<PAGE>

                                                                   EXHIBIT 10.74


                    _______________________________________


                    SUBSCRIPTION AND SHAREHOLDERS AGREEMENT

                               DECEMBER 18, 1996

                    _______________________________________
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

<TABLE>
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                                                                            Page
                                                                            ----
<S>                                                                         <C>
ARTICLE 1        Sale of Stock of Xtra.....................................  2
        1.1      Sale of the Purchased Shares..............................  2

ARTICLE 2        Closing Date; Delivery....................................  2
        2.1      Closing Dates.............................................  2
        2.2      Delivery by Xtra..........................................  2
        2.3      Delivery by DMX...........................................  2
        2.4      Delivery by Rubinstein....................................  3

ARTICLE 3        Representations and Warranties............................  3
        3.1      Representations and Warranties of
                 Xtra and Rubinstein.......................................  3
                 3.1.1     Corporate Power.................................  3
                 3.1.2     Capitalization of Xtra..........................  3
                 3.1.3     Capitalization of Xtra as of
                           the Closing Date................................  3
                 3.1.4     Articles and Bylaws.............................  4
                 3.1.5     Authorization; Validity.........................  4
                 3.1.6     Ownership.......................................  4
                 3.1.7     Brokers or Finders..............................  4
                 3.1.8     Rubinstein's Specific Knowledge
                           of the Companies and Business
                           Operations of Xtra..............................  4

        3.2      Representations and Warranties of DMX.....................  5
                 3.2.1     Corporate Power.................................  5
                 3.2.2     Authorization; Validity.........................  5
                 3.2.3     Investment Purpose; Experience..................  5
 </TABLE>

                                      -i-
<PAGE>
 
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
                 3.2.4     Brokers or Finders.............................   6
        3.3      Survival.................................................   6

ARTICLE 4        Conditions to Closing; Termination.......................   6
        4.1      Conditions to Closing of Xtra............................   6
                 4.1.1      Satisfactory Arrangements for
                            the Initiation of Xtra's
                            operations....................................   6
                 4.1.2     Representations and Warranties
                           Correct........................................   6
                 4.1.3     Covenants......................................   6
                 4.1.4     Opinion of UK Counsel..........................   6
        4.2      Conditions to Closing of the DMX.........................   6
                 4.2.1     Representations................................   7
                 4.2.2     Covenants......................................   7
                 4.2.3     Opinion of UK Counsel..........................   7
        4.3      Conditions to Closing related to Satellite
                 Contract.................................................   7
                 4.3.1      Uplink and Satellite Transmission
                            Contract......................................   7
                 4.3.2      Guaranty of the Satellite Contract............   7
                 4.3.3      Release of DMX by WTCI........................   7
        4.4      Conditions to Closing related to the
                 Capital Structure of Xtra................................   8
                 4.4.1     Capital Structure of Xtra......................   8
                 4.4.2     Share Ownership................................   8
        4.5      Termination..............................................   8
                 4.5.1     Coordination with Stock
                           Purchase Agreement.............................   8
                 4.5.2     Termination of Stock Purchase
                           Agreement......................................   8
</TABLE>

                                     -ii-
<PAGE>
 
<TABLE>
<CAPTION>
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                                                                            ----
<S>                                                                         <C>
ARTICLE 5        Covenants................................................   9
        5.1      Affirmative Covenants of DMX.............................   9
                 5.1.1     Assets of the Companies........................   9
        5.2      Affirmative Covenants of Xtra and Rubinstein.............   9
                 5.2.1     Recapitalization; Amendment of
                           Constituent Documents..........................   9
                 5.2.2     Dilution Protection of DMX's Interest
                           in the Raising of Initial Capital..............   9
                 5.2.3     Qualification under Blue Sky Laws..............   9
                 5.2.4     Transactions with Related Entities.............  10
                 5.2.5     Access.........................................  10
                 5.2.6     Board Appointment and Nominations..............  10

ARTICLE 6        Preemptive Rights........................................  10
        6.1      DMX's Preemptive Rights..................................  10
        6.2      Definition of New Securities.............................  11
        6.3      Definition of Rubinstein Affiliate.......................  11
        6.4      Termination of Preemptive Rights.........................  11
        6.5      Incorporation in Articles of Association.................  11

ARTICLE 7        Registration Rights......................................  12
        7.1      Registration Rights of DMX...............................  12
        7.2      Registration Rights on Foreign Exchanges.................  12

ARTICLE 8        Tag-Along and Drag-Along Rights..........................  12
        8.1      Definitions..............................................  12
                 8.1.1     Permitted Transfer.............................  12
</TABLE>

                                     -iii-
<PAGE>
 
<TABLE>
<CAPTION>
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                                                                            ----
<S>                                                                         <C>
                 8.1.2     Permitted Transferee...........................  12
                 8.1.3     Securities Act.................................  12
                 8.1.4     Selling Shareholder............................  13
                 8.1.5     Shareholder....................................  13
                 8.1.6     Stock..........................................  13
                 8.1.7     Tag-Along Seller...............................  13
                 8.1.8     Transfer.......................................  13
        8.2      Tag-Along Rights.........................................  13
                 8.2.1     Right to Participate in Sale...................  13
                 8.2.2     Exceptions to Tag-Along Rights.................  13
                 8.2.3     Procedures for Tag-Along Sale..................  14
        8.3      Application of Tag-Along Rights to Indirect
                 Transfer of Stock........................................  14
        8.4      Drag-Along Rights........................................  15
                 8.4.1     Right to Require Sale..........................  15
                 8.4.2     Drag-Along Notice..............................  15
                 8.4.3     Non-Cash Consideration.........................  16
        8.5      Termination of Tag-Along and Drag-Along Rights...........  16

ARTICLE 9        Miscellaneous............................................  16
        9.1      Governing Law............................................  16
        9.2      Jurisdiction and Venue...................................  16
        9.3      Waiver of Jury Trial.....................................  17
        9.4      Successors and Assigns...................................  17
        9.5      Entire Agreement; Amendment..............................  17
        9.6      Notices..................................................  17
 </TABLE>

                                     -iv-
<PAGE>
 
<TABLE>
<CAPTION>
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                                                                            ----
        <S>                                                                 <C>
        9.7      Delays or Omissions......................................  18
        9.8      Expenses.................................................  19
        9.9      Counterparts.............................................  19
        9.10     Severability.............................................  19
        9.11     Gender...................................................  19
        9.12     No Third Parties Benefitted..............................  20
        9.13     Attorneys' Fees and Expenses.............................  20
</TABLE>

                                      -v-
<PAGE>
 
                    SUBSCRIPTION AND SHAREHOLDERS AGREEMENT


     This Agreement is made as of December 18, 1996 between DMX Inc. ("DMX"), a
Delaware corporation, Jerold H. Rubinstein, an individual ("RUBINSTEIN"), and
Xtra Music Limited, a corporation incorporated under the laws of England
("XTRA").

     WHEREAS, DMX-Europe (UK) Limited, a United Kingdom company ("DMX-UK"), DMX-
Europe N.V., a Netherlands corporation ("DMX-NV") (collectively, the
"COMPANIES", and individually a "COMPANY") are wholly owned direct and indirect
subsidiaries of DMX;

     WHEREAS, the Companies are in significant financial difficulty, and without
additional financial support will be placed into insolvency proceedings;
Rubinstein has informed the Board of Directors of DMX that in his opinion the
business operations of the Companies are viable and potentially valuable; the
Board of Directors of DMX has determined that DMX will not provide any further
financial support for the Companies;

     WHEREAS, Rubinstein has agreed to use his best efforts to secure other
financing to permit the Companies to continue operations; if Rubinstein is able
to effect an agreement with the creditors and potential equity investors to
reorganize the operations of the Companies (the "REORGANIZATION"), Rubinstein
has agreed to acquire certain interests in the Companies pursuant to that
certain Stock Purchase and Shareholders Agreement of even date herewith (the
"STOCK PURCHASE AGREEMENT");

     WHEREAS, if Rubinstein is unable to effect the Reorganization, then DMX and
Rubinstein intend to establish in Xtra business operations similar to certain
segments of the business previously conducted by the Companies, and Rubinstein
has organized Xtra for that purpose;

     WHEREAS, Rubinstein will deliver a continuing guaranty pursuant to which
Rubinstein will agree to guarantee certain liabilities associated with the
operations of Xtra;

     WHEREAS, the Board of Directors of DMX believes it is in the best interest
of DMX's shareholders to enter into this Agreement.

     NOW THEREFORE, the parties agree as follows:
<PAGE>
 
                                   ARTICLE 1

                             SALE OF STOCK OF XTRA
                             ---------------------

          1.1  SALE OF THE PURCHASED SHARES.  In consideration of the various
               ----------------------------                                  
agreements undertaken pursuant to and subject to the terms and conditions of
this Agreement, Xtra will sell to DMX, and DMX will buy from Xtra, at the
Closing, 100,000 shares of the Preference Shares of Xtra (as defined in Section
4.4.1, below).  The shares of Preference Stock to be transferred to DMX pursuant
to this Section 1.1 shall be referred to as the "PURCHASED SHARES".


                                   ARTICLE 2

                             CLOSING DATE; DELIVERY
                             ----------------------

          2.1 CLOSING DATES. The closing of the purchase and sale of the
              -------------
Purchased Shares (the "CLOSING") shall be held at the offices of Irell & Manella
(i) at 11:00 a.m., on January 31, 1996; (ii) at such other time and place upon
which the parties shall agree; or (iii) if necessary to the successful
initiation of the operations of Xtra, at such earlier time as Rubinstein
designates by written notice to the other parties at least 10 business days
before the designated date of the Closing; provided, however, that all parties
will use their reasonable efforts to close as soon as possible after such notice
from Rubinstein. The date of the Closing shall be referred to in this Agreement
as the "CLOSING DATE".

          2.2 DELIVERY BY XTRA. At the Closing, Xtra will deliver to DMX:
              ----------------
          2.2.1  Documentation evidencing DMX's ownership of the Purchased
          Shares, which shall be accompanied by such other documents as are
          required under applicable law to effect the transfer of ownership to
          DMX; and

          2.2.2  an copy of the Channel Distribution Agreement, in the form
          attached as Exhibit 2.2.2 (the "DISTRIBUTION AGREEMENT"), executed by
          Xtra.

     2.3  DELIVERY BY DMX.  At the Closing, DMX shall deliver:
          ---------------                                     

          2.3.1  To Rubinstein, a certificate acknowledging the termination of
          the Stock Purchase Agreement and the release of the parties from their
          obligations under the Stock Purchase Agreement, in the form attached
          as Exhibit 2.3.1 (the "TERMINATION CERTIFICATE"), executed by DMX; and

                                      -2-
<PAGE>
 
          2.3.2  To Xtra, a copy of the Distribution Agreement, executed by DMX.

     2.4  DELIVERY BY RUBINSTEIN.  At the Closing, Rubinstein shall deliver to
          ----------------------                                              
DMX:

          2.4.1  A copy of the Termination Certificate, executed by Rubinstein;
          and

          2.4.2  A Spousal Consent, consenting to the obligations undertaken
          pursuant to this Agreement and pursuant to the documents delivered by
          Rubinstein pursuant to this Agreement.



                                   ARTICLE 3

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------
 

     3.1  REPRESENTATIONS AND WARRANTIES OF XTRA AND RUBINSTEIN.  Except as set
          -----------------------------------------------------                
forth on the attached Exhibit 3.1, Xtra and Rubinstein represent and warrant to
DMX as follows:

          3.1.1     CORPORATE POWER.  At the Closing Date, Xtra will have all
                    ---------------                                          
requisite legal and corporate power to execute and deliver this Agreement, to
sell and issue the Purchased Shares, and to carry out and perform its
obligations under the terms of this Agreement.

          3.1.2     CAPITALIZATION OF XTRA AS OF THE CLOSING DATE.  As of the
                    ---------------------------------------------            
Closing Date, the authorized capital stock of Xtra shall consist of 20,000,000
Common Shares of which 5,000,000 Common Shares will be issued and outstanding
and will be owned by Rubinstein, and 100,000 Preference Shares, of which no
Preference Shares will be issued and outstanding.  Except as contemplated by
this Agreement, as of the Closing Date there will be no other options, warrants,
conversion privileges, contracts, understandings or other rights that will be
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Xtra's capital stock or any other securities of Xtra.

          3.1.3     ARTICLES AND BYLAWS.  Xtra will deliver a true and correct
                    -------------------                                       
copy of its Memorandum and Articles of Association (or such other equivalent
constituent documents as exist under applicable law) to DMX.

          3.1.4     AUTHORIZATION; VALIDITY.  As of the Closing Date, Xtra shall
                    -----------------------                                     
have taken all corporate actions necessary for the authorization, execution,
delivery and performance of this Agreement by Xtra, and the issuance, sale, and
delivery of the Purchased Shares.  This Agreement, when

                                      -3-
<PAGE>
 
executed and delivered by Xtra (assuming the due execution and delivery by the
other parties), shall constitute the valid and binding obligation of Xtra,
enforceable according to its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors, rules of law
governing specific performance, injunctive relief or other equitable remedies,
and limitations of public policy.

          3.1.5     OWNERSHIP.  The Purchased Shares will be  validly issued,
                    ---------                                                
fully paid and non-assessable; and except as provided in this Agreement, none of
the shares will be subject to any restriction on transfer. Xtra will convey good
and marketable title, free and clear of any liens, to the Purchased Shares, and
will convey such title to DMX with the delivery of the transfer documents
provided for herein.

          3.1.6     BROKERS OR FINDERS.  Xtra has not incurred, and will not
                    ------------------                                      
incur, directly or indirectly, any liability for brokers' or finders' fees,
agents' commissions or any similar charges in connection with this Agreement.

          3.1.7     RUBINSTEIN'S SPECIFIC KNOWLEDGE OF THE COMPANIES AND
                    ----------------------------------------------------
BUSINESS OPERATIONS OF XTRA.  Rubinstein acknowledges that Rubinstein has acted
---------------------------                                                    
as the Chief Executive Officer of DMX and has had both the primary
responsibility for overseeing DMX's investment in the Companies and the
principal involvement on behalf of DMX in attempting to reorganize the affairs
of the Companies.  Rubinstein acknowledges that he and his representatives have
had regular access to the books and records, facilities, equipment, tax returns,
contracts and other assets of Companies.  Rubinstein has detailed knowledge of
the business and financial condition, assets, and liabilities of the Companies.
Rubinstein agrees that DMX, its Board of Directors, and its representatives have
had no active involvement, except through the activities of Rubinstein, in the
day-to-day affairs, business operations and activities of the Companies.  Except
as specifically and expressly provided in this Agreement, none of DMX, any
member of the Board of Directors of DMX, any shareholder of DMX, or any agent of
DMX makes any representation concerning any of the following matters:

               3.1.7.1  The potential or prospects of the business of the
               Companies, including any portion of the business that is similar
               to the business that is to be conducted by Xtra;

               3.1.7.2  The accuracy of any financial information concerning the
               Companies or their assets, including but not limited to the
               accuracy of any information concerning the continued existence or
               condition of the assets to be obtained by DMX and contributed to
               Xtra pursuant to Section 5.1.1; or

                                      -4-
<PAGE>
 
               3.1.7.3 Any claims that might be asserted against Rubinstein or
               Xtra by the Companies, any receiver appointed to take charge of
               the assets of the Companies, or any creditor of the Companies
               other than DMX.

     3.2  REPRESENTATIONS AND WARRANTIES OF DMX.  Except as set forth on the
          -------------------------------------                             
attached Exhibit 3.2, DMX represents and warrants to Xtra and Rubinstein as
follows:

          3.2.1     CORPORATE POWER.  At the Closing Date, DMX will have all
                    ---------------                                         
requisite legal and corporate power to execute and deliver this Agreement, to
purchase the Purchased Shares, and to carry out and perform its obligations
under the terms of this Agreement.

          3.2.2     AUTHORIZATION; VALIDITY.  As of the Closing Date, DMX shall
                    -----------------------                                    
have taken all corporate actions necessary for the authorization, execution,
delivery and performance of this Agreement by DMX, and the purchase of the
Purchased Shares.  This Agreement, when executed and delivered by DMX (assuming
the due execution and delivery by the other parties) shall constitute the valid
and binding obligation of DMX, enforceable according to its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, rules of law governing specific performance, injunctive relief or other
equitable remedies, and limitations of public policy.

          3.2.3     INVESTMENT PURPOSE; EXPERIENCE.  DMX is acquiring the
                    ------------------------------                       
Purchased Shares for investment for its own account, not as a nominee or agent,
and not with a view to, or for resale in connection with, any distribution of
the Purchased Shares.  DMX understands that the Purchased Shares have not been
registered under the Securities Act or qualified pursuant to the California
Corporations Code by reason of specific exemptions therefrom which depend upon,
among other things, the bona fide nature of the investment intent and the
accuracy of DMX's representations as expressed in this Agreement.  DMX is
experienced in evaluating and investing in companies such as Xtra and has the
financial resources to bear the economic risks associated with its investment
and with the Guaranty.

          3.2.4     BROKERS OR FINDERS.  DMX has not incurred, and will not
                    ------------------                                     
incur, directly or indirectly, any liability for brokers' or finders' fees,
agents' commissions or any similar charges in connection with this Agreement.

     3.3  SURVIVAL.  Except as otherwise expressly provided, the
          --------                                              
representations, warranties, and acknowledgements made by each party pursuant to
this Article 3 shall survive the Closing.

                                      -5-
<PAGE>
 
                                   ARTICLE 4

                      CONDITIONS TO CLOSING; TERMINATION
                      ----------------------------------

     4.1  CONDITIONS TO CLOSING OF XTRA.  Xtra's obligation to issue and
          -----------------------------                                 
sell the Purchased Shares at the Closing and to close under this Agreement is,
at the option of Xtra, subject to the fulfillment on or prior to the Closing
Date of each of following conditions:

          4.1.1  SATISFACTORY ARRANGEMENTS FOR THE INITIATION OF XTRA'S
                 ------------------------------------------------------
OPERATIONS.  Xtra shall have reached agreement in principle with potential
----------                                                                
customers of Xtra and with any proposed equity investors in Xtra to begin
operations on a basis satisfactory to Rubinstein, as determined in his sole and
absolute discretion.

          4.1.2  REPRESENTATIONS AND WARRANTIES CORRECT.  The representations
                 --------------------------------------                      
and warranties made in Article 3 of this Agreement by DMX shall be materially
correct when made, and shall be materially correct on the Closing Date with the
same force and effect as if they had been made on the Closing Date.

          4.1.3  COVENANTS.  All covenants, agreements and conditions contained
                 ---------                                                     
in this Agreement to be performed by DMX on or prior to the Closing Date shall
have been performed or complied with in all respects.

          4.1.4  OPINION OF UK COUNSEL.  DMX shall have received an opinion of
                 ---------------------                                        
its United Kingdom counsel to the effect that the execution and delivery of the
Distribution Agreement, and the exercise by Xtra of its rights under the
Distribution Agreement, will not conflict with any obligation of DMX to the
Companies or their creditors or any rights of the Companies under that certain
Technology License and Services Agreement dated as of May 19, 1993, or that
certain Trademark Agreement effective as of July 1, 1992.

     4.2  CONDITIONS TO CLOSING OF THE DMX.  The obligation of DMX to
          --------------------------------                           
purchase the Purchased Shares at the Closing and to close under this Agreement
is, at the option of DMX, subject to the fulfillment on or prior to the Closing
Date of each of following conditions:

          4.2.1  REPRESENTATIONS.  The representations and warranties made by
                 ---------------                                             
Xtra and Rubinstein in Article 3 of this Agreement shall be materially correct
when made, and shall be materially correct on the Closing Date with the same
force and effect as if they had been made on the Closing Date.

          4.2.2  COVENANTS.  All covenants, agreements and conditions contained
                 ---------                                                     
in this Agreement to be performed by Xtra or by Rubinstein on or prior to the
Closing Date shall have been performed or complied with in all respects.

                                      -6-
<PAGE>
 
          4.2.3  OPINION OF UK COUNSEL.  DMX shall have received an opinion of
                 ---------------------                                        
its United Kingdom counsel to the effect that the execution and delivery of the
Distribution Agreement, and the exercise by Xtra of its rights under the
Distribution Agreement, will not conflict with any obligation of DMX to the
Companies or their creditors or any rights of the Companies under that certain
Technology License and Services Agreement dated as of May 19, 1993, or that
certain Trademark Agreement effective as of July 1, 1992.

     4.3 CONDITIONS TO CLOSING RELATED TO SATELLITE CONTRACT. The obligations of
         ---------------------------------------------------
DMX to purchase, and of Xtra to sell, the Purchased Shares at the Closing and to
close under this Agreement are subject to the fulfillment on or prior to the
Closing Date of each of following conditions:

          4.3.1  UPLINK AND SATELLITE TRANSMISSION CONTRACT.  Xtra shall have
                 ------------------------------------------                  
entered into or assumed contractual arrangements with Western Tele-
Communications, Inc. ("WTCI"), pursuant to which WTCI will supply uplink
services and satellite transmission services to transmit the signal for the DMX
music service to the facilities of Xtra in Europe.  Such contractual
arrangements shall be referred to as the "SATELLITE CONTRACT".

          4.3.2  GUARANTY OF THE SATELLITE CONTRACT.  Rubinstein and WTCI shall
                 ----------------------------------                            
have entered into contractual arrangements pursuant to which Rubinstein shall
have guaranteed the payment obligations of Xtra under the Satellite Contract for
the period beginning January 1, 1997, and ending December 31, 1997, (the
"CONTINUING GUARANTY") and pursuant to which such guaranty is secured by the
pledge of certain shares of DMX owned by Rubinstein (the "PLEDGE").  The
Continuing Guaranty, the Pledge, and the associated security documents are
collectively referred to herein as the "GUARANTY".

          4.3.3  RELEASE OF DMX BY WTCI.  WTCI shall have released DMX from the
                 ----------------------                                        
European Transmission Obligations, as defined below, to the extent such
obligations relate to periods after the earlier of December 31, 1996, or the
effective date of the Satellite Contract.  "EUROPEAN TRANSMISSION OBLIGATIONS"
shall mean all obligations and liabilities (including Paragraphs 1.7, 1.8, and
1.9 of Exhibit H to the Master Service Agreement) of DMX under the Master
Service Agreement between DMX and WTCI dated March 1, 1994 (the "MASTER SERVICE
AGREEMENT") related to the rights of DMX under the Master Service Agreement to
obtain transmission services (including both satellite and uplink services) to
transmit the DMX digital audio service to Europe, including the European C-Band
Transmission Services as described in Section 3 of Exhibit B to the Master
Service Agreement.

     4.4 CONDITIONS TO CLOSING RELATED TO THE CAPITAL STRUCTURE OF XTRA. The
         --------------------------------------------------------------
obligations of DMX to purchase, and of

                                      -7-
<PAGE>
 
Xtra to sell, the Purchased Shares at the Closing and to close under this
Agreement are subject to the fulfillment on or prior to the Closing Date of each
of following conditions:


          4.4.1  CAPITAL STRUCTURE OF XTRA.  The constituent documents of Xtra
                 -------------------------                                    
shall have been amended and the capital structure of Xtra recapitalized to the
effect that (i) the authorized capital stock of Xtra shall consist of 20,000,000
1 ordinary shares (the "COMMON SHARES") and 100,000 of preference shares (the
"PREFERENCE SHARES"); (ii) the holder of 100,000 Preference Shares have the
right to convert such shares, at the option of the holder, into whatever number
of Common Shares as will constitute 10 percent of the issued and outstanding
Common Shares at the time of the exercise by the holder of such conversion
rights; (iii) Xtra shall have the right to force the conversion of the
Preference Shares at any time after the completion of the raising of the Initial
Capital, as described in Section 5.2.2, below; and (iv) the Preference Shares
shall have the same right to dividends or distributions by Xtra, and the same
voting rights, as the number of Common Shares into which such Preference Shares
could be converted at the time of such dividend, distribution, or vote.

          4.4.2  SHARE OWNERSHIP.  There shall be 5,000,000 Common Shares
                 ---------------                                         
issued, outstanding, and owned by Rubinstein, and there shall be no Preference
Shares issued or outstanding.

     4.5 TERMINATION. If the Closing does not occur before 5:00 PM (Pacific
         ----------- 
Standard Time) on January 31, 1996, this Agreement may be terminated at the
election of any party to this Agreement unless the Closing was prevented by the
wrongful action of that party.

          4.5.1  COORDINATION WITH STOCK PURCHASE AGREEMENT.  If the closing
                 ------------------------------------------                 
occurs under the Stock Purchase Agreement, then this Agreement shall terminate
at the time of that closing.

          4.5.2  TERMINATION OF STOCK PURCHASE AGREEMENT.  If the Closing
                 ---------------------------------------                 
occurs, then the Stock Purchase Agreement shall terminate at the time of the
Closing.


                                   ARTICLE 5

                                   COVENANTS
                                   ---------

     5.1 AFFIRMATIVE COVENANTS OF DMX. DMX hereby covenants and agrees as
         ----------------------------
follows:

                                      -8-
<PAGE>
 
          5.1.1  ASSETS OF THE COMPANIES.  DMX holds certain debt obligations of
                 -----------------------                                        
the Companies.  DMX will use its best efforts to obtain from the Companies (in
partial or complete satisfaction of the indebtedness of the Companies to DMX)
the assets of the Companies, and if any tangible assets are obtained by DMX, DMX
will promptly transfer such tangible assets to Xtra without receipt of
additional consideration.

     5.2 AFFIRMATIVE COVENANTS OF XTRA AND RUBINSTEIN. Xtra and Rubinstein
         --------------------------------------------
hereby covenant and agree as follows:

          5.2.1  RECAPITALIZATION; AMENDMENT OF CONSTITUENT DOCUMENTS.  Xtra
                 ----------------------------------------------------       
shall take all actions within its legal authority, and Rubinstein shall cause
Xtra to take such actions, to effect the changes in the capital structure of
Xtra described in Sections 4.4.1 and 4.4.2. Prior to the Closing, Xtra shall not
and Rubinstein shall not permit Xtra to make any other amendment to the
constituent documents of Xtra without the consent of DMX.

          5.2.2  DILUTION PROTECTION OF DMX'S INTEREST IN THE RAISING OF INITIAL
                 ---------------------------------------------------------------
CAPITAL.  The parties contemplate that the initial arrangements for the business
-------                                                                         
operations of Xtra will require that Xtra raise $15,000,000 US of capital,
whether in the form of cash contributions, contribution of services for equity,
or contribution of property for equity, in addition to the contributions and
agreements required by this Agreement (the "INITIAL CAPITAL").  Rubinstein shall
arrange for Xtra to obtain the Initial Capital by providing the contributors of
such funds, services, or property equity interests in Xtra either through the
issuance of shares by Xtra or from the Common Shares held by Rubinstein after
the Closing; provided, however, that Rubinstein shall have no affirmative
obligation to provide the Initial Capital other than through the use of newly
issued equity interests in Xtra and his Common Shares in Xtra. Such arrangements
shall not create any liability of Xtra to Rubinstein. After Xtra has received
the Initial Capital, Rubinstein shall have no further obligation under this
Section 5.2.2 to dispose of his Common Shares for the benefit of Xtra.

          5.2.3  QUALIFICATION UNDER BLUE SKY LAWS.  Xtra will accomplish in a
                 ---------------------------------                            
timely manner prior to or promptly following the Closing, the qualification
under applicable Blue Sky laws (or taking such action as may be necessary to
secure an exemption from qualification, if available) of the offer and sale of
the Purchased Shares pursuant to this Agreement, if required.  DMX will
cooperate in obtaining any such qualification or exemption.

          5.2.4  TRANSACTIONS WITH RELATED ENTITIES.  Xtra will not enter into
                 ----------------------------------                           
any agreement, contract, or transaction with Rubinstein or any Rubinstein
Affiliate (as defined in Section 6.3, below) except on arm's length terms.

                                      -9-
<PAGE>
 
          5.2.5  ACCESS.  From and after the execution of this Agreement, Xtra
                 ------                                                       
shall afford to DMX and DMX's representatives reasonable access to the
personnel, properties, books, records, and contracts of Xtra.

          5.2.6  BOARD APPOINTMENT AND NOMINATIONS.  For so long as DMX holds in
                 ---------------------------------                              
excess of 4 percent of the Common Shares (including the Common Shares into which
the Preference Shares may be converted), Xtra shall (and if Rubinstein retains
the ability to control the actions of Xtra, Rubinstein shall cause Xtra) to
include in the slate of nominees recommended by Xtra's management to
shareholders for election as directors at each annual meeting of shareholders of
Xtra, one nominee designated by DMX.  Rubinstein shall vote Rubinstein's shares
in Xtra for such nominee to the extent that under applicable law and voting
procedures the shares held by DMX would be inadequate to elect such director.
In the event that any such designee shall cease to serve as a director for any
reason (including removal for cause), Xtra and Rubinstein shall use their best
efforts to fill such vacancy with a designee of DMX.


                                   ARTICLE 6

                               PREEMPTIVE RIGHTS
                               -----------------

     6.1 DMX'S PREEMPTIVE RIGHTS. Xtra grants to DMX a right of first refusal to
         -----------------------
purchase on the same terms and for the same consideration that percentage
defined below of any New Securities (as defined in Section 6.2, below) which
Xtra may, from time to time, propose to sell and issue (i) to Rubinstein (other
than New Securities issued to Rubinstein as compensation for services that are
both rendered more than three months after the Closing and not rendered in
connection with raising the Initial Capital) or any Rubinstein Affiliate (as
defined in Section 6.3, below), or (ii) to other purchasers if Rubinstein or any
Rubinstein Affiliate has preemptive rights that attach to the sale to such other
purchasers. In such circumstances DMX shall have the right to purchase that
percentage of the New Securities equal to the number of shares of Common Shares
then held by DMX (directly or indirectly) (including the number of shares of
Common Shares issuable upon conversion of other securities of Xtra, if any, held
by DMX, directly or indirectly, that are convertible into Common Shares) divided
by the total number of shares of Common Shares outstanding (including the number
of shares of Common Shares issuable upon conversion of any other outstanding
securities that are convertible into Common Shares).

     6.2 DEFINITION OF NEW SECURITIES. "NEW SECURITIES" shall mean any shares of
         ----------------------------
capital stock of Xtra including Common Shares, other classes of common stock,
and preferred

                                     -10-
<PAGE>
 
stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Shares, other common stock, or preferred stock,
and securities of any type whatsoever that are, or may become, convertible into
said shares of Common Shares, other common stock, or preferred stock; provided,
however, the term "New Securities" does not include (i) preferred stock that is
not convertible into any other security of Xtra and bears a fixed dividend; (ii)
securities offered to the public generally pursuant to a registration statement
or pursuant to Regulation A under the Securities Act (or comparable provisions
of foreign law)' or (iii) Common Shares issued in raising the Initial Capital
and issued prior to the conversion of the Preference Shares.

          6.3  DEFINITION OF RUBINSTEIN AFFILIATE.  As used in this Agreement
               ----------------------------------                            
(including Exhibit 7.1), the term "RUBINSTEIN AFFILIATE" means Rubinstein's
spouse, child, or grandchild; a trust for the benefit of Rubinstein or any of
such persons; any corporation or other entity in which Rubinstein, together with
any Rubinstein Affiliates, owns at least 50 percent of the equity; or any
corporation or other entity that is otherwise controlled by Rubinstein.

          6.4  TERMINATION OF PREEMPTIVE RIGHTS.  The preemptive rights of DMX
               --------------------------------                               
pursuant to Section 6.1, above, shall terminate if (i) DMX holds less than 1
percent of the outstanding Common Shares (including the number of Common Shares
issuable upon conversion of other securities of Xtra, if any, held by DMX,
directly or indirectly, that are convertible into Common Shares) and (ii) no
stock of Xtra has been issued in violation of any rights of DMX under Section
6.1, above.

          6.5  INCORPORATION IN ARTICLES OF ASSOCIATION.  DMX, Rubinstein, and
               ----------------------------------------                       
Xtra shall take all actions required to incorporate the rights and obligations
described in this Article 6.1 into the Articles of Association of Xtra to the
extent necessary to make such rights and obligations enforceable under the laws
of the United Kingdom.



                                   ARTICLE 7

                              REGISTRATION RIGHTS
                              -------------------

          7.1  REGISTRATION RIGHTS OF DMX.  Xtra shall provide DMX, and
               --------------------------                              
Rubinstein shall cause Xtra to provide DMX, with registration rights as
described in Exhibit 7.1;  provided, however, that after such time as Rubinstein
is no longer in control of Xtra, Rubinstein shall be obligated under this
Section 7.1 only to use his best efforts to cause Xtra to provide such
registration rights.

                                     -11-
<PAGE>
 
     7.2  REGISTRATION RIGHTS ON FOREIGN EXCHANGES.  If Xtra registers or lists 
          ----------------------------------------                       
its stock on an exchange outside the United States, then Xtra shall provide to
DMX registration rights equivalent to those described in Exhibit 7.1, with such
changes as are necessary to reflect differences in applicable law and practices
on such exchange.


                                   ARTICLE 8

                        TAG-ALONG AND DRAG-ALONG RIGHTS
                        -------------------------------

     8.1  DEFINITIONS. As used in this Article 8, the following terms shall have
          -----------
the following respective meanings:

          8.1.1  PERMITTED TRANSFER.  "PERMITTED TRANSFER" shall mean (i) a
                 ------------------                                        
Transfer by a Shareholder to another corporation that is a member of the same
affiliated group (within the meaning of Section 1504 of the Internal Revenue
Code of 1986, as amended) as the transferring Shareholder; (ii) a Transfer by a
Shareholder without consideration to such Shareholder's spouse, child, or
grandchild, or to a trust for the benefit of such Shareholder or any of such
persons; or (iii) a Transfer by a Shareholder to a corporation or other entity
in which at least 80 percent of the equity interests in that entity are held by
such Shareholder or Shareholder's spouse, child, or grandchild; provided,
however, that in any such Transfer, the transferee must agree prior to the
Transfer to be bound by the terms of this Article 8.

          8.1.2  PERMITTED TRANSFEREE.  "PERMITTED TRANSFEREE" shall mean any
                 --------------------                                        
person or entity to which a Permitted Transfer of Stock is made.

          8.1.3  SECURITIES ACT.  "SECURITIES ACT" shall mean the Securities Act
                 --------------                                                 
of 1933, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.

          8.1.4  SELLING SHAREHOLDER.  "SELLING SHAREHOLDER" shall mean
                 -------------------                                   
Rubinstein or any Permitted Transferee to whom Rubinstein Transfers Stock.

          8.1.5  SHAREHOLDER.  "SHAREHOLDER" shall mean DMX, any Permitted
                 -----------                                              
Transferee to whom DMX makes a Transfer of Stock, Rubinstein, or any Permitted
Transferee to whom Rubinstein makes a Transfer of Stock.

          8.1.6 STOCK. "STOCK" shall mean Common Shares, Preference Shares, or
                -----
any other stock of Xtra.

                                     -12-
<PAGE>
 
          8.1.7  TAG-ALONG SELLER.  "TAG-ALONG SELLER" shall mean DMX or any
                 ----------------                                           
Permitted Transferee to whom DMX makes a Transfer of Stock.

          8.1.8  TRANSFER.  "TRANSFER" shall mean any sale, transfer,
                 --------                                            
assignment, or other disposition, whether voluntary or involuntary, whether by
gift, bequest or otherwise, of Stock, and shall specifically include any
Transfer of Stock in a public offering.

     8.2  TAG-ALONG RIGHTS.
          ---------------- 

          8.2.1  RIGHT TO PARTICIPATE IN SALE.  If a Selling Shareholder, at any
                 ----------------------------                                   
time or from time to time, enters into an agreement (whether oral or written) to
make a Transfer of any shares of Stock (a "TAG-ALONG SALE"), then each Tag-Along
Seller shall have the right, but not the obligation, to participate in such Tag-
Along Sale by selling up to the number of its shares of Stock (the "TAG-ALONG
ALLOTMENT") equal to the product of (A) the total number of shares of Stock
proposed to be sold by the Selling Shareholder in the Tag-Along Sale times (B) a
fraction, the numerator of which is equal to the number of shares of Stock owned
by such Tag-Along Seller immediately prior to the Tag-Along Sale and the
denominator of which is equal to the sum of the aggregate number of shares of
Stock owned by the Shareholders immediately prior to the Tag-Along Sale.  Any
such sales by the Tag-Along Sellers shall be on the same terms and conditions as
the proposed Tag-Along Sale by the Selling Shareholder.  For purposes of this
calculation, Preference Shares or shares of any other preferred stock shall be
treated as the equivalent of the number of Common Shares into which such
Preference Shares or preferred stock could be converted.

          8.2.2  EXCEPTIONS TO TAG-ALONG RIGHTS.  The foregoing notwithstanding,
                 ------------------------------                                 
Section 8.2 and Section 8.4 shall not apply to any Transfer of shares of Stock
(i) to a Permitted Transferee, (ii) that occurs as consideration for the
contribution of the Initial Capital as described in Section 5.2.2, above, or
(iii) in which Xtra is the principal recipient of the consideration for such
Transfer.

          8.2.3  PROCEDURES FOR TAG-ALONG SALE.  The Selling Shareholder shall
                 -----------------------------                                
promptly provide each Tag-Along Seller with written notice (the "SALE NOTICE")
setting forth the terms and conditions of the proposed Transfer.  Each Tag-Along
Seller shall provide written notice (the "TAG-ALONG NOTICE") to the Selling
Shareholder and Xtra within 15 days after receiving the Sale Notice.  The Tag-
Along Notice shall set forth the number of shares of Stock, if any, such Tag-
Along Seller elects to include in the Tag-Along Sale, which shall not exceed the
Tag-Along Allotment of such Tag-Along Seller as calculated pursuant to Section
8.2.1, above.  The Selling Shareholder shall determine the aggregate number of

                                     -13-
<PAGE>
 
shares to be sold by each Tag-Along Seller in the Tag-Along Sale in accordance
with the terms hereof, and the Tag-Along Notices given by such Tag-Along Sellers
shall constitute their respective binding agreements to sell such shares on the
terms and conditions applicable to such sale (including the requirements of this
Section 8.2); provided, however, that the Tag-Along Sellers shall not be
              --------  -------                                         
obligated to sell such shares in the Tag-Along Sale unless the sale of the
shares of the Selling Shareholders is consummated.  If the proposed purchaser
does not purchase the shares of the Tag-Along Sellers as contemplated by this
Section 8.2, then the Selling Shareholder shall sell the entire amount of the
shares specified in the Sale Notice, and shall implement the proposed Tag-Along
Sale by purchasing from the Tag-Along Sellers the number of shares specified by
each Shareholder in its Tag-Along Notice; provided, however, that the Selling
Shareholder shall not be obligated to purchase such shares if the sale specified
in the Sale Notice is not consummated.

          If a Tag-Along Notice is not received by the Selling Shareholder from
any of the Tag-Along Sellers within the 15-day period specified above, the
Selling Shareholder shall have the right to sell or otherwise transfer the Stock
to the proposed purchaser without any participation by such Tag-Along Sellers,
but only on the terms and conditions stated in the notice to such Tag-Along
Sellers and only if such sale occurs not later than 90 days following the
expiration of the 15-day period specified above.

     8.3    APPLICATION OF TAG-ALONG RIGHTS TO INDIRECT TRANSFER OF STOCK.
            -------------------------------------------------------------  
If (i) a Selling Shareholder exchanges Stock for an equity interest in any
entity, or (ii) a Selling Shareholder sells Stock to any entity that is owned or
controlled by the Selling Shareholder and the Stock constitutes more that 25
percent of the fair market value of the assets of the entity, then the Tag-Along
Sellers' rights to participate in a Transfer shall attach to any Transfer of the
Selling Shareholder's interest in that entity.  If the proposed purchaser
refuses to purchase the Stock of the Shareholders electing to exercise their
Tag-Along Sale rights pursuant to this Section 8.3, then the Selling Shareholder
shall sell the entire amount of the interest specified in the Sale Notice, and
shall implement the proposed Tag-Along Sale by purchasing from the Tag-Along
Sellers the number of shares of Stock properly specified by each Tag-Along
Seller in its Tag-Along Notice; provided, however, that the Selling Shareholder
shall not be obligated to purchase such shares if the sale specified in the Sale
Notice is not consummated.

                                     -14-
<PAGE>
 
     8.4  DRAG-ALONG RIGHTS.
          ----------------- 

          8.4.1  RIGHT TO REQUIRE SALE.  If Rubinstein and all Rubinstein
                 ---------------------                                   
Affiliates agree to sell 100 percent of the Stock held by them to a third person
who is not affiliated with or related to Rubinstein in any manner that could
allow Rubinstein or a Rubinstein Affiliate to enjoy an economic benefit
attributable to the sale that would not be enjoyed by DMX (any such party, a
"THIRD PARTY", and any such transaction, a "DRAG-ALONG SALE"), then DMX or any
Permitted Transferee of DMX (a "DRAG-ALONG SELLER"), subject to Sections 8.4.1,
8.4.2, and 8.4.3, shall sell to such Third Party, upon the demand by Rubinstein,
100 percent of Common Shares and Preference Shares held by the Drag-Along Seller
on the date of the Drag-Along Notice (as defined in Sections 8.4.2, below), at
the same proportionate price and on the same terms and conditions as Rubinstein
has agreed with such Third Party; provided, however, that the terms of such
                                  --------  -------                        
Drag-Along Sale shall provide (i) that the only representation and warranty or
covenant which any Drag-Along Seller shall be required to make in connection
with the Drag-Along Sale is a representation and warranty with respect to its
own ownership of the shares to be sold by it and its ability to convey title
thereto free and clear of liens, encumbrances or adverse claims and (ii) that
the liability of any Drag-Along Seller with respect to any representation and
warranty made in connection with the Drag-Along Sale is the several liability of
that Drag-Along Seller (and not joint with any other person) and that such
liability is limited to the amount of proceeds actually received by that Drag-
Along Seller in the Drag-Along Sale.  If the Drag-Along Sale is in the form of a
merger transaction, each Drag-Along Seller shall vote its shares in favor of
such merger and shall not exercise any rights of appraisal or dissent afforded
under applicable law.

          8.4.2  DRAG-ALONG NOTICE.  Prior to making any Drag-Along Sale, if
                 -----------------                                          
Rubinstein elects to exercise the rights afforded under Section 8.4, Rubinstein
shall provide each Drag-Along Seller with written notice (the "DRAG-ALONG
NOTICE") not less than twenty (20) days prior to the proposed date of the Drag-
Along Sale (the "DRAG-ALONG SALE DATE").  The Drag-Along Notice shall set forth:
(i) the name and address of the Third Party; (ii) the proposed amount and form
of consideration to be paid per share and the terms and conditions of payment
offered by the Third Party; (iii) the aggregate number of shares held of record
by Rubinstein as of the date of the Drag-Along Notice; (iv) the Drag-Along Sale
Date; and (v) confirmation that the proposed Third Party has agreed to purchase
the Drag-Along Seller's Stock in accordance with the terms hereof.

                                     -15- 
<PAGE>
 
          8.4.3  NON-CASH CONSIDERATION.  The provisions of Section 8.4 shall
                 ----------------------                                      
not apply unless the only consideration to be received in the Drag-Along Sale
consists of cash or securities for which an active trading market exists (it
being understood that an active trading market shall be conclusively deemed to
exist for a particular security if that security is listed on the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market System, the
NASDAQ Small Cap Market, the UK Stock Exchange, or the Alternative Investment
Market, and that the failure of the security to be so listed shall not per se
                                                                       --- --
determine that an active trading market does not exist).

     8.5  TERMINATION OF TAG-ALONG AND DRAG-ALONG RIGHTS.  Sections 8.2,
          ----------------------------------------------                
8.3 and 8.4 shall terminate (i) with respect to the Stock held by DMX or a
Permitted Transferee of DMX that is transferred to any transferee other than a
Permitted Transferee, when that Stock is so Transferred, or (ii) with respect
all the Stock held by DMX and all Permitted Transferees of DMX, at such time
after Xtra's initial registered public offering as all Stock held by DMX and its
Permitted Transferees can be sold within a given three-month period without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144, or another applicable exemption of equivalent effect, supported by a
written opinion of legal counsel for Xtra which shall be reasonably satisfactory
in form and substance to legal counsel for DMX.


                                   ARTICLE 9

                                 MISCELLANEOUS
                                 -------------

     9.1    GOVERNING LAW.   This Agreement has been negotiated and entered
            -------------                                                  
into in the State of California and this Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the choice of laws provisions of California or any other jurisdiction.

     9.2  JURISDICTION AND VENUE.  The parties irrevocably agree that any
          ----------------------                                         
legal action or proceedings with respect to this Agreement may be brought in the
courts of the State of California, or in any United States District Court of
California, and, by execution and delivery of this Agreement, each party
irrevocably submits to each such jurisdiction and irrevocably waives any and all
objections which the party may have as to venue in any of the above courts.

     9.3  WAIVER OF JURY TRIAL.  EACH PARTY HEREBY AGREES TO WAIVE ITS
          --------------------                                        
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS AMONG THE PARTIES RELATING TO THE SUBJECT
MATTER OF

                                     -16-
<PAGE>
 
THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT.  The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims.  Each party acknowledges that this waiver is a material
inducement to enter into a business relationship, that each other party has
already relied on this waiver in entering into this Agreement, and will continue
to rely on this waiver in any future dealings.  Each party further warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.

     9.4    SUCCESSORS AND ASSIGNS.  Except as otherwise provided herein,
            ----------------------                                       
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

     9.5    ENTIRE AGREEMENT; AMENDMENT.  This Agreement, the Guaranty, the
            ---------------------------                                    
Distribution Agreement, the Stock Purchase Agreement and the other documents
delivered pursuant to such agreements constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.  Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
each of the parties.

     9.6    NOTICES.  Any notice, demand or request required hereunder
            -------                                                   
shall be given in writing (at the addresses set forth below) by any of the
following means:  (a) personal service; (b) electronic communication, whether by
telex, telegram or telecopy; or (c) registered or certified, first class mail,
return receipt requested.

          (i)   If to DMX:

                DMX, Inc.
                11400 W. Olympic Boulevard
                Los Angeles, CA 90064

                with a copy to:

                Irell & Manella
                1800 Avenue of the Stars
                Los Angeles, CA 90067
                Attn:  C. Kevin McGeehan, Esq.

                                     -17-
<PAGE>
 
                and a copy to:

                J.C. Sparkman
                2530 South Dudley
                Lakewood, Colorado


          (ii)  If to Rubinstein:

                Jerold H. Rubinstein
                700 Park Lane
                Santa Barbara, CA 93108
                (805) 565-3403

                with a copy to:

                Shapiro, Rosenfeld & Close
                2029 Century Park East, Suite 2600
                Los Angeles, CA 90069
                Attention:  Alan D. Jacobson, Esq.


          (iii) If to Xtra:

                Xtra Music, Limited
                c/o Wiggin and Co.
                Imperial Square
                Cheltenham
                Gloucestershire GL50 1YX
                Attn:  Timothy Osborne and Michael Turner

                With a copy to Rubinstein as provided in Subsection (ii) of this
                Section 9.6.

     Such addresses may be changed by notice to the other parties given in the
same manner as above provided.  Any notice, demand or request sent pursuant to
either subsection (a) or (b) hereof shall be deemed received upon such personal
service or upon dispatch by electronic means, and, if sent pursuant to
subsection (c) shall be deemed received three business days following deposit in
the mail.

     9.7    DELAYS OR OMISSIONS. No delay or omission to exercise any right,
            -------------------
power or remedy accruing to any party, upon any breach or default under this
Agreement, shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement must be in writing and shall be effective
only to

                                     -18-
<PAGE>
 
the extent specifically set forth in such writing.  All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.

     9.8    EXPENSES.  Except as expressly provided above, each of the
            --------                                                  
parties shall bear its own expenses and legal fees incurred on its behalf with
respect to this Agreement and the transactions contemplated hereby.

     9.9    COUNTERPARTS.  This Agreement may be executed in any number of
            ------------                                                  
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

     9.10   SEVERABILITY.  In the event that any provision of this Agreement
            ------------                                                    
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

     9.11   GENDER.  The use of the masculine, feminine or neuter gender herein
            ------                                                             
shall be deemed to include any other gender, if the context so requires.

                                     -19-
<PAGE>
 
     9.12   NO THIRD PARTIES BENEFITTED.  This Agreement is made and entered
            ---------------------------                                     
into for the sole protection and benefit of the parties hereto, their successors
and assigns, and no other person or persons shall have any right of action
hereon.

     9.13   ATTORNEYS' FEES AND EXPENSES.  Each party hereby agrees to be
            ----------------------------                                 
responsible for and to pay upon demand all costs and expenses, including,
without limitation, attorneys' fees incurred by another party in connection with
any dispute between such parties concerning this Agreement and the transactions
contemplated herein in which the latter party prevails (whether or not suit is
filed).

     The foregoing agreement is hereby executed as of the date first above
written.

                             DMX Inc.,
                             a Delaware corporation


                             By /s/ L. A. Troxel
                                ------------------------------
                                Its Executive Vice President
                                    -------------------------- 


                             Xtra Music, Ltd.
                             a corporation incorporated under the laws
                             of England


                             By /s/ Illegible
                                ------------------------------
                                Its Director
                                    --------------------------

 
                             JEROLD H. RUBINSTEIN,
                             an individual

                             /s/ Jerold H. Rubinstein
                             ---------------------------------

                                     -20-
<PAGE>
 
                                 EXHIBIT 2.2.2

                        CHANNEL DISTRIBUTION AGREEMENT
                        ------------------------------

     THIS CHANNEL DISTRIBUTION AGREEMENT (the "AGREEMENT") is made this _____
day of _______, 199_, between DMX Inc., ("DMX") a Delaware corporation having
its registered office at 11400 West Olympic Boulevard, Suite 1100, Los Angeles,
California 90064-1507, and Xtra Music Limited, a company incorporated under the
laws of the United Kingdom ("XTRA") (collectively hereinafter referred to as the
"PARTIES" and individually as a "PARTY").

     WHEREAS DMX distributes various channels of digital audio programming in
the United States and other markets;

     WHEREAS DMX formerly distributed such digital audio programming in Europe
through two subsidiaries of DMX, DMX-Europe N.V. and DMX-Europe (UK) Limited
(the "COMPANIES") pursuant to that certain Technology License and Services
Agreement dated as of May 19, 1993, and that certain Trademark Agreement
effective as of July 1, 1992 (the "FORMER LICENSES"); the Companies have been
placed in insolvency proceedings;

     WHEREAS, in connection with the Subscription and Shareholders Agreement
dated as of December 18, 1996 (the "SUBSCRIPTION AGREEMENT"), DMX has agreed to
license such digital audio programming to Xtra for distribution in Europe on the
terms and conditions set forth herein.

     NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions hereinafter set forth, the Parties agree as follows:

1.   CERTAIN DEFINITIONS

     As used in this Agreement, the following terms shall have the following
meanings:

     1.1  "AFFILIATE(S)" shall mean, with respect to either party, a company
directly or indirectly controlling, controlled by or under common control with
such Party.  A company shall be deemed, for the purposes of this Agreement, to
control a corporation or other entity if such company possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation or other entity, whether through the ownership of
voting securities, by contract or otherwise.

     1.2  "CHANNELS" shall mean all channels of audio programming provided by
DMX to its Customers (except for those channels which are subject to an
exclusive license from DMX to any Customer) and all Territory-Specific Channels.
<PAGE>
 
     1.3  "COMMERCIAL ESTABLISHMENT" shall mean each and every premise
(including, without limitation, any restaurant, bar or similar social facility,
office, factory, work-place, place of business, school, university or other
educational facility, religious, government or other public facility, military
installation or facility, air, train, bus or other public transportation
facility, park, place frequented by the public, hotel, motel, club or similar
hospitality facility or medical facility), whether or not business is conducted
at such premises, except for premises which are Private Residences, it being
understood that in the case of a shopping center or other multiple-business
facility, each separate business occupying a distinct space within such facility
shall be deemed to constitute a separate Commercial Establishment.

     1.4  "CONFIDENTIAL INFORMATION" shall mean financial, marketing,
Subscriber, engineering, satellite, broadcast and other technical or
transmission data, software, computer and systems management, programming,
licensing, and any other information relating to the conduct of the business of
either Party, and not generally available to the public, in any form whatsoever.

     1.5  "CONTENT SUPERVISION AUTHORITIES" shall have the meaning described in
Section 2.5, below.

     1.6  "CUSTOMERS" shall mean any and all third parties located outside of
the Territory who are authorized by DMX to receive the Channels.

     1.7  "DELIVERY SITE" shall mean the site used from time to time by DMX as
its studio to create the signal for the Channels, which site is located as of
the date of this Agreement at Denver, Colorado, U.S.A.

     1.8  "DMX MARKS" shall mean the trademarks, service marks, and trade names
and other similar property relating to DMX and/or the Channels that are
specified on Exhibit "A" attached hereto.

     1.9  "ENHANCEMENTS" shall mean revisions, modifications or additions to any
or all of the Channels by DMX and made available in the ordinary course by DMX
to its Customers.

     1.10 "EXPLOIT" shall mean to sell directly to customers or to license
another to sell to customers, but only if the holder of such license sells to
customers.

                                      -2-
<PAGE>
 
     1.11 "FORCE MAJEURE" shall mean any delays, pre-emptions or other failure
to perform when such delays, pre-emptions or failures are due to any cause
beyond the control of the Party whose performance is so affected, including,
without limitation, an act of God, fire, war, strike, riot, labor dispute,
natural disaster, technical failure (including the failure of all or part of the
equipment of others, including the communications satellite(s) on which the
Channels are delivered) or any other reason beyond the control of the Party
whose performance is prevented during the period of such occurrence, including
any legal prohibition, significant, change of law or application of laws
governing performance hereunder, decree, regulation or requirement of any
governmental authority having jurisdiction.

     1.12 "INCREMENTAL COSTS" shall have the meaning described in Section 5.1,
below.

     1.13 "MAINTENANCE" shall mean the general updating of the formats and
contents of the Channels by DMX and made available in the ordinary course by DMX
to its Customers.

     1.14 "XTRA SERVICE" shall mean the digital audio service provided to
Subscribers by Xtra, its Affiliates, or its Licensees.

     1.15 "PRIVATE RESIDENCE" shall mean any single dwelling unit or multiple
dwelling unit private residences, including without limitation, apartment and
condominium buildings, residential hotels, residences for military personnel or
separate unit student housing, but not including transient or temporary
residence establishments such as hotels, motels or medical care facilities.

     1.16 "PROMOTIONAL MATERIALS" shall mean any marketing, promotional or
advertising materials which incorporate the DMX Marks.

     1.17 "SERVICE TECHNOLOGY" shall mean the technology, that (i) is owned by,
acquired by, or licensed to DMX, (ii) DMX has the right to license as provided
herein, and (iii) is necessary for the reception, transmission or distribution
of the Channels, including, without limitation, the addressing system for cable
decoder boxes.

     1.18 "SUBSCRIBER" shall mean a paying customer to whom Xtra, its Affiliate,
or its Licensee provides, for the payment of a prescribed fee, any or all of the
Channels.

     1.19 "TECHNICAL ACCESSORIES" shall mean all other portions of the signal
that transmits the Channels that may be created or made usable now or in the
future for purposes other than transmitting the Channels.

                                      -3-
<PAGE>
 
     1.20 "TERM" shall mean the term of this Agreement as set out in Section
11.1, below.

     1.21 "TERRITORY" shall mean the territory within the countries listed on
Exhibit "B", attached hereto, as such countries are constituted as of the date
of this Agreement, and such territory shall not be affected by any subsequent
alteration of the boundaries of those countries or the emergence of new
political entities within or including such territory.

     1.22 "TERRITORY-SPECIFIC CHANNELS" shall mean any Channels which are
produced by DMX specifically for Use and distribution to Subscribers in the
Territory, or any part thereof.

     1.23 "TRADEMARK TERM" shall mean that two-year period beginning on the
Closing Date (as defined in the Subscription Agreement).

     1.24 "USE" shall mean to down-link from the Delivery Satellite, receive,
decode, digitize, compress, encode, scramble, edit, substitute programming,
insert advertising in, uplink and transmit the signal of the Channels to
Subscribers in the Territory, as permitted by the terms of this Agreement.


2.   RIGHTS OF XTRA WITH RESPECT TO THE CHANNELS

     2.1  GRANT OF LICENSE.  Subject to the terms of this Agreement, DMX hereby
grants to Xtra and Xtra hereby accepts the exclusive, non-transferable, royalty-
free license and right during the Term to market, distribute and license the
Channels to Subscribers and to Use the signal of the Channels, the Service
Technology, and the Technical Accessories in the Territory.  This Agreement does
not give Xtra any right or license to distribute or to Use the Channels, the
Service Technology, or the Technical Accessories outside of the Territory.

     2.2  FAILURE TO EXPLOIT LICENSE.  Xtra agrees to Exploit the Channels in
substantially all of the Territory; provided, however, that DMX's only remedy
for the failure by Xtra to Exploit the Channels shall be to take the actions
described in this Section 2.2.  If Xtra fails to Exploit the Channels in a
substantial portion of the Territory, and does not cure such failure to Exploit
within ninety (90) days of notice by DMX, then at the conclusion of such ninety
day period the license granted pursuant to Sections 2.1 and 2.4 shall become a
non-exclusive license and DMX shall be relieved of its obligations under Section
2.10, below.  If Xtra fails to Exploit the Channels in any country that is a
part of the Territory, and does not cure such failure to Exploit within ninety
(90) days of notice by DMX, then at the conclusion of such ninety day

                                      -4-
<PAGE>
 
period the license granted pursuant to Section 2.1 and 2.4 shall become a non-
exclusive license with respect to such country and DMX shall be relieved of its
obligations under Section 2.10, below, with respect to such country.  All or any
part of the Territory that becomes non-exclusive pursuant to this Section 2.2
shall be referred to as a "NON-EXCLUSIVE TERRITORY", and the date on which that
Non-Exclusive Territory becomes non-exclusive pursuant to this Section 2.2 shall
be referred to as the "NON-EXCLUSIVE DATE".  If DMX does not Exploit the
Channels within a Non-Exclusive Territory within 180 days of the Non-Exclusive
Date, and if Xtra does Exploit the Channels within that Non-Exclusive Territory
within 180 days of the Non-Exclusive Date, then the license granted pursuant to
Sections 2.1 and 2.4 shall again become an exclusive license for that Non-
Exclusive Territory and the rights of Xtra under Section 2.10, below, with
respect to that Non-Exclusive Territory shall be restored.

     2.3  SUBLICENSE.  During the Term Xtra shall be entitled to sublicense
third parties to redistribute the Channels in the Territory, provided that such
sublicensing does not entitle such sub-licensee to do any act or thing which if
done by Xtra would be a breach of the terms of this Agreement.

     2.4  TECHNICAL ACCESSORIES.  During the Term and subject to the other
restrictions described in this Agreement, Xtra shall have the exclusive right to
Use in the Territory any Technical Accessories included within the signal of the
Channels for any lawful purpose, including, but not limited to close captioning,
games, sweepstakes, contests, advertising and promotions.  Xtra shall obtain any
license or authorization required under applicable law for such Use, and shall
not use the Technical Accessories in a jurisdiction in any manner which is not
lawful in that jurisdiction.  If Xtra determines in its sole discretion not to
use any part of the Technical Accessories, Xtra may license such Technical
Accessories to DMX or to another third party for any lawful purpose.

     2.5  CENSORSHIP AND PROGRAM SUBSTITUTION.  DMX acknowledges and agrees that
the Channels may be subject to censorship by certain government authorities and
may be edited by them or by Xtra according to guidelines and directives
prescribed by such authorities ("CONTENT SUPERVISION AUTHORITIES") prior to
distribution within certain countries in the Territory.  Xtra shall have the
right to edit programs and, with the prior approval of DMX where reasonably
possible, which approval shall not be unreasonably withheld, substitute programs
solely in order to comply with codes, practices, directives or orders from the
Content Supervision Authorities.  To enable Xtra to comply with any governmental
programming standards and practices and other governmental and regulatory
directives, Xtra may retransmit the Channels with a delay from the time the
signal is received.  Except as expressly provided

                                      -5-
<PAGE>
 
in this Agreement, including this Section 2.5, Xtra shall use the Channels
without insertion (whether of advertising or otherwise), deletion, or editing.

     2.6  INSERTION OF LOGO AND MARK OF XTRA.  Xtra shall have the right to use
its own logo, station identity mark, trade name, service mark or other
identifiers within the Channels as part of its network identity and branding
within the Xtra Service.

     2.7  INCLUDING CHANNELS IN XTRA SERVICE; ADDITION OF CHANNELS.  Xtra shall
be entitled, in its sole discretion, to include any or all of the Channels in
the Xtra Service.  Xtra shall be entitled, at its sole discretion, to create and
distribute additional channels within the Xtra Service and within the Territory;
provided, however, that DMX shall have to right to approve (acting reasonably)
such additional channels that are distributed with the Channels.  Xtra may
request that DMX create such additional Channels or Territory-Specific Channels
on terms and conditions to be agreed between the Parties, or Xtra may create
such channels itself or through the engagement of third parties.  Any such
additional channels created by or on behalf of Xtra shall be owned solely by
Xtra.

     2.8  COMMERCIAL ANNOUNCEMENTS.  Xtra shall be entitled, in its sole
discretion, to include commercial announcements within the Channels distributed
to Commercial Establishments, so long as such commercial announcements relate
specifically to the Commercial Establishment to which such Channels are
distributed.  Furthermore, Xtra shall be entitled to include in the Channels the
same types of commercial announcements and/or advertisements that DMX includes
in the Channels as provided to its Customers.  Except as provided herein, no
commercial announcements will be included in any of the Channels.

     2.9  RESTRICTIONS ON USE.  In order to ensure the integrity of the Channels
and compliance with the restrictions that may be applicable to the underlying
programming,sound recording, music and statutory use permits, Xtra shall not,
and the rights granted herein shall not be interpreted to grant Xtra or any
other person any right to:

          2.9.1     Record, make or manufacture any recordings or other
          reproductions of any Channel for commercial use, other than to effect
          distribution as part of the Xtra Service; or

          2.9.2  Transmit, re-transmit or authorize the transmission or re-
          transmission of any Channel outside the Territory.

                                      -6-
<PAGE>
 
Xtra shall not distribute the Channels over any medium or in any manner that
does not permit Xtra to institute adequate controls to prevent the reception,
transmission, or re-transmission of any Channel outside the Territory by any
person.  Controls imposed by Xtra that are equivalent to the controls imposed by
DMX in the United States on the same medium to prevent unauthorized transmission
or retransmission shall be deemed to be adequate controls for purposes of the
preceding sentence.  Notwithstanding anything else contained in this Agreement,
the transmission of the Channels outside the Territory solely because a portion
of the footprint of the satellite used by Xtra falls outside the geographical
boundaries of the Territory shall not violate Xtra's obligations under this
Agreement if (i) DMX-UK does not otherwise Exploit or Use the Channels outside
the Territory, and (ii) substantially all of the footprint of the satellite used
by DMX-UK falls within the Territory.

     2.10 NON-COMPETITION.  DMX agrees that during the Term it will not
distribute the Channels or any of them in the Territory via any medium, nor will
DMX authorize any other person to do the same.  Notwithstanding the foregoing,
DMX shall be entitled to distribute video channels or music services other than
the Channels in the Territory, so long as the format of such other music
services is not substantially similar to that of the Channels.

     2.11 DELETION OF CHANNEL.  At any time and from time to time, DMX shall be
entitled, in its sole discretion, to delete one or more Channels from the
Channels offered to its Customers, and upon such deletion such Channel shall
cease to be available to Xtra.  DMX may not delete a Channel pursuant to this
Section 2.11 unless, at least thirty days before the effective date of such
deletion, DMX provides to Xtra (i) notice of the deletion, (ii) one or more
disks inscribed with the music programming for the Channel as of the date of the
notice, and (iii) a copy of the software prepared by DMX to select the music for
such Channel; provided, however, that in order to delete a Channel, DMX shall
not be required to provide any software or other intellectual property that DMX
does not own or otherwise have right to transfer to Xtra.  The provisions of
Section 6.3 shall apply to the use by Xtra of any items provided pursuant to
this Section 2.11.

     2.12 ENHANCEMENTS AND MAINTENANCE.  DMX shall provide Enhancements and
Maintenance to Xtra at the same time as DMX provides Enhancements and
Maintenance to DMX's Customers.

3.   DELIVERY AND DISTRIBUTION

     3.1  DELIVERY OF THE CHANNELS.  DMX shall deliver to Xtra at the Delivery
Site digital audio signals of the Channels, to enable Xtra to Use the signal in
a manner and quality as contemplated by this Agreement.  DMX shall provide Xtra
with

                                      -7-
<PAGE>
 
any technical information in its possession that is reasonably requested by Xtra
for the purpose of uplinking, downlinking, receiving the Channels in the
Territory, and interfacing the signal of the Channels to the Xtra Service.

     3.2  SATELLITE AND UPLINK ARRANGEMENTS.  Xtra shall designate the satellite
to be used to transmit the Channels to Europe (the "DESIGNATED SATELLITE") and
shall arrange to uplink the Channels from the delivery point at DMX's Denver
studio to the Designated Satellite.

     3.3  CHANGE IN DELIVERY SATELLITE.  Xtra shall provide written notice to
DMX of any planned permanent change in the Designated Satellite not less than
ninety (90) days prior to such change.  If a temporary change in the Designated
Satellite is required, DMX and Xtra shall each use their reasonable efforts
(including the earliest practicable notice by Xtra to DMX of such events) to
avoid any interruption of or disruption in delivery of the Channels to the
Subscribers.  Each Party shall be responsible for its own costs associated with
any permanent or temporary change in the Designated Satellite, including
administrative and technical costs of aligning or setting reception equipment.


4.   LICENSE OF TRADEMARKS

     4.1  LICENSE TO TRADEMARKS FOR PROMOTIONAL PURPOSES.  DMX hereby grants to
Xtra for the Trademark Term a non-exclusive, non-transferable, royalty-free
license to use the DMX Marks for the distribution, marketing and promotion of
the Channels to Subscribers and potential Subscribers within the Territory.

     4.2  APPROVAL RIGHTS.  Xtra shall not use the DMX Marks in distribution,
marketing, promotion or advertising without the prior written approval of such
use by DMX.  In its sole discretion, DMX shall be entitled to provide Xtra with
a copy of its corporate guidelines or style guides for proper usage of the DMX
Marks, which guidelines shall be followed by Xtra.  In addition, Xtra agrees to
use the DMX Marks on materials of high quality and in a manner which upholds the
image and reputation of DMX.

     4.3  PROCEDURE FOR APPROVAL.  In the event that Xtra proposes to produce
Promotional Materials, Xtra shall provide samples of such proposed Promotional
Materials to DMX for its approval.  Within ten (10) days of receipt of such
proposed Promotional Materials, DMX shall, in writing, either approve or object
to the use of the DMX Marks on such proposed Promotional Materials, and, in the
event of an objection, DMX shall state its reasons for such objection.  In the
event that DMX does not object to the use of the DMX Marks within such ten (10)
day period, such use shall be deemed to be approved and the proposed Promotional
Materials may be used.  Upon

                                      -8-
<PAGE>
 
request, Xtra shall provide DMX with samples of all approved Promotional
Materials as used by Xtra.

     4.4  CONSEQUENCES OF TERMINATION.  Upon the earlier of the expiration of
the Trademark Term or the termination of this Agreement ("TRADEMARK TERMINATION
DATE"), Xtra shall immediately discontinue all use of the DMX Marks or marks
confusingly similar thereto.

     4.5  USE OF "FORMERLY KNOWN AS DMX".  For two (2) years after the earlier
of the expiration of the Trademark Term or the date on which Xtra stops using
the DMX Marks for the distribution, marketing and promotion of the Channels to
Subscribers and potential Subscribers within the Territory, Xtra shall be
entitled to refer to the Channels in its promotional materials as "formerly
known as DMX" or "formerly know as Digital Music Express".


5.   COSTS AND REPORTING REQUIREMENTS
 
     5.1  PAYMENT OF INCREMENTAL COSTS.  Xtra shall pay to DMX the incremental
costs incurred by DMX for the creation and delivery of the Channels to Xtra
("INCREMENTAL COSTS"), including without limitation, the following costs and
charges:

     a.   All costs of creation and delivery of the Territory-Specific Channels
          made at the request of Xtra; and

     b.   All costs of modifications to the Channels, Enhancements, or
          Maintenance made at the request of Xtra.

On a quarterly basis, DMX shall provide to Xtra an invoice which sets forth the
amount and nature of such Incremental Costs, and within thirty (30) days of
receipt of the invoice, Xtra shall pay to DMX the amount of Incremental Costs
set forth in such invoice.  DMX shall have no obligation to create, deliver, or
effect any Territory-Specific Channels, Enhancements, or Maintenance requested
by Xtra.

     5.2  INTEREST.  In the event that any payments due under Section 5.1 from
Xtra are not paid on the due date therefor, there shall be added to the amount
of such payment interest for the period from the due date until payment is made,
at an interest rate equal to the lesser of 10 percent per annum or the highest
legal rate under applicable law.

     5.3  WITHHOLDING AND SIMILAR CHARGES.  All payments shall be made in U.S.
Dollars and shall be paid in full without set-off or counterclaim and free and
clear of and without any deduction or withholding for or on account of any
taxes, unless required to do so by law.  Each party shall make application to
any relevant tax authority for double tax

                                      -9-
<PAGE>
 
relief in respect of amounts payable hereunder if the other party so requests in
writing.  Xtra shall be responsible for collecting and paying any income,
franchise, sales, use, occupational, general service or other taxes,
assessments, licenses, or other charges assessed, levied, imposed or collected
by any governmental or political entity, or any agencies or instrumentalities
thereof, with respect to its receipt or distribution of the channels or any
other activity hereunder, except income taxes payable by DMX.  Each party shall
provide the other party with any documentation reasonably requested by the other
party to permit the other party to claim a credit or deduction for foreign taxes
paid or born by the other party.

     5.4  COST RECORDS AND AUDITS.  DMX shall keep accurate and complete records
and accounts of all Incremental Costs.  No more than twice in each one (1) year
period during the Term, and for one (1) year following expiration or termination
of this Agreement, on reasonable notice to DMX during normal business hours,
Xtra shall have the right to appoint an internationally recognized accounting
firm to examine and audit such Incremental Cost records.  All costs of
conducting such an audit shall be borne by Xtra, unless it is determined that
the Incremental Costs paid to DMX for the period to which such audit relates
have been over-reported by DMX by more than five percent (5%), in which case DMX
shall pay the cost of the audit.  All information obtained by Xtra as a result
of such audit shall be treated as Confidential Information in accordance with
the provisions of Section 7 of this Agreement.

6.   OWNERSHIP OF INTELLECTUAL PROPERTY

     6.1  OWNERSHIP OF CHANNELS.  Except as otherwise provided herein, DMX
retains all rights, title and interest in and to the Channels and all
programming produced for or included in the Channels, including worldwide rights
for use in all media.

     6.2  OWNERSHIP OF MARKS.  Xtra hereby acknowledges the right, title and
interest of DMX and its Affiliates in and to the DMX Marks and the right of DMX
to use and license the use of the DMX Marks.  Xtra agrees not to claim any title
to the DMX Marks or any right to use the DMX Marks except as permitted by this
Agreement.   At no time shall Xtra adopt or use, without the prior written
consent of DMX, any variation of the DMX Marks or any work or mark likely to be
similar to, or confused with, the DMX Marks.  Any and all goodwill arising from
the use by Xtra of the DMX Marks shall inure solely to the benefit of DMX.  As
may be required by law, Xtra will at its expense record this Agreement and
register the DMX Marks with appropriate government authorities in the Territory,
and DMX will cooperate in effecting such recordation and registration.  Xtra
shall not assert any claim to the DMX Marks or such goodwill, either during or
after the Term of this Agreement, and Xtra shall not take any action that could

                                     -10-
<PAGE>
 
be detrimental to the goodwill associated with the DMX Marks.

     6.3  COPYRIGHT, MUSIC PERFORMANCE, SOUND RECORDING AND REPRODUCTION RIGHTS
AND FEES.   Xtra shall acquire from the owners, composers, licensees and/or
music or copyright rights societies all of the intellectual property rights
necessary for the distribution of the Channels in the Territory, including
copyrights, synchronization of music contained in the Channels and non-dramatic
performing rights, mechanical, performing and author's rights in each musical
composition and sound recording contained in the Channels. Xtra shall also be
responsible for all royalties, fees, and other charges of any kind with respect
to such rights.

7.   CONFIDENTIALITY

     7.1  NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.  Neither Xtra nor DMX
shall disclose to any third party (other than its respective employees or
financial and legal advisers, in their capacity as such) any Confidential
Information concerning the other Party derived in the course of performance
hereunder, including, without limitation, any information relating to
identification of Subscribers or financial material obtained through any audit,
or any of the terms of this Agreement, except:

          7.1.1  to the extent necessary to comply with law or the valid order
     of a court of competent jurisdiction or a regulatory authority having
     jurisdiction, in which event the Party making such disclosure shall so
     notify the other Party as promptly as practicable (and, if possible, prior
     to making such disclosure) and shall seek confidential treatment of such
     information;

          7.1.2  as part of its reporting or review procedure to its parent
     company, its auditors, attorneys and potential investors provided, however,
     that such parent company, auditors, its attorneys and potential investors
     agree to be bound by the provisions of the confidentiality provisions of
     this Agreement;

          7.1.3  in order to enforce its rights pursuant to this Agreement;

          7.1.4  as part of its obligation to make timely disclosure to public
     investors in its securities; or

          7.1.5  to the extent necessary to engage third parties to distribute
     the Channels or manufacture equipment for distribution of the Channels in
     accordance with this Agreement, provided that such third party distributors
     or manufacturers agree to comply with the confidentiality provisions of
     this Agreement.

                                     -11-
<PAGE>
 
8.   REPRESENTATIONS AND WARRANTIES

     8.1  REPRESENTATIONS OF DMX.  DMX hereby represents and warrants to Xtra
that:

          8.1.1  DMX is a corporation duly organized and validly existing under
     the laws of Delaware.

          8.1.2  DMX has the power and authority to enter into this Agreement
     and to perform fully its obligations hereunder.

          8.1.3  DMX is under no contractual or other legal obligation which
     shall in any way interfere with its full, prompt and complete performance
     hereunder, except to the extent that any continuing rights of the Companies
     under the Former Licenses would interfere with the rights granted under
     this Agreement.

          8.1.4  Within the United States, neither the Channels nor any material
     or programming contained therein shall libel, slander or defame any person,
     or violate, infringe upon or give rise to or advance any claim with respect
     to any contractual right, common law right or any other right of any party
     (including, without limitation, any copyright, patent, trademark, literary
     or dramatic right, music synchronization or performance right or right of
     privacy or publicity) or violate any law.

     8.2  REPRESENTATIONS OF XTRA.  Xtra hereby represents and warrants to DMX
that:

          8.2.1  Xtra is a corporation duly organized and validly existing under
     the laws of the United Kingdom.

          8.2.2  Xtra has the corporate power and authority to enter into this
     Agreement and to perform fully its obligations hereunder.

          8.2.3  Xtra is under no contractual or other legal obligation which
     shall in any way interfere with its full, prompt and complete performance
     hereunder.

          8.2.4  Xtra shall during the Term have valid licenses or other
     authorizations granted by the appropriate governmental authorities
     throughout the Territory, if required under applicable law, to distribute
     the Channels in accordance with this Agreement, and will operate such
     systems throughout the Term in accordance with such licenses or
     authorizations.

                                     -12-
<PAGE>
 
9.   COMPLIANCE WITH LAWS AND LICENSES

     9.1  REGULATORY COMPLIANCE.  Xtra shall ensure that the content of the Xtra
Service complies in all aspects with the regulatory requirements in the
Territory or any part thereof.  Xtra further undertakes to obtain any requisite
governmental approvals required in the Territory or any part thereof for the
distribution of the Xtra Service.

     9.2  PIRACY.  Xtra agrees that it will not authorize parties other than
Subscribers to receive the signal of the Channels, nor will it authorize others
to copy, take or otherwise reproduce any part of the Channels without the prior
written consent of DMX.  Xtra further agrees to take all reasonable and
practical security measures to prevent the unauthorized or otherwise unlawful
copying, taping or distribution of the Channels by others; provided, however,
security measures that are equivalent to the security measures taken by DMX in
the United States on the same medium to prevent unauthorized or otherwise
unlawful copying, taping or distribution of the Channels by others shall be
deemed to be adequate security measures for purposes of this sentence.


10.  INDEMNIFICATION

     10.1 INDEMNIFICATION.  Each Party shall indemnify and hold the other Party
harmless from and against any and all claims, liabilities, costs and expenses,
including attorneys fees and costs, arising out of any breach by such Party of
any of its respective representations, warranties or covenants herein contained.
In addition, without limiting the foregoing, Xtra shall indemnify and hold DMX
harmless against any and all claims, liabilities, costs and expenses, including
attorneys fees and costs, arising from and in connection with (i) any non-
payment of any amounts payable in respect of copyrights, and music and sound
recording performance and reproduction rights, arising from the distribution of
the Channels in the Territory; (ii) any assertion by any third party that the
distribution, promotion, and other exploitation of the Channels, and any
programming contained therein, violate or infringe upon any rights of such third
party in the Territory, unless such third party is not a creditor (as of the
date of this Agreement), receiver or trustee of the Companies and the claims of
such third party derive from a purported grant of rights by DMX to the third
party that is inconsistent with this Agreement; or (iii) the failure of Xtra to
obtain or maintain proper governmental authority to distribute the Channels in
the Territory.

                                     -13-
<PAGE>
 
     10.2  PROCEDURE FOR INDEMNIFICATION.  The Party entitled to indemnification
hereunder (the "INDEMNIFIED PARTY") shall notify the other Party hereto (the
"INDEMNIFYING PARTY") in writing of the claim or action for which such indemnity
applies. The Indemnifying Party shall undertake the defense of any such claim or
action and permit the Indemnified Party to participate therein at the
Indemnified Party's own expense. The settlement of any such claim or action by
an Indemnified Party, without the Indemnifying Party's prior written consent,
shall release the Indemnifying Party from its obligations hereunder with respect
to such claim or action so settled.  The Indemnifying Party shall not settle or
otherwise dispose of any claim without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.

11.  TERM AND TERMINATION

     11.1 TERM.  Unless terminated earlier pursuant to the provisions of this
Agreement, the Term of this Agreement shall be a period of five (5) years from
the Closing Date (a defined in the Subscription Agreement).

     11.2 TERMINATION FOR BREACH.  This Agreement may be terminated by a party
(the "NOTICING PARTY") as follows:

          11.2.1  thirty (30) days following written notice by the Noticing
     Party to the other Party (the "NOTICED PARTY") of any material inaccuracy
     of a representation made by the Noticed Party herein or in the Subscription
     Agreement or of a material breach by the Noticed Party of any of its
     obligations hereunder or under the Subscription Agreement, if such
     misrepresentation or breach is not cured within the thirty (30) period
     following such notice;

          11.2.2  immediately upon written notice by the Noticing Party to the
     Noticed Party if the Noticed Party has made a voluntary petition for
     protection under the bankruptcy laws, or if the Noticed Party has taken any
     similar action in consequence of debt;

                                     -14-
<PAGE>
 
          11.2.3  thirty (30) days following written notice by the Noticing
     Party to the Noticed Party if the Noticed Party has been the subject of the
     filing of an involuntary petition in bankruptcy, or if any distress or
     attachment is levied or any receiver is appointed in respect of the
     business or a substantial part of the property or assets of the Noticed
     Party, unless such petition, distress, attachment, or receiver is dismissed
     within such thirty-day period; or

          11.2.4  upon thirty (30) days following written notice by the Noticing
     Party to the Noticed Party if any event of Force Majeure shall continue for
     a period of sixty (60) consecutive days.

The exercise of any right to termination under this Section 11.2 is not an
exclusive remedy, and the Noticing Party may in addition exercise any other
remedy available to it in law or equity.

     11.3 EFFECT OF TERMINATION.  The expiration or termination of this
Agreement for whatever reason shall not affect any rights of either Party which
may have accrued prior to such expiration or termination. Subject to the
foregoing, neither party shall by reason of the expiration or termination of
this Agreement be liable to the other for compensation or damage on account of
the loss of present or prospective profits on distribution or anticipated
distribution of the Channels, or expenditures, investments or commitments made
in connection therewith.  Upon the expiration or termination of this Agreement,
Xtra shall promptly pay all outstanding and/or accrued Incremental Costs to DMX
and return to DMX, or otherwise dispose of as DMX may reasonably instruct, all
tapes and materials in relation to the Channels, programming contained therein,
advertisements or Promotional Materials, and other materials, documents and
papers provided to Xtra and relating to the Channels which Xtra may have in its
possession or under its control.


12.  MISCELLANEOUS

     12.1      NOTICES.  Any notice in connection with this Agreement shall be
in writing and shall be delivered by air courier or by facsimile to the
addresses or facsimile numbers given below. Notice given by air courier shall be
deemed given when recorded on the records of the air courier as received by the
receiving party. Notice given by facsimile shall be deemed given upon
transmission if on a business day and during business hours in the country of
receipt, otherwise notice shall be deemed to have been given at 9:00 a.m. on the
next business day in the country of receipt.

                                     -15-
<PAGE>
 
          If to DMX:

                    DMX Inc.
                    11400 West Olympic Blvd., Suite 1100
                    Los Angeles, California  90064

          If to Xtra:

                    Xtra Music, Limited
                    c/o Wiggin and Co.
                    Imperial Square
                    Cheltenham
                    Gloucestershire GL50 1YX
                    Attn:  Timothy Osborne and Michael Turner

                    with a copy to:

                    Jerold H. Rubinstein
                    700 Park Lane
                    Santa Barbara, CA 93108

Either party may change its address by giving notice to the other in the manner
set forth above.

     12.2      GOVERNING LAW; JURISDICTION AND VENUE.  This Agreement has been
negotiated and entered into in the State of California and this Agreement shall
be governed by and construed in accordance with the laws of the State of
California, without giving effect to its conflict of laws rules.  The Parties
hereby irrevocably agree that any legal action or proceedings with respect to
this Agreement may be brought in the courts of the State of California, or in
any United States District Court of California and by execution and delivery of
this Agreement, each party irrevocably submits to each such jurisdiction and
irrevocably waives any and all objections which it may have as to venue in any
of the above courts.

     12.3      WAIVER OF JURY TRIAL.  EACH PARTY HEREBY AGREES TO WAIVE ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS AMONG THE PARTIES RELATING TO THE SUBJECT
MATTER OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT.  The scope of this
waiver is intended to be all encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims.  Each Party acknowledges that this waiver is a
material inducement to enter into a business relationship, that each other Party
has already relied on this waiver in entering into this Agreement, and will
continue to rely on this waiver in any future dealings.  Each Party further
warrants and represents that it has reviewed this waiver with its legal counsel,
and that it knowingly and

                                     -16-
<PAGE>
 
voluntarily waives its jury trial rights following consultation with legal
counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.  In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.

     12.4      ASSIGNMENT.  The right and obligations of the Parties may be
assigned in whole or in part, voluntarily or by operation of law, without the
prior written consent of the other Party if such assignment is to an Affiliate
of the assigning Party.  Each Party shall notify the other within seven (7) days
of any such assignment.  In addition, DMX shall be entitled to assign its rights
and obligations under this Agreement in connection with a merger or acquisition
transaction (in whatever form) between DMX and a subsidiary of Tele-
Communications, Inc.  Except as expressly provided, neither Party may assign or
transfer this Agreement to any third party without the consent of the other
Party, which consent shall not be unreasonably withheld.

     12.5      NO PARTNERSHIP.  Nothing contained herein shall be deemed to
create, and the Parties do not intend to create, any relationship of partners or
joint venturers as between Xtra and DMX with respect to this Agreement.  Neither
Xtra nor DMX shall be, or shall hold itself out to be, the agent of the other
under this Agreement. No Subscriber shall be deemed to have any privity of
contract or direct contractual or other relationship with DMX by virtue of this
Agreement or DMX's delivery of the Channels to Xtra hereunder.

     12.6      SEVERABILITY.  If at any time, any provision of this Agreement
is, or becomes under any law, or is found by a court of competent jurisdiction
to be illegal, void, invalid, prohibited or unenforceable, then such provision
shall be ineffective to the extent of such illegality, voidness, invalidity,
prohibition or unenforceability and the remaining provisions of this Agreement
shall remain in full force and effect.  In such event, the Parties shall
thereafter use their respective best endeavors to negotiate and agree upon a
substitute provision which is valid and enforceable and achieves to the greatest
extent the legal and commercial objectives of the prohibited provision.

     12.7      CAPTIONS AND HEADINGS. The captions and headings herein are
included for convenience only and shall not be considered a part of or used to
construe this Agreement.

     12.8      COSTS OF PREPARATION.  Each of the Parties herein undertakes to
bear its own costs in relation to and arising from the preparation and execution
of this Agreement.

                                     -17-
<PAGE>
 
     12.9      ATTORNEYS' FEES AND EXPENSES.  Each Party hereby agrees to be 
responsible for and to pay upon demand all costs and expenses, including,
without limitation, reasonable attorneys' fees incurred by another Party in
connection with any dispute between such parties concerning this Agreement and
the transactions contemplated herein in which the latter Party prevails (whether
or not suit is filed).

     12.10     SUCCESSORS AND PERMITTED ASSIGNS.  This Agreement shall be
binding upon and shall inure to the benefit of the Parties and their respective
successors, assigns and permitted assignees.

     12.11     FORCE MAJEURE.  Neither DMX nor Xtra shall be liable to the other
for any event of Force Majeure. In the event of any such delay, pre-emption or
failure due to Force Majeure, the Party whose performance is affected shall
promptly notify the other Party of the nature and anticipated length of
continuance of such Force Majeure, and during such period both Parties shall be
excused from performance.

     12.12     SURVIVAL.  Upon termination of this Agreement for any reason,
Sections 4.4, 6.1, 6.2, 7.1, 10.1, 10.2, 12.1, 12.2, 12.3, 12.9, and 12.12
(including any definitions that are necessary to the operation of such sections)
shall continue to remain in full force and effect.

                                     -18-
<PAGE>
 
     12.13     ENTIRE AGREEMENT.  This Agreement (together with all Schedules
attached hereto, which are incorporated herein by this reference) and the
Subscription Agreement (and all documents delivered pursuant thereto) constitute
the whole agreement between the Parties and it is expressly declared that no
variations hereof shall be effective unless made in writing and signed by both
Parties.  All prior terms sheets and other correspondence between the parties
shall be deemed to have lapsed upon the signing of this Agreement.


    IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.



DMX Inc.



By:__________________________           
Its__________________________



Xtra Music, Limited



By:__________________________        
Its:__________________________


                                     -19-
<PAGE>
 
                                   EXHIBIT A

TRADEMARKS
----------

 .  ICT

 .  International Cablecasting Technologies Inc.

 .  ICT & Design (former corporate logo)

 .  DMX DJ

 .  DMX

 .  Digital Music Express

 .  DMX & Design:

                          [LOGO OF DIGITAL MUSIC EXPRESS]


 .  DMX World Logo:

                          [LOGO OF DMX WORLD]

                                     -20-
<PAGE>
 
                                   EXHIBIT B

                                   TERRITORY

1.  EUROPE:  Albania, Andorra, Austria, Belarus, Belgium, Bosnia and Herzegovia,
Bulgaria, Croatia, the Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein,
Lithuania, Luxembourg, Macedonia, Malta, Moldova, Monaco, Netherlands, Norway,
Poland, Portugal, Romania, Russia, San Marino, Serbia & Montenegro, Slovakia,
Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, Vatican
City, Yugoslavia, and any political entity whose borders are enclosed entirely
within the countries listed in this paragraph 1.

2.  MIDDLE EAST:  Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, United Arab Emirates,
Yemen, and any political entity whose borders are enclosed entirely within the
countries listed in this paragraph 2.

                                     -21-
<PAGE>
 
                                  EXHIBIT 2.2.2

                             DISTRIBUTION AGREEMENT

                                      -2-
<PAGE>
 
                                  EXHIBIT 2.3.1

                            TERMINATION CERTIFICATE

     DMX Inc. ("DMX"), a Delaware corporation and Jerold H. Rubinstein, an
individual ("RUBINSTEIN"), agree and acknowledge that:

     1.  Pursuant to the terms of the Subscription and Shareholders Agreement
     dated as of December 18, 1996, and pursuant to the terms of the Stock
     Purchase and Shareholders Agreement dated as of December 18,1996 (the
     "STOCK PURCHASE AGREEMENT"), the Stock Purchase Agreement is terminated.

     2.  Each of DMX and Rubinstein mutually release the other from any
     obligation or liability under the Stock Purchase Agreement.


                    DMX Inc.,
                    a Delaware corporation


                    By _____________________________
                       Its _________________________


 
                    JEROLD H. RUBINSTEIN,
                    an individual


                    ______________________________

                                      -1-
<PAGE>
 
                                  EXHIBIT 3.1

                         EXCEPTIONS TO REPRESENTATIONS
                     AND WARRANTIES OF XTRA AND RUBINSTEIN



                      This page intentionally left blank.
                                      
                                      -1-
<PAGE>
 
                                  EXHIBIT 3.2

                         EXCEPTIONS TO REPRESENTATIONS
                             AND WARRANTIES OF DMX



                      This page intentionally left blank.

                                      -1-
<PAGE>
 
                                  EXHIBIT 7.1

                              REGISTRATION RIGHTS

     1.1  CERTAIN DEFINITIONS.  As used in this Exhibit 7.1, any capitalized
          -------------------                                                 
term shall have the meaning assigned to such term in the Agreement, and the
following terms shall have the following respective meanings:

     "COMMISSION" shall mean the Securities and Exchange Commission or any other
      ----------                                                                
federal agency at the time administering the Securities Act.

     "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
      ------------                                                             
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

     "HOLDER" shall mean DMX or a transferee of registration rights under
      ------                                                             
Section 1.9.

     "REGISTER," "REGISTERED" OR "REGISTRATION" refers to a registration
      --------    ----------      ------------                          
effected by preparing and filing a registration statement in compliance with the
Securities Act (or any comparable provision of foreign law), and the declaration
or ordering of the effectiveness of such registration statement.

     "REGISTRABLE SECURITIES" means the shares of Common Stock held by DMX after
      ----------------------                                                    
the consummation of the transactions contemplated in the Agreement, shares
issued in respect of such shares of Common Stock upon any stock split, stock
dividend, recapitalization, conversion, or similar event, which have not been
sold to the public.

     "REGISTRATION EXPENSES" shall mean all expenses incurred by Xtra in
      ---------------------                                             
complying with Sections 1.2 and 1.3, below, including without limitation all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for Xtra, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of Xtra which shall be paid
in any event by Xtra).

     "RUBINSTEIN AFFILIATE" shall have the meaning described in Section 6.3 of
      --------------------                                                    
the Agreement.

     "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
      --------------                                                           
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

                                      -1-
<PAGE>
 
     "SELLING EXPENSES" shall mean all underwriting discounts and selling
      ----------------                                                   
commissions applicable to the sale and all fees and disbursements of counsel for
any holder.

     1.2  REQUESTED REGISTRATION.
          ---------------------- 

          1.2.1     PARITY WITH RUBINSTEIN.  Xtra shall provide Holder with the
                    ----------------------                                     
same demand registration rights, if any, that are provided to Rubinstein or any
Rubinstein Affiliate under any existing contract or any contract entered into in
the future by Xtra and Rubinstein or any Rubinstein Affiliate.  Xtra shall
provide DMX with notice of any such registration rights.

          1.2.2     MODIFICATIONS AS APPLIED TO DMX.  If the registration rights
                    -------------------------------                             
that are used to define the demand registration rights of a Holder call for
calculations or determine rights based on the number of shares of Xtra held by
Rubinstein or any Rubinstein Affiliate or based upon a minimum number of shares
which must be registered, such provision shall apply to Holder with the
following modification.  Any such provision shall apply to Holder using as a
standard that number of shares of Xtra which bears the same relationship to the
total number of shares of Xtra owned by Holder as the number of shares called
for in that provision bears to the total number of shares of Xtra owned by
Rubinstein or any Rubinstein Affiliate.

     1.3  XTRA REGISTRATION.
          ----------------- 

          1.3.1     NOTICE OF REGISTRATION.  If, at any time or from time to
                    ----------------------                                  
time, Xtra shall determine to register any of its securities, either for its own
account or the account of a holder or holders of the Xtra's securities, other
than (i) a registration relating solely to employee benefit plans on Form S-1 or
S-8 or similar forms which may be promulgated in the future, (ii) a registration
on Form S-4 or similar form which may be promulgated in the future relating
solely to a Commission Rule 145 transaction, or (iii) a registration undertaken
pursuant to Section 1.2.1, above, Xtra will:

          (a) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Xtra intends to attempt to
qualify such securities under the applicable Blue Sky or other state securities
laws); and

          (b) include in such registration (and any related qualification under
Blue Sky laws or other compliance), and in any underwriting involved therein,
all Registrable Securities specified in a written request or requests made by
any Holder or Holders within 20 days after receipt by such Holder of such
written notice from Xtra.

                                      -2-
<PAGE>
 
          1.3.2  UNDERWRITING.  If the registration of which Xtra gives notice
                 ------------                                                 
is for a registered public offering involving an underwriting, Xtra shall so
advise the Holders as a part of the written notice given pursuant to Section
1.3.1. In such event the right of any Holder to registration pursuant to Section
1.3 shall be conditioned upon such Holder's agreeing to participate in such
underwriting and in the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with Xtra and the
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by Xtra or by the other holders
whose securities are being registered. Notwithstanding any other provision of
this Section 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, Xtra shall so advise all
Holders and the other holders distributing their securities through such
underwriting. The number of Registrable Securities and other securities that may
be included in the registration and underwriting shall be allocated on the
following basis: (i) first to the securities to be registered by Xtra for its
own account, if any; (ii) second, to holders of securities other than Rubinstein
or any Rubinstein Affiliate who are exercising contractual, "demand"
registration rights; (iii) then to holders of securities (including Holders,
Rubinstein and any Rubinstein Affiliate) who are exercising contractual,
"piggyback" registration rights; and (iv) finally to other holders of securities
of Xtra. As among those holders of equal priority suffering such cut-back, the
cut-back shall be in proportion, as nearly as practicable, to the respective
amounts of securities entitled to inclusion in such registration held by such
holders at the time of filing the registration statement. If at any time
Rubinstein or any Rubinstein Affiliate is granted registration rights that would
provide them higher priority or more protection against a cut-back than is
described in the preceding two sentences, then Xtra shall afford same priority
or protection to the Holders. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to Xtra and
the underwriter. Any securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.

     1.4  EXPENSES OF REGISTRATION.    All Registration Expenses incurred in
          ------------------------                                          
connection with any registration, qualification or compliance pursuant to
Sections 1.3 shall be borne pro rata by those selling securities pursuant to
such registration.  All Registration Expenses incurred in connection with
registration, qualification or compliance pursuant to Section 1.2.1 shall be
borne by Xtra and the Holders selling securities pursuant to such registration
on

                                      -3-
<PAGE>
 
the same basis as provided in the registration rights afforded to Rubinstein or
any Rubinstein Affiliate.  All Selling Expenses relating to securities
registered by the Holders or other holders shall be borne by the Holders or
other holders of such securities pro rata on the basis of the number of shares
so registered.

     1.5  REGISTRATION PROCEDURES.  In the case of each registration,
          -----------------------                                    
qualification or compliance effected by Xtra pursuant to this Exhibit 7.1, Xtra
will:

          (a) Keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof;

          (b) Keep such registration, qualification or compliance effective for
a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;

          (c) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;

          (d) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement;

          (e) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that Xtra shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;

          (f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering; each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;

          (g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of material fact or omits

                                      -4-
<PAGE>
 
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and

          (h) At the request of any Holder requesting registration of
Registrable Securities pursuant to this Exhibit 7.1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with an underwritten registration pursuant to this Exhibit 7.1, (i) furnish an
opinion dated such date, of the counsel representing Xtra for the purposes of
such registration, addressed to the underwriters and, if such counsel is also
representing the Holders requesting registration of Registrable Securities, to
such Holders, and (ii) use its best efforts to furnish a letter dated such date,
from the independent certified public accountants of Xtra, addressed to the
underwriters and to the Holders.

     1.6  INDEMNIFICATION.
          --------------- 

          1.6.1     INDEMNIFICATION BY XTRA.  Xtra will indemnify and defend
                    -----------------------                                 
each Holder, each of its officers and directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Exhibit 7.1, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by Xtra of any rule or
regulation promulgated under the Securities Act applicable to Xtra and relating
to action or inaction required of Xtra in connection with any such registration,
qualification or compliance, and will pay to each such Holder, each of its
officers and directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, as
incurred, any legal and any other expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action; provided, however, that Xtra will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission,

                                      -5-
<PAGE>
 
made in reliance upon and in conformity with written information furnished to
Xtra by an instrument duly executed by a Holder or underwriter and stated to be
specifically for use therein or any violation by a Holder or underwriter of any
rule or regulation promulgated under the Securities Act applicable to such
Holder or such underwriter in connection with such registration.

          1.6.2     INDEMNIFICATION BY HOLDERS.  Each Holder will, if
                    --------------------------                       
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and defend Xtra, each of its directors and officers, each underwriter,
if any, of Xtra's securities covered by such a registration statement, each
person who controls Xtra or such underwriter within the meaning of Section 15 of
the Securities Act, and each other such Holder, each of its officers and
directors and partners and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof) including any of
the foregoing incurred in settlement of any litigation commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, or any violation by such
Holder of any rule or regulation promulgated under the Securities Act applicable
to such Holder in connection with such registration, and will pay to Xtra, such
other Holders, such directors, officers, partners, persons, underwriters or
control persons, as incurred, any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such expenses, claims, losses, damages or liability arise
out of or are based upon (i) such an untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in such registration
statement, prospectus, offering circular or other document or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to Xtra by an instrument duly executed by such Holder and stated to be
specifically for use therein, or (ii) any such violation by such Holder of any
rule or regulation promulgated under the Securities Act applicable to such
Holder in connection with such registration; provided, however, that the
obligations of such Holder hereunder shall be limited to an amount equal to the
greater of (x) the proceeds to such Holder of Registrable Securities sold as
contemplated herein, or (y) the out-of-

                                      -6-
<PAGE>
 
pocket expenses incurred by Xtra (not including defense costs or amounts paid to
those claiming against the Xtra) in connection with any such registration that
cannot be completed as a result of the untrue statement or violation of such
Holder that gives rise to the indemnity obligation under this Section.

          1.6.3     PROCEDURES.  Each party entitled to indemnification under
                    ----------                                               
this Section 1.6 (the "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.6 unless such failure
resulted in actual detriment to the Indemnifying Party.  Notwithstanding the
above, however, if representation of one or more Indemnified Parties by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
conflicting interests between such Indemnified Parties (the "CONFLICTING
INDEMNIFIED PARTIES") and any other party represented by such counsel in such
proceeding, then such Conflicting Indemnified Parties shall have the right to
retain one separate counsel, chosen by the holders of a majority of the
Registrable Securities included in the registration, at the expense of the
Indemnifying Party.  No Indemnifying Party (i) in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation, or (ii) shall
be liable for amounts paid in any settlement if such settlement is effected
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.

     1.7  INFORMATION BY HOLDER.  The Holder or Holders of Registrable
          ---------------------                                       
Securities included in any registration shall furnish to Xtra such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as Xtra may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Exhibit
7.1.

                                      -7-
<PAGE>
 
     1.8  RULE 144 REPORTING.  With a view to making available the benefits of
          ------------------                                                  
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock, Xtra agrees to each of the
following:

          1.8.1     PUBLIC INFORMATION.  Xtra will use its best efforts to make
                    ------------------                                         
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act at all times after the effective date of
the first registration under the Securities Act filed by the Xtra for an
offering of its securities to the general public.

          1.8.2     FILINGS.  Xtra will use its best efforts to file with the
                    -------                                                  
Commission in a timely manner all reports and other documents required of Xtra
under the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements).

          1.8.3     WRITTEN STATEMENT OF COMPLIANCE.  Xtra will furnish to a
                    -------------------------------                         
Holder forthwith upon request a written statement by Xtra as to its compliance
with the reporting requirements of said Rule 144 (at any time after 90 days
after the effective date of the first registration statement filed by Xtra for
an offering of its securities to the general public) and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of Xtra and
such other reports and documents of Xtra as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.

     1.9  TRANSFER OF REGISTRATION RIGHTS.  The rights to cause Xtra to register
          -------------------------------                                       
securities granted under Sections 1.2 and 1.3 may be assigned only to a
transferee or assignee in connection with the transfer or assignment by DMX of
not less than 25 percent of DMX's ownership of the Registrable Securities of
Xtra immediately after the Closing or in connection with the transfer or
assignment by the transferee of not less than all of the transferee's ownership
of the Registrable Securities of Xtra; provided that Xtra shall be entitled to
notice of any such transfer of registration rights within thirty (30) days of
the date such transfer is effected.  No transferee, assignee or other person
purporting to exercise rights under this Exhibit 7.1 who is not a signatory to
the Agreement shall be entitled to do so unless and until such person agrees to
be bound by the terms of this Exhibit 7.1.

     1.10 TERMINATION OF REGISTRATION RIGHTS.  The registration rights granted
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pursuant to this Exhibit 7.1 shall terminate as to a Holder at such time after
Xtra's initial registered public offering as all Registrable Securities held

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<PAGE>
 
by the Holder can be sold within a given three-month period without compliance
with the registration requirements of the Securities Act pursuant to Rule 144,
supported by a written opinion of legal counsel for Xtra which shall be
reasonably satisfactory in form and substance to legal counsel for such Holder.

     1.11 "MARKET STAND OFF" AGREEMENT.  Each Holder agrees that it shall not,
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to the extent requested by Xtra and an underwriter of common stock (or other
securities) of Xtra, sell or otherwise transfer or dispose (other than to donees
who agree to be similarly bound) of any Registrable Securities during the one
hundred and twenty (120) day period following the effective date of a
registration statement of Xtra filed under the Securities Act; provided,
however, that such agreement shall not apply to Registrable Securities being
registered and sold pursuant to such registration statement.  A Holder's
obligations under this Section 1.1.1 shall terminate at such time as any other
person with registration rights (whether or not pursuant to this Agreement) or
any officer or director of Xtra is not bound by a similar obligation.  In order
to enforce the foregoing covenant, Xtra may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such one hundred and twenty (120) day period.

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