following representations and warranties to Lender:

4.1 Due Organization. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.

4.2 Chief Executive Office. The chief executive office
of Borrower is at 11400 West Olympic Boulevard, Suite 1100, Los Angeles,
California 90064-1507.

4.3 Corporate Power. Borrower has all corporate power
necessary to own and operate its properties and to carry on its business as now
conducted and to execute and deliver, and to perform its obligations under,
this Agreement, the Note and the other instruments and agreements to be
executed and delivered by Borrower pursuant to this Agreement.

4.4 Authorization. All corporate action on the part of
Borrower necessary for the execution, delivery and performance of this
Agreement has been duly taken and is in full force and effect.

4.5 Representative Authorization. The officer executing
this Agreement on behalf of Borrower is fully authorized to execute and deliver
the same.

4.6 Binding Nature. This Agreement is a legal, valid and
binding obligation of Borrower, enforceable in accordance with its terms,
except as affected by bankruptcy, insolvency or similar laws and by general
equitable principles.

4.7 Litigation and Contingent Liabilities. There is no
action, suit, investigation or proceeding pending or, to the knowledge of
Borrower, threatened in writing against or affecting Borrower, or any of its
property by or before any court, arbitrator or administrative or governmental
authority, the adverse determination of which reasonably could be expected to
have a Material Adverse Effect, except for the purported class action lawsuit
entitled Brickell Partners v. Jerold H. Rubinstein, Donne F. Fisher, Leo J.
Hindery, Jr., James R. Shaw, Sr., Kent Burkhart, J.C. Sparkman, Menon Bhaskar,
DMX Inc., and Tele-Communications, Inc. (Civil Action No. 15206) filed in the
Delaware Chancery Court.

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<PAGE> 12
4.8 No Event of Default. No Event of Default has
occurred and is continuing or would result from the execution, delivery and
performance by Borrower of this Agreement.

4.9 Compliance With Laws. Borrower is in compliance with
all Legal Requirements applicable to its assets and business with only such
exceptions as in the aggregate would not be reasonably likely to have a
Material Adverse Effect. No approvals by, or filings with, any governmental
authority are required to be obtained or made in connection with the execution
and delivery of this Agreement or the Note, the consummation of the
transactions herein or therein contemplated or the performance of or compliance
with the terms and conditions hereof or thereof.

4.10 Absence of Conflicts. The execution, delivery or
performance of this Agreement or the Note will not (a) violate any Legal
Requirement, (b) conflict with or result in a breach of or a default under any
agreement or instrument to which Borrower is a party or by which any of its
properties is bound or (c) result in the creation or imposition of a Lien upon
any property (now owned or hereafter acquired) of Borrower (except for the
security interest granted pursuant to Article 8).

4.11 Accurate and Complete Disclosure. No representation
or warranty made by Borrower in this Agreement is false or misleading in any
material respect (including by omission of material information necessary to
make such representation, warranty or statement not misleading).

4.12 Title and Authority. Borrower has rights in and good
title to the Collateral and has full power and authority to grant to Lender a
security interest in the Collateral pursuant to this Agreement and to execute,
deliver and perform its obligations in accordance with this Agreement, without
the consent or approval of any other Person other than any consent or approval
which has been obtained.

4.13 Filings. Fully executed Uniform Commercial Code
financing statements containing a description of the Collateral have been filed
of record in every governmental office in which such filing is necessary to
establish a legal, valid and perfected security interest in favor of Lender in
respect of any Collateral (other than Collateral that is equipment located at
premises occupied by subscribers to Borrower's music services) in which a
security interest may be perfected by filing in the United States and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the
filing of Uniform Commercial Code continuation statements.

4.14 No Other Names. Borrower uses no name other than
"DMX Inc."

4.15 Priority of Security Interest. The Collateral is and
will be owned by Borrower free and clear of any Lien other than the security
interest granted hereby. The security interest granted to Lender in Article 8
is a legal, valid and perfected first priority security interest subject to no
prior Lien of any nature.

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<PAGE> 13
ARTICLE 5

Affirmative Covenants

Unless Lender shall otherwise agree, Borrower shall comply
with the following provisions so long as any Obligation is outstanding:

5.1 Accounting Records. Borrower shall maintain adequate
books and accounts in accordance with GAAP. Within 45 days after the end of
each of the first three quarters of each fiscal year, Borrower shall deliver to
Lender a copy of consolidated financial statements for such quarter (consisting
of at least a balance sheet and related statements of operations, cash flows
and stockholders equity), and within 90 days after the end of each fiscal year
Borrower shall deliver a copy of audited consolidated financial statements for
such fiscal year (consisting of at least a balance sheet and related statements
of operations, cash flows and stockholders equity). All such financial
statements shall be prepared in accordance with GAAP applied on a basis
consistent with prior periods (except as otherwise noted therein) and, to the
extent applicable, Regulation S-X under the Exchange Act.

5.2 Corporate Existence. Borrower shall preserve and
maintain its corporate existence and all its licenses, privileges and
franchises and other rights necessary or desirable in the normal course of its
businesses, except to the extent that the failure to preserve and maintain its
corporate existence and such rights would not be reasonably likely to have a
Material Adverse Effect.

5.3 Qualifications To Do Business. Borrower shall
qualify to do business and shall be and remain in good standing in each
jurisdiction in which the nature of its business requires it to be so
qualified, or in which failure to be so qualified and in good standing would be
reasonably likely to have a Material Adverse Effect.

5.4 Compliance With Laws. Borrower shall comply with all
applicable Legal Requirements, except where the failure to do so would not have
a Material Adverse Effect.

5.5 Taxes and Other Liabilities. Borrower shall pay and
discharge when due (including any grace period) any and all Indebtedness and
all taxes and assessments except as may be subject to good faith contest or as
to which a bona fide dispute may arise.

5.6 Conduct of Business. Borrower shall conduct its
business only in the ordinary course.

5.7 Use of Proceeds. Borrower shall use the proceeds of
the Loan only (i) to purchase (or to reimburse the Company for its purchase,
after September 30, 1996, of) tuners, including remote controls and related
equipment, for use by its commercial and residential customers in receiving
Borrower's music services and (ii) to pay commissions owed in connection with
the obtaining of commercial customers for Borrower's music services.

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<PAGE> 14
5.8 Records of Accounts Receivable. Borrower shall keep
or cause to be kept records of all accounts receivable included in the
Collateral which are accurate in all material respects. Borrower shall at all
times keep all records of such accounts receivable and the other Collateral at
its chief executive office located at 11400 West Olympic Boulevard, Suite 1100,
Los Angeles, California 90064-1507.

5.9 Protection of Security. Borrower shall, at its own
cost and expense, take any and all actions necessary to defend title to the
Collateral against all Persons and to defend the security interest of Lender in
the Collateral and the priority thereof, against any adverse Lien of any nature
whatsoever.

5.10 Continuing Obligations of Borrower. Borrower shall
observe and perform all the material conditions and obligations to be observed
and performed by it under each material contract, agreement, interest or
obligation relating to the Collateral, all in accordance with the terms and
conditions thereof.

5.11 Indemnification. Borrower shall indemnify and hold
Lender and Lender's directors, officers, employees, affiliates, attorneys and
agents (collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) which may be imposed on, incurred by or asserted
against such Indemnitees in any manner relating to or arising out of this
Agreement or the making of the Loan (collectively, the "Indemnified Matters");
provided, however, that Borrower shall have no obligation to an Indemnitee
under this Section 5.11 with respect to Indemnified Matters to the extent such
Indemnified Matters were caused by or resulted from the gross negligence or
willful misconduct of an Indemnitee.

ARTICLE 6

Negative Covenants

Unless Lender shall otherwise agree, Borrower shall comply
with the following provisions so long as any Obligation is outstanding:

6.1 No Merger, etc. Borrower shall not effect or enter
into any agreement to effect, any merger, consolidation, reorganization,
recapitalization or similar transaction other than as contemplated by the
proposal made by Lender to the Company on August 30, 1996.

6.2 Type of Business. Borrower shall not engage in any
material respect in any business other than the businesses in which it
currently is engaged.

6.3 Indebtedness. Borrower shall not incur, assume or
suffer to exist any Indebtedness, except (a) the Loan, (b) Indebtedness for
borrowed money and capital lease obligations

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<PAGE> 15
outstanding as of the Closing Date and reflected in the most recent balance
sheet of Borrower delivered to Lender and (c) Indebtedness for goods or
services incurred in the ordinary course of business.

6.4 Dividends. Without the prior written consent of
Lender, Borrower shall not make or pay, or become or remain liable to make or
pay, any distribution of any nature (whether in cash, property, securities or
otherwise) on account of or in respect of any equity interest in Borrower or on
account of the purchase, redemption, retirement or acquisition of any such
equity interest.

6.5 Loans and Investments. Borrower shall not at any
time make or have outstanding any loan or advance to, or purchase, acquire or
own any stock, bonds, notes or securities of, or any partnership or other
ownership interest in, or make any capital contribution to, any other Person,
or purchase or acquire any assets (whether with cash or in exchange for other
assets) or make any other investment in any Person or agree, become or remain
liable to do any of the foregoing, except:

(a) investments and loans described in any of its
periodic reports filed pursuant to the Exchange Act prior to the date of this
Agreement;

(b) trade credit extended to subcontractors or
suppliers, under usual and customary terms in the ordinary course of business;
and

(c) loans and advances on a short-term basis to
employees and officers of Borrower in the ordinary course of Borrower's
business for expenses of such businesses.

6.6 Sale of Assets. Borrower shall not at any time sell,
lease, assign or otherwise dispose of any of its assets to any Person, whether
pursuant to a sale, lease, assignment, transfer or other disposition of capital
stock, assets or other property, in one transaction or in any series of related
transactions, except for sales of inventory and equipment in the ordinary
course of business of Borrower or the leasing of equipment and other property
in the ordinary course of business of Borrower.

6.7 No Other Lien. Except for the security interest
herein granted to Lender, Borrower shall not create, incur, assume or suffer to
exist any Lien of any kind on the Collateral.

ARTICLE 7

Events of Default

7.1 Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:

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<PAGE> 16
(a) Payments. Borrower shall fail to pay when
due, whether at Maturity or otherwise, any principal, interest, fees, expenses
or other payment due under this Agreement or the Note, and such failure shall
continue uncured for two Business Days after the due date.

(b) Other Covenants. Borrower shall fail in any
material respect to perform any of its obligations under this Agreement other
than any obligation to pay money, and such failure shall continue uncured for a
period of 30 days.

(d) Bankruptcy. Borrower shall institute a
voluntary case seeking liquidation or reorganization under Chapter 7 or Chapter
11 of the United States Bankruptcy Code, or shall consent to the institution of
an involuntary case thereunder against it; Borrower shall file a petition
initiating or shall otherwise institute any similar proceeding under any other
applicable federal or state law, or shall consent thereto; or Borrower shall
apply for, or by consent or acquiescence there shall be an appointment with
respect to Borrower of, a receiver, liquidator, sequestrator, trustee or other
officer with similar powers, or Borrower shall make an assignment for the
benefit of creditors; or Borrower shall admit in writing its inability to pay
its debts generally as they become due; or, if an involuntary case shall be
commenced seeking the liquidation or reorganization of Borrower under Chapter 7
or Chapter 11 of the United States Bankruptcy Code, or any similar proceeding
shall be commenced against Borrower under any other applicable law, and (i) the
petition commencing the involuntary case is not timely controverted, (ii) the
petition commencing the involuntary case is not dismissed within 45 days after
its filing, (iii) an interim trustee is appointed to take possession of all or
a portion of the property, to operate all or any part of the business of
Borrower or (iv) an order for relief or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer shall have been issued or entered
therein.

(e) Cross-Default. Borrower shall be in default
of any obligation (other than the Obligations) under any agreement or
instrument for the payment of Indebtedness in excess of $100,000 and such
Indebtedness shall continue uncured for more than 10 days.

7.2 Acceleration. If any Event of Default described in
Section 7.1(d) shall occur, all Obligations shall become immediately due and
payable, all without notice of any kind. If any other Event of Default shall
occur, Lender may declare all Obligations to be due and payable, whereupon all
Obligations shall immediately become due and payable, all as so declared by
Lender and without presentment, demand, protest or other notice of any kind.
Any such declaration made pursuant to this Section 7.2 may be rescinded by
Lender.

7.3 Other Remedies. If any Event of Default shall occur
and be continuing, Lender shall have, in addition to the remedies set forth in
this Agreement, all other remedies available at law or in equity.

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<PAGE> 17
ARTICLE 8

Security Interest

8.1 Grant of Security Interest. To secure the prompt
payment and performance of the Obligations, Borrower hereby grants to Lender a
security interest in all of Borrower's right, title and interest in the
following (collectively, the "Collateral"):

(a) all tuners, remote control devices and other
equipment designed for use by Borrower's customers in receiving Borrower's
music services;

(b) all agreements with commercial subscribers to
Borrower's music services, including accounts receivable or other rights to
payment arising from goods sold or leased or services rendered under such
agreements; and

8.2 Collections.

(a) So long as no Event of Default shall have
occurred and be continuing, Borrower shall have the right to collect all
accounts receivable included in the Collateral in the ordinary course of its
business; provided that Borrower shall, if Lender shall so request, (i) arrange
for remittances on any such accounts receivable to be made directly to lock
boxes or blocked accounts designated by Lender or in such other manner as
Lender may direct, and (ii) promptly deposit all payments received by Borrower
on account of such accounts receivable, whether in the form of cash, checks,
notes, drafts, bills of exchange, money orders or otherwise, in one or more
accounts designated by Lender in precisely the form received (but with any
endorsements of Borrower necessary for deposit or collection), subject to
withdrawal by Lender only, as hereinafter provided, and until they are
deposited, such payments shall be deemed to be held in trust by Borrower for
and as Lender's property and shall not be commingled with Borrower's other
funds.

(b) Upon the occurrence and during the
continuance of an Event of Default, Lender shall have the right, as the agent
of Borrower, with power of substitution for Borrower and in Borrower's name,
Lender's name or otherwise, for the use and benefit of Lender (i) to receive,
endorse, assign or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (ii) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (iii) to sign the
name of Borrower on any invoice or bill of lading relating to any of the
Collateral; (iv) to send verifications of accounts receivable to any customer;
(v) to commence and prosecute any and all suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect or otherwise
realize on all or any of the Collateral or to enforce any rights in respect of
any Collateral; (vi) to settle, compromise, adjust or defend any actions, suits
or proceedings relating to or pertaining

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<PAGE> 18
to all or any of the Collateral; (vii) to notify, or to require Borrower to
notify, the account debtors obligated on any accounts receivable to make
payment thereof directly to Lender; and (viii) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though Lender were the
absolute owner of the Collateral for all purposes; provided that nothing herein
contained shall be construed as requiring or obligating Lender to make any
commitment or to make any inquiry as to the nature or sufficiency of any
payment received by Lender, or to present or file any claim or notice, or to
take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken by Lender or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of Borrower or to any claim or action against Lender in the
absence of the gross negligence or wilful misconduct of Lender. The
appointment of Lender as the agent of Borrower for the purposes set forth in
this Section 8.2 is coupled with an interest and is irrevocable. The
provisions of this Section 8.2 shall in no event relieve Borrower of any of its
obligations under this Agreement with respect to the Collateral or any part
thereof or impose any obligation on Lender to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by Lender of any other or further right which it may have on the date
of this Agreement or hereafter, whether hereunder or by law or otherwise.

8.3 Remedies upon Default.

(a) Upon the occurrence and during the
continuance of an Event of Default, Borrower shall deliver each item of
Collateral to Lender on demand, and it is agreed that Lender shall have the
right to take any or all of the following actions at the same or different
times: (i) with or without legal process and with or without previous notice
or demand for performance, to take possession of the Collateral and without
liability for trespass (as to the property of Borrower) to enter any premises
where the Collateral may be located for the purpose of taking possession of or
removing the Collateral; and (ii) generally, to exercise any and all rights
afforded to a secured party under the Uniform Commercial Code or other
applicable Legal Requirements. Without limiting the generality of the
foregoing, Lender shall have the right, subject to the applicable Legal
Requirements, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as Lender
shall deem appropriate. As to any Collateral constituting a security, Lender
shall be authorized at any such sale (if it reasonably deems it advisable to do
so) to restrict the prospective bidders or purchasers to Persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof.
Upon consummation of any sale Lender shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold.
Each purchaser at any sale of Collateral shall hold the property sold
absolutely, free from any claim or right on the part of Borrower, and Borrower
hereby waives (to the extent permitted by applicable Legal Requirements) all
rights of redemption, stay and appraisal which Borrower now has or may at any
time in the future have under any Legal Requirement now existing or hereafter
enacted.

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<PAGE> 19
(b) Lender shall give Borrower at least 10 days'
written notice (which Borrower agrees is reasonable notice within the meaning
of Section 9-504(3) of the Uniform Commercial Code) of Borrower's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as Lender may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as Lender may
determine. Lender shall not be obligated to make any sale of any Collateral if
it shall determine not to do so, regardless of the fact that notice of sale of
such Collateral shall have been given. Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by Lender until the sale price is paid by the purchaser or
purchasers thereof, but Lender shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may be sold again upon
like notice. At any public sale, Lender may bid for or purchase, free (to the
extent permitted by applicable Legal Requirements) from any right of
redemption, stay or appraisal on the part of Borrower (all such rights being
also hereby waived and released to the extent permitted by applicable Legal
Requirements), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to Lender
from Borrower as a credit against the purchase price, and Lender may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to Borrower therefor. As an alternative to
exercising the power of sale herein conferred upon it, Lender may proceed by a
suit or suits at law or in equity to foreclose on and to sell the Collateral or
any portion thereof pursuant to a judgment or decree of a court or courts
having competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. In any event, Lender shall have the right to claim and collect from
Borrower any deficiency remaining after sale of any Collateral.

8.4 Application of Proceeds. Lender shall apply the
proceeds of any collection or sale of the Collateral as follows:

FIRST, to the payment of all reasonable costs and expenses
incurred by Lender in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by Lender
hereunder on behalf of Borrower and any other reasonable costs or
expenses incurred by Lender in connection with the exercise of any
right or remedy hereunder;

SECOND, to the payment in full of the Obligations, in
accordance with this Agreement; and

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<PAGE> 20
THIRD, to Borrower, its successors or assigns, or as a court
of competent jurisdiction may otherwise direct.

Lender shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement. Upon any sale
of the Collateral by Lender (including, pursuant to a power of sale granted by
statute or under a judicial proceeding), the receipt of Lender or of the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to Lender or such officer or be answerable in any way for the
misapplication thereof.

8.5 Locations of Collateral; Place of Business.

(a) Borrower hereby represents and warrants that
all the tangible Collateral (other than Collateral that is equipment located at
premises occupied by subscribers to Borrower's music services) is located at
the locations listed on Schedule 8.5. Borrower shall not establish, or permit
to be established, any other location for Collateral unless all filings under
the Uniform Commercial Code or otherwise which are required by this Agreement
to be made with respect to the Collateral have been made and Lender has a
valid, legal and perfected first priority security interest in the Collateral.

(b) At such time or times as Lender may request,
Borrower shall promptly prepare and deliver to Lender a schedule or schedules
in form satisfactory to Lender, certified on behalf of Borrower by the
president or a vice president of Borrower, showing the identity, amount and
location of any and all Collateral.

(c) Borrower shall not change, or permit to be
changed, the location of its chief executive office unless all filings under
the Uniform Commercial Code or otherwise which are required by this Credit
Agreement to be made have been made and Lender has a valid, legal and perfected
first priority security interest.

ARTICLE 9

Miscellaneous

9.1 Successors and Assigns. The terms and provisions of
this Agreement shall be binding upon, and the benefits thereof shall inure to,
the parties hereto and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights or obligations hereunder
without the prior written consent of Lender.

9.2 No Implied Waiver. No delay or omission to exercise
any right, power or remedy accruing to Lender upon any breach or default of
Borrower under this Agreement shall impair any such right, power or remedy of
Lender, nor shall it be construed to be a waiver of any such

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<PAGE> 21
breach or default, or an acquiescence therein, or of or in any similar breach
or default occurring thereafter, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default occurring theretofore
or thereafter.

9.3 Amendments; Waivers. No amendment, modification or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed and delivered by each party to be bound thereby.
Any amendment, modification or waiver hereunder shall be effective only in the
specific instance and for the specific purpose for which given.

9.4 Severability. If any provision of this Agreement, or
the application of such provision to any Person or circumstance, is found by a
court of competent jurisdiction to be unenforceable for any reason, such
provision may be modified or severed from this Agreement to the extent
necessary to make such provision enforceable against such Person or in such
circumstance. Neither the unenforceability of such provision nor the
modification or severance of such provision will affect (i) the enforceability
of any other provision of this Agreement or (ii) the enforceability of such
provision against any Person or in any circumstance other than those against or
in which such provision is found to be unenforceable.

9.5 Notices. Any notice which Borrower or Lender may be
required or may desire to give to the other under any provision of this
Agreement shall be in writing, and shall be deemed to have been duly given if
(a) personally delivered (including delivery by Federal Express or other
nationally recognized overnight courier) or (b) sent by telecopy as follows:

To Borrower:

DMX Inc.
11400 West Olympic Boulevard
Suite 1100
Los Angeles, California 90064-1507
Attention: President
Telecopy No.: (310) 444-1717

With a copy to:

Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-7199
Attention: Alvin G. Segel, Esq.
Telecopy No.: (310) 203-7199

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To Lender:

Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: General Counsel
Telecopy No.: (303) 488-3245

With a copy to:

Sherman & Howard L.L.C.
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
Attention: Charles Y. Tanabe, Esq.
Telecopy No.: (303) 298-0940

Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.

9.6 Interpretation. This Agreement, together with the
exhibits and schedules to this Agreement, is the final expression of their
agreement with respect to the subject matter hereof and is intended as a
complete statement of the terms and conditions of such agreement.

9.7 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT
OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO,
WITHOUT REGARD TO ITS LAWS REGARDING CHOICE OF APPLICABLE LAW.

9.8 Counterparts. This Agreement may be executed in any
number of counterparts each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.

9.9 Headings. Captions, headings and the table of
contents in this Agreement are for convenience only, and are not to be deemed
part of this Agreement.

9.10 Terms. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. All pronouns (and any variation) will be
deemed to refer to the masculine, feminine or neuter, as the identity of the
Person may require. The singular or plural includes the other, as the context
requires or permits. The word include (and any variation) is used in an
illustrative sense rather than a limiting sense. The word day means a calendar
day. The word year means a calendar year.

17
<PAGE> 23
9.11 Additional Waivers.

(a) Bankruptcy. In the event that Borrower
becomes insolvent or files a petition for reorganization, arrangement,
composition, discharge or similar relief under any present or future provision
of the Bankruptcy Code, or if such a petition be filed against Borrower, and in
any such proceedings some or all of the Obligations shall be terminated or
rejected or any of the Obligations of Borrower modified or abrogated, Borrower
agrees that its liability hereunder shall not thereby be affected or modified,
and such liability shall continue in full force and effect as if no such action
or proceeding had occurred and shall continue to be effective or reinstated, as
the case may be, if any payment of any of the Obligations must be returned by
Lender upon such insolvency, bankruptcy or reorganization, or otherwise, as
though such payment had not been made.

(b) Statutes of Limitation. Borrower waives the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof, to the extent permitted by law. Borrower understands that
Lender would not make the Loan in the absence of the foregoing covenant by
Borrower and the other covenants of Borrower in this Agreement.

(c) Demands for Performance. Borrower
acknowledges that repeated and successive demands may be made and payments or
performance made hereunder in response to such demands as and when, from time
to time, Borrower may default in its performance of the Obligations.
Notwithstanding any such performance hereunder, this Agreement shall remain in
full force and effect and shall apply to any and all subsequent defaults by
Borrower in payment or performance of the Obligations.

(d) No Set-off. Borrower waives any defense
arising by reason of any disability of Borrower. Borrower waives any setoff,
defense or counterclaim which Borrower may have or claim to have against
Lender. Borrower shall not have any right of subrogation, and hereby waives
any right to enforce any remedy which Lender now has or may hereafter have
against Borrower, and waives any and all statutory or other rights to
participate in any security now or hereafter held by Lender.

9.12 Further Assurances. Borrower, at its expense, shall
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as Lender may from time to
time reasonably request for the better assuring and preserving of the security
interests and the rights and remedies created hereby, including the payment of
any fees and taxes required in connection with the execution and delivery of
this Agreement, the granting of the security interests created hereby and the
filing of any financing statements or other documents in connection herewith.
If any amount payable under or in connection with any of the Collateral shall
be or become evidenced by any promissory note or other instrument, such note or
instrument shall be immediately pledged and delivered to Lender, duly endorsed
in a manner satisfactory to Lender. Borrower shall notify Lender of any change
in its corporate name or in the location of its chief executive office, its
chief place of business or the office where it keeps its records relating to
the

18
<PAGE> 24
accounts receivable owned by it. Borrower shall promptly notify Lender if any
material portion of the Collateral is damaged or destroyed.

9.13 Expenses. Borrower shall pay all reasonable and
documented out-of-pocket costs and expenses, including reasonable fees and
documented disbursements of Lender's counsel, in connection with an Event of
Default or Potential Default, the enforcement of this Agreement or the Note and
collection and other proceedings resulting therefrom. Borrower shall indemnify
Lender against any transfer taxes, documentary taxes, assessments or charges
made by any governmental authority by reason of the execution and delivery of
this Agreement or the Note.

9.14 Jurisdiction and Venue. The parties hereby
irrevocably agree that any legal action or proceeding with respect to this
Agreement may be brought in (i) the Superior Court of Los Angeles County,
California, (ii) the United States District Court, Central District of
California, (iii) any court of the State of Colorado having jurisdiction over
the subject matter of such action or proceeding or (iv) the United States
District Court, District of Colorado, and by execution and delivery of this
Agreement, each party hereby irrevocably consents and submits to each such
jurisdiction and hereby irrevocably waives any and all objections which it may
have as to venue in any of the above courts. Borrower and Lender hereby waive
personal service or any and all process, and consent that all such services of
process be made by registered or certified mail directed to the addresses
provided for in this Agreement and service so made shall be deemed to be
completed five Business Days after the same shall have been deposited in the
United States mail, postage prepaid.

9.15 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT, OR ANY DEALINGS BETWEEN BORROWER AND LENDER RELATING TO
THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. The
scope of this waiver is intended to be all encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Each party acknowledges that this
waiver is a material inducement to enter into a business relationship, that
Lender has already relied on this waiver in entering into this Agreement, and
that each party will continue to rely on this waiver in any future dealings
with the other. Each party further warrants and represents that he or it has
reviewed this waiver with his or its legal counsel, and that he and or it
knowingly and voluntarily waives his or its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE AND MAY BE
MODIFIED ONLY IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION OF OR TO THIS AGREEMENT. In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.

19
<PAGE> 25

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.

DMX INC., a Delaware corporation

By: /s/ JEROLD H. RUBINSTEIN
-----------------------------------
Title: Chief Executive Officer
--------------------------------

TELE-COMMUNICATIONS, INC., a Delaware
corporation

By: /s/ STEPHEN M. BRETT
----------------------------------
Title: Executive Vice President and
Secretary
-------------------------------

20
<PAGE> 26
Schedule 8.5

Location of Collateral

<TABLE>
<CAPTION>
Location Type of Collateral
-------- ------------------
<S> <C>
11400 West Olympic Boulevard, Suite 1100 tuners, remote control devices and other
Los Angeles, California 90064-1507 equipment designed for use by Borrower's
customers in receiving Borrower's music
services

15235 Alton Parkway, Suite 100, Building 18 same
Irvine, California 92714
</TABLE>
<PAGE> 27
Exhibit A

Note

$3,500,000 ____________, 1997
Denver, Colorado

FOR VALUE RECEIVED, DMX Inc., a Delaware corporation ("Borrower"),
promises to pay to the order of Tele-Communications, Inc., a Delaware
corporation ("Lender"), at 5619 DTC Parkway, Englewood, Colorado 80111, in
lawful money of the United States of America and in immediately available
funds, the principal sum of up to Three Million Five Hundred Thousand Dollars
($3,500,000). This Note is made pursuant to the Loan and Security Agreement
(the "Loan Agreement") dated as of ____________, 1997, between Lender and
Borrower, and all terms defined in the Loan Agreement shall have the same
meanings when used herein. Interest shall accrue on the Outstanding Principal
at the rate prescribed by the Loan Agreement.

All interest on Outstanding Principal accrued from the date hereof
through and including May 31, 1997 shall be due and payable on May 31, 1997.
Thereafter, Outstanding Principal as of May 31, 1997 and accrued and unpaid
interest thereon shall be due and payable in 36 equal monthly installments on
the first day of each calendar month, beginning July 1, 1997. In any event,
all Outstanding Principal and all accrued and unpaid interest shall be due and
payable on the Maturity Date. All payments made on this Note shall be credited
first to accrued interest and second to the reduction of principal.

This Note is subject to the terms and conditions of the Loan
Agreement, to which reference is hereby made for a statement of such terms and
conditions, including the security provisions thereof, and those under which
this Note shall be paid prior to its due date or its due date accelerated.

This Note shall be deemed to be made under and shall be construed in
accordance with and governed by the laws of the State of Colorado.

DMX INC., a Delaware corporation

By:
-----------------------------------
Title:
---------------------------------

A-1
<PAGE> 28
[TCI LETTERHEAD]

May 29, 1997

DMX Inc.
11400 West Olympic Boulevard
Suite 1100
Los Angeles, California 90064-1507
Attention: J. Wendy Kim, Chief Financial Officer

Re: Loan and Security Agreement (the "Loan Agreement") and
$3,500,000 Note (the "Note") dated February 6, 1997 made
between Tele-Communications, Inc., as Lender, and DMX Inc., as
Borrower

Gentlemen and Ladies:

This letter sets forth the terms of the extension of the Commitment
Period with respect to the above-referenced Loan Agreement and Note. Any
capitalized term not otherwise defined in this letter shall have the meaning
given to it in the Loan Agreement.

A. Section 1.9 of the Loan Agreement shall be amended and
restated as follows:

1.9 "Commitment Termination Date" means August 31, 1997.

B. The first full sentence of Section 2.3(a) of the Loan
Agreement shall be amended and restated as follows:

2.3(a) Payment of Loan. Borrower (i) shall pay interest
accrued on the Loan as provided in Section 2.2(a) and (ii) shall pay
the Outstanding Principal as of the Commitment Termination Date and
all interest thereon in 34 equal monthly installments commencing on
September 1, 1997 and thereafter on the first day of the month until
the Maturity Date.

C. The first two sentences in the second paragraph of the Note
are amended and restated as follows:

"All interest on Outstanding Principal accrued from the date
hereof through and including August 31, 1997 shall be due and payable
on August 31, 1997. Thereafter, Outstanding Principal as of August
31, 1997 and accrued and unpaid interest thereon shall be due and
payable in 34 equal monthly installments on the first day of each
calendar month, beginning September 1, 1997."

Subject to the provisions above, all terms and provisions of the Loan
Agreement and the Note shall remain in full force and effect.
<PAGE> 29

DMX Inc.
May 29, 1997
Page 2

Please confirm the agreement of DMX to the amendments to the Loan
Agreement and Note as stated in this letter by signing below on behalf of DMX.

Sincerely,

TELE-COMMUNICATIONS, INC.

By: /s/ STEPHEN M. BRETT
---------------------------------
Its: Executive Vice President and
Secretary
--------------------------------
Confirmed and Agreed:

DMX INC.

By: /s/ JEROLD H. RUBINSTEIN
-------------------------------
Its: Chief Executive Officer
------------------------------

<PAGE> 1

EXHIBIT 10.8
TCI MUSIC, INC.
FORM OF 1997 STOCK INCENTIVE PLAN

Article I.

Purpose and Effectiveness

1.1 Purpose. The purpose of the TCI Music, Inc. 1997 Stock
Incentive Plan (the "Plan") is to promote the success of TCI Music, Inc. (the
"Company") by providing a method whereby (i) eligible employees of the Company
and its Subsidiaries and (ii) eligible non-employee consultants and advisors to
the Company and its Subsidiaries may be awarded additional remuneration for
services rendered and encouraged to invest in capital stock of the Company,
thereby increasing their proprietary interest in the Company's businesses,
encouraging them to remain in the employ of the Company or its Subsidiaries,
and increasing their personal interest in the continued success and progress of
the Company or its Subsidiaries. The Plan is also intended to aid in
attracting persons of exceptional ability (i) to become officers and employees
of the Company and its Subsidiaries and (ii) to provide services to the Company
as non-employee consultants and advisors.

1.2 Effective Date. The Plan shall be effective as of the date it
was approved by both the Board of Directors of the Company and the sole
stockholder of the Company, ____________, 1997.

Article II.

Definitions

2.1 Certain Defined Terms. Capitalized terms not defined
elsewhere in the Plan shall have the following meanings (whether used in the
singular or plural):

"Affiliate" of the Company means any corporation, partnership,
or other business association that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with the Company.

"Agreement" means a stock option agreement, stock appreciation
rights agreement, restricted shares agreement, stock units agreement,
performance award agreement or agreement evidencing more than one type
of Award, as specified in Section 11.5, as any such Agreement may be
supplemented or amended from time to time.

"Approved Transaction" means any transaction in which the
Board (or, if approval of the Board is not required as a matter of
law, the stockholders of the Company) shall approve (i) any
consolidation or merger of the Company, or binding share exchange,
pursuant to which shares of Common Stock would be changed or converted
into or exchanged for cash, securities or other property, other than
any such transaction in which the holders of the Common Stock
immediately prior to such
<PAGE> 2
transaction have the same proportionate ownership of the common stock
of, and voting power with respect to, the surviving corporation
immediately after such transaction, (ii) any merger, consolidation or
binding share exchange to which the Company is a party as a result of
which the persons who are holders of the Common Stock immediately
prior thereto have less than a majority of the combined voting power
of the outstanding capital stock of the Company ordinarily (and apart
from the rights accruing under special circumstances) having the right
to vote in the election of directors immediately following such
merger, consolidation or binding share exchange, (iii) the adoption of
any plan or proposal for the liquidation or dissolution of the
Company, or (iv) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company.

"Award" means a Performance Award and/or a grant of Options,
SARs, Restricted Shares and/or Stock Units under this Plan.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes thereto.
Reference to any specific Code section shall include any successor
section.

"Committee" means the committee of the Board appointed
pursuant to Section 3.1 to administer the Plan.

"Common Stock" means the Series A Stock and the Series B
Stock.

"Company" has the meaning ascribed to such term in Section
1.1.

"Disability" means the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment that (a) can be expected to result in death or (b)
has lasted or can be expected to last for a continuous period of not
less than 12 months.

"Dividend Equivalents" means, with respect to Restricted
Shares to be issued at the end of the Restriction Period, to the
extent specified by the Committee only, an amount equal to all
dividends and other distributions (or the economic equivalent thereof)
that are payable to stockholders of record during the Restriction
Period on a like number of shares of Series A Stock.

"Domestic Relations Order" means a domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder.

-2-
<PAGE> 3
"Effective Date" means the date on which the Plan became
effective pursuant to Section 1.2.

"Equity security" has the meaning ascribed to such term in
Section 3(a)(11) of the Exchange Act, and an equity security of an
issuer has the meaning ascribed thereto in Rule 16a-1 promulgated
under the Exchange Act, or any successor Rule.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes
thereto. Reference to any specific Exchange Act section shall include
any successor section.

"Fair Market Value" of a share of Series A Stock or Series B
Stock on any day means the last sale price (or, if no last sale price
is reported, the average of the high bid and low asked prices) for a
share of Series A Stock or Series B Stock, as applicable, on such day
(or, if such day is not a trading day, on the next preceding trading
day) as reported on NASDAQ or, if not reported on NASDAQ, as quoted by
the National Quotation Bureau Incorporated, or if the Series A Stock
or Series B Stock is listed on an exchange, on the principal exchange
on which the Series A Stock or Series B Stock, as applicable, is
listed. If for any day the Fair Market Value of a share of Series A
Stock or Series B Stock, as applicable, is not determinable by any of
the foregoing means, then the Fair Market Value for such day shall be
determined in good faith by the Committee on the basis of such
quotations and other considerations as the Committee deems
appropriate.

"Free Standing SAR" has the meaning ascribed thereto in
Section 7.1.

"Holder" means an employee or, subject to Section 11.2, former
employee of the Company or a Subsidiary, or a present or, subject to
Section 11.2, former consultant or advisor to the Company or a
Subsidiary, who has in either case received an Award under this Plan.

"Incentive Stock Option" means a stock option granted under
Article VI which is intended to be an incentive stock option within
the meaning of Section 422 of the Code.

"NASDAQ" means the Nasdaq Stock Market.

"Nonqualified Stock Option" means a stock option granted under
Article VI that is designated a nonqualified stock option, or is
otherwise not an Incentive Stock Option.

"Option" means any Incentive Stock Option or Nonqualified
Stock Option.

-3-
<PAGE> 4
"Performance Award" means an award made pursuant to Article X
that is subject to the attainment of one or more Performance Goals.

"Performance Goal" means a standard established by the
Committee to determine in whole or in part whether a Performance Award
shall be earned.

"Plan" has the meaning ascribed thereto in Section 1.1.

"Restricted Shares" means shares of Series A Stock or the
right to receive shares of Series A Stock, as the case may be, awarded
pursuant to Article VIII.

"Restriction Period" means a period of time beginning on the
date of each award of Restricted Shares and ending on the Vesting Date
with respect to such award.

"Retained Distribution" has the meaning ascribed thereto in
Section 8.3.

"SARs" means stock appreciation rights, awarded pursuant to
Article VII, with respect to shares of Series A Stock.

"Series A Stock" means the Series A Common Stock, $1.00 par
value per share, of the Company.

"Series B Stock" means the Series B Common Stock, $1.00 par
value per share, of the Company.

"Stock Unit Award" has the meaning ascribed thereto in Section
9.1.

"Subsidiary" of the Company means any present or future
subsidiary (as defined in Section 424(f) of the Code) of the Company,
or any business entity in which the Company owns, directly or
indirectly, 50% or more of the voting, capital or profits interests.
An entity shall be deemed a subsidiary of the Company for purposes of
this definition only for such periods as the requisite ownership or
control relationship is maintained.

"Tandem SARs" has the meaning ascribed thereto in Section 7.1.

"Vesting Date" with respect to any Restricted Shares awarded
hereunder means the date on which such Restricted Shares cease to be
subject to a risk of forfeiture, as designated in or determined in
accordance with the Agreement with respect to such award of Restricted
Shares pursuant to Article VIII. If more than one Vesting Date is
designated for an award of Restricted Shares, reference in the Plan

-4-
<PAGE> 5
to a Vesting Date in respect of such Award shall be deemed to refer to
each part of such Award and the Vesting Date for such part.

Article III.

Administration

3.1 Committee. The Plan shall be administered by the Compensation
Committee of the Board unless a different committee is appointed by the Board.
The Committee shall be comprised of not less than two persons. Each member of
the Committee shall be a member of the Board who (i) is not a current employee
of the Company, (ii) is not a former employee of the Company who receives
compensation from the Company for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, (iii) has not ever been
an officer of the Company or any of its current affiliates, and (iv) does not
receive any remuneration from the Company, directly or indirectly, in any
capacity other than as a director (including, without limitation, payment in
exchange for goods or services), if any such relationship or transaction would
prevent such member from being an "outside director" with respect to the
Company for purposes of Section 162(m) of the Code and the rules and
regulations of the Treasury Department promulgated thereunder. Subject to the
foregoing, the Board may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed, may fill
vacancies in the Committee and may remove members of the Committee. The
Committee shall select one of its members as its chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of
its members shall constitute a quorum and all determinations shall be made by a
majority of such quorum. Any determination reduced to writing and signed by
all of the members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held.

3.2 Powers. The Committee shall have full power and authority to
grant to eligible persons Options under Article VI of the Plan, SARs under
Article VII of the Plan, Restricted Shares under Article VIII of the Plan,
Stock Units under Article IX of the Plan, and/or Performance Awards under
Article X of the Plan, to determine the terms and conditions (which need not be
identical) of all Awards so granted, to interpret the provisions of the Plan
and any Agreements relating to Awards granted under the Plan and to supervise
the administration of the Plan. The Committee in making an Award may provide
for the granting or issuance of additional, replacement or alternative Awards
upon the occurrence of specified events, including the exercise of the original
Award. The Committee shall have sole authority in to select persons to whom
Awards may be granted under the Plan and to determine the timing, pricing and
amount of any such Award, subject only to the express provisions of the Plan.
In making determinations hereunder, the Committee may take into account the
nature of the services rendered by the respective employees, consultants and
advisors, their present and potential contributions to the success of the
Company and its Subsidiaries and such other factors as the Committee in its
discretion deems relevant.

3.3 Interpretation. The Committee is authorized, subject to the
provisions of the Plan, to establish, amend and rescind such rules and
regulations as it deems necessary or advisable for the

-5-
<PAGE> 6
proper administration of the Plan and to take such other action in connection
with or in relation to the Plan as it deems necessary or advisable. Each
action and determination made or taken pursuant to the Plan by the Committee,
including any interpretation or construction of the Plan, shall be final and
conclusive for all purposes and upon all persons. No member of the Committee
shall be liable for any action or determination made or taken by him or the
Committee in good faith with respect to the Plan.

Article IV.

Shares Subject to the Plan

4.1 Number of Shares. Subject to the provisions of this Article
IV, the maximum number of shares of Series A Stock with respect to which Awards
may be granted during the term of the Plan shall be 4,000,000 shares. No
shares of Series B Stock may be the subject of Awards under the Plan. Shares
of Series A Stock will be made available from the authorized but unissued
shares of the Company or from shares reacquired by the Company, including
shares purchased in the open market. The shares of Series A Stock subject to
(i) any Award granted under the Plan that shall expire, terminate or be
annulled for any reason without having been exercised (or considered to have
been exercised as provided in Section 7.2), (ii) any Award of any SARs granted
under the Plan that shall be exercised for cash and (iii) any Award of
Restricted Shares or Stock Units that shall be forfeited prior to becoming
vested (provided that the Holder received no benefits of ownership of such
Restricted Shares or Stock Units other than voting rights and the accumulation
of Retained Distributions and unpaid Dividend Equivalents that are likewise
forfeited), shall again be available for purposes of the Plan.

4.2 Adjustments. If the Company subdivides its outstanding shares
of Series A Stock into a greater number of shares of Series A Stock (by stock
dividend, stock split, reclassification or otherwise) or combines its
outstanding shares of Series A Stock into a smaller number of shares of Series
A Stock (by reverse stock split, reclassification or otherwise), or if the
Committee determines that any stock dividend, extraordinary cash dividend,
reclassification, recapitalization, reorganization, split-up, split-off, spin-
off, combination, exchange of shares, warrants or rights offering to purchase
Series A Stock, or other similar corporate event (including mergers or
consolidations other than those which constitute Approved Transactions) affects
the Series A Stock such that an adjustment is required in order to preserve the
benefits or potential benefits intended to be made available under this Plan,
then the Committee shall, in its sole discretion and in such manner as the
Committee may deem equitable and appropriate, make such adjustments to any or
all of (i) the number and kind of shares which thereafter may be awarded,
optioned, or otherwise made subject to the benefits contemplated by the Plan,
(ii) the number and kind of shares subject to outstanding Awards, and (iii) the
purchase or exercise price and the relevant appreciation base with respect to
any of the foregoing, provided, however, that the number of shares subject to
any Award shall always be a whole number. The Committee may, if deemed
appropriate, provide for a cash payment to any Holder of an Award in connection
with any adjustment made pursuant to this Section 4.2.

-6-
<PAGE> 7
Article V.

Eligibility

5.1 General. The persons who shall be eligible to participate in
the Plan and to receive Awards under the Plan shall be such employees
(including officers and, subject to Section 5.2, directors) of the Company and
its Subsidiaries or consultants or advisors to the Company and its Subsidiaries
as the Committee shall select. Awards may be made to employees, consultants
and advisors who hold or have held Awards under this Plan or hold or have held
awards under any other plan of the Company or any of its Affiliates

5.2 Ineligibility. No member of the Committee, while serving as
such, shall be eligible to receive an Award.

Article VI.

Stock Options

6.1 Grant of Options. Subject to the limitations of the Plan, the
Committee shall designate from time to time those eligible persons to be
granted Options, the time when each Option shall be granted to such eligible
persons, the number of shares subject to such Option, whether such Option is an
Incentive Stock Option or a Nonqualified Stock Option and, subject to Section
6.2, the purchase price of the shares of Series A Stock subject to such Option.
Subject to the other provisions of the Plan, the same person may receive
Incentive Stock Options and Nonqualified Stock Options at the same time and
pursuant to the same Agreement, provided that Incentive Stock Options and
Nonqualified Stock Options are clearly designated as such.

6.2 Option Price. The price at which shares may be purchased upon
exercise of an Option shall be fixed by the Committee and may be more than,
less than or equal to the Fair Market Value of the Series A Stock as of the
date the Option is granted.

6.3 Term of Options. Subject to the provisions of the Plan with
respect to death, retirement and termination of employment, the term of each
Option shall be for such period as the Committee shall determine as set forth
in the applicable Agreement.

6.4 Exercise of Options. An Option granted under the Plan shall
become (and remain) exercisable during the term of the Option to the extent
provided in the applicable Agreement and this Plan and, unless the Agreement
otherwise provides, may be exercised to the extent exercisable, in whole or in
part, at any time and from time to time during such term; provided. however,
that subsequent to the grant of an Option, the Committee, at any time before
complete termination of such Option, may accelerate the time or times at which
such Option may be exercised in whole or in part (without reducing the term of
such Option).

-7-
<PAGE> 8
6.5 Manner of Exercise.

(a) Form of Payment. An Option shall be exercised by
written notice to the Company upon such terms and conditions as the
Agreement may provide and in accordance with such other procedures for
the exercise of Options as the Committee may establish from time to
time. The method or methods of payment of the purchase price for the
shares to be purchased upon exercise of an Option and of any amounts
required by Section 11.10 shall be determined by the Committee and may
consist of (i) cash, (ii) check, (iii) promissory note, (iv) whole
shares of Series A Stock or Series B Stock already owned by the
Holder, (v) the withholding of shares of Series A Stock issuable upon
such exercise of the Option, (vi) the delivery, together with a
properly executed exercise notice, of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan
proceeds required to pay the purchase price, (vii) any combination of
the foregoing methods of payment, or (viii) such other consideration
and method of payment as may be permitted for the issuance of shares
under the Delaware General Corporation Law. The permitted method or
methods of payment of the amounts payable upon exercise of an Option,
if other than in cash, shall be set forth in the applicable Agreement
and may be subject to such conditions as the Committee deems
appropriate. Without limiting the generality of the foregoing, if a
Holder is permitted to elect to have shares of Series A Stock issuable
upon exercise of an Option withheld to pay all or any part of the
amounts payable in connection with such exercise, then the Committee
may reserve the discretion to approve or disapprove such election,
which approval or disapproval may be given after such election is
made.

(b) Value of Shares. Shares of Series A Stock or Series
B Stock delivered in payment of all or any part of the amounts payable
in connection with the exercise of an Option, and shares of Series A
Stock withheld for such payment, shall be valued for such purpose at
their Fair Market Value as of the exercise date.

(c) Issuance of Shares. The Company shall effect the
transfer of the shares of Series A Stock purchased under any Option as
soon as practicable after the exercise thereof and payment in full of
the purchase price therefor and of any amounts required by Section
11.10, and within a reasonable time thereafter such transfer shall be
evidenced on the books of the Company. No Holder or other person
exercising an Option shall have any of the rights of a stockholder of
the Company with respect to shares of Series A Stock subject to an
Option granted under the Plan until due exercise and full payment has
been made. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such due
exercise and full payment.

6.6 Certain Limitations. No person may be granted Options
covering more than [1% of outstanding] shares (as adjusted pursuant to Section
4.2) of TCI Music Series A Common Stock

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<PAGE> 9
in the calendar year ending December 31, 1997, or Options covering more than
________ shares (as adjusted pursuant to Section 4.2) of TCI Music Series A
Common Stock in any one subsequent calendar year. Any acceleration of existing
Options in accordance with Section 11.1 of the Plan will not be deemed to be a
new grant of such Options for purposes of this Section.

6.7 Nontransferability. Unless otherwise determined by the
Committee and provided in the applicable Agreement, Options shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a Domestic Relations Order and, except as otherwise required
pursuant to a Domestic Relations Order, Options may be exercised during the
lifetime of the Holder thereof only by such Holder (or his or her court
appointed legal representative).

Article VII.

SARs

7.1 Grant of SARs. Subject to the limitations of the Plan, SARs
may be granted by the Committee to such eligible persons in such numbers and at
such times during the term of the Plan as the Committee shall determine. An
SAR may be granted to a Holder of an Option (hereinafter called a "related
Option") with respect to all or a portion of the shares of Series A Stock
subject to the related Option (a "Tandem SAR") or may be granted separately to
an eligible employee (a "Free Standing SAR"). Subject to the limitations of
the Plan, SARs shall be exercisable in whole or in part upon notice to the
Company upon such terms and conditions as are provided in the Agreement.

7.2 Tandem SARs. A Tandem SAR may be granted either concurrently
with the grant of the related Option or (if the related Option is a
Nonqualified Option) at any time thereafter prior to the complete exercise,
termination, expiration or cancellation of such related Option. Tandem SARs
shall be exercisable only at the time and to the extent that the related Option
is exercisable (and may be subject to such additional limitations on
exercisability as the Agreement may provide), and in no event after the
complete termination or full exercise of the related Option. Upon the exercise
or termination of the related Option, the Tandem SARs with respect thereto
shall be canceled automatically to the extent of the number of shares of Series
A Stock with respect to which the related Option was so exercised or
terminated. Subject to the limitations of the Plan, upon the exercise of a
Tandem SAR, the Holder thereof shall be entitled to receive from the Company,
for each share of Series A Stock with respect to which the Tandem SAR is being
exercised, consideration (in the form determined as provided in Section 7.4)
equal in value to the excess of the Fair Market Value of a share of Series A
Stock on the date of exercise over the related Option purchase price per share;
provided, however, that the Committee may, in any Agreement granting Tandem
SARs, provide that the appreciation realizable upon exercise thereof shall be
measured from a base higher than the related Option purchase price.

7.3 Free Standing SARs. Free Standing SARs shall be exercisable
at the time, to the extent and upon the terms and conditions set forth in the
applicable Agreement. The base price of a Free Standing SAR shall be not less
than 100% of the Fair Market Value of the Series A Stock on

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<PAGE> 10
the date of grant of the Free Standing SAR. Subject to the limitations of the
Plan, upon the exercise of a Free Standing SAR, the Holder thereof shall be
entitled to receive from the Company, for each share of Series A Stock with
respect to which the Free Standing SAR is being exercised, consideration (in
the form determined as provided in Section 7.4) equal in value to the excess of
the Fair Market Value of a share of Series A Stock on the date of exercise over
the base price per share of such Free Standing SAR.

7.4 Consideration. The consideration to be received upon the
exercise of an SAR by the Holder shall be paid in cash, shares of Series A
Stock (valued at Fair Market Value on the date of exercise of such SAR) or a
combination of cash and shares of Series A Stock as specified in the Agreement,
or, if so provided in the Agreement, either as determined by the Committee in
its sole discretion or as elected by the Holder, provided that the Committee
shall have the sole discretion to approve or disapprove the election by a
Holder to receive cash in full or partial settlement of an SAR, which approval
or disapproval shall be given after such election is made. The Company's
obligation arising upon the exercise of an SAR may be paid currently or on a
deferred basis with such interest or earnings equivalent as the Committee may
determine. No fractional shares of Series A Stock shall be issuable upon
exercise of an SAR and, unless otherwise provided in the applicable Agreement,
the Holder will receive cash in lieu of fractional shares. Unless the
Committee shall otherwise determine, to the extent a Free Standing SAR is
exercisable, it will be exercised automatically for cash on its expiration
date.

7.5 Limitations. The applicable Agreement may provide for a limit
on the amount payable to a Holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the
Holder in whole or in part for cash during any specified period, for a limit on
the time periods during which a Holder may exercise SARs and for such other
limits on the rights of the Holder and such other terms and conditions of the
SAR as the Committee may determine, including, without limitation, a condition
that the SAR may be exercised only in accordance with rules and regulations
adopted by the Committee from time to time. Unless otherwise so provided in
the applicable Agreement, any such limit relating to a Tandem SAR shall not
restrict the exercisability of the related Option. Such rules and regulations
may govern the right to exercise SARs granted prior to the adoption or
amendment of such rules and regulations as well as SARs granted thereafter.

7.6 Certain Limitations. No person may be granted SARs covering
more than [1% of outstanding] shares (as adjusted to Section 4.2) of TCI Music
Series A Common Stock in the calendar year ending December 31, 1997, or SARs
covering more than ______ shares (as adjusted pursuant to Section 4.2) of TCI
Music Series A Common Stock in any one subsequent calendar year. Any
acceleration of existing SARs in accordance with Section 11.1 of the Plan will
not be deemed to be a new grant of such SARs for purposes of this Section.

7.7 Exercise. For purposes of this Article VII, the date of
exercise of an SAR shall mean the date on which the Company shall have received
notice from the Holder of the SAR of the exercise of such SAR.

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7.8 Nontransferability. Unless otherwise determined by the
Committee and provided in the applicable Agreement, SARs shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a Domestic Relations Order and, except as otherwise required
pursuant to a Domestic Relations Order, SARs may be exercised during the
lifetime of the Holder thereof only by such Holder (or his or her court
appointed legal representative).

Article VIII.

Restricted Shares

8.1 Grant. Subject to the limitations of the Plan, the Committee
shall designate those eligible persons to be granted awards of Restricted
Shares, shall determine the time when each such Award shall be granted, whether
shares of Series A Stock covered by awards of Restricted Shares will be issued
at the beginning or the end of the Restriction Period and whether Dividend
Equivalents will be paid during the Restriction Period in the event shares of
the Series A Stock are to be issued at the end of the Restriction Period, and
shall designate (or set forth the basis for determining) the Vesting Date or
Vesting Dates for each award of Restricted Shares and may prescribe other
restrictions, terms and conditions applicable to the vesting of such Restricted
Shares in addition to those provided in the Plan. The Committee shall
determine the price, if any, to be paid by the Holder for the Restricted
Shares; provided, however, that the issuance of Restricted Shares shall be made
for at least the minimum consideration necessary to permit such Restricted
Shares to be deemed fully paid and nonassessable. All determinations made by
the Committee pursuant to this Section 8.1 shall be specified in the Agreement.

8.2 Issuance of Restricted Shares at Beginning of the Restriction
Period. If shares of Series A Stock are issued at the beginning of the
Restriction Period, the stock certificate or certificates representing such
Restricted Shares shall be registered in the name of the Holder to whom such
Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Shares (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the applicable Agreement. Such
certificates shall remain in the custody of the Company and the Holder shall
deposit with the Company stock powers or other instruments of assignment, each
endorsed in blank, so as to permit retransfer to the Company of all or any
portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Agreement.

8.3 Restrictions. Restricted Shares issued at the beginning of
the Restriction Period shall constitute issued and outstanding shares of Series
A Stock for all corporate purposes. The Holder will have the right to vote
such Restricted Shares, to receive and retain such dividends and distributions,
as the Committee may in its sole discretion designate, paid or distributed on
such Restricted Shares and to exercise all other rights, powers and privileges
of a Holder of Series A Stock

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<PAGE> 12
with respect to such Restricted Shares; except, that (a) the Holder will not be
entitled to delivery of the stock certificate or certificates representing such
Restricted Shares until the Restriction Period shall have expired and unless
all other vesting requirements with respect thereto shall have been fulfilled
or waived; (b) the Company will retain custody of the stock certificate or
certificates representing the Restricted Shares during the Restriction Period
as provided in Section 8.2; (c) other than such dividends and distributions as
the Committee may in its sole discretion designate, the Company will retain
custody of all distributions ("Retained Distributions") made or declared with
respect to the Restricted Shares (and such Retained Distributions will be
subject to the same restrictions, terms and vesting and other conditions as are
applicable to the Restricted Shares) until such time, if ever, as the
Restricted Shares with respect to which such Retained Distributions shall have
been made, paid or declared shall have become vested, and such Retained
Distributions shall not bear interest or be segregated in a separate account;
(d) the Holder may not sell, assign, transfer, pledge, exchange, encumber or
dispose of the Restricted Shares or any Retained Distributions or his interest
in any of them during the Restriction Period; and (e) a breach of any
restrictions, terms or conditions provided in the Plan or established by the
Committee with respect to any Restricted Shares or Retained Distributions will
cause a forfeiture of such Restricted Shares and any Retained Distributions
with respect thereto.

8.4 Issuance of Stock at End of the Restriction Period.
Restricted Shares issued at the end of the Restriction Period shall not
constitute issued and outstanding shares of Series A Stock and the Holder shall
not have any of the rights of a stockholder with respect to the shares of
Series A Stock covered by such an award of Restricted Shares, in each case
until such shares shall have been transferred to the Holder at the end of the
Restriction Period. If and to the extent that shares of Series A Stock are to
be issued at the end of the Restriction Period, the Holder shall be entitled to
receive Dividend Equivalents with respect to the shares of Series A Stock
covered thereby either (i) during the Restriction Period or (ii) in accordance
with the rules applicable to Retained Distributions, as the Committee may
specify in the Agreement.

8.5 Cash Awards. In connection with any award of Restricted
Shares, an Agreement may provide for the payment of a cash amount to the Holder
of such Restricted Shares at any time after such Restricted Shares shall have
become vested. Such cash awards shall be payable in accordance with such
additional restrictions, terms and conditions as shall be prescribed by the
Committee in the Agreement and shall be in addition to any other salary,
incentive, bonus or other compensation payments which such Holder shall be
otherwise entitled or eligible to receive from the Company.

8.6 Completion of Restriction Period. On the Vesting Date with
respect to each award of Restricted Shares, and the satisfaction of any other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b) any Retained Distributions
and any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent that the Restricted Shares related thereto
shall have become vested and (c) any cash award to be received by the Holder
with respect to such Restricted Shares shall become payable, all in accordance
with the terms of the applicable Agreement. Any such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall not
become vested shall be

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<PAGE> 13
forfeited to the Company and the Holder shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been
so forfeited. The Committee may, in its discretion, provide that the delivery
of any Restricted Shares, Retained Distributions and unpaid Dividend
Equivalents that shall have become vested, and payment of any cash awards that
shall have become payable, shall be deferred until such date or dates as the
recipient may elect. Any election of a recipient pursuant to the preceding
sentence shall be filed in writing with the Committee in accordance with such
rules and regulations, including any deadline for the making of such an
election, as the Committee may provide.

Article IX.

Stock Units

9.1 Grant. In addition to granting awards of Options, SARs and
Restricted Shares, the Committee shall have authority to grant to eligible
persons awards of Stock Units ("Stock Unit Awards") which may be in the form of
Series A Stock or units, the value of which is based, in whole or in part, on
the Fair Market Value of the Series A Stock. Subject to the provisions of the
Plan, including any rules established pursuant to Section 9.2, awards of Stock
Units shall be subject to such terms, restrictions, conditions, vesting
requirements and payment rules as the Committee may determine in its sole
discretion, which need not be identical for each Award. The determinations
made by the Committee pursuant to this Section 9.1 shall be specified in the
applicable Agreement.

9.2 Rules. The Committee may, in its sole discretion, establish
any or all of the following rules for application to an award of Stock Units:

(a) Any shares of Series A Stock which are part of an
award of Stock Units may not be assigned, sold, transferred, pledged
or otherwise encumbered prior to the date on which the shares are
issued, or if later, the date provided by the Committee at the time of
the Award.

(b) Such Awards may provide for the payment of cash
consideration by the person to whom such Award is granted or provide
that the Award, and Series A Stock to be issued in connection
therewith, if applicable, shall be delivered without the payment of
cash consideration; provided, however, that the issuance of any shares
of Series A Stock in connection with an award of Stock Units shall be
for at least the minimum consideration necessary to permit such shares
to be deemed fully paid and nonassessable.

(c) Awards of Stock Units may relate in whole or in part
to performance or other criteria established by the Committee at the
time of grant.

(d) Awards of Stock Units may provide for deferred
payment schedules, vesting over a specified period of employment, the
payment (on a current or deferred

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<PAGE> 14
basis) of dividend equivalent amounts with respect to the number of
shares of Series A Stock covered by the Award, and elections by the
employee to defer payment of the Award or the lifting of restrictions
on the Award, if any.

(e) In such circumstances as the Committee may deem
advisable, the Committee may waive or otherwise remove, in whole or in
part, any restrictions or limitations to which a Stock Unit Award was
made subject at the time of grant.

Article X.

Performance Awards

10.1 Terms of Performance Awards. Subject to the limitations of
the Plan, the Committee shall designate those eligible persons to be granted
Performance Awards, shall determine the form and amount of each such award, the
time when each such award shall be granted, and the Performance Goals
applicable thereto, and may prescribe other restrictions, terms and conditions
applicable to such Award in addition to those provided in the Plan. A
Performance Award may be payable in the form of cash, property or securities of
the Company, including, without limitation, Options, SARs, Restricted Shares
and/or Stock Units. A Performance Award shall be paid, vested or otherwise
deliverable solely on account of the attainment of one or more pre-established,
objective Performance Goals established by the Committee prior to the earlier
to occur of (i) 90 days after the commencement of the period of service to
which the Performance Goal relates and (ii) the passage of 25% of the period of
service (as scheduled in good faith at the time the goal is established), and
in any event while the outcome is substantially uncertain. A Performance Goal
is objective if a third party having knowledge of the relevant facts could
determine whether the goal is met.

10.2 Performance Goal Criteria. A Performance Goal may be based on
one or more business criteria that apply to the individual, one or more
business units of the Company, or the Company as a whole, and may include one
or more of the following: revenue, net income, stock price, market share,
earnings per share, return on equity, return on assets or decrease in costs.
Unless otherwise stated, such a Performance Goal need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business criteria). In
interpreting Plan provisions applicable to Performance Goals and Performance
Awards, it is the intent of the Plan to conform with the standards of Section
162(m) of the Code and Treasury Regulation (S) 1.162-27(e)(2)(i), and the
Committee in establishing such goals and interpreting the Plan shall be guided
by such provisions.

10.3 Committee Certification. Prior to the payment of any
compensation based on the achievement of Performance Goals, the Committee must
certify in writing that applicable Performance Goals and any of the material
terms thereof were, in fact, satisfied. Subject to the foregoing provisions,
the terms, conditions and limitations applicable to any Performance Awards made
pursuant to this Plan shall be determined by the Committee.

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<PAGE> 15
10.4 Certain Limitations. Notwithstanding anything to the contrary
contained in this Plan, any Performance Awards made hereunder shall be limited
so that no person may be granted Performance Awards consisting of cash or in
any other form permitted under this Plan (other than Awards consisting of
Options or SARs or otherwise consisting of shares of Common Stock or units
denominated in such shares, or, in either case, additional cash amounts related
to such an Award) in respect of any one-year period having a value determined
on the date of grant in excess of [$10,000,000.]

Article XI.

General Provisions

11.1 Acceleration of Options, SARs, Restricted Shares and Stock
Units.

(a) Death or Disability. If a Holder's employment (which
term shall include, as the context shall require, a Holder's period of
service to the Company and its Subsidiaries as a consultant or
advisor) shall terminate by reason of death or Disability,
notwithstanding any contrary waiting period, installment period,
vesting schedule or Restriction Period in any Agreement or in the
Plan, unless the applicable Agreement provides otherwise: (i) in the
case of an Option or SAR, each outstanding Option or SAR granted under
the Plan shall immediately become exercisable in full in respect of
the aggregate number of shares covered thereby; (ii) in the case of
Restricted Shares, the Restriction Period applicable to each such
award of Restricted Shares shall be deemed to have expired and all
such Restricted Shares, any related Retained Distributions and any
unpaid Dividend Equivalents shall become vested and any cash amounts
payable pursuant to the applicable Agreement shall be adjusted in such
manner as may be provided in the Agreement, (iii) in the case of Stock
Units, each such award of Stock Units shall become vested in full, and
(iv) in the case of Performance Awards, each such Performance Award
shall become vested in full.

(b) Approved Transactions. In the event of any Approved
Transaction, notwithstanding any contrary waiting period, installment
period, vesting schedule or Restriction Period in any Agreement or in
the Plan, unless the applicable Agreement provides otherwise: (i) in
the case of an Option or SAR, each such outstanding Option or SAR
granted under the Plan shall become exercisable in full in respect of
the aggregate number of shares covered thereby; (ii) in the case of
Restricted Shares, the Restriction Period applicable to each such
award of Restricted Shares shall be deemed to have expired and all
such Restricted Shares, any related Retained Distributions and any
unpaid Dividend Equivalents shall become vested and any cash amounts
payable pursuant to the applicable Agreement shall be adjusted in such
manner as may be provided in the Agreement; (iii) in the case of Stock
Units, each such award of Stock Units shall become vested in full; and
(iv) in the case of Performance Awards, all Performance Goals shall
thereupon be deemed to have been

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<PAGE> 16
achieved, fully vested and immediately payable; in each case effective
immediately prior to consummation of the Approved Transaction;
provided, however, that any Options, SARs or, if applicable, Stock
Units not theretofore exercised shall terminate upon consummation of
the Approved Transaction. Notwithstanding the foregoing, unless
otherwise provided in the applicable Agreement, the Committee may, in
its discretion, determine that any or all outstanding Awards of any or
all types granted pursuant to the Plan will not vest or become
exercisable on an accelerated basis, nor Performance Goals be deemed
to have been achieved, in connection with an Approved Transaction
and/or will not terminate if not exercised prior to consummation of
the Approved Transaction, if the Board or the surviving or acquiring
corporation, as the case may be, shall have taken, or made effective
provision for the taking of, such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for
such Award or to assume such Award and in order to make such new or
assumed Award, as nearly as may be practicable, equivalent to the old
Award (before giving effect to any acceleration of the vesting or
exercisability thereof), taking into account, to the extent
applicable, the kind and amount of securities, cash or other assets
into or for which the Series A Stock may be changed, converted or
exchanged in connection with the Approved Transaction.

11.2 Termination of Employment.

(a) General. If a Holder's employment shall terminate
prior to the complete exercise of an Option or SAR (or deemed exercise
thereof, as provided in Section 7.2) or during the Restriction Period
with respect to any Restricted Shares or prior to the vesting or
complete exercise of any Stock Units or Performance Award, then such
Option, SAR, Stock Unit or Performance Award shall thereafter be
exercisable, and the Holder's rights to any unvested Restricted
Shares, Retained Distributions, unpaid Dividend Equivalents and cash
amounts and any such unvested Stock Units shall thereafter vest solely
to the extent provided in the applicable Agreement; provided, however,
that (i) no Option or SAR may be exercised after the scheduled
expiration date thereof; (ii) if the Holder's employment terminates by
reason of death or Disability, the Option or SAR shall remain
exercisable for a period of at least one year following such
termination (but not later than the scheduled expiration of such
Option or SAR); and (iii) any termination by the Company for cause
will be treated in accordance with the provisions of Section 11.2.

(b) Termination by Company for Cause. If a Holder's
employment with the Company or a Subsidiary shall be terminated by the
Company or such Subsidiary during the Restriction Period with respect
to any Restricted Shares, or prior to the exercise of any Option or
SAR, or prior to the vesting or exercise of any Stock Unit, or prior
to the vesting of any Performance Award, for cause, then (i) all
Options and SARs and all unvested or unexercised Stock Units held by
such Holder shall immediately terminate, (ii) such Holder's rights to
all Restricted Shares, Retained

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<PAGE> 17
Distributions, any unpaid Dividend Equivalents and any cash awards
shall be forfeited immediately, and (iii) such Holder's interest in
all unvested Performance Awards shall be forfeited immediately. For
purposes of this Section 11.2, "cause" shall have the meaning ascribed
thereto in any employment agreement to which such Holder is a party
or, in the absence thereof, shall include but not be limited to,
insubordination, dishonesty, incompetence, moral turpitude, other
misconduct of any kind or refusal to perform one's duties and
responsibilities for any reason other than illness or incapacity;
provided, however, that if such termination occurs within 12 months
after an Approved Transaction, "cause" shall mean only a felony
conviction for fraud, misappropriation or embezzlement.

(c) Miscellaneous. The Committee may determine whether
any given leave of absence constitutes a termination of employment;
provided, however, that, without limiting the generality of the
foregoing, for purposes of the Plan (i) any leave of absence, duly
authorized in writing by the Company for military service or sickness,
or for any other purpose approved by the Company if the period of such
leave does not exceed 90 days, and (ii) any leave of absence in excess
of 90 days, duly authorized in writing by the Company, if the
employee's right to reemployment is guaranteed either by statute or
contract, shall not be a termination of employment. Awards made under
the Plan shall not be affected by any change of employment so long as
the Holder continues to be an employee of the Company or any
Subsidiary.

11.3 Right of Company to Terminate Employment. Nothing contained
in the Plan or in any Award, and no action of the Company or the Committee with
respect thereto, shall confer or be construed to confer on any Holder any right
to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of the Holder at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Holder and
the Company or any Subsidiary.

11.4 Nonalienation of Benefits. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefits.

11.5 Written Agreement. Each grant of an Option under the Plan
shall be evidenced by a stock option agreement which shall designate the
Options granted thereunder as Incentive Stock Options or Nonqualified Stock
Options; each SAR shall be evidenced by a stock appreciation rights agreement;
each award of Restricted Shares shall be evidenced by a restricted shares
agreement; each award of Stock Units shall be evidenced by a stock units
agreement; and each Performance Award shall be evidenced by a performance award
agreement; each in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve; provided, however, that if more than one type of Award is made
to the same Holder,

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<PAGE> 18
such Awards may be evidenced by a single agreement with such Holder. Each
grantee of an Option, SAR, Restricted Shares, Stock Units or Performance Awards
shall be notified promptly of such grant and a written agreement shall be
promptly executed and delivered by the Company and the grantee, provided that,
in the discretion of the Committee, such grant of Options, SARs, Restricted
Shares or Stock Units, or such Performance Award, as applicable, shall
terminate if such written agreement is not signed by such grantee (or his
attorney) and delivered to the Company within 60 days after the date the
Committee approved such grant. Any such written agreement may contain (but
shall not be required to contain) such provisions as the Committee deems
appropriate (i) to insure that the penalty provisions of Section 4999 of the
Code will not apply to any stock or cash received by the Holder from the
Company or (ii) to provide cash payments to the Holder to mitigate the impact
of such penalty provisions upon the Holder. Any such agreement may be
supplemented or amended from time to time as approved by the Committee as
contemplated by Section 11.8(b).

11.6 Designation of Beneficiaries. Each person who shall be
granted an Award under the Plan may designate a beneficiary or beneficiaries
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Committee on a form to be
prescribed by it, provided that no such designation shall be effective unless
so filed prior to the death of such person.

11.7 Right of First Refusal. The Agreements may contain such
provisions as the Committee shall determine to the effect that if a Holder
elects to sell all or any shares of Series A Stock that such Holder acquired
upon the exercise of an Option or SAR or upon the vesting of Restricted Shares
or Stock Units awarded under the Plan, then such Holder shall not sell such
shares unless such Holder shall have first offered in writing to sell such
shares to the Company at Fair Market Value on a date specified in such offer
(which date shall be at least three business days and not more than ten
business days following the date of such offer). In any such event,
certificates representing shares issued upon exercise of Options or SARs and
the vesting of Restricted Shares or Stock Units shall bear a restrictive legend
to the effect that transferability of such shares are subject to the
restrictions contained in the Plan and that the applicable Agreement and the
Company may cause the transfer agent for the Series A Stock to place a stop
transfer order with respect to such shares.

11.8 Termination and Amendment.

(a) General. No Awards may be made under the Plan on or
after the tenth anniversary of the Effective Date, or such earlier
date as the Plan may be terminated as provided herein. The Board or
the Committee may at any time prior to the tenth anniversary of the
Effective Date terminate the Plan, and may, from time to time, suspend
or discontinue the Plan or modify or amend the Plan in such respects
as it shall deem advisable; except that no such modification or
amendment shall be effective prior to approval by the Company's
stockholders to the extent such approval is then required pursuant to
Section 162(m) of the Code in order to preserve the deductibility to
the Company of any compensation expense that may be incurred by

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the Company with respect to any Award then outstanding (unless the
Company waives such condition with respect to any such amendment
and/or any such Award) or to the extent stockholder approval is
otherwise required by applicable legal requirements.

(b) Modification. No termination, modification or
amendment of the Plan may, without the consent of the person to whom
any Award shall theretofore have been granted, adversely affect the
rights of such person with respect to such Award. No modification,
extension, renewal or other change in any Award granted under the Plan
shall be made after the grant of such Award, unless the same is
consistent with the provisions of the Plan. With the consent of the
Holder and subject to the terms and conditions of the Plan (including
Section 11.8(a)), the Committee may amend outstanding Agreements with
any Holder, including, without limitation, any amendment which would
(i) accelerate the time or times at which the Award may be exercised
and/or (ii) extend the scheduled expiration date of the Award.
Without limiting the generality of the foregoing, the Committee may,
but solely with the Holder's consent unless otherwise provided in the
Agreement, agree to cancel any Award under the Plan and issue a new
Award in substitution therefor, provided that the Award so substituted
shall satisfy all of the requirements of the Plan as of the date such
new Award is made. Nothing contained in the foregoing provisions of
this Section 11.8(b) shall be construed to prevent the Committee from
providing in any Agreement that the rights of the Holder with respect
to the Award evidenced thereby shall be subject to such rules and
regulations as the Committee may, subject to the express provisions of
the Plan, adopt from time to time, or impair the enforceability of any
such provision.

11.9 Government and Other Regulations. The obligation of the
Company with respect to Awards shall be subject to all applicable laws, rules
and regulations and such approvals by any governmental agencies as may be
required, including, without limitation, the effectiveness of any registration
statement required under the Securities Act of 1933, and the rules and
regulations of any securities exchange or automated quotation system on which
the Series A Stock may be listed or quoted. For so long as the Series A Stock
is registered under the Exchange Act, the Company shall use its reasonable
efforts to comply with any legal requirements (i) to maintain a registration
statement in effect under the Securities Act of 1933 with respect to all shares
of Series A Stock that may be issued to Holders under the Plan, and (ii) to
file in a timely manner all reports required to be filed by it under the
Exchange Act.

11.10 Withholding. The Company's obligation to deliver shares of
Series A Stock or pay cash in respect of any Award under the Plan shall be
subject to applicable federal, state and local tax withholding requirements.
Federal, state and local withholding tax due at the time of an Award, upon the
exercise of any Option or SAR or upon the vesting of, or expiration of
restrictions with respect to, Restricted Shares or Stock Units, as appropriate,
may, in the discretion of the Committee, be paid in shares of Series A Stock or
Series B Stock already owned by the Holder or through the

-19-
<PAGE> 20
withholding of shares otherwise issuable to such Holder, upon such terms and
conditions (including, without limitation, the conditions referenced in Section
6.5) as the Committee shall determine. If the Holder shall fail to pay, or
make arrangements satisfactory to the Committee for the payment, to the Company
of all such federal, state and local taxes required to be withheld by the
Company, then the Company shall, to the extent permitted by law, have the right
to deduct from any payment of any kind otherwise due to such Holder an amount
equal to any federal, state or local taxes of any kind required to be withheld
by the Company with respect to such Award.

11.11 Non-Exclusivity of the Plan. Neither the adoption of the Plan
by the Board nor the submission of the Plan to the stockholders of the Company
for approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding
of stock and cash otherwise then under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.

11.12 Exclusion from Pension and Profit-Sharing Computation. By
acceptance of an Award, unless otherwise provided in the applicable Agreement,
each Holder shall be deemed to have agreed that such Award is special incentive
compensation that will not be taken into account, in any manner, as salary,
compensation or bonus in determining the amount of any payment under any
pension, retirement or other employee benefit plan, program or policy of the
Company or any Subsidiary. In addition, each beneficiary of a deceased Holder
shall be deemed to have agreed that such Award will not affect the amount of
any life insurance coverage, if any, provided by the Company on the life of the
Holder which is payable to such beneficiary under any life insurance plan
covering employees of the Company or any Subsidiary.

11.13 Unfunded Plan. Neither the Company nor any Subsidiary shall
be required to segregate any cash or any shares of Series A Stock which may at
any time be represented by Awards, and the Plan shall constitute an "unfunded"
plan of the Company. Except as provided in Article VIII with respect to awards
of Restricted Shares and except as expressly set forth in writing, no employee
shall have voting or other rights with respect to shares of Series A Stock
prior to the delivery of such shares. Neither the Company nor any Subsidiary
shall, by any provisions of the Plan, be deemed to be a trustee of any Series A
Stock or any other property, and the liabilities of the Company and any
Subsidiary to any employee pursuant to the Plan shall be those of a debtor
pursuant to such contract obligations as are created by or pursuant to the
Plan, and the rights of any employee, former employee or beneficiary under the
Plan shall be limited to those of a general creditor of the Company or the
applicable Subsidiary, as the case may be. In its sole discretion, the Board
may authorize the creation of trusts or other arrangements to meet the
obligations of the Company under the Plan, provided, however, that the
existence of such trusts or other arrangements is consistent with the unfunded
status of the Plan.

11.14 Governing Law. The Plan shall be governed by, and construed
in accordance with, the laws of the State of Delaware.

-20-
<PAGE> 21
11.15 Accounts. The delivery of any shares of Series A Stock and
the payment of any amount in respect of an Award shall be for the account of
the Company or the applicable Subsidiary, as the case may be, and any such
delivery or payment shall not be made until the recipient shall have paid or
made satisfactory arrangements for the payment of any applicable withholding
taxes as provided in Section 11.10.

11.16 Legends. In addition to any legend contemplated by Section
11.7, each certificate evidencing Series A Stock subject to an Award shall bear
such legends as the Committee deems necessary or appropriate to reflect or
refer to any terms, conditions or restrictions of the Award applicable to such
shares, including, without limitation, any to the effect that the shares
represented thereby may not be disposed of unless the Company has received an
opinion of counsel, acceptable to the Company, that such disposition will not
violate any federal or state securities laws.

11.17 Company's Rights. The grant of Awards pursuant to the Plan
shall not affect in any way the right or power of the Company to make
reclassifications, reorganizations or other changes of or to its capital or
business structure or to merge, consolidate, liquidate, sell or otherwise
dispose of all or any part of its business or assets.

-21-

<PAGE> 1
EXHIBIT 21

SUBSIDIARIES OF TCI MUSIC, INC.

TCI Music, Inc. has no subsidiaries. Following the Merger, DMX Inc.
will be a wholly owned subsidiary of TCI Music, Inc.

Subsidiaries of DMX Inc. are 450714 B.C. Ltd., TEMPO Sound, Inc. and
DMX-Europe N.V.

DMX Europe (UK) Limited is a subsidiary of DMX-Europe N.V.

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Tele-Communications, Inc.:

We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Tele-Communications, Inc. and TCI Music, Inc. of our report, dated
March 24, 1997, relating to the consolidated balance sheets of
Tele-Communications, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 1996, which report appears in the December 31, 1996 Annual Report on Form
10-K of Tele-Communications, Inc. and to the reference to our firm under the
heading "Experts" in the Proxy Statement/Prospectus included within the
Registration Statement.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Denver, Colorado
June 4, 1997

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Tele-Communications, Inc.:

We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Tele-Communications, Inc. and TCI Music, Inc. of our report, dated
March 24, 1997, relating to the combined balance sheets of TCI Group as of
December 31, 1996 and 1995, and the related combined statements of operations,
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the December 31, 1996 Annual Report
on Form 10-K of Tele-Communications, Inc. and to the reference to our firm
under the heading "Experts" in the Proxy Statement/Prospectus included within
the Registration Statement. Our report covering the combined financial
statements refers to the effects of not consolidating TCI Group's interest in
Liberty Media Group for all periods that TCI Group has an interest in Liberty
Media Group.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Denver, Colorado
June 4, 1997

<PAGE> 1
EXHIBIT 23.4

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders of
Telewest Communications plc:

We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Tele-Communications, Inc. and TCI Music, Inc. of our report, dated
March 24, 1997, relating to the combined balance sheets of Liberty Media Group
as of December 31, 1996 and 1995, and the related combined statements of
operations and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the December 31, 1996 Annual Report
on Form 10-K of Tele-Communications, Inc. and to the reference to our firm
under the heading "Experts" in the Proxy Statement/Prospectus included within
the Registration Statement.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Denver, Colorado
June 4, 1997

<PAGE> 1
EXHIBIT 23.6

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Tele-Communications, Inc. and TCI Music, Inc. of our report dated
March 11, 1997 relating to the consolidated balance sheet of Telewest
Communications plc and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations and cash flows for each of the
years in the three-year period ended December 31, 1996, which report appears in
the December 31, 1996 Annual Report on Form 10-K of Tele-Communications, Inc.,
and to the reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus included within the Registration Statement.

/s/ KPMG Audit Plc
KPMG Audit Plc
Chartered Accountants
Registered Auditors

London, England
June 4, 1997

<PAGE> 1
EXHIBIT 23.7

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Tele-Communications, Inc. and TCI Music, Inc. of our report dated
March 14, 1997 on the consolidated financial statements of Sprint Spectrum
Holding Company, L.P. and subsidiaries (which expresses an unqualified opinion
and includes an explanatory paragraph referring to the developmental stage of
Sprint Spectrum Holding Company, L.P. and subsidiaries) for each of the two
years in the period ended December 31, 1996, for the period from October 24,
1994 (date of inception) to December 31, 1994 and for the cumulative period
from October 24, 1994 (date of inception) to December 31, 1996 appearing in the
Annual Report on Form 10-K of Tele-Communications, Inc. for the year ended
December 31, 1996, and to the reference to us under the heading "Experts" in
the Proxy Statement/Prospectus, which is part of this Registration Statement.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Kansas City, Missouri
June 3, 1997

<PAGE> 1
EXHIBIT 23.8

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-4 of
Tele-Communications, Inc. and TCI Music, Inc. of our report dated March 7,
1997, on the financial statements of American PCS, L.P. (a Delaware Limited
Partnership) as of and for the year ended December 31, 1996 referred to in the
consolidated financial statements of Sprint Spectrum Holding Company, L.P. and
subsidiaries, which appears in the Annual Report on Form 10-K of
Tele-Communications, Inc. for the year ended December 31, 1996. We also
consent to the reference to us under the heading "Experts" in such Prospectus
included within the Registration Statement.

/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP

Washington, D.C.
June 3, 1997

<PAGE> 1
EXHIBIT 23.9

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of the Registration Statement on Form
S-4 of Tele-Communications, Inc. and TCI Music, Inc. of our report dated
February 14, 1996, relating to the combined financial statements of VII Cable
which appears in the Current Report on Form 8-K of Tele-Communications, Inc.
dated June 19, 1996. We also consent to the reference to us under the heading
"Experts" in such Proxy Statement/Prospectus included within the Registration
Statement.

/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP

San Jose, California
June 4, 1997

<PAGE> 1
EXHIBIT 99.1

[FORM OF PROXY]

DMX INC.
11400 WEST OLYMPIC BLVD.
SUITE 1100
LOS ANGELES, CALIFORNIA 90064

PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY ___, 1997

The undersigned hereby appoints Jerold H. Rubinstein and Wendy J. Kim,
or either of them, proxies and attorneys-in-fact for the undersigned, each with
full power of substitution, and hereby authorizes them to vote at the Special
Meeting of stockholders of DMX Inc. (the "Company") to be held at the Company's
executive offices, located at 11400 West Olympic Boulevard, Suite 1100, Los
Angeles, California 90064 on June __, 1997, starting at 10:00 a.m., local time,
and at all adjournments or postponements thereof, all the shares of common
stock, $.01 par value, of the Company standing in the name of the undersigned
or which the undersigned maybe entitled to vote as follows:

1. FOR [ ] AGAINST [ ] ABSTAIN [ ] approval of the
Agreement and Plan of Merger dated as of February 6, 1997, as amended
by Amendment One to Merger Agreement, described in the Proxy
Statement/Prospectus and as set forth in Appendix I thereto;

2. In their discretion, the proxies are authorized to vote on such other
business as may properly come before the Special Meeting or any
adjournments or postponements thereof;

hereby revoking any proxy or proxies heretofore given by the undersigned.

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY AND MAY BE REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED ABOVE BY THE UNDERSIGNED. IF NO DIRECTION
IS MADE, IT WILL BE VOTED FOR PROPOSAL 1 AND IN THE PROXIES' DISCRETION ON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.

---------------------------------------------
By:
-----------------------------------------

Your signature should appear exactly as your
name appears in the space at the left.
For joint accounts, all owners should sign.
When signing in a fiduciary or representative
capacity, please give your full title as such.

Date:
---------------------------------------

PLEASE SIGN AND RETURN THIS PROXY CARD TODAY
USING THE ENCLOSED POSTAGE PAID ENVELOPE.