<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1995
Registration No. 33-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------
TELE-COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4841 84-1260157
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
5619 DTC Parkway
Englewood, Colorado 80111-3000
(303) 267-5500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
Stephen M. Brett, Esq.
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
(303) 267-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies to:
Elizabeth M. Markowski Francis R. Wheeler
Baker & Botts, L.L.P. Holme Roberts & Owen, LLC
885 Third Avenue 1700 Lincoln St., Suite 4100
New York, New York 10022-4834 Denver, Colorado 80203
(212) 705-5000 (303) 861-7000
------------------------------
Approximate date of commencement of proposed sale of the securities to the
public: Upon consummation of the Merger as described herein.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================================
Proposed Proposed
Title of Each Class of Maximum Maximum Amount of
Securities To Be Amount To Be Offering Price Aggregate Registration
Registered Registered(1) Per Share Offering Price(2) Fee(2)(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Redeemable Convertible TCI Group Preferred Stock,
Series G, par value $.01 per share 9,175,459
- ------------------------------------------------------
Redeemable Convertible Liberty Media Group
Preferred Stock, Series H, par value $.01 per share 9,175,459 (2) $271,822,973 $72,791
- ------------------------------------------------------
Tele-Communications, Inc. Series A TCI Group ---
Common Stock, par value $1.00 per share
- ------------------------------------------------------
Tele-Communications, Inc. Series A Liberty Media ---
Group Common Stock, par value $1.00 per share
===========================================================================================================================
</TABLE>
(1) Upon the effectiveness of the Merger between United Video Satellite Group,
Inc. ("UVSG") and TCI Merger Sub, Inc. described herein, up to 2,988,812
shares of Class A Common Stock, par value $.01 per share ("UVSG Class A
Common Stock") of UVSG, and 6,186,647 shares of Class B Common Stock, par
value $.01 per share ("UVSG Class B Common Stock") of UVSG may be exchanged
for an equal number of shares of Redeemable Convertible TCI Group Preferred
Stock, Series G, par value $.01 per share, and Redeemable Convertible
Liberty Media Group Preferred Stock, Series H, par value $.01 per share
(collectively, the "TCI/LMG Preferred Stock"), of Tele-Communications, Inc.
("TCI"). The number of shares of TCI/LMG Preferred Stock being registered
is based on the maximum number of such shares issuable by TCI in connection
with the Merger. This Registration Statement also relates to such
indeterminable number of shares of Tele-Communications, Inc. Series A TCI
Group Common Stock, par value $1.00 per share ("TCI Group Common Stock"),
and Tele-Communications, Inc. Series A Liberty Media Group Common Stock,
par value $1.00 per share ("Liberty Media Group Common Stock"), as may be
issued upon the conversion after the effective time of the Merger of the
shares of TCI/LMG Preferred Stock issued in the Merger, and such additional
shares as may be issued as a result of the anti-dilution provisions of such
shares of TCI/LMG Preferred Stock. This Registration Statement also
relates to the resale of shares of TCI/LMG Preferred Stock and TCI Group
Common Stock and Liberty Media Group Common Stock pursuant to General
Instruction A.1(4).
(2) Estimated in accordance with Rule 457(f)(1) solely for the purpose of
calculating the registration fee on the basis of the aggregate market value
of the shares of UVSG Class A Common Stock and UVSG Class B Common Stock to
be canceled in the Merger described herein. The aggregate market value of
such common stock has been calculated on the basis of $29.625 per share,
the average of the high and low prices of the UVSG Class A Common Stock on
the Nasdaq National Market on December 19, 1995. For purposes of this
calculation it is assumed that the UVSG Class B Common Stock had been
converted into an equal number of shares of UVSG Class A Common Stock.
(3) In accordance with Rule 457(b), the total registration fee of $93,732 has
been reduced by $20,941 which was previously paid pursuant to Section 14(g)
of the Securities Exchange Act of 1934, in connection with filings by UVSG
on October 16, 1995 and November 30, 1995 of preliminary proxy materials in
connection with the Merger.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
[LOGO UNITED VIDEO
SATELLITE GROUP APPEARS HERE]
December 21, 1995
Dear Stockholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend a special meeting of stockholders (the "Special Meeting") of United
Video Satellite Group, Inc. ("UVSG"), which will be held at the Southern Hills
Marriott Hotel, 1902 East 71st Street South, Tulsa, Oklahoma, on January 25,
1996, at 9:00 a.m. local time. At the meeting, you will be asked to consider
and vote upon a proposal to adopt the Agreement and Plan of Merger dated as of
July 10, 1995, as amended (together with the exhibits and schedules thereto,
the "Merger Agreement"), among UVSG, Tele-Communications, Inc. ("TCI") and TCI
Merger Sub, Inc. ("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub
will be merged into UVSG, with UVSG as the surviving corporation (the
"Merger"). As a result of the Merger, TCI will own at least 33% of the issued
and outstanding common stock of UVSG ("UVSG Common Stock") representing at
least 83% of the total voting power of UVSG Common Stock.
Pursuant to the terms of the Merger Agreement, holders of UVSG's Class A
Common Stock (other than UVSG and its subsidiaries, TCI and its wholly owned
subsidiaries and the undersigned) have the right to elect to have up to 50% of
their shares of Class A Common Stock converted into "Merger Consideration"
consisting of one share of TCI's Redeemable Convertible TCI Group Preferred
Stock, Series G, par value $.01 per share ("TCI Group Preferred Stock"), and
one share of TCI's Redeemable Convertible Liberty Media Group Preferred Stock,
Series H, par value $.01 per share ("Liberty Media Group Preferred Stock" and,
together with the TCI Group Preferred Stock, "TCI/LMG Preferred Stock"). Prior
to the Merger, 50% of the currently outstanding shares of UVSG's Class B
Common Stock, all of which are presently owned by the undersigned, will be
converted into UVSG Class A Common Stock and the remaining shares of UVSG's
Class B Common Stock, upon consummation of the Merger, will be converted into
Merger Consideration consisting of one share of TCI Group Preferred Stock and
one share of Liberty Media Group Preferred Stock. All shares of UVSG's Class A
Common Stock for which a valid election to receive Merger Consideration has
not been made shall continue to remain outstanding as shares of Class A Common
Stock of UVSG as the surviving corporation upon consummation of the Merger.
See "TERMS OF THE MERGER--Consideration to be Received in the Merger" in the
accompanying Proxy Statement/Prospectus.
The initial liquidation value for the TCI Group Preferred Stock and the
Liberty Media Group Preferred Stock is $21.60 per share and $5.40 per share,
respectively, subject in both cases to increase in an amount equal to
aggregate accrued but unpaid dividends, if any. No dividends will be payable
on the TCI/LMG Preferred Stock if the sum of the last reported sale price of
the Tele-Communications, Inc. Series A TCI Group Common Stock ("TCI Group
Series A Common Stock") plus one-fourth of the last reported sale price of the
Tele-Communications, Inc. Series A Liberty Media Group Common Stock ("LMG
Series A Common Stock") equals or exceeds $27 for any ten consecutive trading
days during the 65 trading days immediately prior to the first anniversary of
issuance of the TCI/LMG Preferred Stock. If the sum of the amounts specified
in the preceding sentence does not equal or exceed $27 for the specified
period, dividends will begin to accrue on the TCI/LMG Preferred Stock on the
first anniversary of issuance, and will thereafter be payable semi-annually
commencing August 1, 1997, at the rate of 4% per annum on the liquidation
value. Any dividends paid on the TCI/LMG Preferred Stock may be paid, at TCI's
election, in cash or shares of TCI Group Series A Common Stock. The amount of
TCI Group Series A Common Stock to be issued as payment for dividends shall be
based upon the average market price for the ten consecutive day trading period
ending on the tenth trading day prior to the regular record date. Additional
dividends will accrue on unpaid dividends initially at a rate of 4% per annum.
The dividend rate on dividends that remain unpaid for six months will increase
to 8.625% per annum. Each share of TCI Group Preferred Stock is convertible at
the option of the holder at any time prior to the close of business on the
last business day prior to redemption into 1.05 shares of TCI Group Series A
Common Stock and each share of Liberty Media Group Preferred Stock is
convertible at any time prior to the close of business on the last business
day prior to redemption into .2625 of one share of LMG Series A Common Stock.
The TCI/LMG Preferred Stock is redeemable at TCI's option, in whole or in
part, at any time on or after February 1, 2001. The TCI/LMG Preferred Stock
will be redeemable in full on February 1, 2016, to the extent then
outstanding. In all cases, the redemption price per share will be the
liquidation value thereof, including the amount of any accrued but unpaid
dividends thereon, to
<PAGE>
and including the redemption date. The TCI/LMG Preferred Stock will rank prior
to TCI's common stock and TCI's Class B 6% Cumulative Redeemable Exchangeable
Junior Preferred Stock (the "TCI Class B Preferred Stock") and pari passu with
all other currently outstanding classes and series of preferred stock of TCI
with respect to the declaration and payment of dividends and in liquidation.
The TCI/LMG Preferred Stock will vote in any general election of directors of
TCI and will have one vote per share for such purposes and will vote as a
single class with the common stock of TCI, the TCI Class B Preferred Stock and
any other class or series of TCI's preferred stock entitled to vote in any
general election of directors of TCI. The TCI/LMG Preferred Stock will have no
other voting rights except as required by the Delaware General Corporation Law.
See "DESCRIPTION OF TCI CAPITAL STOCK" in the accompanying Proxy
Statement/Prospectus.
In order to make a valid election to receive Merger Consideration, UVSG
stockholders must follow the election procedures described in the accompanying
Proxy Statement/Prospectus and in the Form of Election and Letter of
Transmittal which will be mailed to you separately by The Bank of New York, the
Exchange Agent. A stockholder's election will not be effective unless such
stockholder submits a properly completed and signed Form of Election and Letter
of Transmittal, as well as the certificates for UVSG Class A Common Stock to
which such Form of Election and Letter of Transmittal relates (or an
appropriate guarantee of delivery), to The Bank of New York, the Exchange
Agent, by 5:00 p.m., Eastern Standard Time, on January 22, 1996.
The Board of Directors has carefully reviewed and considered the terms of the
proposed Merger. In connection with this review and consideration, the Board
retained Furman Selz Incorporated ("Furman Selz"), who has rendered an opinion,
subject to the assumptions and considerations set forth therein, to the effect
that the consideration to be received and the ownership interests to be
retained by the holders (other than TCI) of UVSG Class A Common Stock in the
proposed Merger, taken as a whole, are fair from a financial point of view to
such holders. The opinion of Furman Selz is set forth as Appendix II to the
accompanying Proxy Statement/Prospectus. In light of, among other things, the
opinion of Furman Selz, the Board of Directors has determined that the terms of
the Merger are fair to, and in the best interests of, UVSG stockholders, has
unanimously approved the Merger Agreement and recommends that you vote FOR the
proposal to adopt the Merger Agreement. A copy of the Merger Agreement is
included as Appendix I to the accompanying Proxy Statement/Prospectus and
should be read in its entirety. For a further discussion of the Board of
Directors' consideration and evaluation of the Merger as well as a discussion
of the interests of certain directors and executive officers of UVSG in the
proposed Merger, see "THE MERGER" in the accompanying Proxy
Statement/Prospectus.
The accompanying Proxy Statement/Prospectus provides you with a description
of the terms of the proposed Merger and certain additional information. Please
give all of this information your careful attention.
Adoption of the Merger Agreement requires the affirmative vote of a majority
of the total voting power of all outstanding shares of UVSG Class A Common
Stock and Class B Common Stock entitled to vote at the Special Meeting, voting
together as a single class. The undersigned beneficially owns shares of UVSG
Common Stock representing approximately 96% of the total voting power of all
outstanding shares of UVSG Common Stock and has agreed with TCI to vote those
shares (or cause them to be voted) in favor of adoption of the Merger
Agreement. Such vote by the undersigned will assure that the Merger Agreement
will be approved and adopted at the Special Meeting. In addition, directors and
executive officers of UVSG, including the undersigned, who collectively own
approximately 97% of the total voting power of the outstanding shares of UVSG
Common Stock, have informed UVSG that they intend to vote their shares in favor
of adoption of the Merger Agreement.
Whether or not you are personally able to attend the Special Meeting, please
complete, sign, date and return the enclosed proxy as soon as possible in the
enclosed return envelope, which requires no postage if mailed in the United
States. This action will not limit your right to vote in person if you wish to
attend the special meeting and vote personally. Any signed proxies received by
UVSG that are not specifically marked with a direction of how to vote in
connection with the Merger will be counted as affirmative votes in favor of
adoption of the Merger Agreement.
Sincerely yours,
/s/ Lawrence Flinn, Jr.
Lawrence Flinn, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE>
UNITED VIDEO SATELLITE GROUP, INC.
7140 SOUTH LEWIS AVENUE, TULSA, OKLAHOMA 74136-5422
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JANUARY 25, 1996
TO THE STOCKHOLDERS OF UNITED VIDEO SATELLITE GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Special Meeting (the "Special Meeting") of
Stockholders of United Video Satellite Group, Inc., a Delaware corporation
("UVSG"), will be held on January 25, 1996, at 9:00 a.m. at the Southern Hills
Marriott Hotel, 1902 East 71st Street South, Tulsa, Oklahoma, for the
following purposes:
1. To consider and act upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of July 10, 1995, as amended (the "Merger
Agreement"), among Tele-Communications, Inc., a Delaware corporation
("TCI"), TCI Merger Sub, Inc., a Delaware corporation ("Merger Sub"), and
UVSG pursuant to which (a) Merger Sub will be merged with and into UVSG,
with UVSG as the surviving corporation, following which TCI would hold
voting stock constituting at least 83% of the voting power of UVSG's
outstanding voting stock, and (b) UVSG's Stockholders would have the right
to elect to receive shares of two newly created series of TCI's preferred
stock in the merger for up to 50% of the shares of UVSG common stock held
by such Stockholders.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement of the Special Meeting.
The Board of Directors has fixed the close of business on December 11, 1995,
as the record date for the determination of Stockholders entitled to notice of
and to vote at the Special Meeting or any adjournments thereof.
By Order of the Board Of Directors
/s/ Craig M. Waggy
Craig M. Waggy
Secretary
Tulsa, Oklahoma
December 21, 1995
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER
ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS
RETURNED A PROXY.
<PAGE>
UNITED VIDEO SATELLITE GROUP, INC. TELE-COMMUNICATIONS, INC.
PROXY STATEMENT PROSPECTUS
For Special Meeting of Stockholders to 9,175,459 Shares of Redeemable
be held January 25, 1996 Convertible TCI Group Preferred Stock,
Series G 9,175,459 Shares of
Redeemable Convertible Liberty Media
Group Preferred Stock, Series H
----------------
This Proxy Statement/Prospectus is being furnished to holders of Class A
Common Stock ("UVSG Class A Common Stock") and Class B Common Stock ("UVSG
Class B Common Stock"), each $.01 par value per share (collectively, "UVSG
Common Stock"), of United Video Satellite Group, Inc., a Delaware corporation
("UVSG"), in connection with the solicitation of proxies by the Board of
Directors of UVSG for use at a special meeting of stockholders of UVSG, or any
adjournment or postponement thereof (the "Special Meeting"), to consider and
vote upon a proposal to approve and adopt an Agreement and Plan of Merger,
dated as of July 10, 1995, as amended, together with exhibits and schedules
thereto (the "Merger Agreement"), by and among Tele-Communications, Inc., a
Delaware corporation ("TCI"), TCI Merger Sub, Inc., a Delaware corporation
("Merger Sub"), and UVSG. Pursuant to the Merger Agreement, Merger Sub will be
merged into UVSG, with UVSG as the surviving corporation (the "Merger"). As a
result of the Merger, TCI will own at least 33% of the issued and outstanding
UVSG Common Stock representing at least 83% of the total voting power of UVSG
Common Stock.
Pursuant to the terms of the Merger Agreement, holders of UVSG's Class A
Common Stock (other than UVSG and its subsidiaries, TCI and its wholly owned
subsidiaries and Lawrence Flinn, Jr., the Chief Executive Officer and majority
stockholder of UVSG) have the right to elect to have up to 50% of their shares
of UVSG Class A Common Stock converted into "Merger Consideration" consisting
of one share of TCI's Redeemable Convertible TCI Group Preferred Stock, Series
G, par value $.01 per share ("TCI Group Preferred Stock"), and one share of
TCI's Redeemable Convertible Liberty Media Group Preferred Stock, Series H,
par value $.01 per share ("Liberty Media Group Preferred Stock" and, together
with the TCI Group Preferred Stock, "TCI/LMG Preferred Stock"). Prior to the
Merger, 50% of the currently outstanding shares of UVSG Class B Common Stock,
all of which are presently held by Mr. Flinn, will be converted into UVSG
Class A Common Stock on a one for one basis and the remaining shares of UVSG
Class B Common Stock, upon consummation of the Merger, will be converted into
Merger Consideration consisting of one share of TCI Group Preferred Stock and
one share of Liberty Media Group Preferred Stock. All shares of UVSG Class A
Common Stock for which a valid election to receive Merger Consideration has
not been made shall continue to remain outstanding as shares of Class A Common
Stock of UVSG as the surviving corporation upon consummation of the Merger.
See "TERMS OF THE MERGER--Consideration to be Received in the Merger."
TCI has filed a registration statement on Form S-4 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Act"), relating to the
shares of TCI Group Preferred Stock and Liberty Media Group Preferred Stock
that are proposed to be issued in the Merger to holders of outstanding shares
of UVSG Common Stock who have validly elected to convert a portion of their
shares of UVSG Common Stock into Merger Consideration. This Proxy
Statement/Prospectus also constitutes the Prospectus of TCI filed as part of the
Registration Statement.
The initial liquidation value for the TCI Group Preferred Stock and the
Liberty Media Group Preferred Stock is $21.60 per share and $5.40 per share,
respectively, subject in both cases to increase in an amount equal to
aggregate accrued but unpaid dividends, if any. No dividends will be payable
on the TCI/LMG Preferred Stock if the sum of the last reported sale price of
the Tele-Communications, Inc. Series A TCI Group Common Stock ("TCI Group
Series A Common Stock") plus one-fourth of the last reported sale price of the
Tele-Communications, Inc. Series A Liberty Media Group Common Stock ("LMG
Series A Common Stock") equals or exceeds $27 for any ten consecutive trading
days during the 65 trading days immediately prior to the first
<PAGE>
anniversary of issuance of the TCI/LMG Preferred Stock. If the sum of the
amounts specified in the preceding sentence does not equal or exceed $27 for
the specified period, dividends will begin to accrue on the TCI/LMG Preferred
Stock on the first anniversary of issuance of the TCI/LMG Preferred Stock, and
will thereafter be payable semi-annually commencing August 1, 1997, at the
rate of 4% per annum. Dividends will be payable on the TCI/LMG Preferred
Stock, at TCI's election, in cash or shares of TCI Group Series A Common
Stock. Additional dividends will accrue on unpaid dividends initially at a
rate of 4% per annum. The dividend rate on dividends that remain unpaid for
six months will increase to 8.625% per annum. Each share of TCI Group
Preferred Stock is convertible at the option of the holder at any time prior
to the close of business on the last business day prior to redemption into
1.05 shares of TCI Group Series A Common Stock and each share of Liberty Media
Group Preferred Stock is convertible at any time prior to the close of
business on the last business day prior to redemption into .2625 of one share
of LMG Series A Common Stock. The TCI/LMG Preferred Stock is redeemable at
TCI's option, in whole or in part, at any time on or after February 1, 2001.
The TCI/LMG Preferred Stock will be redeemable in full on February 1, 2016, to
the extent then outstanding. In all cases, the redemption price per share will
be the liquidation value thereof, including the amount of any accrued but
unpaid dividends thereon, to and including the redemption date. The TCI/LMG
Preferred Stock will vote in any general election of directors of TCI and will
have one vote per share for such purposes and will vote as a single class with
TCI's common stock, TCI's Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock (the "TCI Class B Preferred Stock") and any other class or
series of TCI's preferred stock entitled to vote in any general election of
directors. The TCI/LMG Preferred Stock will have no other voting rights except
as required by the Delaware General Corporation Law. See "DESCRIPTION OF TCI
CAPITAL STOCK."
On December 20, 1995, the last trading day before the date of this Proxy
Statement/Prospectus, the last reported sale prices on the Nasdaq National
Market for shares of UVSG Class A Common Stock, TCI Group Series A Common
Stock and LMG Series A Common Stock were $30 3/4, $19 5/16, and $25 5/8,
respectively.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to the stockholders of UVSG on or about December 22, 1995.
SEE "RISK FACTORS" ON PAGE 19 FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED BY UVSG STOCKHOLDERS.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is December 21, 1995.
ii
<PAGE>
AVAILABLE INFORMATION
UVSG and TCI are each subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information may be inspected without charge at, and
copies thereof may be obtained at prescribed rates from, the public reference
facilities of the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048.
This Proxy Statement/Prospectus does not include all of the information set
forth in the Registration Statement filed by TCI with the Commission under the
Act, as permitted by the rules and regulations of the Commission. The
Registration Statement, including any amendments, schedules and exhibits filed
or incorporated by reference as a part thereof, is available for inspection
and copying as set forth above. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated herein by reference as to
the contents of any contract or other document referred to herein or therein
are not necessarily complete and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, and each such statement shall
be deemed qualified in its entirety by such reference.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES COVERED BY THIS PROXY STATEMENT/PROSPECTUS OR A
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF UVSG OR TCI SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by UVSG (File
No. 0-22662) and TCI (File No. 0-20421) and are incorporated in this Proxy
Statement/Prospectus by reference and made a part hereof:
1. UVSG's Annual Report on Form 10-K for the year ended December 31, 1994,
as amended by Form 10-K/A (Amendment No. 1).
2. UVSG's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995.
3. UVSG's Current Reports on Form 8-K dated June 22, 1995, July 10, 1995
and July 20, 1995.
4. TCI's Annual Report on Form 10-K for the year ended December 31, 1994,
as amended by Form 10-K/A (Amendment No. 1).
5. TCI's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995 and June 30, 1995 and TCI's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, as amended by Form 10-Q/A (Amendment
No. 1).
6. TCI's Current Reports on Form 8-K dated January 23, 1995, February 3,
1995, as amended by Form 8-K/A, February 13, 1995, February 15, 1995,
April 6, 1995, April 20, 1995, as amended by Form 8-K/A, May 4, 1995, as
amended by Form 8-K/A, July 26, 1995, August 10, 1995 and December 18,
1995.
iii
<PAGE>
7. The financial statements and notes thereto of TeleCable Corporation as
of December 31, 1993 and 1992 and for each of the two years in the period
ended December 31, 1993, included in TCI's Current Report on Form 8-K,
dated August 26, 1994.
All documents subsequently filed by UVSG or TCI pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, after the date of this Proxy
Statement/Prospectus and prior to the closing or termination of the Merger,
shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the dates of filing of such
documents, and all documents filed by TCI pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the closing of the Merger and prior to the
termination of the offering and any reoffering of the securities covered
hereby shall be deemed to be incorporated by reference into the Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Proxy Statement/Prospectus shall be deemed
to be modified or superseded for purposes of this Proxy Statement/Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference in
this Proxy Statement/Prospectus modifies or supersedes such previous
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
All information appearing in this Proxy Statement/Prospectus is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL
REQUEST BY ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN
DELIVERED, IN THE CASE OF DOCUMENTS RELATED TO TCI, FROM STEPHEN M. BRETT,
SENIOR VICE PRESIDENT AND GENERAL COUNSEL, TELE-COMMUNICATIONS, INC., TERRACE
TOWER II, 5619 DTC PARKWAY, ENGLEWOOD, COLORADO 80111 (TELEPHONE 303-267-5500)
AND, IN THE CASE OF DOCUMENTS RELATING TO UVSG, FROM MANAGER OF INVESTOR
RELATIONS, UNITED VIDEO SATELLITE GROUP, INC., 7140 SOUTH LEWIS AVENUE, TULSA,
OKLAHOMA 74136-5422 (TELEPHONE 918-488-4000). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE RECEIVED BY JANUARY 18,
1996.
----------------
This Proxy Statement/Prospectus also may be used as a prospectus for the
resale by affiliates of UVSG of shares of the TCI/LMG Preferred Stock acquired
in the Merger and shares of TCI Group Series A Common Stock and LMG Series A
Common Stock acquired upon conversion thereof. Any such resales would be
reflected in a supplement to this Proxy Statement/Prospectus or a post-
effective amendment of the related Registration Statement, as appropriate.
iv
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TABLE OF CONTENTS
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AVAILABLE INFORMATION................................................. iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... iii
SUMMARY............................................................... 1
The Companies....................................................... 1
The Merger.......................................................... 1
Description of TCI/LMG Preferred Stock.............................. 4
The Special Meeting................................................. 6
No Dissenter's Rights............................................... 6
UVSG's Reasons for the Merger; Recommendation of the UVSG Board of
Directors.......................................................... 6
Opinion of UVSG's Financial Advisor................................. 7
TCI's Reasons for the Merger........................................ 8
Interest of Certain Persons in Merger............................... 8
Comparative Per Share Market Information............................ 9
Dividends........................................................... 11
Certain Federal Income Tax Consequences............................. 11
Accounting Treatment................................................ 12
Selected Historical Financial Data.................................. 12
Certain Comparative Per Share Data.................................. 17
RISK FACTORS.......................................................... 19
THE SPECIAL MEETING................................................... 21
Date, Time, Place and Purpose....................................... 21
Stockholder Proposals............................................... 21
Record Date; Voting at the Special Meeting.......................... 21
Proxies............................................................. 22
THE MERGER............................................................ 23
Background of the Merger............................................ 23
UVSG's Reasons for the Merger; Recommendations of the UVSG Board of
Directors.......................................................... 26
Opinion of UVSG's Financial Advisor................................. 29
TCI's Reasons for the Merger........................................ 35
Certain Consequences of the Merger; Operations Following the
Merger............................................................. 36
Interest of Certain Persons in the Merger........................... 36
Certain Transactions Between TCI and UVSG........................... 38
TERMS OF THE MERGER................................................... 39
General; Effective Time............................................. 39
Consideration to be Received in the Merger.......................... 39
Conditions to the Merger............................................ 40
Covenants........................................................... 41
No Solicitation of Transactions..................................... 43
Certain Personnel Matters........................................... 43
Indemnification..................................................... 44
Survival of Representations......................................... 45
Termination, Amendment and Waiver................................... 45
Expenses............................................................ 46
Certain Restrictions on Resale of TCI/LMG Preferred Stock........... 46
Other Agreements.................................................... 46
Amendment of UVSG Certificate of Incorporation and Bylaws........... 48
</TABLE>
v
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Change in UVSG Board of Directors at Closing........................ 48
Regulatory Approvals................................................ 48
Accounting Treatment................................................ 48
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................... 49
Introduction........................................................ 49
The Merger Transaction.............................................. 49
Ownership and Disposition of TCI/LMG Preferred Stock................ 51
UVSG SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 55
MANAGEMENT OF UVSG FOLLOWING THE MERGER............................... 57
DESCRIPTION OF TCI CAPITAL STOCK...................................... 57
General............................................................. 57
TCI Group Common Stock and Liberty Media Group Common Stock......... 58
TCI Preferred Stock................................................. 75
Other Matters....................................................... 91
COMPARISON OF STOCKHOLDERS' RIGHTS.................................... 93
Authorized Capital Stock............................................ 93
Voting Rights....................................................... 94
Conversion Rights................................................... 94
Dividends and Share Distributions................................... 95
Board of Directors.................................................. 95
Election of Directors............................................... 95
Removal of Directors................................................ 96
Special Meetings of Stockholders.................................... 96
Merger, Consolidation, Sale of Assets and Dissolution............... 96
Change of Control................................................... 97
Amendments to Certificate of Incorporation.......................... 97
Amendments to Bylaws................................................ 97
LEGAL MATTERS......................................................... 98
EXPERTS............................................................... 98
</TABLE>
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Appendix I-A Merger Agreement
Appendix I-B Amendment No. 1 to Merger Agreement
Appendix II Opinion of Furman Selz Incorporated
Appendix III Information Concerning Persons Who Will Serve as Directors
of UVSG Following the Merger
Appendix IV Restated Certificate of Incorporation of UVSG
</TABLE>
vi
<PAGE>
SUMMARY
The following summary is intended only to highlight certain information
contained elsewhere in this Proxy Statement/Prospectus or in the documents
incorporated by reference herein. This summary is not intended to be complete
and is qualified in its entirety by the more detailed information contained
elsewhere in this Proxy Statement/Prospectus, the Appendices hereto and the
documents incorporated by reference or otherwise referred to herein.
Stockholders are urged to review carefully the entire Proxy
Statement/Prospectus, including the Appendices hereto.
THE COMPANIES
UVSG. UVSG provides satellite-delivered video, audio, data and program
promotion services to cable television systems, satellite dish owners, radio
stations and private network users primarily throughout North America. UVSG has
over a decade's experience in successfully developing marketable services and
technology for the point-to-multipoint satellite transmission industry. UVSG
operates in five related businesses: electronic program promotion and guide
services, electronic interactive information delivery services, satellite
transmission services for private networks, direct-to-home satellite services
and satellite distribution of video services. On July 20, 1995, UVSG acquired
an additional interest in SSDS, Inc. ("SSDS"), thereby increasing its ownership
interest to 70% of the outstanding common stock of SSDS. SSDS provides
information technology consulting and software development services to large
organizations with complex computer needs.
The principal executive offices of UVSG are located at 7140 South Lewis
Avenue, Tulsa, Oklahoma 74136-5422, and its telephone number is (918) 488-4000.
TCI. TCI, through its subsidiaries and affiliates, is principally engaged in
the construction, acquisition, ownership and operation of cable television
systems and in providing satellite-delivered video entertainment, information
and home shopping programming services to various video distribution media,
principally cable television systems. TCI believes that, measured by the number
of basic subscribers, it is the largest provider of cable television services
in the United States. At September 30, 1995, TCI's subsidiaries owned cable
television systems serving approximately 12.2 million basic cable subscribers
throughout the continental United States. TCI is also a provider of programming
packages to home satellite dish owners, and at September 30, 1995, provided
service to approximately 481,000 subscribers. TCI also has an investment in
Primestar Partners, a partnership which operates a direct-to-home broadcast
satellite service, and at September 30, 1995, TCI and its subsidiaries had
approximately 367,000 Primestar Partners subscribers. TCI is also involved, as
an investor and developer, in new television and telecommunications ventures
and technologies.
The principal executive offices of TCI are located at Terrace Tower II, 5619
DTC Parkway, Englewood, Colorado 80111-3000, and its telephone number is (303)
267-5500.
THE MERGER
The Merger Agreement provides for the merger of Merger Sub, a wholly owned
subsidiary of TCI, with and into UVSG, with UVSG being the surviving
corporation (the "Surviving Corporation"). As a result of the Merger, UVSG will
become a majority-controlled subsidiary of TCI. If all UVSG stockholders elect
to convert, to the full extent permitted, their shares of UVSG Common Stock
into Merger Consideration, TCI will own 50% of the then outstanding common
stock of the Surviving Corporation, representing approximately 88% of the
voting power of the then outstanding common stock of the Surviving Corporation.
If no UVSG stockholders convert shares of UVSG Common Stock into Merger
Consideration other than Mr. Flinn, who has agreed with TCI to have 50% of his
shares of UVSG Common Stock converted into Merger Consideration, TCI will own
at least 33% of the then outstanding common stock of the Surviving Corporation,
representing at least 83% of the voting power of the Surviving Corporation. TCI
currently does not own any shares of UVSG Common Stock.
<PAGE>
The Merger will become effective (the "Effective Time") on the later of January
25, 1996 and the date of filing of a Certificate of Merger with the Secretary
of State of the State of Delaware. At the Effective Time, each share of UVSG
Class A Common Stock for which a valid election to convert the same into Merger
Consideration has been made will be converted into the right to receive Merger
Consideration consisting of one share of TCI Group Preferred Stock and one
share of Liberty Media Group Preferred Stock. Such filing is anticipated to
take place as soon as practicable after the last condition precedent to the
Merger set forth in the Merger Agreement has been satisfied or, where
permissible, waived, which is expected to occur immediately after the Special
Meeting. See "TERMS OF THE MERGER--General; Effective Time,--Conditions to the
Merger,--Regulatory Approvals."
Merger Consideration. Pursuant to the terms of the Merger Agreement, holders
of UVSG Class A Common Stock (other than UVSG and its subsidiaries, TCI and its
wholly owned subsidiaries and Mr. Flinn) have the right to elect to have up to
50% of their shares of UVSG Class A Common Stock converted into Merger
Consideration consisting of one share of TCI Group Preferred Stock and one
share of Liberty Media Group Preferred Stock for each share of UVSG Class A
Common Stock converted. Prior to the Merger, 50% of the currently outstanding
shares of UVSG Class B Common Stock, all of which are currently held by Mr.
Flinn, will be converted into UVSG Class A Common Stock and the remaining
shares of UVSG Class B Common Stock, upon consummation of the Merger, will be
converted into Merger Consideration consisting of one share of TCI Group
Preferred Stock and one share of Liberty Media Group Preferred Stock for each
share of UVSG Class B Common Stock converted. All shares of UVSG Class A Common
Stock for which a valid election to receive Merger Consideration has not been
made shall continue to remain outstanding as shares of Class A Common Stock of
UVSG as the Surviving Corporation following consummation of the Merger. See
"TERMS OF THE MERGER--Consideration to be Received in the Merger."
UVSG has been advised that no existing directors or executive officers of
UVSG currently intend to elect to convert shares of their UVSG Common Stock
into the right to receive Merger Consideration, other than Mr. Flinn, who will
receive Merger Consideration with respect to 50% of his shares of UVSG Common
Stock and Roy L. Bliss, President and Chief Operating Officer of UVSG, who has
indicated that he will consider, based upon market and other factors, whether
to elect to convert some portion of his UVSG Class A Common Stock into the
right to receive Merger Consideration.
Election to Receive Merger Consideration. In order to make a valid election
(an "Election") to receive Merger Consideration, a Form of Election and Letter
of Transmittal ("Form of Election"), properly completed and signed and
accompanied by certificates for the shares of UVSG Class A Common Stock to
which it relates, duly endorsed in blank, must be received by The Bank of New
York, as Exchange Agent (the "Exchange Agent"), no later than 5:00 p.m.,
Eastern Standard Time, on January 22, 1996 (the "Election Date"). Forms of
Election received by the Exchange Agent after such Election deadline and any
Forms of Election that are unsigned or otherwise incomplete or improperly
completed or that otherwise fail to comply with the requirements for making
Elections as set forth in the instructions contained in the Form of Election
will not be valid. Any UVSG stockholder may at any time prior to the Election
Date revoke his or her Election by notice received by the Exchange Agent no
later than 5:00 p.m., Eastern Standard Time, on the Election Date. At any time
after the expiration of 30 days following the Election Date, if the Merger
shall not have been consummated prior thereto, any UVSG stockholder who has
deposited certificates for UVSG Class A Common Stock with the Exchange Agent
has a right to withdraw such certificates and thereby revoke his or her
Election as of the Election Date, by written notice to such effect received by
the Exchange Agent no later than 5:00 p.m., Eastern Standard Time, on the fifth
business day immediately prior to the Effective Time. See "TERMS OF THE
MERGER--Consideration to be Received in the Merger--Election to Receive Merger
Consideration."
Conditions to the Merger. The respective obligations of UVSG and TCI to
consummate the transactions contemplated by the Merger Agreement are subject to
the satisfaction or, where permissible, waiver of a number of conditions,
including approval of the Merger Agreement by the requisite vote of
stockholders of UVSG,
2
<PAGE>
receipt of certain regulatory approvals and contract consents, effective
registration under the Act of shares of TCI/LMG Preferred Stock to be issued in
connection with the Merger, receipt of a tax opinion from UVSG's legal
advisors, the execution and delivery by TCI and UVSG of a stockholder
agreement, as well as other usual and customary conditions for a transaction of
the type of the Merger. See "TERMS OF THE MERGER--Conditions to the Merger--
Regulatory Approvals."
Covenants. Under the Merger Agreement, UVSG has agreed to conduct its
business in the ordinary and usual course consistent with past practice, and to
use its reasonable efforts to preserve intact its business organization and
assets. UVSG has also agreed, except as contemplated by the Merger Agreement or
consented to in writing by TCI, to refrain from issuing additional capital
stock, amending its charter, entering into or modifying material agreements or
taking certain other actions. See "TERMS OF THE MERGER--Covenants."
The Merger Agreement also provides that, subject to the fiduciary duties of
UVSG's Board of Directors under applicable law, UVSG will not, directly or
indirectly, solicit from, cooperate with or furnish any nonpublic information
to, or negotiate with any person other than TCI with respect to any proposal
for a merger, consolidation, reorganization or other business combination or
recapitalization involving UVSG. The Merger Agreement does not prohibit the
UVSG Board, to the extent required by its fiduciary duties under applicable
law, from providing information to, or participating in discussions with, any
party that makes an unsolicited inquiry with respect to UVSG if the UVSG Board
reasonably believes that such party may make a proposal on terms that are
superior from a financial point of view, to the terms of the Merger for the
stockholders of UVSG. UVSG has agreed to provide TCI with written notice of its
receipt of any such proposal or inquiry and with such information regarding the
person making the same as TCI may request. See "TERMS OF THE MERGER--No
Solicitation of Transactions."
Certain Personnel Matters. Upon the closing of the Merger, UVSG and Mr. Flinn
will enter into a three-year employment agreement, pursuant to which Mr. Flinn
will continue to be employed as the Chairman and Chief Executive Officer of
UVSG. In addition, UVSG's employment agreements with Mr. Bliss and Peter C.
Boylan III, UVSG's Executive Vice President and Chief Financial Officer, will
be amended to, among other things, extend the term to the third anniversary of
the closing of the Merger.
Each UVSG stock option outstanding immediately prior to the Effective Time
shall represent following the Effective Time the right to purchase the same
number of shares of UVSG Common Stock following the Merger without any change
thereto resulting from the Merger, except that the unvested UVSG stock options
held by Messrs. Bliss and Boylan to acquire 225,000 and 75,000 shares of UVSG
Class A Common Stock, respectively, and by Michael C. Morton, a director of
UVSG, to acquire 12,000 shares of UVSG Class A Common Stock shall vest and
become immediately exercisable upon consummation of the Merger. Each UVSG stock
appreciation right outstanding immediately prior to the Effective Time shall
continue to be outstanding immediately following the Effective Time without any
change in any of its terms or conditions except that UVSG is required under the
Merger Agreement to use all commercially reasonable efforts to amend the terms
concerning the valuation of such stock appreciation right to exclude any value
of the stock appreciation right attributable to new business entered into
between TCI or any of its affiliates and the Surviving Corporation or any of
its affiliates following the Effective Time. See "--Interest of Certain Persons
in the Merger" and "TERMS OF THE MERGER--Certain Personnel Matters."
Indemnification. The Merger Agreement provides that, after the Effective
Time, UVSG will indemnify each person who was, at any time prior to the
Effective Time, a director or officer of UVSG against all losses, claims,
damages, costs, expenses, liabilities or judgments, amounts paid in settlement
of or in connection with any claim, action, suit, proceeding or investigation
based on, or arising out of the fact that such person was a director or officer
of UVSG at any time prior to the Effective Time, under certain circumstances.
See "TERMS OF THE MERGER--Indemnification."
3
<PAGE>
Termination. The Merger Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time, (a) by the mutual consent of UVSG and
TCI, (b) by either UVSG or TCI (i) if the Merger has not been consummated
before January 31, 1996, unless the absence of such occurrence is due to the
failure of the party seeking to terminate the Merger Agreement to perform any
of its obligations thereunder, (ii) for a material breach by the other party
under the Merger Agreement that is not cured within five days after notice,
(iii) if a court of competent jurisdiction has issued an order permanently
enjoining or otherwise prohibiting the Merger, or (iv) if the requisite vote of
stockholders of UVSG approving the Merger Agreement has not been obtained at
the Special Meeting and the party seeking to terminate the Merger Agreement has
complied with its obligations under the Merger Agreement relating to the
Special Meeting, or (c) by TCI, if the UVSG Board of Directors withdraws or
modifies in any manner adverse to TCI its recommendation to UVSG stockholders
that they approve the Merger Agreement. See "TERMS OF THE MERGER--Termination,
Amendment and Waiver."
Amendment of UVSG Certificate of Incorporation and Bylaws. As a result of the
Merger, UVSG's Certificate of Incorporation will be amended and restated to
modify several of its provisions including those regarding share distributions,
merger consideration, the number and term of UVSG's directors, voting by the
Board of Directors, removal of Board members, amendment of UVSG's Bylaws and
indemnification of directors and officers. Following the Merger, certain
provisions of UVSG's Bylaws will be amended, including provisions governing the
election of directors, the calling of special meetings of stockholders and
action of stockholders by written consent. The indemnification provisions for
UVSG's officers and directors will be removed from the Bylaws and included in
UVSG's Restated Certificate of Incorporation (the "Restated Certificate"). See
"TERMS OF THE MERGER--Amendment of UVSG Certificate of Incorporation and
Bylaws" and "COMPARISON OF STOCKHOLDERS' RIGHTS."
Change in UVSG Board of Directors. The Merger Agreement provides that upon
consummation of the Merger all of the directors of UVSG as the Surviving
Corporation, other than Mr. Flinn, shall resign. Messrs Bliss and Boylan,
currently executive officers of UVSG, will be appointed to the Board of the
Surviving Corporation following the Merger as well as certain nominees
designated by TCI. See "TERMS OF THE MERGER--Change in UVSG Board of Directors
at Closing" and "MANAGEMENT OF UVSG FOLLOWING THE MERGER."
DESCRIPTION OF TCI/LMG PREFERRED STOCK
Liquidation Value; Dividends. The initial liquidation value for the TCI Group
Preferred Stock and the Liberty Media Group Preferred Stock is $21.60 per share
and $5.40 per share, respectively, subject in both cases, to increase in an
amount equal to aggregate accrued but unpaid dividends, if any. No dividends
will accrue on the TCI/LMG Preferred Stock if the sum of the last reported sale
price of TCI Group Series A Common Stock plus one-fourth of the last reported
sale price of the LMG Series A Common Stock equals or exceeds $27 for any ten
consecutive trading days during the 65 trading days immediately prior to the
first anniversary of issuance of the TCI/LMG Preferred Stock. If the sum of the
amounts specified in the preceding sentence does not equal or exceed $27 for
the specified period, dividends will begin to accrue on the TCI/LMG Preferred
Stock on the first anniversary of issuance of the TCI/LMG Preferred Stock, and
will thereafter be payable semi-annually commencing August 1, 1997, at the rate
of 4% per annum on the liquidation value. Any dividends paid on the TCI/LMG
Preferred Stock may be paid, at TCI's election, in cash or shares of TCI Group
Series A Common Stock. Additional dividends will accrue on unpaid dividends
initially at a rate of 4% per annum. The dividend rate on dividends that remain
unpaid for six months will increase to 8.625% per annum.
Conversion Right; Adjustment to Conversion Rates. Each share of TCI Group
Preferred Stock is convertible at the option of the holder at any time prior to
the close of business on the last business day prior to redemption into 1.05
shares of TCI Group Series A Common Stock and each share of Liberty Media Group
Preferred Stock is convertible at any time prior to the close of business on
the last business day prior to redemption into .2625 of a share of LMG Series A
Common Stock. The conversion rights of the TCI/LMG
4
<PAGE>
Preferred Stock are subject to adjustment in certain circumstances, as more
fully described under "DESCRIPTION OF TCI CAPITAL STOCK."
Among other such adjustments, if the LMG Series A Common Stock, or any other
redeemable capital stock of TCI into which either series of TCI/LMG Preferred
stock may be convertible ("Redeemable Capital Stock"), is redeemed in full by
TCI (the "Redemption Event"), then, except as otherwise described below, the
shares of such TCI/LMG Preferred Stock will thereafter be convertible into the
kind and amount of consideration that would have been received in such
Redemption Event by a holder of the number of shares of Redeemable Capital
Stock that would have been issuable upon conversion of such shares of TCI/LMG
Preferred Stock, if they had been converted in full immediately prior to such
Redemption Event.
However, if any series of Redeemable Capital Stock into which a series of
TCI/LMG Preferred Stock is then convertible is redeemed in full by TCI in
exchange for securities of another issuer ("Redemption Securities"), TCI may
elect to provide the holders of such TCI/LMG Preferred Stock with the right to
exchange such TCI/LMG Preferred Stock, concurrently with the Redemption Event,
for preferred stock of such other issuer ("Mirror Preferred Stock"). Such
Mirror Preferred Stock shall be convertible into Redemption Securities and
shall otherwise have terms and conditions comparable to the TCI/LMG Preferred
Stock exchanged. If TCI provides such an exchange right, any holder that does
not then choose to participate in such exchange will continue to hold such
TCI/LMG Preferred Stock but such holder will lose the conversion right with
respect to the Redeemable Capital Stock redeemed in the Redemption Event and
will not have any right to receive Redemption Securities in lieu thereof. A
holder that participates in such exchange will receive Mirror Preferred Stock
convertible into Redemption Securities, but will no longer hold the TCI/LMG
Preferred Stock so exchanged.
An alternative provision will apply if, at the time of exercise of any such
exchange right provided by TCI, the holders of the applicable series of TCI/LMG
Preferred Stock would be entitled to receive on conversion any property in
addition to the Redeemable Capital Stock being redeemed. In that case, holders
that choose to participate in the exchange will receive both Mirror Preferred
Stock issued by the issuer of the Redemption Securities of the other issuer and
a new preferred stock of TCI convertible into such additional property. In such
event, the Mirror Preferred Stock and such new TCI preferred stock will have a
combined liquidation value equal to the liquidation value of the TCI/LMG
Preferred Stock exchanged and will otherwise have terms and conditions
comparable to such TCI/LMG Preferred Stock.
The above description is necessarily incomplete and is qualified in its
entirety by the more detailed description of such provisions under "DESCRIPTION
OF TCI CAPITAL STOCK" and by the forms of the Certificates of Designations for
the TCI Group Preferred Stock and the Liberty Media Group Preferred Stock,
copies of which have been filed as exhibits to the Registration Statement of
which this Proxy Statement/Prospectus is a part. Any such exchange right
provided by TCI will be provided in compliance with applicable Federal
securities laws, including the registration requirements of such laws, to the
extent applicable.
Redemption. The TCI/LMG Preferred Stock is redeemable at TCI's option, in
whole or in part, at any time on or after February 1, 2001. The TCI/LMG
Preferred Stock will be redeemable in full on February 1, 2016, to the extent
then outstanding. In all cases, the redemption price per share will be the
liquidation value thereof, including the amount of any accrued but unpaid
dividends thereon, to and including the redemption date.
Ranking. The TCI/LMG Preferred Stock will rank prior to the TCI Common Stock
(as defined under "DESCRIPTION OF TCI CAPITAL STOCK") and the TCI Class B
Preferred Stock and pari passu with all other currently outstanding classes and
series of TCI Preferred Stock (as defined under "DESCRIPTION OF TCI CAPITAL
STOCK") with respect to the declaration and payment of dividends and in
liquidation.
Voting Rights. The TCI/LMG Preferred Stock will vote in any general election
of directors of TCI and will have one vote per share for such purposes and will
vote as a single class with the TCI Common Stock, the
5
<PAGE>
TCI Class B Preferred Stock and any other class or series of TCI Preferred
Stock entitled to vote in any general election of directors. The TCI/LMG
Preferred Stock will have no other voting rights except as required by the
Delaware General Corporation Law ("DGCL"). See "DESCRIPTION OF TCI CAPITAL
STOCK."
THE SPECIAL MEETING
The Special Meeting will be held on January 25, 1996, at the Southern Hills
Marriott Hotel, 1902 East 71st Street South, Tulsa, Oklahoma, commencing at
9:00 a.m. local time, to consider and vote upon the proposal to approve and
adopt the Merger Agreement and such other matters as may properly be brought
before the Special Meeting.
Only UVSG stockholders of record as of the close of business on December 11,
1995 (the "Record Date"), are entitled to notice of, and to vote at, the
Special Meeting. Under Section 251 of the DGCL, the Merger Agreement must be
adopted and approved by the UVSG stockholders by the affirmative vote of the
holders of a majority of the total voting power of the shares of UVSG Common
Stock issued and outstanding on the Record Date, voting together as a single
class. Under UVSG's Certificate of Incorporation, stockholder action must be
taken at a meeting and may not be taken by written consent. Each share of UVSG
Class A Common Stock is entitled to one vote and each share of UVSG Class B
Common Stock is entitled to ten votes on each matter that is properly presented
to stockholders at the Special Meeting.
Mr. Flinn, who holds approximately 96% of the total voting power of the
outstanding UVSG Common Stock, has agreed with TCI to vote, consistent with his
fiduciary duty, if any, as a majority stockholder of UVSG, to approve the
Merger Agreement and the transactions contemplated thereby. If Mr. Flinn does
not vote his shares or cause them to be voted in favor of the Merger Agreement,
or if the Board of Directors of UVSG determines, in the exercise of its
fiduciary obligations, not to submit the Merger Agreement for consideration by
the stockholders of UVSG, or if UVSG is the "breaching party" as such term is
defined in the Merger Agreement and the Merger Agreement is terminated or
expires as a result of the breach by UVSG, then, in any such case, Mr. Flinn is
obligated to pay a termination fee in cash to TCI in an amount equal to the sum
of $10 million, plus the excess, if any, over $10 million of the product of (i)
the positive difference between (a) the value per share of any consideration
Mr. Flinn receives for his shares of UVSG Common Stock or any portion thereof
in any transaction or series of related transactions within two years following
the termination of the Merger Agreement and (b) $27 and (ii) the number of
shares of UVSG Common Stock sold or otherwise disposed of in such transactions.
See "THE MERGER--Interest of Certain Persons in the Merger."
Directors and executive officers of UVSG, including Mr. Flinn, who
collectively own approximately 97% of the total voting power of the outstanding
shares of UVSG Common Stock, have informed UVSG that they intend to vote their
shares in favor of adoption of the Merger Agreement. If Mr. Flinn votes his
shares as he has agreed, the Merger Agreement will be approved and adopted at
the Special Meeting irrespective of the vote of any other stockholder of UVSG.
No vote of the TCI stockholders is required for approval of the Merger
Agreement.
NO DISSENTER'S RIGHTS
Under the DGCL, there are no rights of appraisal for UVSG stockholders who
dissent to the Merger. See "THE SPECIAL MEETING--Record Date; Voting at the
Special Meeting."
UVSG'S REASONS FOR THE MERGER; RECOMMENDATION OF THE UVSG BOARD OF DIRECTORS
UVSG's Board of Directors has considered the terms and structure of the
Merger, has reviewed with its financial and legal advisors the financial and
legal aspects of the Merger and has considered with its senior management the
financial and operational considerations relating to the Merger. The UVSG Board
of Directors believes that the Merger is fair to, and in the best interests of,
the stockholders of UVSG taken as a whole and unanimously recommends that
stockholders vote FOR the proposal to adopt the Merger Agreement.
6
<PAGE>
In reaching its decision to approve the Merger Agreement, the UVSG Board of
Directors considered the following factors, none of which was given any more
weight than any other factor:
(i) Growth Opportunities for UVSG as a Result of Affiliation with TCI. The
UVSG Board of Directors believes that UVSG's affiliation with TCI as a result
of the Merger will provide UVSG with growth opportunities for its satellite-
delivered electronic program guide and satellite-transmitted video business
segments, as well as its developing interactive television technology business,
within the cable television systems owned by TCI. In addition, UVSG believes
that there are growth opportunities for SSDS, its majority-owned subsidiary
which provides information technology consulting and software development
services to large organizations with complex computer needs, within TCI and
with other entities with which TCI is affiliated or has contacts. There can be
no assurance, however, that the Merger will secure such growth opportunities
for UVSG or SSDS.
(ii) Closer Relationship with Major Customer. TCI is currently UVSG's largest
single customer for electronic program guide services and superstation
programming. UVSG's Board of Directors believes that the Merger will strengthen
UVSG's relationship with TCI and TCI's cable television systems, although
carriage by TCI of UVSG programming is subject to the channel occupancy limits
promulgated by the FCC. There can be no assurance that TCI will increase or
maintain its use of UVSG's services.
(iii) Synergistic Fit of UVSG and TCI. A significant portion of UVSG's
business consists of developing and marketing electronic program guides and
programming for cable television system operators. Among its other businesses,
TCI owns and manages cable television systems and has use for the services
provided by UVSG. Both UVSG and TCI have direct-to-home satellite services and
UVSG believes that the companies may be able to benefit from economies of scale
in connection with these services following the Merger.
(iv) Comparison with Other Opportunities. UVSG's Board of Directors believes
that the Merger presents the best opportunity for increasing the long-term
value of UVSG to UVSG's stockholders. UVSG's Board of Directors considered a
proposal by a third party to acquire UVSG's electronic program guide business,
but believes that the remaining mix of assets of UVSG following such a
transaction would not likely result in a long-term value to UVSG's stockholders
as favorable as the value of UVSG following the Merger.
(v) Fairness to UVSG Stockholders. Furman Selz Incorporated ("Furman Selz")
has delivered a written opinion that, as of July 10, 1995, the consideration to
be received and the ownership interests to be retained by the holders (other
than TCI) of UVSG Class A Common Stock in the Merger, taken together, is fair
from a financial point of view to such holders. Each holder (other than TCI) of
UVSG Class A Common Stock is able to elect to receive Merger Consideration in
the Merger for up to 50% of such holder's UVSG Common Stock on the same terms
as each other holder. In light of, among other things, Furman Selz' opinion,
the UVSG Board of Directors believes that the Merger is fair and that the
Merger Consideration to be received by those holders of UVSG Common Stock that
elect to receive such Merger Consideration in the Merger, together with the
ownership interests to be retained, is fair to the holders (other than TCI) of
UVSG Common Stock.
(vi) Liquidity and Diversification for Majority Stockholder. The Board of
Directors believes that the Merger and the receipt by the majority stockholder
of shares of TCI/LMG Preferred Stock with respect to 50% of his shares of UVSG
Common Stock provides the majority stockholder with an opportunity for
liquidity and diversification in his investment through a tax free transaction
that benefits UVSG for the reasons discussed above.
See "THE MERGER--UVSG's Reasons for the Merger; Recommendation of UVSG
Board."
OPINION OF UVSG'S FINANCIAL ADVISOR
The Board of Directors of UVSG retained Furman Selz, a nationally recognized
investment banking firm, to act as financial advisor to UVSG in connection with
the proposed Merger and to review the fairness, from a financial point of view,
to the UVSG stockholders of the consideration to be received and the ownership
interests
7
<PAGE>
to be retained by such stockholders. Furman Selz has delivered a written
opinion to the Board of Directors that, as of the date thereof, based on the
assumptions and considerations described in such opinion, the consideration to
be received and the ownership interests to be retained by the holders (other
than TCI) of the UVSG Class A Common Stock in the Merger, taken together, are
fair from a financial point of view to such holders. A copy of the written
opinion of Furman Selz, which sets forth the assumptions made, the matters
considered and the scope of review undertaken in connection therewith, is set
forth as Appendix II to this Proxy Statement/Prospectus. See "THE MERGER--
Opinion of UVSG's Financial Advisor."
TCI'S REASONS FOR THE MERGER
TCI believes that the availability of electronic program guide services is an
increasingly important element of video programming delivery due to
developments in technology which are increasing the volume and variety of video
programming. TCI believes that UVSG is well positioned to offer quality
products and services and to successfully manage their transition as new
technologies are introduced.
TCI operates, or is an investor in, businesses which are similar to those of
UVSG in the development of interactive electronic program guides, direct-to-
home satellite programming sales and the provision of superstation programming.
TCI believes that it will be able to work well with UVSG to identify industry
trends, adapt products and services to coincide with technological and
marketplace developments, gain economies of scale and manage the businesses for
continued growth. See "THE MERGER--TCI's Reasons for the Merger."
INTEREST OF CERTAIN PERSONS IN MERGER
In connection with the Merger Agreement, Mr. Flinn and TCI entered into an
agreement pursuant to which Mr. Flinn agreed to vote, consistent with his
fiduciary obligations, if any, as a majority stockholder of UVSG, his shares of
UVSG Common Stock in favor of the Merger. Mr. Flinn currently holds shares of
UVSG Common Stock representing approximately 96% of the voting power of all
outstanding shares of UVSG Common Stock. Mr. Flinn has also agreed that, if he
does not vote or cause to be voted his shares in favor of the approval of the
Merger Agreement, or if the Board of Directors of UVSG determines, in the
exercise of its fiduciary obligations, not to submit the Merger Agreement for
consideration by the stockholders of UVSG, or if UVSG is the "breaching party"
as such term is defined in the Merger Agreement and the Merger Agreement is
terminated or expires as a result of the breach by UVSG, he will pay a
termination fee in cash to TCI in an amount equal to $10 million plus the
excess, if any, over $10 million of the product of (i) the positive difference
between (a) the value per share of any consideration Mr. Flinn receives for his
shares of UVSG Common Stock or any portion thereof in any transaction or series
of related transactions within two years following the termination of the
Merger Agreement and (b) $27 and (ii) the number of shares of UVSG Common Stock
sold or otherwise disposed of in such transactions.
Mr. Flinn has also agreed in his individual capacity that he will not
purchase or sell any securities of UVSG or enter into any obligation with
respect to the purchase or sale of such securities, participate or engage in
discussions regarding any such sale or provide any material, nonpublic
information regarding UVSG or any of its subsidiaries to any person (other than
TCI) in connection with the foregoing.
Mr. Flinn has also agreed to convert 50% of the shares of UVSG Class B Common
Stock beneficially owned by him into an equal number of shares of UVSG Class A
Common Stock as contemplated by the Merger Agreement. Pursuant to the terms of
the Merger Agreement, the remaining 50% of Mr. Flinn's UVSG Class B Common
Stock will be converted into Merger Consideration at the Effective Time. In
consideration of Mr. Flinn's agreements respecting voting and conversion of his
shares of UVSG Common Stock, TCI has agreed to enter into a registration rights
agreement with Mr. Flinn, pursuant to which TCI is required under certain
circumstances to register under the Act, for resale by Mr. Flinn, shares of TCI
Group Series A Common Stock and LMG Series A Common Stock that may be acquired
by Mr. Flinn upon conversion of the TCI/LMG Preferred Stock he will receive as
Merger Consideration. See "THE MERGER--Interest of Certain Persons in the
Merger."
8
<PAGE>
Unvested stock options previously granted to certain directors and officers
of UVSG to acquire an aggregate of 312,000 shares of UVSG Class A Common Stock
will become immediately exercisable upon consummation of the Merger. In
addition, UVSG will enter into an employment agreement with Mr. Flinn, will
amend the existing employment agreements of Messrs. Bliss and Boylan and will
enter into agreements with certain other UVSG officers, which agreements, among
other things, will provide for certain payments if UVSG terminates such
officers' employment following the Merger for any reason other than for
"cause." See "TERMS OF THE MERGER--Certain Personnel Matters."
COMPARATIVE PER SHARE MARKET INFORMATION
UVSG Class A Common Stock, TCI Group Series A Common Stock and LMG Series A
Common Stock are each currently quoted on the Nasdaq National Market under the
symbols "UVSGA," "TCOMA" and "LBTYA," respectively. UVSG Class A Common Stock
has been publicly traded since November 19, 1993. Effective August 3, 1995, TCI
amended its Restated Certificate of Incorporation to, among other things,
redesignate its Class A Common Stock and Class B Common Stock as Tele-
Communications, Inc. Series A TCI Group Common Stock and Tele-Communications,
Inc. Series B TCI Group Common Stock ("TCI Group Series B Common Stock") and
authorize two new series of common stock, Tele-Communications, Inc. Series A
Liberty Media Group Common Stock and Tele-Communications, Inc. Series B Liberty
Media Group Common Stock ("LMG Series B Common Stock"). On August 10, 1995, TCI
distributed to its stockholders (the "Distribution") one-quarter of a share of
LMG Series A Common Stock for each share of TCI Group Series A Common Stock
held of record and one-quarter of a share of LMG Series B Common Stock for each
share of TCI Group Series B Common Stock held of record. The following table
sets forth the range of high and low sale prices reported on the Nasdaq
National Market for the periods indicated for UVSG Class A Common Stock, the
Class A Common Stock of TCI, TCI Group Series A Common Stock and LMG Series A
Common Stock. The prices have been rounded up to the nearest eighth and do not
include retail markups, markdowns or commissions.
9
<PAGE>
<TABLE>
<CAPTION>
High Low
---- ----
<S> <C> <C>
UVSG CLASS A COMMON STOCK
Year ended December 31, 1993:
Fourth Quarter (beginning November 19, 1993)............... $17 $12 1/4
Year ended December 31, 1994:
First Quarter.............................................. 14 3/4 11 3/4
Second Quarter............................................. 14 10 1/2
Third Quarter.............................................. 20 1/2 13 1/2
Fourth Quarter............................................. 25 16 1/4
Year ended December 31, 1995:
First Quarter.............................................. 27 20 1/2
Second Quarter............................................. 33 3/4 23
Third Quarter.............................................. 35 7/8 25 1/2
Fourth Quarter (through December 20, 1995)................. 32 25
TCI CLASS A COMMON STOCK
Year ended December 31, 1993:
First Quarter.............................................. 25 1/2 20 3/4
Second Quarter............................................. 24 17 1/2
Third Quarter.............................................. 26 3/4 21 5/8
Fourth Quarter............................................. 33 1/4 24 7/8
Year ended December 31, 1994:
First Quarter.............................................. 30 1/4 20 3/8
Second Quarter............................................. 23 3/8 18 1/4
Third Quarter.............................................. 23 7/8 19 3/4
Fourth Quarter............................................. 25 20 1/4
Year ended December 31, 1995:
First Quarter.............................................. 23 3/4 19 7/8
Second Quarter............................................. 24 1/2 17 1/4
Third Quarter (through August 10, 1995*)................... 26 1/4 22 5/8
TCI GROUP SERIES A COMMON STOCK
Year ended December 31, 1995:
Third Quarter (beginning August 11, 1995).................. 20 16 7/8
Fourth Quarter (through December 20, 1995)................. 21 16 3/4
LMG SERIES A COMMON STOCK
Year ended December 31, 1995:
Third Quarter (beginning August 11, 1995).................. 28 23 1/2
Fourth Quarter (through December 20, 1995)................. 28 1/8 22 7/8
</TABLE>
- --------
* The date of the Distribution.
10
<PAGE>
On June 21, 1995, the last trading day before UVSG and TCI publicly announced
that they had entered into negotiations for the Merger, the last reported sale
prices on the Nasdaq National Market for shares of UVSG Class A Common Stock
and TCI Class A Common Stock were $32 3/8 and $23 5/16 per share, respectively.
On December 20, 1995, the last reported sale prices of UVSG Class A Common
Stock, TCI Group Series A Common Stock and LMG Series A Common Stock were $30
3/4, $19 5/16 and $25 5/8 per share, respectively.
DIVIDENDS
UVSG has not paid dividends on its common stock since UVSG's initial public
offering on November 19, 1993. UVSG currently intends to retain all earnings
for continued development and growth of its business and has no plans to pay
cash dividends in the future. Any future change in UVSG's dividend policy will
be made at the discretion of UVSG's Board of Directors in light of conditions
then existing, including UVSG's earnings, financial condition, capital
requirements, business conditions and other factors that UVSG's Board of
Directors deems relevant.
TCI and its predecessors have never paid any cash dividends with respect to
its common stock. TCI anticipates that no cash dividends will be paid on TCI
Common Stock for the foreseeable future. Payment of cash dividends on TCI
Common Stock is determined by the TCI Board of Directors in light of TCI's
earnings, financial condition and other relevant considerations. As a holding
company, TCI's ability to pay cash dividends is dependent on its ability to
receive cash dividends and advances from its subsidiaries. Certain loan
agreements to which certain subsidiaries of TCI are parties or are subject
contain provisions that limit the amount of dividends, other than stock
dividends, that such companies may pay. Future loan agreements may contain
similar restrictions. Payment of dividends by TCI is also subject to the terms
of the TCI/LMG Preferred Stock and other TCI Preferred Stock. See "DESCRIPTION
OF TCI CAPITAL STOCK--TCI Preferred Stock."
No dividends will accrue on the TCI/LMG Preferred Stock if the sum of the
last reported sale price of TCI Group Series A Common Stock plus one-fourth of
the last reported sale price of LMG Series A Common Stock equals or exceeds $27
for any ten consecutive trading days during the 65 trading days immediately
prior to the first anniversary of issuance of the TCI/LMG Preferred Stock. If
the sum of the amounts specified in the preceding sentence does not equal or
exceed $27 for the specified period, dividends will begin to accrue on the
TCI/LMG Preferred Stock on the first anniversary of issuance of the TCI/LMG
Preferred Stock, and will thereafter be payable semi-annually commencing August
1, 1997, at the rate of 4% per annum on the liquidation value. By way of
example, if the first anniversary of issuance of the TCI/LMG Preferred Stock
had been December 20, 1995 and the determination of whether dividends on the
TCI/LMG Preferred Stock would accrue had been made on such date, dividends on
the TCI/LMG Preferred Stock would have begun to accrue as of such date, because
the sum of (i) the last reported sale price per share of the TCI Group Series A
Common Stock and (ii) one-fourth of the last reported sale price per share of
the LMG Series A Common Stock did not exceed $27 for any ten consecutive
trading day period within the 65 trading days immediately preceding such date.
Any dividends paid on the TCI/LMG Preferred Stock will be paid, at TCI's
election, in cash or shares of TCI Group Series A Common Stock. Additional
dividends will accrue on unpaid dividends initially at a rate of 4% per annum
on the liquidation value. If dividends remain unpaid for six months, the
dividend rate on such unpaid dividends will increase to 8.625% per annum. See
"DESCRIPTION OF TCI CAPITAL STOCK--Preferred Stock--Series G Redeemable
Convertible TCI Group Preferred Stock,--Series H Redeemable Convertible Liberty
Media Group Preferred Stock."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
UVSG has received a tax opinion from its counsel that the Merger will qualify
as a reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and that no gain or loss will be recognized by the
stockholders of UVSG from the receipt of the TCI/LMG Preferred Stock in
exchange for their
11
<PAGE>
UVSG Common Stock in the Merger. The matter is not free from doubt and there
are no court decisions or published IRS rulings considering a similar
transaction. The tax opinion is based on current law and is subject to a number
of assumptions and conditions. For a discussion of these and other federal
income tax consequences in connection with the Merger see "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES." It is recommended that each UVSG stockholder consult
his or her own tax advisor concerning the federal (and any applicable foreign,
state and local) income tax consequences of the Merger.
On December 7, 1995, the Treasury Department proposed legislation that would
treat certain preferred stock received in a corporate reorganization as "boot"
and not as qualified stock consideration. If the TCI/LMG Preferred Stock were
determined not to be qualified stock consideration, the receipt of TCI/LMG
Preferred Stock in the Merger would be taxable to any UVSG stockholder who
exchanges shares of UVSG Common Stock for Merger Consideration. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES--The Merger Transaction." As of the date
hereof, the specific statutory language for this proposal has not been released
by the Treasury Department, but based on the summary descriptions of the
proposal that have been released, there is a strong position that the proposal,
if enacted, would not apply to the TCI/LMG Preferred Stock or the Merger.
However, there can be no assurance that tax legislation enacted in the future
would not result in the Merger being a taxable transaction. As stated above,
the tax opinion is based on current federal income tax law, and no opinion is
expressed as to whether any future legislation (which could have a retroactive
effect) will apply to the Merger. Under the Merger Agreement, UVSG is not
obligated to close the Merger if, in its reasonable judgment, any legislation
proposed after the date of the Merger Agreement would be reasonably likely to
have a material adverse effect on the transactions contemplated by the Merger
Agreement. UVSG has advised TCI that it would exercise its right not to
consummate the Merger if any legislation proposed after the date of the Merger
Agreement would, as determined by UVSG in its reasonable judgment, be
reasonably likely to result in the Merger being considered to be a taxable
transaction. This Proxy Statement/Prospectus will not be updated for new
developments with respect to any tax legislation, and UVSG stockholders are
advised to consult their own tax advisors on these matters.
ACCOUNTING TREATMENT
The Merger will be accounted for by TCI under the purchase method of
accounting, whereby the consideration paid for UVSG will be allocated to the
identifiable assets and liabilities of UVSG based on their respective fair
values. Because TCI's economic ownership interest in UVSG following
consummation of the Merger is not expected to exceed 50% of the issued and
outstanding UVSG Common Stock, the allocation of the consideration paid for
UVSG by TCI will not be "pushed down" to, or otherwise be reflected in, UVSG's
separate financial statements.
SELECTED HISTORICAL FINANCIAL DATA
UVSG. The following selected financial data for UVSG and its subsidiaries for
each of the years in the three-year period ended December 31, 1994, and as of
December 31, 1994 and 1993, are derived from audited consolidated financial
statements of UVSG included in the UVSG Annual Report on Form 10-K for the year
ended December 31, 1994, as amended, incorporated herein by reference. The
selected financial data for the years 1991 and 1990, and at December 31, 1992,
1991 and 1990, have been derived from audited consolidated financial statements
of UVSG previously filed with the Commission, but not incorporated herein by
reference. The selected financial data for the nine months ended September 30,
1995 and 1994, and as of September 30, 1995, are derived from UVSG's unaudited
consolidated financial statements incorporated herein by reference. The data
set forth in this table should be read in conjunction with the Financial
Statements and the Notes to Financial Statements incorporated by reference
herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
12
<PAGE>
UNITED VIDEO SATELLITE GROUP, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
-------------------- ---------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $ 183,869 $ 140,494 $196,679 $114,384 $68,223 $53,442 $45,979
Operating expenses...... 155,827 121,315 170,315 104,149 60,092 45,813 37,960
--------- --------- -------- -------- ------- ------- -------
Operating income........ 28,042 19,179 26,364 10,235 8,131 7,629 8,019
Other income (expense),
net.................... (238) (604) (72) (1,894) (2,200) 385 (469)
--------- --------- -------- -------- ------- ------- -------
Income before income
taxes and minority in-
terest................. 27,804 18,575 26,292 8,341 5,931 8,014 7,550
Provision for income
taxes.................. (10,663) (7,161) (9,985) (1,082) (37) (45) --
Minority interest in
affiliate earnings..... (116) -- -- -- (308) (315) (214)
--------- --------- -------- -------- ------- ------- -------
Income from continuing
operations............. $ 17,025 $ 11,414 $ 16,307 $ 7,259 $ 5,586 $ 7,654 $ 7,336
========= ========= ======== ======== ======= ======= =======
Earnings per share...... $ .93 $ .64 $ .91
========= ========= ========
Weighted average number
of common and common
equivalent shares
outstanding............ 18,281 17,845 17,918
Cash dividends declared
per common share(3).... $ -- $ -- $ -- $ -- N/A N/A N/A
========= ========= ======== ========
Pro forma:
Historical income from
continuing operations
before income taxes and
minority interests..... $ 8,341 $ 5,931 $ 8,014 $ 7,550
Historical provision for
income taxes........... (1,082) (37) (45) --
Pro forma income tax ef-
fects(1)............... (2,088) (2,217) (3,000) (2,869)
Pro forma minority
interest in affiliate
earnings............... -- (191) (195) (133)
-------- ------- ------- -------
Pro forma income from
continuing
operations(1).......... $ 5,171 $ 3,486 $ 4,774 $ 4,548
======== ======= ======= =======
Pro forma weighted
average common and
common equivalent
shares outstanding(2).. 16,693 16,544
Pro forma earnings per
share from continuing
operations(1).......... $ .31 $ .21
======== =======
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
------------- -----------------------------------------
1995 1994 1993 1992 1991 1990
------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.......... $ 92,747 $ 83,738 $ 63,320 $20,761 $12,440 $ 9,902
Total assets............ 179,247 147,048 119,136 74,991 30,780 26,548
Current liabilities..... 85,489 74,410 60,852 27,251 17,583 16,809
Long-term obligations... 27,900 29,510 31,276 34,608 2,257 3,532
Stockholders' equity.... 62,986 43,128 27,008 13,132 9,733 5,315
Net book value per com-
mon share.............. 3.52 2.45
</TABLE>
- --------
(1) UVSG closed an initial public offering of UVSG Class A Common Stock on
November 26, 1993. Immediately prior to the closing, UVSG completed a
series of transactions pursuant to which certain affiliated corporations
were merged or otherwise became wholly owned subsidiaries of UVSG (the
"Reorganization"). Prior to that date, UVSG and certain of these affiliated
corporations operated under Subchapter S of the Code and comparable
provisions of applicable state income tax laws. The amounts shown reflect
provisions for federal and state income taxes as if UVSG and each of the
entities that became wholly owned subsidiaries of UVSG had been subject to
federal and state income taxes during such periods.
(2) For the period prior to the Reorganization, consists of (i) a number of
common and common equivalent shares equal to the sum of (a) the number of
shares of UVSG Class B Common Stock outstanding immediately after the
Reorganization and (b) 2,800,000 representing the number of additional
shares of UVSG Class B Common Stock that would have been issued by UVSG if
the certain shares canceled in the Reorganization in exchange for cash
instead were converted into UVSG Class B Common Stock and (ii) a number of
common equivalent shares attributable to shares of UVSG Class B Common
Stock which were subject to stock options upon occurrence of the
Reorganization. Does not include 2,080,000 shares of UVSG Class A Common
Stock reserved for issuance under UVSG's Equity Incentive Plan and Stock
Option Plan for Non-Employee Directors.
(3) UVSG has not declared any dividends subsequent to the Reorganization. Prior
to the Reorganization, UVSG and certain existing S corporations made cash
distributions to their stockholders to fund such stockholders' federal and
state income tax liabilities attributable to their earnings and capital
contributions to certain of the other existing S corporations and for other
matters.
14
<PAGE>
TCI. The following table sets forth selected historical financial data for
TCI and subsidiaries as of September 30, 1995 and as of December 31 of each of
the years in the five-year period ended December 31, 1994, and for the nine-
month periods ended September 30, 1995 and 1994 and for each of the years in
the five-year period ended December 31, 1994. The data set forth in this table
is qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements and the notes thereto of TCI incorporated by
reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The
following information also should be read in conjunction with the description
of TCI Common Stock set forth under "DESCRIPTION OF TCI CAPITAL STOCK."
Capitalized terms used below that have not been previously defined have the
meanings specified under "DESCRIPTION OF TCI CAPITAL STOCK."
TELE-COMMUNICATIONS, INC.
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Fiscal Year Ended December 31,
--------------- --------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OPERATING DATA:
Revenue................. $ 4,945 3,427 4,936 4,153 3,574 3,214 2,940
Operating income........ $ 513 625 788 916 864 674 546
Earnings (loss) from
continuing operations.. $ (92) 63 60 (7) 7 (78) (191)
Dividend requirement on
redeemable preferred
stocks................. $ (26) (3) (8) (2) (15) -- --
Net earnings (loss) from
continuing operations
attributable to
common stockholders:
TCI Class A and Class
B common stock....... $ (a) 60 52 (9) (23) (97) (254)
TCI Group Common
Stock................ (a) N/A N/A N/A N/A N/A N/A
Liberty Media Group
Common Stock......... (a) N/A N/A N/A N/A N/A N/A
------- ------ ------ ------ ------ ------ ------
$ (a) 60 52 (9) (23) (97) (254)
======= ====== ====== ====== ====== ====== ======
Earnings (loss) from
continuing operations
attributable to common
stockholders per common
share:
TCI Class A and Class
B common stock....... $ (a) .12 .10 (.02) (.01) (.22) (.54)
TCI Group Common
Stock................ $ (a) N/A N/A N/A N/A N/A N/A
Liberty Media Group
Common Stock......... $ (a) N/A N/A N/A N/A N/A N/A
Cash dividends declared
per common share....... $ -- -- -- -- -- -- --
Weighted average common
shares outstanding..... (a) 517 541 433 424 360 355
Ratio of earnings to
combined fixed charges
and preferred stock
dividends.............. (b) 1.04 1.19 1.22 1.02 (b) (b)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
------------- ----------------------------------
1995 1994 1993 1992 1991 1990
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Property and equipment, net.. $ 7,153 5,876 4,935 4,562 4,081 4,156
Franchise costs, net......... $11,778 9,444 9,197 9,300 8,104 7,348
Net assets of discontinued
operations.................. -- -- -- -- 242 54
Total assets................. $24,601 19,317 16,520 16,310 15,166 14,106
Debt......................... $12,660 11,162 9,900 10,285 9,455 8,922
Stockholders' equity......... $ 4,669 2,681 2,112 1,726 1,570 748
Shares of common stock
outstanding (net of treasury
shares):
TCI Class A and Class B
common stock.............. -- 576 450 430 419 358
TCI Group Common Stock..... 656 N/A N/A N/A N/A N/A
Liberty Media Group Common
Stock..................... 164 N/A N/A N/A N/A N/A
Book value per common share:
TCI Class A and Class B
common stock.............. $ -- 4.65 4.69 4.01 3.75 2.09
TCI Group Common Stock(c).. $ 4.49 N/A N/A N/A N/A N/A
Liberty Media Group Common
Stock(c).................. $ 10.51 N/A N/A N/A N/A N/A
</TABLE>
- --------
(a) The calculations of net loss from continuing operations attributable to
common stockholders and loss per share for the period ended September 30,
1995 is (i) in the case of the TCI Class A and Class B common stock, $.09
per share, based upon the net loss attributable to common stockholders from
January 1, 1995 through the date of the Distribution of $59 million and
upon 648,161,994 weighted average shares of TCI Class A and Class B common
stock from January 1, 1995 through the date of the Distribution and (ii) in
the case of the TCI Group Common Stock and Liberty Media Group Common
Stock, $.09 and $.02 per share, respectively, based upon (x) the net loss
attributable to the TCI Group and the Liberty Media Group from the date of
the Distribution through September 30, 1995 of $56 million and $3 million,
respectively, and (y) the weighted average shares of TCI Group Common Stock
and Liberty Media Group Common Stock outstanding from the date of the
Distribution through September 30, 1995 of 656,376,044 and 164,092,594,
respectively.
(b) Below 1.00 for such periods.
(c) The computations of the historical book value per share of the TCI Group
Common Stock and the Liberty Media Group Common Stock are based upon
656,378,199 shares of TCI Group Common Stock and 164,093,132 shares of
Liberty Media Group Common Stock outstanding on such date and upon the
attribution of TCI's net assets as of September 30, 1995 to each of the TCI
Group and Liberty Media Group. Shares of TCI Group Common Stock and Liberty
Media Group Common Stock represent ownership interests in TCI and the
attributed net assets of the TCI Group and the Liberty Media Group are not
necessarily indicative of the allocation of any proceeds remaining upon any
liquidation of TCI. In this regard, any such liquidation proceeds remaining
for distribution to holders of TCI Common Stock would be allocated based
upon the respective aggregate Market Capitalization of the outstanding TCI
Group Common Stock and Liberty Media Group Common Stock.
16
<PAGE>
CERTAIN COMPARATIVE PER SHARE DATA
The following sets forth certain comparative data related to book value and
earnings (loss) per common share (i) on a historical basis for TCI and UVSG,
(ii) on a pro forma basis for TCI and (iii) on a pro forma equivalent basis for
UVSG assuming that 50% of the outstanding shares of UVSG Class A Common Stock
are converted into Merger Consideration. The pro forma information shown gives
effect to the Merger as if it had occurred as of September 30, 1995 with
respect to the pro forma balance sheet data. The pro forma operating data gives
effect to the Merger as if it had occurred as of January 1, 1994. The following
information should be read in conjunction with the consolidated historical
financial statements and notes thereto of TCI and UVSG, which are incorporated
by reference into this Proxy Statement/Prospectus. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The following information also should be read
in conjunction with the description of TCI Common Stock set forth under
"DESCRIPTION OF TCI CAPITAL STOCK." Capitalized terms used below that have not
previously been defined have the meanings specified under "DESCRIPTION OF TCI
CAPITAL STOCK." TCI and UVSG did not pay any cash dividends on their common
stock during the year ended December 31, 1994, or during the nine month period
ended September 30, 1995. See "--Dividends."
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------ ------------------------
Liberty Liberty UVSG
TCI Media TCI Media Pro Forma
Group Group TCI UVSG Group Group TCI Equivalent
----- ------- --- ---- ------- ------- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Book value per common
share September 30,
1995................... $4.49(a) 10.51(a) (b) 3.52 $ 4.78(e) 10.36(e) (b) 7.75 (h)
Primary and fully
diluted earnings (loss)
attributable to common
stockholders per common
and common equivalent
share:
Year ended December 31,
1994.................. $ (b) (b) .10(c) .91 $ (b) (b) .09(f) .10 (i)
Nine months ended
September 30, 1995.... $ (d) (d) (d) .93 $ (.15)(g) (.12)(g) (b) (.19)(h)
</TABLE>
- --------
(a) The computations of the historical book value per share of the TCI Group
Common Stock and the Liberty Media Group Common Stock are based upon
656,378,199 shares of TCI Group Common Stock and 164,093,132 shares of
Liberty Media Group Common Stock outstanding on such date and upon the
attribution of TCI's net assets as of September 30, 1995 to each of the TCI
Group and Liberty Media Group. Shares of TCI Group Common Stock and Liberty
Media Group Common Stock represent ownership interests in TCI and the
attributed net assets of the TCI Group and the Liberty Media Group are not
necessarily indicative of the allocation of any proceeds remaining upon any
liquidation of TCI. In this regard, any such liquidation proceeds remaining
for distribution to holders of TCI Common Stock would be allocated based
upon the respective aggregate Market Capitalization of the outstanding TCI
Group Common Stock and Liberty Media Group Common Stock.
(b) Not applicable and/or not meaningful.
(c) The TCI historical earnings per common and common equivalent share for the
year ended December 31, 1994 is based upon 540,837,355 weighted average
shares and does not include the 164,089,627 shares of Liberty Media Group
Common Stock subsequently issued pursuant to the Distribution.
(d) The calculations of net loss from continuing operations attributable to
common stockholders and loss per share for the period ended September 30,
1995 is (i) in the case of the TCI Class A and Class B Common Stock, $.09
per share, based upon the net loss attributable to common stockholders from
January 1, 1995 through the date of the Distribution of $59 million and
648,161,994 weighted average shares of TCI Class A and Class B Common Stock
from January 1, 1995 through the date of the Distribution and (ii) in the
case of the TCI Group Common Stock and Liberty Media Group Common Stock,
$.09 and $.02 per share, respectively, based upon (x) the net loss
attributable to the TCI Group and the Liberty Media Group from the date of
the Distribution through September 30, 1995 of $56 million and $3 million,
respectively, and (y) the weighted average shares of TCI Group Common Stock
and Liberty Media Group Common Stock outstanding from the date of the
Distribution through September 30, 1995 of 656,376,044 and 164,092,594,
respectively.
(e) The pro forma book value computations of TCI Group and Liberty Media Group
are computed in the same manner as described in note (a) above, and are
based upon a preliminary allocation of TCI's purchase price for UVSG
assuming that all UVSG stockholders elect to convert, to the full extent
permitted, their shares of UVSG Common Stock into Merger Consideration.
Such pro forma information also assumes full conversion of the shares of
TCI/LMG Preferred Stock received as Merger Consideration into shares of TCI
Group Series
17
<PAGE>
A Common Stock and LMG Series A Common Stock. If no UVSG stockholders, other
than Mr. Flinn, convert shares of UVSG Common Stock into Merger
Consideration, the pro forma book value per common share at September 30,
1995 would be $4.69 and $10.41 for the TCI Group, and the Liberty Media
Group, respectively.
(f) The TCI pro forma earnings per common and common equivalent share for the
year ended December 31, 1994, is computed in the same manner as described
in note (c) above, and is based upon a preliminary allocation of TCI's
purchase price for UVSG assuming that all UVSG stockholders elect to
convert, to the full extent permitted, their shares of UVSG Common Stock
into Merger Consideration. Such pro forma financial information assumes
full conversion of the shares of TCI/LMG Preferred Stock received as
Merger Consideration into shares of TCI Class A common stock. If no UVSG
stockholders, other than Mr. Flinn, convert shares of UVSG Common Stock
into Merger Consideration, the pro forma earnings per common and common
equivalent share for the year ended December 31, 1994 would remain at $.09
per share. The pro forma earnings per common and common equivalent share
for the year ended December 31, 1994 does not give effect to the shares of
LMG Series A Common Stock that were issued pursuant to the Distribution.
Accordingly, the calculation of pro forma earnings per common and common
equivalent share for such period assumes that the TCI/LMG Preferred Stock
issuable in the Merger for each share of UVSG Common Stock converted into
Merger Consideration would have been convertible during such period into
1.05 shares of TCI Class A Common Stock, rather than 1.05 shares of TCI
Group Series A Common Stock and 0.2625 shares of LMG Series A Common
Stock.
(g) The pro forma loss per common share for the nine months ended September
30, 1995 for the TCI Group and the Liberty Media Group assumes that the
Distribution occurred on January 1, 1995 and is based upon a preliminary
allocation of TCI's purchase price for UVSG assuming that all UVSG
stockholders elect to convert, to the full extent permitted, their shares
of UVSG Common Stock into Merger Consideration. Such pro forma financial
information assumes full conversion of the shares of TCI/LMG Preferred
Stock received as Merger Consideration into shares of TCI Group Series A
Common Stock and LMG Series A Common Stock. If no UVSG stockholders, other
than Mr. Flinn, convert shares of UVSG Common Stock into Merger
Consideration, the pro forma loss per common share for the nine months
ended September 30, 1995 would remain at $.15 per share and $.12 per
share, respectively, for the TCI Group and the Liberty Media Group,
respectively.
(h) The indicated UVSG pro forma equivalents represent the sum of the products
obtained by multiplying the TCI Group and Liberty Media Group pro forma
amounts by the respective number of shares of TCI Group Series A Common
Stock (1.05) and LMG Series A Common Stock (.2625), which would be issued
upon conversion of the TCI/LMG Preferred Stock received for each share of
UVSG Common Stock converted into Merger Consideration. If no UVSG
stockholders, other than Mr. Flinn, convert shares of UVSG Common Stock
into Merger Consideration, the pro forma equivalent book value per common
share at September 30, 1995 would be $7.66 and the pro forma equivalent
loss per common share for the nine months ended September 30, 1995 would
remain at $.19 per share. See "TERMS OF THE MERGER--Consideration to be
Received in the Merger."
(i) The indicated UVSG pro forma equivalent is determined by multiplying TCI
pro forma earnings per share for the year ended December 31, 1994 by 1.05,
which equals the number of shares of TCI Class A Common Stock that would
have been issued upon conversion of the TCI/LMG Preferred Stock received
for each share of UVSG Common Stock converted into Merger Consideration,
assuming that the Distribution had not occurred. If no UVSG stockholders
convert shares of UVSG Common Stock into Merger Consideration other than
Mr. Flinn, the pro forma equivalent earnings per common and common
equivalent share for the year ended December 31, 1994 would remain at
$.10. The pro forma earnings per common and common equivalent share for
the year ended December 31, 1994 does not give effect to the shares of LMG
Series A Common Stock that were issued pursuant to the Distribution. See
"TERMS OF THE MERGER--Consideration to be Received in the Merger."
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<PAGE>
RISK FACTORS
The following factors, among others, should be considered carefully, by UVSG
stockholders in considering whether to make an election to receive TCI/LMG
Preferred Stock.
Uncertainty of Market Value of Merger Consideration and Market Value of UVSG
Common Stock. UVSG stockholders who make a valid Election to receive Merger
Consideration in the Merger will receive one share of TCI Group Preferred
Stock and one share of Liberty Media Group Preferred Stock for each share of
UVSG Class A Common Stock that is subject to such Election. Each share of TCI
Group Preferred Stock is convertible into 1.05 shares of TCI Group Series A
Common Stock and each share of Liberty Media Group Preferred Stock is
convertible into .2625 of a share of LMG Series A Common Stock. On December
20, 1995, the last trading day before the date of this Proxy
Statement/Prospectus, the last reported sale prices on the Nasdaq National
Market for shares of UVSG Class A Common Stock, TCI Group Series A Common
Stock and LMG Series A Common Stock were $30 3/4, $19 5/16 and $25 5/8 per
share, respectively. If a UVSG stockholder had converted on that day the
TCI/LMG Preferred Stock received as Merger Consideration, the stockholder
would have received shares of TCI Common Stock with an aggregate market value
of $27.00 for each share of UVSG Common Stock converted into Merger
Consideration in the Merger. There can be no assurance that the underlying
market value of the TCI/LMG Preferred Stock received as Merger Consideration
will be equal to or greater than the market value of shares of UVSG Common
Stock that are converted into such Merger Consideration at the Effective Time
or at any time thereafter. See "SUMMARY--Comparative Per Share Market
Information." No dividends will accrue on the TCI/LMG Preferred Stock if the
sum of the last reported sale price of TCI Group Series A Common Stock plus
one-fourth of the last reported sale price of LMG Series A Common Stock equals
or exceeds $27 for any ten consecutive trading days during the 65 trading days
immediately prior to the first anniversary of issuance of the TCI/LMG
Preferred Stock. See "DESCRIPTION OF TCI CAPITAL STOCK."
Control of UVSG by TCI Following the Merger. UVSG's voting stock is divided
into two classes with different voting rights, which allows for the
maintenance of control of UVSG by the holders of UVSG Class B Common Stock.
Holders of UVSG Class A Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of UVSG, and holders of UVSG
Class B Common Stock are entitled to ten votes per share. Both classes vote
together as a single class on all matters, except where class voting is
required by the DGCL. UVSG, as the Surviving Corporation following the Merger,
will continue to have these two classes of voting stock. Mr. Flinn currently
owns all of the UVSG Class B Common Stock and has approximately 96% of the
total voting power of all outstanding shares of UVSG Common Stock. As a result
of the Merger, TCI will hold all of the then outstanding shares of UVSG Class
B Common Stock and will have at least 83% of the total voting power of all
outstanding shares of UVSG Common Stock. Thus, following the Merger, TCI will
have the ability to elect all of the directors of UVSG and to control all
other matters requiring the approval of UVSG's stockholders voting as a single
class.
Possible Related Party Transactions. UVSG provides services to TCI at the
present time which in some instances produce significant revenues for UVSG.
UVSG believes it is likely that additional transactions will occur between
UVSG and TCI and affiliates of TCI in the future with respect to the provision
of services to TCI and its affiliates by UVSG. Some of UVSG's operations may
in the future be combined with those of TCI affiliates. TCI representatives
will constitute a majority of the Board of Directors of UVSG following the
Merger. While under applicable principles of law any transactions between UVSG
and TCI are subject to TCI's fiduciary obligations to the minority
stockholders of UVSG, there is no assurance that the transactions will be on
terms that would have been negotiated if the two companies had remained
independent or that UVSG could obtain in negotiations with an independent
party. The Stockholder Agreement described below under "TERMS OF THE MERGER--
Other Agreements" requires that if any transaction between UVSG and TCI or an
affiliate of TCI which must be approved by UVSG stockholders is not approved
by a majority of the directors of UVSG who are not officers, directors or
employees of TCI ("Disinterested Directors"), TCI shall cause its equity
securities in UVSG to be voted in the same proportion for and against such
transaction as the securities of the other stockholders of UVSG voting thereon
are voted. It is not anticipated that most of the potential transactions
between UVSG and TCI would involve approval by UVSG's stockholders.
19
<PAGE>
TCI Losses. TCI reported net earnings (losses) attributable to common
stockholders of $(118) million, $60 million, $52 million, $(9) million and
$(23) million for the nine-month periods ended September 30, 1995 and 1994 and
the years ended December 31, 1994, 1993 and 1992, respectively.
Notwithstanding the losses it has incurred, TCI has been able to, and expects
to continue to be able to, satisfy its debt service and other obligations as
and when such obligations become due. TCI's Operating Cash Flow (operating
income before depreciation, amortization and other non-cash credits or
charges) of $1,798 million, $1,858 million and $1,637 million for the years
ended December 31, 1994, 1993 and 1992, respectively, and $1,503 million and
$1,339 million for the nine-month periods ended September 30, 1995 and 1994,
respectively, has historically been sufficient to cover its interest expense
of $785 million, $731 million and $718 million for the years ended December
31, 1994, 1993 and 1992, respectively, and $745 million and $568 million for
the nine-month periods ended September 30, 1995 and 1994, respectively.
Operating Cash Flow is a measure of value and borrowing capacity within the
cable television industry and is not intended to be a substitute for cash
flows provided by operating activities, a measure of performance prepared in
accordance with generally accepted accounting principles, and should not be
relied upon as such. Operating Cash Flow, as defined, does not take into
consideration substantial costs of doing business, such as interest expense,
and should not be considered in isolation from other measures of performance.
Another measure of liquidity is net cash provided by operating activities as
reflected in TCI's consolidated statements of cash flows. Net cash provided by
operating activities ($1,005 million, $1,251 million and $957 million for the
years ended December 31, 1994, 1993 and 1992, and $670 million and $700
million for the nine months ended September 30, 1995 and 1994, respectively)
reflects net cash flow from the operations of TCI available for TCI's
liquidity needs after taking into consideration the substantial costs of doing
business referred to above that are not reflected in Operating Cash Flow.
Amounts expended by TCI for its investing activities exceed net cash provided
by operations.
Risk that TCI Earnings Will Not Cover Combined Fixed Charges and Preferred
Stock Dividends. The ratio of earnings to combined fixed charges and preferred
stock dividends of TCI was 1.02, 1.22 and 1.19 for the years ended December
31, 1992, 1993 and 1994, respectively, and 1.04 for the nine months ended
September 30, 1994. The ratio of earnings to combined fixed charges and
preferred stock dividends was less than 1.00 for the years ended December 31,
1991 and 1990 and for the nine months ended September 30, 1995 as earnings
available for combined fixed charges and preferred stock dividends were
inadequate to cover combined fixed charges and preferred stock dividends for
such periods. The amounts of the coverage deficiencies for the years ended
December 31, 1991 and 1990 and for the nine months ended September 30, 1995
were $177 million, $399 million and $171 million, respectively. For the ratio
calculations, earnings available for combined fixed charges and preferred
stock dividends consist of earnings (losses) before income taxes plus combined
fixed charges and preferred stock dividends (minus capitalized interest),
distributions from and (earnings) losses of less than 50%-owned affiliates
with debt not guaranteed by TCI (net of earnings not distributed of less than
50%-owned affiliates), and minority interest in earnings (losses) of
consolidated subsidiaries (other than preferred stock dividend requirements).
Combined fixed charges and preferred stock dividends consist of (i) interest
(including capitalized interest) on indebtedness, excluding interest to 50%-
owned affiliates, (ii) TCI's proportionate share of interest of 50%-owned
affiliates, (iii) that portion of rental expense TCI believes to be
representative of interest (one-third of rental expense), (iv) amortization of
deferred debt expense, (v) that portion of minority interest in earnings of
consolidated subsidiaries that represents preferred stock dividend
requirements, excluding preferred stock dividend requirements to 50%-owned
affiliates, (vi) preferred stock dividend requirements of 50% owned
affiliates, other than amounts to TCI, and (vii) preferred stock dividend
requirements of TCI. TCI has guaranteed the debt of certain less than 50%-
owned affiliates and certain other entities in which it has an interest. Fixed
charges of $5,777,000, $13,833,000, $2,517,000, $506,000 and $710,000,
relating to such guarantees for the years ended December 31, 1994, 1993, 1992,
1991 and 1990 respectively, and fixed charges of $4,866,000 and $10,676,000
relating to such guarantees for the nine months ended September 30, 1995 and
1994, respectively, have not been included in fixed charges.
Risks of TCI Holding Company Structure; Restrictions on Dividends. TCI is a
holding company and its assets consist primarily of investments in its
subsidiaries. Substantially all of the consolidated liabilities of TCI
20
<PAGE>
have been incurred by its subsidiaries. TCI's rights, and therefore the extent
to which the holders of the TCI/LMG Preferred Stock will be able to
participate in the distribution of assets of any subsidiary upon the latter's
liquidation or reorganization, will be subject to prior claims of the
subsidiary's creditors, including trade creditors, except to the extent that
TCI may itself be a creditor with recognized claims against such subsidiary
(in which case the claims of TCI would still be subject to the prior claims of
any secured creditor of such subsidiary and of any holder of indebtedness of
such subsidiary that is senior to that held by TCI).
TCI's ability to pay cash dividends on the TCI/LMG Preferred Stock, and on
any other classes and series of stock ranking on a parity with the TCI/LMG
Preferred Stock with respect to the payment of dividends, is dependent upon
the ability of TCI's subsidiaries to distribute amounts to TCI in the form of
dividends, loans or advances or in the form of repayment of loans and advances
from TCI. The subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any dividends on the TCI/LMG
Preferred Stock or to make any funds available therefor, whether by dividends,
loans or other payments. The payment of dividends, loans or advances to TCI by
its subsidiaries may be subject to statutory or regulatory restrictions, is
contingent upon the cash flows generated by those subsidiaries and is subject
to various business considerations. Further, certain of TCI's subsidiaries are
subject to loan agreements that prohibit or limit the transfer of funds by
such subsidiaries to TCI in the form of dividends, loans, or advances and
require that such subsidiaries' indebtedness to TCI be subordinate to the
indebtedness under such loan agreements. TCI's subsidiaries currently have the
ability to transfer funds to TCI in amounts exceeding TCI's dividend
requirements on TCI Preferred Stock. The amount of net assets of subsidiaries
subject to such restrictions exceeds TCI's consolidated net assets. See
"SUMMARY--Dividends."
THE SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE
This Proxy Statement/Prospectus and the accompanying form of proxy are being
furnished to holders of UVSG Common Stock in connection with the solicitation
of proxies by the UVSG Board of Directors for use at the Special Meeting to be
held on January 25, 1996, at the Southern Hills Marriott Hotel, 1902 East 71st
Street South, Tulsa, Oklahoma, commencing at 9:00 a.m. local time, and at any
adjournment or postponement thereof.
At the Special Meeting, holders of UVSG Common Stock will be asked to
consider and vote upon (i) a proposal to approve and adopt the Merger
Agreement and (ii) such other matters as may properly be brought before the
Special Meeting.
STOCKHOLDER PROPOSALS
This Proxy Statement/Prospectus is being used in connection with the Special
Meeting. Proposals of UVSG stockholders that are intended to be presented at
UVSG's 1996 Annual Meeting of Stockholders must be received by the Secretary
of UVSG not later than January 1, 1996 in order to be included in the proxy
statement and proxy relating to the 1996 Annual Meeting.
RECORD DATE; VOTING AT THE SPECIAL MEETING
The UVSG Board of Directors has fixed December 11, 1995 as the Record Date
for the determination of the UVSG stockholders entitled to notice of and to
vote at the Special Meeting. Accordingly, only holders of record of shares of
UVSG Common Stock at the close of business on the Record Date will be entitled
to notice of and to vote at the Special Meeting. At the close of business on
the Record Date, there were 5,532,006 shares of UVSG Class A Common Stock and
12,373,294 shares of UVSG Class B Common Stock outstanding and entitled to
vote, held by 96 holders of record. Each holder of record of shares of UVSG
Class A Common Stock on the Record Date is entitled to cast one vote per share
on each proposal properly submitted for the vote of the UVSG stockholders,
either in person or by properly executed proxy, at the Special Meeting. Each
holder of record of shares of UVSG Class B Common Stock is entitled to ten
votes per share. The presence, in person or
21
<PAGE>
by properly executed proxy, of the holders of a majority of the outstanding
shares of UVSG Common Stock entitled to vote is necessary to constitute a
quorum at the Special Meeting. Abstentions will be counted in determining
whether a quorum is present.
Under Section 251 of the Delaware General Corporation Law ("DGCL"), the
Merger Agreement must be adopted and approved by the UVSG stockholders by the
affirmative vote of the holders of a majority of the total voting power of the
shares of UVSG Common Stock issued and outstanding on the Record Date, voting
together as a single class. Under UVSG's Certificate of Incorporation,
stockholder action must be taken at a meeting and may not be taken by written
consent. Abstentions and broker non-votes will have the same effect as
negative votes.
Under the DGCL, there are no rights of appraisal for UVSG stockholders who
dissent to the Merger.
Mr. Flinn, who holds approximately 96% of the total voting power of the
outstanding UVSG Common Stock, has agreed with TCI to vote, consistent with
his fiduciary duty, if any, as a stockholder of UVSG, to approve and adopt the
Merger Agreement and the transactions contemplated thereby. Mr. Flinn in
limited circumstances may owe a fiduciary duty to the other stockholders of
UVSG because he controls UVSG. This duty is distinguishable from the fiduciary
duties he owes to UVSG as a director and officer when acting in such
capacities. If Mr. Flinn does not vote his shares or cause them to be voted in
favor of the Merger Agreement, or if the Board of Directors of UVSG
determines, in the exercise of its fiduciary obligations, not to submit the
merger proposal for consideration by the stockholders of UVSG, or if UVSG is
the "breaching party" as such term is defined in the Merger Agreement and the
Merger Agreement is terminated or expires as a result of the breach by UVSG,
then, in any such case, Mr. Flinn is obligated to pay a termination fee in
cash to TCI in an amount equal to the sum of $10 million, plus the excess, if
any, over $10 million of the product of (i) the positive difference between
(a) the value per share of any consideration Mr. Flinn receives for his shares
of UVSG Common Stock or any portion thereof in any transaction or series of
related transactions within two years following the termination of the Merger
Agreement and (b) $27 and (ii) the number of shares of UVSG Common Stock sold
or otherwise disposed of in such transactions. See "THE MERGER--Interest of
Certain Persons in the Merger."
PROXIES
All shares of UVSG Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at the Special
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted FOR adoption and
approval of the Merger Agreement.
At the date of this Proxy Statement/Prospectus, the Board of Directors of
UVSG does not know of any business to be presented at the Special Meeting
other than as set forth in the notice accompanying this Proxy
Statement/Prospectus. If any other matters should properly be presented at the
Special Meeting for consideration, including, among other things,
consideration of a motion to adjourn the Special Meeting to another time
and/or place, the persons named in the enclosed form of proxy and acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of UVSG, at or before the taking of the vote at the Special
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of UVSG, before the taking of the vote at the
Special Meeting or (iii) attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not in and of itself
constitute a revocation of the proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to UVSG at 7140 South
Lewis Avenue, Tulsa, Oklahoma, 74136-5422, Attention: Secretary, or hand-
delivered to the Secretary of UVSG, at or before the taking of the vote at the
Special Meeting.
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<PAGE>
Expenses incurred in connection with the printing and mailing of this Proxy
Statement/Prospectus will be paid by UVSG. In addition to solicitation by use
of the mails, proxies may be solicited by directors, officers and employees of
UVSG in person or by telephone, telegram or other means of communication. Such
directors, officers and employees will not be additionally compensated, but
may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and UVSG will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
If your shares of UVSG Common Stock are held in the name of a brokerage
firm, bank nominee or other institution, only it can sign a proxy card with
respect to your shares of UVSG Common Stock. Accordingly, please contact the
person responsible for your account and give instructions for a proxy card to
be signed representing your shares of UVSG Common Stock.
If you have any questions about giving your proxy or require assistance,
please contact the Secretary of UVSG, at 7140 South Lewis Avenue, Tulsa,
Oklahoma, 74136-5422, at (918) 488-4000.
THE MERGER
BACKGROUND OF THE MERGER
During May 1994, UVSG and TCI had informal discussions, initiated by UVSG,
regarding the formation of a venture between UVSG's Prevue Networks subsidiary
and TCI with respect to TV Guide On Screen, TCI's joint venture with News
Corporation of America ("News") in the electronic guide business. Limited
contacts by telephone between the parties continued sporadically thereafter
but were inconclusive.
In mid-December 1994, Joe D. Batson, Senior Vice President of UVSG and
President of its Prevue Networks subsidiary, and others from UVSG met in
Denver with John C. Malone, President and Chief Executive Officer of TCI, and
Larry E. Romrell, Executive Vice President of TCI and President of its
subsidiary, TCI Technology Ventures, Inc. ("TCITV"), to discuss TCI's
relationship with Prevue Networks and use of its services. The discussions
touched upon many of the relationships between UVSG and TCI and included
mention of possible ventures between TCI and UVSG's Prevue Networks and UVSG's
Superstar Satellite Entertainment division ("Superstar"), UVSG's direct-to-
home satellite business.
In early January 1995, Roy L. Bliss, President and Chief Operating Officer
of UVSG, while discussing unrelated matters with Julian Markby, then UVSG's
principal contact with PaineWebber Incorporated ("PaineWebber"), mentioned
UVSG's interest in forming ventures with TCI in the electronic guide and
direct-to-home satellite businesses. Mr. Markby offered to inquire as to
whether TCI had any interest during an upcoming visit he previously had
scheduled with Robert R. Bennett, Senior Vice President of TCI and Senior Vice
President and Chief Financial Officer of its Liberty Media subsidiary, later
in January. PaineWebber was not retained to act on behalf of UVSG in
connection with any transaction with TCI. During the visit, Mr. Bennett
expressed interest in the ventures and suggested a meeting with UVSG to
discuss matters. Unsolicited, PaineWebber sent to TCI after the visit a
compilation of publicly available information about UVSG. PaineWebber did not
receive any compensation from either TCI or UVSG for contacting TCI about
UVSG.
Mr. Bennett met in Denver with Mr. Markby and Peter C. Boylan, Executive
Vice President and Chief Financial Officer of UVSG, on February 9, 1995 to
discuss a possible business combination between Superstar and Netlink USA
("Netlink"), TCI's direct-to-home satellite business. Rick Brattin, Senior
Vice President of UVSG and President of Superstar, participated in a portion
of the meeting by telephone. Those persons met later that day with Messrs.
Bliss and Batson and Todd Walker, Vice President, Finance and Administration,
of Prevue Networks for UVSG and Mr. Romrell, David P. Beddow, Senior Vice
President of TCITV, Bruce W. Ravenel, Senior Vice President and Chief
Operating Officer of TCITV, David D. Boileau, Vice President, Finance, of
TCITV, and Charles Moldow, director of investments for TCITV, for TCI to
discuss a possible joint venture
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between Prevue Networks and TV Guide On Screen. At the end of that meeting,
Messrs. Romrell and Ravenel met briefly with Messrs. Bliss and Boylan. Mr.
Romrell suggested that separate transactions involving Superstar and Netlink
and Prevue Networks and TV Guide On Screen would be complicated to do on a tax
free basis as requested by UVSG and inquired whether a transaction involving
UVSG directly might be possible. Mr. Romrell had raised the possibility
earlier in the day in a telephone conversation with Mr. Flinn, who was
traveling.
On March 14, 1995, TCI representatives consisting of Messrs. Bennett,
Ravenel, Boileau, Beddow and Moldow and David Wargo, a consultant to TCITV,
met at UVSG's offices in Tulsa, where various UVSG personnel discussed
publicly available information about UVSG. Mr. Romrell arrived near the end of
the meeting. Mr. Flinn joined Mr. Romrell and other TCI representatives on a
TCI flight back to Denver. The possibility of a transaction involving UVSG
directly was discussed briefly on the plane.
On April 19, 1995, Mr. Bennett sent to UVSG a term sheet for possible
transactions, contacted Mr. Flinn by telephone and informed Mr. Flinn that
transactions with TCI involving Prevue Networks and Superstar presented a
number of tax issues and would be very difficult to implement. The term sheet
outlined transactions whereby (a) UVSG would acquire an interest in Netlink in
exchange for UVSG Class A Common Stock, (b) TCI and possibly News would
contribute their interests in TV Guide On Screen and UVSG would contribute its
interest in Prevue Networks to a new partnership and (c) Mr. Flinn would agree
to certain restrictions relating to the voting, transfer and sale of his UVSG
shares such that TCI could ultimately acquire a controlling interest in UVSG.
Mr. Bennett also asked Mr. Flinn whether he might consider a tax free exchange
of TCI Class A Common Stock for a portion of his UVSG shares. Mr. Flinn
indicated that he would not unless an appropriate exchange ratio could be
agreed upon.
Subsequently, Mr. Bennett contacted Mr. Boylan and informed him that the
possible transactions with TCI involving Prevue Networks and Superstar
reflected in the term sheet might be too complicated to do on a tax free
basis.
Around this time, TCI suggested to News, its co-venturer in TV Guide On
Screen, that it talk with UVSG about whether Prevue Networks could be combined
with TV Guide On Screen. News expressed an interest and Mr. Bennett and
William Squadron, Vice President of Strategic Planning of News, contacted Mr.
Flinn about the matter by telephone. UVSG had discussions with News about a
possible transaction beginning in early May. On June 6, 1995, News made a
proposal to acquire UVSG's Prevue Networks and SpaceCom subsidiaries in a
complex transaction that the UVSG Board of Directors concluded was less
favorable to UVSG and its stockholders than that then being discussed with
TCI. Discussions between UVSG and News continued intermittently until shortly
before the UVSG Board of Directors approved the transaction with TCI on June
19, 1995.
In early May 1995, Messrs. Flinn and Boylan separately had brief contacts
with Mr. Bennett at the National Cable Television Association meetings in
Dallas. Mr. Bennett suggested to each that TCI exchange shares of its Class A
Common Stock for a portion of Mr. Flinn's UVSG shares and suggested an
exchange ratio of one to one based upon TCI's perception of relative private
market values of the two companies. At the time, the UVSG Class A Common Stock
was trading at a significantly higher price per share than that of the TCI
Class A Common Stock. Mr. Flinn suggested that exchange ratio would not be
acceptable but that they should continue talking.
On May 24, 1995, Messrs. Flinn, Bliss and Boylan met with Messrs. Romrell,
Bennett, Ravenel, Boileau, Beddow and Moldow from TCI to discuss possible
transactions involving Prevue Networks and TV Guide On Screen and Superstar
and Netlink. The UVSG representatives also presented to the TCI
representatives publicly available information about UVSG, and the TCI
representatives presented to the UVSG representatives publicly available
information about TCI.
On June 1, 1995, Mr. Bennett contacted Mr. Flinn and proposed a tax free
exchange of newly issued TCI preferred stock for shares of UVSG Class B Common
Stock owned by Mr. Flinn representing at least 80% of the voting power of UVSG
outstanding voting securities. Mr. Flinn indicated the proposal would be worth
discussing further.
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On June 2, 1995, Mr. Romrell contacted Messrs. Bliss and Boylan to set up a
meeting and suggested potential transaction structures, including an exchange
by Mr. Flinn of UVSG Class B Common Stock for shares of TCI preferred stock
not involving other UVSG stockholders, that would be discussed at a meeting
scheduled for June 6, 1995.
On June 6, 1995, Messrs. Flinn, Bliss and Boylan met in Denver with Messrs.
Romrell, Bennett, Ravenel, Boileau and Beddow to discuss specific terms of a
tax free transaction. TCI proposed the conversion by Mr. Flinn of half his
UVSG Class B Common Stock, which has ten votes per share, into UVSG Class A
Common Stock, which has one vote per share, and the exchange by Mr. Flinn of
his remaining UVSG Class B Common Stock, which would constitute at least an
83% voting interest in UVSG, for shares of newly issued TCI preferred stock,
with UVSG's Board of Directors waiving application of Section 203 of the DGCL.
In general, Section 203 of the DGCL limits the ability of a person acquiring
beneficial ownership of 15% or more of the voting power of a corporation's
outstanding voting stock from engaging in a business combination with the
corporation within three years of the date such person acquired such
beneficial interest unless, among other things, prior to such date the
corporation's board of directors approved either the business combination or
the transaction whereby such beneficial ownership was acquired. See
"DESCRIPTION OF TCI CAPITAL STOCK--Other Matters." Mr. Flinn requested that
the other UVSG stockholders be given the opportunity to exchange their UVSG
Class A Common Stock on the same basis he had been offered to exchange his
UVSG Class B Common Stock for shares of TCI preferred stock. Messrs. Flinn,
Bliss and Boylan discussed TCI's proposal and possible responses that evening
with counsel, Holme Roberts & Owen LLC ("Holme Roberts"), and Furman Selz,
which had been contacted the previous day about providing advice in connection
with any transaction with TCI and giving a fairness opinion if one was
appropriate.
On the morning of June 7, 1995, Messrs. Bliss and Boylan contacted Mr.
Romrell to indicate that a transaction could not proceed unless all UVSG
stockholders were given the opportunity to exchange their shares of UVSG Class
A Common Stock for TCI preferred stock on a basis comparable to Mr. Flinn's.
Also on June 7, 1995, Furman Selz spoke with Dr. Malone about the proposed
transaction involving UVSG. Dr. Malone was making a presentation at a media
investors conference sponsored by Furman Selz that had been previously
scheduled for that date. Furman Selz encouraged Dr. Malone to consider a
transaction with UVSG that would provide an equal opportunity for all UVSG
stockholders to participate rather than acquiring control of UVSG from Mr.
Flinn alone.
On June 8, 1995, UVSG's Board of Directors met to review the status of
discussions with TCI. The directors had previously been informed about
discussions with TCI as they progressed. Possible material terms of the
potential transaction, possible structures of the transaction to permit the
transaction to be a tax free reorganization and related matters were
discussed. Holme Roberts advised the Board of their legal duties in
considering the transaction proposed by TCI and the demand by TCI that a
waiver of Section 203 of the DGCL would be required before any agreement,
arrangement or understanding could be reached among UVSG, Mr. Flinn and TCI.
The Board formally approved the engagement of Furman Selz and the pursuit of
negotiations with TCI.
On June 12, 13 and 15, 1995, Messrs. Flinn, Bliss and Boylan had several
telephone conference calls with Messrs. Romrell and Bennett to discuss the
potential terms of a proposed transaction. Holme Roberts was present for each
of the calls, as was Baker & Botts L.L.P., counsel for TCI ("Baker Botts").
TCI required that detailed terms of the proposed transaction be agreed and
Section 203 of the DGCL be waived before it would conduct a proposed due
diligence investigation of UVSG. The parties agreed that certain due diligence
issues be addressed by Baker Botts prior to June 19, 1995, under a separate
confidentiality agreement while negotiations were continuing. Further
negotiation of the possible transaction and TCI's due diligence investigation
were each subject to satisfactory completion by Baker Botts of its limited
investigation, which was commenced on June 14.
On June 15, 1995, UVSG's Board of Directors and Holme Roberts met to discuss
the proposed terms of the transaction under discussion with TCI.
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Baker Botts concluded its limited due diligence prior to June 19. On June
19, 1995, there were a number of telephone conference calls between TCI and
UVSG and their counsel regarding the possible terms of the proposed
transaction. That evening, the UVSG Board of Directors met to consider certain
aspects of the proposed transaction. The terms of the proposed transaction
were explained in detail. Furman Selz orally advised the Board that based on
their preliminary analysis it was highly likely they would deliver a favorable
fairness opinion as to the proposed transaction. Holme Roberts reviewed
certain legal aspects of the proposed transaction for the Board. The Board
then approved a confidentiality agreement, a cover letter to a term sheet and
all agreements contemplated thereby and authorized the transaction subject
only to negotiation of a mutually satisfactory definitive agreement and to the
receipt of a favorable fairness opinion from Furman Selz. Mr. Flinn was also
party to the cover letter. The approval of matters by the Board included
approval of the transaction for purposes of Section 203(a)(1) of the DGCL.
During the period June 21 through 23, 1995, representatives of TCI conducted
a due diligence investigation of UVSG at the offices of UVSG in Tulsa. The
cover letter and confidentiality agreement referred to above were signed on
the morning of June 21 before TCI's due diligence investigation began. On June
23, 1995, representatives of TCI conducted a due diligence investigation in
Denver at the offices of SSDS, a computer system integrator of which UVSG was
in the process of acquiring a 70% interest.
On June 26, 1995, TCI advised UVSG that it had satisfactorily completed its
due diligence investigation and that negotiation of definitive agreements
could proceed.
Negotiation of definitive agreements was conducted by telephone and in
person between UVSG and TCI and their counsel between July 5 and 10, 1995. On
July 10, the UVSG Board of Directors met to approve the definitive agreements.
Furman Selz discussed matters relating to fairness of the transaction and its
opinion and delivered its fairness opinion. Holme Roberts reviewed with the
Board their fiduciary obligations with respect to the Merger. The Board
discussed alternatives to the transaction with TCI that consisted of the
transaction proposed by News and maintaining UVSG as an independent company.
The Board then approved the transaction.
Documentation for the Merger was finalized in all material respects on July
10, 1995, and definitive agreements were signed on July 11, 1995.
On December 18, 1995, UVSG and TCI signed an amendment to the Merger
Agreement extending from December 31, 1995 to January 31, 1996 the date after
which the Merger Agreement may be terminated by either party if the Merger has
not been consummated and changing the form of certain documents attached as
exhibits to the Merger Agreement.
UVSG'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE UVSG BOARD OF DIRECTORS
UVSG's Board of Directors has considered the terms and structure of the
Merger, has reviewed with its financial and legal advisors the financial and
legal aspects of the Merger and has considered with its senior management the
financial and operational considerations relating to the Merger. UVSG's Board
of Directors believes that the Merger is fair to and in the best interests of
the stockholders of UVSG taken as a whole. UVSG's Board of Directors
unanimously approved the Merger Agreement and unanimously recommends that the
stockholders vote FOR the proposal to approve and adopt the Merger Agreement.
In reaching these conclusions and recommendations, UVSG's Board of Directors
considered, among other things, the following factors, none of which was given
any more weight than any other factor:
(i) Growth Opportunities for UVSG as a Result of Affiliation with
TCI. UVSG's business segments include its Prevue Networks subsidiary, which
has developed and supplies satellite-delivered, electronic program guide
services including The Prevue Channel and a promotional channel named Sneak
Prevue to cable television systems throughout the United States. Prevue
Networks has also begun marketing its services to cable television systems in
a number of foreign countries. The Prevue Channel is a comprehensive
information source and guide for all of a cable television system's channel
offerings, while Sneak Prevue exclusively promotes a cable
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television system's pay-per-view offerings. UVSG, through its UVTV division
("UVTV"), markets and distributes to cable television systems video and audio
services, such as superstations WGN (Chicago), WPIX (New York) and KTLA (Los
Angeles). The markets for UVSG's Prevue Networks and UVTV services are cable
television system operators and revenue growth is largely dependent on
increasing the number of cable television systems that carry these services.
Although UVSG believes that these business segments, especially Prevue
Networks, have experienced healthy growth over the past few years, with
increasing competition in the U.S. cable television market from other on-
screen program guides and cable television programming services similar to
UVTV, growth opportunities in these markets are becoming increasingly
difficult.
UVSG is also developing electronic interactive television technology that
allows cable television viewers to retrieve on demand continuously updated
information, such as program guide, sports and weather information. The growth
and success of these interactive information delivery services also depends
upon UVSG's ability to obtain commitments from cable television system
operators to acquire and make available to their respective subscribers these
services. A number of companies are developing similar interactive services
and are competing with UVSG for distribution of these services on cable
television systems.
TCI is generally considered the largest cable television system operator in
the United States with approximately 12.2 million basic cable subscribers as
of September 30, 1995, in cable television systems that it owns throughout the
continental United States. At September 30, 1995, UVSG has agreements with TCI
cable television systems with approximately 9.5 million subscribers for one or
more of its Prevue Network services and TCI cable television systems with
approximately 6.9 million subscribers for one or more of UVTV's superstations.
While TCI has not undertaken to increase its use of UVSG's services, UVSG
management believes that UVSG's affiliation with TCI as a result of the Merger
will provide opportunities for it to do so. Use of UVSG's Prevue Networks and
UVTV operations, as well as its newly-developing interactive television
technology, could be expanded within the cable television systems owned by TCI
and its subsidiaries, many of which do not currently use UVSG's services. In
addition, UVSG believes that there are growth opportunities for UVSG's
majority owned subsidiary, SSDS, which provides information technology
consulting and software development services to large organizations with
complex computer needs, within TCI and with other entities with which TCI is
affiliated or has contacts. For example, TCI's @Home subsidiary has retained
SSDS to perform system integration work with respect to its back office
functions in preparation for its service offerings and Mr. Ravenel has joined
the SSDS Board of Directors.
As discussed below, UVSG believes that it and TCI will work well together as
UVSG continues to develop existing and new products. Thus, in addition to
growth opportunities for its products within TCI's cable television systems,
UVSG believes that there will be increased growth opportunities as well for
its existing and new products in other cable television systems as a result of
its affiliation with TCI.
In considering the potential benefits for growth through the affiliation
with TCI, UVSG's Board of Directors also considered the potential negative
impact of the affiliation on sale of UVSG's services to cable television
system operators other than TCI. UVSG management reviewed similar arrangements
by TCI and other cable television system operators with suppliers of cable
television products and discussed with certain of UVSG's larger customers such
customers' reactions to acquiring services from UVSG if UVSG became affiliated
with a cable television system operator. UVSG has no reason to believe that
other cable television systems would not buy UVSG's services if UVSG were
affiliated with TCI.
UVSG also believes that its affiliation with TCI, and increased visibility
within the industry, will provide it with a wider access to development
opportunities proposed by third parties. Both TCI and UVSG are active in the
business development sector and may develop or be approached with transactions
that are beneficial to one, the other or both of TCI and UVSG that they can
refer among themselves. UVSG believes that TCI would refer to UVSG a number of
otherwise favorable development or investment opportunities that are too small
for TCI's involvement.
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(ii) Closer Relationship with Major Customer. Cable television systems owned
by TCI account for approximately 9.5 million subscribers to Prevue Network's
services and 6.9 million subscribers to UVTV's services, or approximately 22%
and 17%, respectively, of the total number of subscribers for Prevue Network's
and UVTV's services at September 30, 1995. TCI is currently UVSG's largest
single customer for electronic program guide services and superstation
programming.
While UVSG believes that it offers superior services within these respective
product categories and has received no indication that TCI cable television
systems will stop carrying UVSG's services, there can be no assurance that the
current number of TCI cable television systems would continue to carry UVSG's
services. UVSG is aware that TCI owns the company that distributes WTBS, a
superstation similar to those marketed by UVTV and, as discussed above, knows
of TCI's and News' investment in TV Guide On Screen.
UVSG's Board of Directors believes that the Merger will strengthen UVSG's
relationship with TCI and TCI's cable television systems. While there can be
no assurance that such will be the case, UVSG believes the Merger will make
more likely the continued relationship and expansion of UVSG's role as a
service provider to TCI cable television systems, subject to limitations under
the FCC's "channel occupancy rule" (47 C.F.R. (S)76.504), which limits the
number of channels that can be occupied on a cable system by a video
programmer in which the cable operator has an attributable interest.
(iii) Synergistic Fit of UVSG and TCI. The core businesses and origins of
both TCI and UVSG are in the cable television industry. UVSG believes that
both companies have taken similar paths in utilizing technology within the
industry and have similar views of the future of the industry. Given the
common background and similar experiences in the industry, UVSG believes that
it will be able to work well with TCI for continued growth within the evolving
marketplace.
Many of UVSG's business segments focus on the development and sale of
services to cable television systems. TCI's core businesses include the cable
television systems that it owns and manages. As discussed above, UVSG's Prevue
Networks offers electronic program guide and promotion services, which UVSG
believes are the most well-established and respected services of their type in
the industry. TCI's cable television systems can use such electronic program
guide services. Indeed, TCI at various times has been involved in developing
electronic program guide businesses. UVSG believes there is a similar fit
between UVTV's superstation business and TCI's cable television systems' need
for programming.
Both UVSG, through Superstar, and TCI, through its subsidiary, Netlink USA,
are actively involved in the direct-to-home satellite services market. UVSG
believes that, following the Merger, Superstar and Netlink will benefit from
each other's experience within the industry. There may be opportunities to
combine certain functions to gain economies of scale. In addition, UVSG
believes there may be great potential for developing the direct-to-home
satellite service market internationally through potential joint efforts of
Superstar and Netlink.
UVSG's majority owned subsidiary, SSDS, provides information technology
consulting and software development services to large organizations with
complex computer system needs. SSDS is actively involved in integrating data,
video and voice technologies to meet the complex computing, information
retrieval and communication needs of various enterprises and is actively
exploring future opportunities in computer networking. TCI requires such
services for its own organization. More importantly, as the cable television,
telecommunications and entertainment industries converge, UVSG believes there
are increased opportunities for SSDS through its association with TCI to
actively participate in developing new applications and technologies that
would benefit both UVSG and TCI.
(iv) Comparison with Other Opportunities. After carefully reviewing the
opportunities available to UVSG in lieu of the Merger, UVSG's Board of
Directors believes that the Merger presents the best opportunity for
increasing the long-term value of UVSG to UVSG's stockholders. The Board of
Directors considered (a) sales of one or more of UVSG's businesses, (b) a
strategic combination with another company, such as in the Merger, where all
of UVSG's business segments would remain intact, and (c) continuing to operate
absent a sale or strategic combination.
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UVSG considered the sale of its Prevue Networks subsidiary and related
electronic interactive television services, but believed that the remaining
mix of assets of UVSG following such sale would not result in as much long-
term value to UVSG's stockholders as would a merger with TCI, where it would
continue to own those assets. Given the related businesses and unique fit of
UVSG and TCI and the associated growth opportunities discussed above, UVSG's
Board of Directors believed there were few companies that could provide
comparable benefits to UVSG as TCI could in a strategic combination. The Board
also believed that because of the similarities of its businesses with TCI and
the synergistic fit between the two companies, TCI understood and appreciated
the value of UVSG and offered Merger Consideration that UVSG's Board of
Directors believes is fair. Finally, the Board of Directors considered
continuing to operate UVSG without any combination or affiliation with a
strategic partner. Given the increasing consolidation in the industry and
increased competition, the Board believed that a strategic combination, such
as the Merger, would increase UVSG's growth opportunities and financial
prospects.
(v) Fairness to UVSG Stockholders. The UVSG Board of Directors carefully
reviewed and discussed with Furman Selz Furman Selz' written opinion that, as
of the date of the opinion, the consideration to be received and the ownership
interests to be retained by the holders (other than TCI) of UVSG Class A
Common Stock in the Merger, taken together, is fair from a financial point of
view to such holders. Each holder (other than TCI) of UVSG Class A Common
Stock is able to elect to receive Merger Consideration in the Merger for up to
50% of such holder's UVSG Common Stock on the same terms as each other holder.
Based on the opinion of Furman Selz and the other reasons discussed in this
section, the UVSG Board of Directors believes that the Merger is fair and that
the Merger Consideration to be received by those holders of UVSG Common Stock
that elect to receive such Merger Consideration in the Merger, together with
the ownership interests to be retained, is fair to the holders (other than
TCI) of UVSG Common Stock.
(vi) Liquidity and Diversification for Majority Stockholder. Mr. Flinn,
UVSG's majority stockholder, currently holds 70.2% of the total outstanding
shares of UVSG Common Stock. Given the size of the holding, any potential sale
by Mr. Flinn in the public market or as a private transaction to obtain
liquidity in his investment in UVSG could potentially be disruptive to the
trading value of UVSG Class A Common Stock. The Board of Directors believes
that the Merger and the receipt by Mr. Flinn of shares of TCI/LMG Preferred
Stock with respect to 50% of his shares of UVSG Common Stock provide Mr. Flinn
with an opportunity for liquidity and diversification in his investment
through a tax free transaction that clearly benefits UVSG, for the reasons
discussed above.
Mr. Flinn has indicated to UVSG that he has agreed to vote his shares of
UVSG Common Stock to approve the Merger because it allows him on a tax free
basis to diversify his personal holdings by exchanging 50% of his shares of
UVSG Common Stock (which represents a large portion of his total net worth)
for TCI/LMG Preferred Stock in a transaction that, in turn, he believes
benefits UVSG for the reasons discussed above.
OPINION OF UVSG'S FINANCIAL ADVISOR
Furman Selz delivered its written opinion to the UVSG Board of Directors
that, as of July 10, 1995, the consideration to be received and the ownership
interests to be retained by the holders (other than TCI) of UVSG Class A
Common Stock in the Merger, taken together, is fair from a financial point of
view to such holders. The opinion of Furman Selz has not been, and is not
anticipated to be, updated.
The written opinion of Furman Selz, dated July 10, 1995, which sets forth
the assumptions made, matters considered and the review undertaken with regard
to such opinion, is included as Appendix II to this Proxy
Statement/Prospectus. Furman Selz' opinion is directed only to the fairness of
the consideration to be received, and the ownership interests to be retained
by the holders of UVSG Class A Common Stock (other than TCI) and does not
address any other terms of any other transaction involving UVSG and TCI.
Furman Selz' opinion was delivered for the information of the UVSG Board of
Directors and does not constitute a recommendation to any stockholder of UVSG
as to whether such stockholder should elect to convert shares of UVSG Class A
Common Stock in the Merger or as to how such stockholder should vote at the
Special Meeting. The summary of the opinion of Furman Selz set forth below is
qualified in its entirety by reference to the full text of the opinion. UVSG
stockholders are urged to read this opinion in its entirety.
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In rendering its opinion, Furman Selz, among other things, (i) reviewed the
terms and conditions of a draft of the Merger Agreement dated July 7, 1995 and
the outline of the principal terms relating to the Transaction, dated June 20,
1995; (ii) analyzed historical business and financial information relating to
UVSG and TCI, including certain public filings of each of UVSG and TCI; (iii)
reviewed certain financial forecasts and other data provided by UVSG,
including the most recent forecast of financial information for UVSG prepared
by UVSG's senior management; (iv) conducted discussions with members of the
senior managements of UVSG and TCI, respectively, and certain other employees
of UVSG, concerning each companies' business and operations, assets, present
condition and future prospects, to the extent deemed appropriate by Furman
Selz; (v) reviewed certain publicly available information, including certain
research reports, concerning certain other companies engaged in businesses
which Furman Selz believes to be comparable to UVSG and TCI and the trading
markets for certain of such other companies' securities; (vi) reviewed the
terms of certain recent business combinations which Furman Selz deemed
relevant; and (vii) conducted other studies, analyses and investigations as
Furman Selz deemed appropriate.
In arriving at its opinion, Furman Selz did not visit or conduct a physical
inspection of the properties and facilities of UVSG or TCI (although
representatives of Furman Selz visited UVSG's headquarters) nor did it make,
obtain or assume any responsibility for any independent evaluation or
appraisal of any such properties and facilities or of the assets and
liabilities of UVSG or TCI. Furman Selz assumed and relied upon the accuracy
and completeness of the financial and other information supplied to or
otherwise used by it in arriving at its opinion and did not attempt
independently to verify, or undertake any obligation to verify, such
information. In addition, Furman Selz assumed that UVSG's forecasts and
projections supplied to it represented the best current judgment of UVSG's
management as to the future financial condition and results of operations of
UVSG, and assumed that such forecasts and projections were reasonably prepared
based on such current judgment. Furman Selz assumed no responsibility for and
expressed no view as to such forecasts and projections or the assumptions on
which they are based.
Furman Selz was not asked to and did not participate in any efforts to
solicit third-party offers to acquire all or part of UVSG, nor did it evaluate
potential alternative transactions. The management of UVSG instructed Furman
Selz to provide the opinion on that basis. Furman Selz was not provided with
financial projections of TCI nor was it given access to employees of TCI other
than TCI senior management. All financial and other information concerning TCI
considered by Furman Selz were derived from TCI's public filings and other
public information.
Furman Selz also took into account its assessment of general economic,
market and financial conditions and its experience in similar transactions, as
well as its experience in securities valuation in general. Its opinion
necessarily is based upon conditions as they existed at the time of the
opinion and could be evaluated on that date. Industry performance, general
business and economic conditions and other matters are beyond the control of
UVSG or TCI. Furman Selz did not give an opinion as to what the trading value
of the TCI/LMG Preferred Stock or the UVSG Class A Common Stock will be when
the Merger is consummated.
Except as described above under "--Background of the Merger," Furman Selz
was not asked to and did not recommend any of the financial or other terms of
the Merger. Furman Selz did not express any views on any terms of the Merger
other than the fairness from a financial point of view of the consideration to
be received and the ownership interests to be retained by the holders, other
than TCI or its subsidiaries and affiliates, of UVSG Class A Common Stock. In
particular, it expressed no views on any agreements or arrangements which
might be concluded between TCI and UVSG after the date of its opinion.
In addition, upon the advice of UVSG and its legal advisors, Furman Selz
assumed that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code and therefore be treated as a tax free transaction
to the holders of the UVSG Class A Common Stock.
The following is a brief summary of the material aspects of the analyses
performed by Furman Selz in connection with rendering its opinion as to the
fairness, from a financial point of view, of the consideration to be
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received and the ownership interests to be retained by the holders (other than
TCI) of UVSG Class A Common Stock and discussed with the UVSG Board of
Directors at its meeting on July 10, 1995.
UVSG Projections. Furman Selz analyzed UVSG's possible values under the
following two alternative scenarios: (i) a merger projections scenario, which
applied valuation analyses deemed appropriate by Furman Selz in its reasonable
judgment based upon forecast financial information for UVSG provided by UVSG
management to reflect consummation of the Merger; and (ii) no merger
projections scenario, which applied valuation analyses deemed appropriate by
Furman Selz in its reasonable judgment based upon forecast financial
information for UVSG provided by UVSG management to reflect results of UVSG if
the Merger were not consummated and if TCI were subsequently to reduce its
level of business activity with UVSG in conjunction with developing its own
competing operations. TCI was not consulted with respect to the preparation of
these projections nor did it receive any copies of them.
UVSG Valuation Analyses. The financial analyses used by Furman Selz in
arriving at its opinion relating to UVSG included (i) segment sale analysis,
in order to estimate based on Furman Selz' reasonable judgment an overall
implied value per share at which UVSG's segments could be sold on an
individual basis in private market transactions, which consisted of (a)
unleveraged discounted cash flow analysis of projected cash flow of each
segment provided by UVSG management and (b) comparable transaction analyses,
which consisted of reviewing financial aspects of selected private market
acquisitions of assets, businesses or interests in businesses comparable to
the business segments of UVSG; (ii) trading analysis, which consisted of (a)
comparing financial, market and operating performances of selected publicly
traded companies to those of the business segments of UVSG, and (b) where
deemed appropriate by Furman Selz, utilizing other analyses, including
discounted cash flow analyses for each of UVSG's segments and comparable
transaction analyses, to determine a valuation per share for UVSG in a non-
control, public market transaction; (iii) discounted cash flow analysis of
projected future cash flow to be derived by UVSG assuming financial
information for UVSG as a whole provided by UVSG management; and (iv)
discounted share price analysis which consisted of discounting to the present
potential future trading values of UVSG Class A Common Stock assuming
financial information for UVSG provided by UVSG management.
The material portions of the foregoing analyses are summarized in more
detail below.
1.Segment Sale Analysis
Merger Projections Scenario. In order to estimate, based on Furman Selz'
reasonable judgment, an overall implied value per share at which UVSG's
segments could be sold on an individual basis in private market
transactions using projections provided by UVSG management assuming
consummation of the Merger, Furman Selz prepared a segment sale analysis
based on the following analyses: (i) unleveraged discounted cash flow
analysis by segment and (ii) comparable transaction analysis for each
segment. The unleveraged discounted cash flow analysis, based upon
financial information provided by UVSG management, consisted of calculating
a range of net present values of the projected unleveraged free cash flows
in the forecast for each segment using various discount rates reflecting
weighted average costs of capital which Furman Selz deemed appropriate in
its reasonable judgment for each segment and combining such values with
terminal values for each segment calculated by multiplying projected EBITDA
(earnings before interest, taxes, depreciation and amortization) for each
segment for 1999 by a range of exit multiples Furman Selz deemed
appropriate in its reasonable judgment for each segment and discounting
this value using the same range of discount rates as those utilized for the
unleveraged free cash flows for each segment. The comparable transaction
analysis consisted of reviewing financial aspects of selected acquisitions
of assets, businesses or interests in businesses comparable to those of the
business segments of UVSG. Acquisition transactions analyzed by Furman Selz
in connection with the segment sale analysis under the merger projections
scenario included: Capital Cities and Hearst/33.3% of Lifetime; Cablevision
Systems/50% of AMC; Capital Cities/ABC, Hearst and NBC/12% of A&E; Viacom
Inc./Starsight; IDB Communications Group, Inc./Hughes Television Network;
TCI/Tempo Enterprises, Inc.; LDDS Communications, Inc./IDB Communications
Group, Inc.; IDB Communications Group, Inc./CiCi Inc.;
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UVSG/SSDS; Tracor, Inc./GDE Systems; and Verdix Corp./Rational. Such
analysis resulted in an implied total enterprise value range of $485.0
million to $710.0 million. In order to derive equity value per share of
UVSG Common Stock, Furman Selz subtracted from the implied total enterprise
value the estimated net liabilities of UVSG at March 31, 1995 to yield an
implied pre-tax per share equity value range of $26.69 to $37.94. In
addition, Furman Selz prepared the merger projections scenario segment sale
analysis assuming that each of UVSG's businesses were sold in separate
taxable transactions. Such analysis resulted in an implied after-tax per
share equity value range of $16.52 to $24.52.
No Merger Projections Scenario. In order to estimate, based on Furman
Selz' reasonable judgment, an overall implied value per share at which
UVSG's segments could be sold on an individual basis in private market
transactions using projections provided by UVSG management assuming the
Merger is not consummated, Furman Selz prepared a segment sale analysis
based on the following analyses: (i) unleveraged discounted cash flow
analysis by segment and (ii) comparable acquisitions analysis for each
segment. The unleveraged discounted cash flow analysis, based upon
financial information provided by UVSG management, consisted of calculating
a range of net present values of the projected unleveraged free cash flows
in the forecast for each segment using various discount rates reflecting
weighted average costs of capital which Furman Selz deemed appropriate in
its reasonable judgment for each segment and combining such values with
terminal values for each segment discounted using the same range of
discount rates as those utilized for the unleveraged free cash flows for
each segment. Such terminal values were determined, for all business
segments excluding The Prevue Channel, by multiplying projected EBITDA for
each segment for 1999 by a range of exit multiples Furman Selz deemed
appropriate in its reasonable judgment for such segments, and for The
Prevue Channel, estimating the terminal value of The Prevue Channel at a
date prior to 1999 upon which, in the opinion of management, a terminal
value should be calculated for The Prevue Channel under this scenario. The
comparable transaction analysis consisted of reviewing financial aspects of
selected acquisitions of assets, businesses or interests in businesses
comparable to those of the business segments of UVSG. Acquisition
transactions analyzed by Furman Selz in connection with the segment sale
analysis under the no merger projections scenario included: UVSG/22.1% of
Prevue Networks; UVSG/Cable Teleguide; Liberty Broadcasting/Family Network;
Discovery Channel/Learning Channel; IDB Communications Group, Inc./Hughes
Television Network; TCI/Tempo Enterprises, Inc.; LDDS Communications,
Inc./IDB Communications Group, Inc.; IDB Communications Group, Inc./CiCi
Inc.; UVSG/SSDS; Tracor, Inc./GDE Systems; and Verdix Corp./Rational. Such
analysis resulted in an implied total enterprise value range of $305.0
million and $520.0 million. In order to derive equity value per share of
UVSG Common Stock, Furman Selz subtracted from the implied total enterprise
value the estimated net liabilities of UVSG at March 31, 1995 to yield an
implied pre-tax per share equity value range of $17.19 to $27.90. In
addition, Furman Selz prepared the no merger projections scenario segment
sale analysis assuming that each of UVSG's businesses were sold in separate
taxable transactions. Such analysis resulted in an implied after-tax equity
value per share in a range of $11.71 to $18.75.
2.Trading Analysis
Merger Projections Scenario. In order to determine a valuation per share
for UVSG in a non-control, public market transaction, Furman Selz prepared
a trading analysis that consisted of comparing financial, market and
operating performances of selected publicly traded companies to business
segments of UVSG using projections provided by UVSG management assuming
consummation of the Merger. Companies analyzed by Furman Selz in connection
with the trading analysis under the merger projections scenario included:
International Family Entertainment; BET Holdings; Turner Broadcasting
System, Inc.; Gaylord Entertainment Company; Graff Pay-Per-View; Home
Shopping Network; Starsight; LodgeNet Entertainment; Spectravision; Comsat;
Data Transmission Network; AMC Entertainment; Carmike Cinemas; Cineplex
Odeon; GC Companies; Regal Cinemas; Cambridge Technology Partners; Computer
Sciences; SHL Systemhouse; Technology Solutions; American Management
Systems; Broadway & Seymour; Renaissance Solutions; and BDM International.
Furman Selz also referred to discounted cash flow analyses for each segment
and comparable transaction analyses for each segment when it deemed in its
reasonable judgment such analyses relevant to the trading analysis. Such
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analysis resulted in an implied total enterprise value range of $420.0
million to $635.0 million. In order to derive equity value per share of
UVSG Common Stock, Furman Selz subtracted from the total enterprise value
the estimated net liabilities of UVSG at March 31, 1995 to yield an implied
per share equity value range of $23.26 to $33.98.
No Merger Projections Scenario. Furman Selz prepared a trading analysis
that consisted of comparing financial, market and operating performances of
selected publicly traded companies to business segments of UVSG using
projections provided by UVSG management assuming the Merger is not
consummated. Companies analyzed by Furman Selz in connection with the
trading analysis under the no merger projections scenario included:
LodgeNet Entertainment; Spectravision; Comsat; Data Transmission Network;
AMC Entertainment; Carmike Cinemas; Cineplex Odeon; GC Companies; Regal
Cinemas; Cambridge Technology Partners; Computer Sciences; SHL Systemhouse;
Technology Solutions; American Management Systems; Broadway & Seymour;
Renaissance Solutions; and BDM International. Furman Selz also referred to
discounted cash flow analyses for each segment and comparable transaction
analyses for each segment when it deemed in its reasonable judgment such
analyses relevant to the trading analysis. Such analysis resulted in an
implied total enterprise value range of $270.0 million to $485.0 million.
In order to derive total equity value and equity value per share of UVSG
Common Stock, Furman Selz subtracted from the total enterprise value the
estimated net liabilities of UVSG at March 31, 1995 to yield an implied per
share equity value range of $15.34 to $26.06.
3.Discounted Cash Flow Analysis
Merger Projections Scenario. Furman Selz conducted an unleveraged
discounted cash flow analysis based upon financial information for UVSG as
a whole provided by UVSG management assuming consummation of the Merger.
Furman Selz calculated a range of the net present values of the projected
unleveraged free cash flows in the forecast using various discount rates
reflecting weighted average costs of capital in the range of 14% to 18%,
and combined such values with terminal values for UVSG calculated by
multiplying projected EBITDA for 1999 by a range of exit multiples from 6
to 8 times and using the same range of discount rates as those utilized for
the unleveraged free cash flows. The net present value of projected free
cash flow, when combined with the terminal values, yielded an implied total
enterprise value in the range of $532.1 million to $766.1 million. In order
to derive equity value per share of UVSG Common Stock, Furman Selz
subtracted from the total enterprise value the estimated net liabilities of
UVSG at March 31, 1995 to yield an implied per share equity value range of
$29.23 to $41.58.
No Merger Projections Scenario. Furman Selz conducted an unleveraged
discounted cash flow analysis based upon financial information for UVSG
provided by UVSG management assuming the Merger is not consummated. Furman
Selz calculated a range of net present values of the projected unleveraged
free cash flows in the forecast using various discount rates reflecting
weighted average costs of capital in the range of 14% to 18%, and combined
such values with terminal values for UVSG calculated by multiplying
projected EBITDA for 1999 by a range of exit multiples from 5 to 7 times
and using the same range of discount rates as those utilized for the
unleveraged free cash flows. The net present value of projected free cash
flow, when combined with the terminal values, yielded an implied total
enterprise value range of $266.5 million to $387.7 million. In order to
derive equity value per share of UVSG Common Stock, Furman Selz subtracted
from the total enterprise value the estimated net liabilities of UVSG at
March 31, 1995 to yield an implied per share equity value range of $15.20
to $21.60.
4.Discounted Share Price Analysis
Merger Projections Scenario. Furman Selz analyzed the potential future
public market trading values of UVSG Common Stock using UVSG management's
EBITDA forecasts assuming consummation of the Merger, applying at the end
of each year multiples of 6 to 8 times EBITDA for that year, and
discounting the result at discount rates of 14% to 18%. This analysis,
which was conducted for the 1996 through 1999 EBITDA projections, generated
implied per share present values of potential future trading values ranging
from $20.39 to $35.49.
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No Merger Projections Scenario. Furman Selz analyzed the potential future
public market trading values of UVSG Common Stock using UVSG management's
EBITDA forecasts assuming the Merger is not consummated, applying at the end
of each year multiples of 5 to 7 times EBITDA for that year, and discounting
the result at discount rates of 14% to 18%. This analysis, which was conducted
for the 1996 through 1999 EBITDA projections, generated implied per share
present values of potential future trading values ranging from $12.10 to
$21.14.
Analysis Relating to TCI. In giving its opinion as to the fairness of the
consideration to be received and the ownership interests to be retained by the
holders of the UVSG Class A Common Stock, Furman Selz evaluated the TCI/LMG
Preferred Stock, conducting analyses which included (i) reviewing the terms
and conditions of the TCI/LMG Preferred Stock, and (ii) a valuation of the
TCI/LMG Preferred Stock derived from combining (a) the value of 1.05 shares of
TCI Class A Common Stock underlying the TCI/LMG Preferred Stock calculated by
multiplying 1.05 times the closing bid price on July 7, 1995 of the TCI Class
A Common of $24.125, equaling $25.33, and (b) the value of the dividend stream
of the TCI/LMG Preferred Stock calculated by discounting the value of
dividends using a range of discount rates which Furman Selz believed
appropriate in its reasonable judgment multiplied by a range of probabilities
of receiving such dividends. Furman Selz highlighted that with a 10% dividend
discount rate and a 100% probability of receiving the dividend for an assumed
period of four years from the first anniversary of issuance of the TCI/LMG
Preferred Stock to the fifth anniversary of issuance of the TCI/LMG Preferred
Stock, when the TCI/LMG Preferred Stock becomes redeemable at TCI's option,
the value of the dividend may be estimated at $3.19 per share of TCI/LMG
Preferred Stock and that the total value of one share of TCI/LMG Preferred
Stock would be estimated to be $28.52. Furman Selz also highlighted that if
the probability of receiving the dividend is 0%, the value of one share of the
TCI/LMG Preferred Stock would be estimated to be the value of the underlying
shares of TCI Class A Common, or $25.33. As an illustration of the estimated
statistical probability of receiving the dividend, Furman Selz also reviewed
data relating to the volatility of the TCI Class A Common, and, with the
assumption that the returns on an investment in TCI Class A Common will
correlate with a log normal distribution with a normal curve volatility of
30%, Furman Selz calculated a probability of receiving the dividend of
approximately 61% with a resultant dividend value of $1.95 per share of
TCI/LMG Preferred Stock giving a corresponding overall implied per share value
of the TCI/LMG Preferred Stock of $27.28. Furman Selz performed such analysis
utilizing a broad range of TCI/LMG Preferred Stock discount rates and TCI
Class A Common Stock market prices and volatilities.
In connection with its analysis relating to TCI, Furman Selz reviewed TCI's
public filings with the Commission, reviewed publicly available analyst
information and other third-party reports addressing TCI and TCI Class A
Common Stock and held discussions with senior management of TCI. Based solely
on the foregoing, Furman Selz determined that it was not aware of any material
information relating to TCI that was not publicly disclosed and thus concluded
that the trading value (at the time of the delivery of Furman Selz' opinion)
of the TCI Class A Common Stock, a liquid, well-followed security, reflected
the market's reasonable assessment of its value.
Aggregation/Blending Analysis. In order to determine the value of the
consideration to be received and the ownership interests to be retained
assuming consummation of the Merger as compared to the value of each share of
UVSG Class A Common in the case that the Merger is not consummated, Furman
Selz performed an aggregation/blending analysis to derive the value of such
consideration to be received and the ownership interests to be retained
assuming all UVSG stockholders convert 50% of their shares of UVSG Common
Stock into shares of TCI/LMG Preferred Stock pursuant to the terms of the
Merger Agreement and retain the remaining 50% of their shares of UVSG Common
Stock. In this analysis, Furman Selz calculated the value of the consideration
to be received and the ownership interests to be retained in the Merger by
combining 50% of the estimated implied value of the TCI/LMG Preferred Stock
with 50% of the estimated implied equity value per share of UVSG Class A
Common Stock in the merger projection scenario. The results of such analysis
were then compared to the estimated implied equity values per share of the
UVSG Class A Common Stock derived in the no merger projections scenario.
Furman Selz performed the aggregation/blending analysis assuming two valuation
scenarios
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for the TCI/LMG Preferred Stock, including (i) a range of values per share of
the TCI/LMG Preferred Stock of $25.33 to $28.52, and (ii) a point estimate of
the value per share of the TCI/LMG Preferred Stock of $27.28. The
aggregation/blending analysis, assuming a range of values per share of the
TCI/LMG Preferred Stock of $25.33 to $28.52, resulted in the following implied
per share values of consideration to be received and ownership interests to be
retained versus the implied per share values for UVSG Class A Common Stock
based on no merger projections: segment sale analysis (pre-tax): $26.01 to
$33.23 versus $17.19 to $27.90; segment sale analysis (after-tax): $20.93 to
$26.52 versus $11.71 to $18.75; trading analysis: $24.29 to $31.25 versus
$15.34 to $26.06; discounted cash flow analysis: $27.28 to $35.05 versus
$15.20 to $21.60; discounted share price analysis: $22.86 to $32.00 versus
$12.10 to $21.14. The aggregation/blending analysis, assuming a point estimate
of the value per share of the TCI/LMG Preferred Stock of $27.28, resulted in
the following implied per share values of consideration to be received and
ownership interests to be retained versus implied per share values for UVSG
Class A Common Stock based on no merger projections: segment sale analysis
(pre-tax): $26.99 to $32.61 versus $17.19 to $27.90; segment sale analysis
(after-tax): $21.90 to $25.90 versus $11.71 to $18.75; trading analysis:
$25.27 to $30.63 versus $15.34 to $26.06; discounted cash flow analysis:
$28.25 to $34.43 versus $15.20 to $21.60; discounted share price analysis:
$23.84 to $31.38 versus $12.10 to $21.14.
In arriving at its written opinion and in discussing its opinion with UVSG's
Board of Directors, Furman Selz performed various financial analyses. All
material financial analyses performed are summarized above. The summary set
forth above does not, however, purport to be a complete description of Furman
Selz' analyses. Furman Selz believes that each of the individual analyses
summarized above supports its fairness determination. Furman Selz believes
that such determination and related analyses and summaries should be
considered as a whole.
UVSG paid Furman Selz $625,000 and agreed to reimburse Furman Selz for its
reasonable out-of-pocket expenses and to indemnify it against certain
liabilities relating to or arising out of services performed by it as
financial advisor to UVSG in connection with the Merger.
Furman Selz is a nationally recognized investment banking firm. As part of
its investment banking services, Furman Selz is frequently engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, secondary distributions of securities, private
placements and valuations for estate, corporate and other purposes. Furman
Selz was retained by UVSG's Board of Directors to act as UVSG's financial
advisor in connection with the Merger based upon Furman Selz' experience as a
financial advisor in mergers and acquisitions as well as Furman Selz'
familiarity with the cable television and telecommunications industries.
Furman Selz served as a co-managing underwriter in UVSG's initial public
offering of 4,100,000 shares of UVSG Class A Common Stock in November 1993,
for which it received customary compensation, net of expenses, of $607,776.
Except as described above, Furman Selz has not rendered material financial
advisory or investment banking services to UVSG or to TCI during the past two
years. Furman Selz may, in the ordinary course of business, trade securities
of UVSG and TCI for its own account or for the accounts of customers and thus
may hold long or short positions in such securities at any time.
TCI'S REASONS FOR THE MERGER
TCI believes that the availability of electronic program guide services is
an increasingly important element of video programming delivery. The current
volume and variety of video programming will be further increased as digital
and other new technologies are implemented, thus increasing the importance of
the electronic program guide as a navigational tool for the consumer. TCI
believes that UVSG is well positioned in terms of market share, managerial
talent, technical skills and financial resources, all of which enhance its
ability to offer quality products and services and successfully manage their
transition as new technologies are introduced.
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TCI operates or is an investor in businesses which are similar to those of
UVSG in the development of interactive electronic program guides, direct-to-
home satellite programming sales and the provision of superstation
programming. TCI believes that because it is involved in businesses which are
similar to those operated by UVSG, it is in a good position to understand
UVSG's operations and work well with UVSG to identify industry trends, adapt
products and services to coincide with technological and marketplace
developments, gain economies of scale and manage the businesses for continued
growth.
TCI believes that changes in technology will provide additional
opportunities for the continued growth of UVSG. The Merger will enable TCI to
participate financially in UVSG's future growth.
CERTAIN CONSEQUENCES OF THE MERGER; OPERATIONS FOLLOWING THE MERGER
If all UVSG stockholders elect to convert the full amount permitted of their
shares of UVSG Common Stock into Merger Consideration, TCI will own 50% of the
then outstanding common stock of the Surviving Corporation, representing
approximately 88% of the voting power of the then outstanding common stock of
the Surviving Corporation. If no UVSG stockholders convert shares of UVSG
Common Stock into Merger Consideration other than Mr. Flinn, who has agreed
with TCI to have 50% of his shares of UVSG Class B Common Stock converted into
Merger Consideration, TCI will own at least 33% of the then outstanding common
stock of the Surviving Corporation, representing at least 83% of the voting
power of the then outstanding common stock of the Surviving Corporation. TCI
currently does not own any shares of UVSG Common Stock. Accordingly, as a
result of the Merger, TCI will have voting control of UVSG as the Surviving
Corporation. TCI will therefore be able to approve or disapprove any matter
presented to stockholders of UVSG, regardless of the vote of the other
stockholders of UVSG, except to the extent limited by the stockholder
agreement to be entered into by TCI and UVSG as part of the Merger (the
"Stockholder Agreement"). See "TERMS OF THE MERGER--Other Agreements."
A UVSG stockholder's percentage interest in UVSG's future earnings or growth
will decline to the extent he or she receives the Merger Consideration for a
portion of his or her shares of UVSG Common Stock. A UVSG stockholder who
receives the Merger Consideration will share indirectly in UVSG's future
earnings and growth through TCI's ownership of UVSG and will also share in any
future earnings and growth of the other assets and businesses of TCI. There
can be no assurance that the value of the Merger Consideration a UVSG
stockholder may elect to receive will be equal to or greater than the value of
the shares of UVSG Common Stock converted into Merger Consideration. See "RISK
FACTORS--Uncertainty of Market Value of Merger Consideration and Market Value
of UVSG Common Stock."
It is expected that the business and operations of UVSG will be conducted
substantially as they are currently being conducted following consummation of
the Merger. TCI will, however, continuously evaluate the business and
operations of UVSG (as well as those of its other subsidiaries) and take such
actions as it deems appropriate under then existing circumstances.
TCI and UVSG have recommenced discussions with News to explore the
possibility of a business combination, joint venture, strategic alliance or
other transaction involving UVSG's Prevue Networks and the assets and
operations of TCI and News in the electronic guide business. No specific
business proposal regarding such a possible transaction has been formulated,
and there can be no assurance that any such proposal would be feasible. See
"--Background of the Merger."
Except for the Merger and as otherwise described in this Proxy
Statement/Prospectus, TCI has no present plans or proposals that would result
in an extraordinary corporate transaction, such as a merger, reorganization,
liquidation or sale or transfer of a material amount of assets of UVSG.
INTEREST OF CERTAIN PERSONS IN THE MERGER
In connection with the Merger Agreement, Mr. Flinn and TCI entered into an
agreement (the "Flinn Agreement") pursuant to which Mr. Flinn agreed to vote,
consistent with his fiduciary obligations, if any, as a
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stockholder of UVSG, his shares of UVSG Common Stock in favor of the Merger.
Mr. Flinn currently holds shares of UVSG Common Stock representing
approximately 96% of the voting power of all outstanding shares of UVSG Common
Stock.
Pursuant to the Flinn Agreement, Mr. Flinn has agreed in connection with the
Merger to convert 50% of the shares of UVSG Class B Common Stock beneficially
owned by him at the Effective Time into an equal number of shares of UVSG
Class A Common Stock as contemplated by the Merger Agreement. Pursuant to the
terms of the Merger Agreement, the remaining 50% of Mr. Flinn's UVSG Class B
Common Stock will be converted into Merger Consideration at the Effective
Time. In consideration of Mr. Flinn's agreements respecting voting and
conversion of his shares of UVSG Common Stock, TCI has agreed to enter into a
registration rights agreement with Mr. Flinn, pursuant to which TCI is
required under certain circumstances to register under the Act, for resale by
Mr. Flinn, shares of TCI Common Stock that may be acquired by Mr. Flinn upon
conversion of the TCI/LMG Preferred Stock he will receive as Merger
Consideration.
Pursuant to the Flinn Agreement, Mr. Flinn has agreed that if he does not
vote or cause to be voted all of his shares of UVSG Common Stock in favor of
the Merger Agreement, if UVSG's Board of Directors determines, in the exercise
of its fiduciary obligations, not to submit the Merger Agreement for
consideration by stockholders of UVSG or if UVSG is the "breaching party," as
defined in the Merger Agreement, and the Merger Agreement is terminated or
expires as a result of the breach by UVSG, Mr. Flinn will pay a termination
fee in cash to TCI in an amount equal to the sum of $10 million, plus the
excess, if any, over $10 million of the product of (i) the positive difference
between (a) the value per share of any consideration Mr. Flinn receives for
his shares of UVSG Common Stock or any portion thereof in any transaction or
series of related transactions within two years following the termination of
the Merger Agreement and (b) $27 and (ii) the number of shares of UVSG Common
Stock sold or otherwise disposed of in such transactions.
Mr. Flinn has also agreed that until the earlier to occur of the Effective
Time and the termination of the Merger Agreement in his individual capacity he
will not (i) purchase or sell any securities of UVSG, (ii) enter into any
agreement or other obligation with respect to the purchase or sale of such
securities or solicit any offer to do so, or (iii) participate or engage in
discussions or negotiations regarding any such sale with any person other than
TCI or provide any material, nonpublic information regarding UVSG or any of
its subsidiaries to any person in connection with the foregoing.
Mr. Flinn has also agreed in the Flinn Agreement that UVSG and its
subsidiaries shall have the sole rights in and to the trade name "United
Video" and has agreed to cause his affiliates, including United Video
Cablevision, Inc. and United Video Management, Inc., to convey the rights in
such trade name to UVSG and to change their names following the closing of the
Merger.
In addition, Mr. Flinn has agreed to take such actions as may be necessary
to amend the Bylaws of UVSG immediately after the Effective Time as provided
in the Merger Agreement. The Merger Agreement provides that immediately after
the Effective Time all of the directors of UVSG as the Surviving Corporation
other than Mr. Flinn shall resign. Mr. Flinn has agreed to take all necessary
action to elect to the Board of Directors persons nominated by TCI. See "TERMS
OF THE MERGER--Amendment of UVSG Certificate of Incorporation and Bylaws--
Change in Directors."
In connection with the Merger, UVSG and TCI have agreed to enter into the
Stockholder Agreement, which provides for TCI to vote its shares of UVSG
equity securities in any general election of directors in favor of the
election of Messrs. Bliss and Boylan as directors so long as they are
executive officers of UVSG and of Mr. Flinn as a director so long as he owns
at least 20% of the then outstanding equity securities of UVSG (or lesser
amounts in certain circumstances). The Stockholder Agreement would also
provide for TCI to vote its UVSG equity securities in the same proportion for
or against any transaction for which UVSG stockholder approval is required
under the DGCL as the equity securities of other UVSG stockholders voting
thereon are voted if TCI or an affiliate of TCI (other than UVSG and its
subsidiaries) would be a party to the transaction or a direct or indirect
beneficiary of the transaction (except in its capacity as a stockholder of
UVSG), unless such transaction
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is approved by a majority of the Disinterested Directors of UVSG. See "TERMS
OF THE MERGER--Other Agreements."
The Stockholder Agreement also provides that if UVSG proposes to enter into
any merger or consolidation subject to Article IV, Section A, paragraph 6 of
the Restated Certificate (which provision requires that in any merger or
consolidation of UVSG holders of Class A Common Stock and Class B Common Stock
receive, on a per share basis, consideration of substantially equivalent
value, as determined in good faith by the UVSG Board of Directors), then,
unless a majority of the Disinterested Directors of UVSG determines (and, if
requested by any Disinterested Director, UVSG obtains an opinion from an
independent financial advisor to that effect) that the consideration to be
received by the holders of the Class A Common Stock in such transaction is
substantially equivalent in value, on a per share basis, to the consideration
to be received by the holders of the Class B Common Stock in such transaction,
taking into account all relevant factors, including, without limitation, the
anticipated tax treatment of such consideration to the holders of the Class A
Common Stock and Class B Common Stock TCI shall not permit its equity
securities in UVSG to be voted in favor of such merger or consolidation in any
greater percentage than the percentage in which the equity securities of the
other stockholders of UVSG voting on such transaction are voted in favor of
such merger or consolidation. Notwithstanding the foregoing, to the extent
that the holders of the Class A Common Stock and the holders of the Class B
Common Stock, respectively, are entitled to receive in any merger or
consolidation (pursuant to any election or otherwise), securities that do not
differ in any respect other than their relative voting rights and related
differences in designation, conversion and share distribution provisions,
which differences would be permitted in a share distribution under the
Restated Certificate, such relative voting rights and related differences in
designation, conversion and share distribution provisions are to be
disregarded in determining the per share value of the consideration to be
received by the holders of the Class A Common Stock and the Class B Common
Stock, respectively, as required under the Restated Certificate.
Unvested stock options previously granted to Messrs. Bliss, Boylan and
Morton to acquire an aggregate of 312,000 shares of UVSG Class A Common Stock
will become immediately exercisable upon consummation of the Merger. The
aggregate dollar value of such options that were "in-the-money" as of December
20, 1995 was $4,264,500, calculated as the difference between the aggregate
exercise price of such options and the aggregate market value of the shares of
UVSG Class A Common Stock that may be acquired on exercise, based on a price
per share of $30 3/4, the last reported sale price on the Nasdaq National
Market for shares of UVSG Class A Common Stock on December 20, 1995. In
addition, UVSG will enter into an employment agreement with Mr. Flinn, will
amend the existing employment agreements with Messrs. Bliss and Boylan and
will enter into agreements with certain UVSG officers that, among other
things, will, provide for certain payments if UVSG terminates such officers'
employment following the Merger other than for "cause." See "TERMS OF THE
MERGER--Certain Personnel Matters."
UVSG has been advised that no existing directors or executive officers of
UVSG currently intend to elect to convert shares of their UVSG Common Stock
into the right to receive Merger Consideration, other than Mr. Flinn, who will
receive Merger Consideration with respect to 50% of his shares of UVSG Common
Stock, and Mr. Bliss, who has indicated that he will consider, based upon
market and other factors, whether to elect to convert some portion of his UVSG
Class A Common Stock into the right to receive the Merger Consideration.
CERTAIN TRANSACTIONS BETWEEN TCI AND UVSG
Other than the Merger Agreement and the related transactions described in
this Proxy Statement/Prospectus, there has not been during the last two full
fiscal years of UVSG any material contract, arrangement, understanding,
relationship, negotiation or transaction between UVSG and TCI concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or transfer of a material amount
of assets.
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TERMS OF THE MERGER
GENERAL; EFFECTIVE TIME
The Merger Agreement provides for the merger of Merger Sub with and into
UVSG with UVSG being the Surviving Corporation. As a result of the Merger,
UVSG will become a majority-controlled subsidiary of TCI. TCI will own between
33% and 50% of the then outstanding common stock of the Surviving Corporation,
representing between 83% and 88% of the voting power of the then outstanding
common stock of the Surviving Corporation. In the Merger, which will become
effective upon the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware, stockholders of UVSG who have so elected will
receive the Merger Consideration described below. Such filing is anticipated
to take place as soon as practicable after the last of the conditions
precedent to the Merger set forth in the Merger Agreement have been satisfied
or, where permissible, waived, which is expected to occur immediately after
the Special Meeting. The following description of the Merger Agreement is
qualified in its entirety by reference to the complete text of the Merger
Agreement, which is incorporated by reference herein and a copy of which
(exclusive of certain exhibits and schedules) is annexed to this Proxy
Statement/Prospectus as Appendix I.
CONSIDERATION TO BE RECEIVED IN THE MERGER
Each share of UVSG Class A Common Stock outstanding immediately prior to the
Effective Time (other than shares held by UVSG as a treasury share or by any
direct or indirect subsidiary of UVSG, all of which will be canceled, and
other than shares held by TCI or any of its direct or indirect wholly owned
subsidiaries) that are subject to a valid Election to convert such share into
the Merger Consideration will be converted in the Merger into and represent
the right to receive one share of TCI Group Preferred Stock and one share of
Liberty Media Group Preferred Stock having the terms described below in
"DESCRIPTION OF TCI CAPITAL STOCK." Each share of UVSG Class A Common Stock
outstanding immediately prior to the Effective Time (other than those
described above) that is not subject to a valid Election to convert such share
into the Merger Consideration will remain outstanding and continue as a share
of Class A Common Stock of the Surviving Corporation.
Each share of UVSG Class A Common Stock and UVSG Class B Common Stock
outstanding immediately prior to the Effective Time that is held by TCI or any
of its direct or indirect wholly owned subsidiaries will remain outstanding
following the Merger and continue as one share of Class A Common Stock (in the
case of UVSG Class A Common Stock) and one share of Class B Common Stock (in
the case of UVSG Class B Common Stock) of the Surviving Corporation. Each
share of UVSG Class B Common Stock outstanding immediately prior to the
Effective Time (other than as described above) will be converted in the Merger
into the right to receive one share of TCI Group Preferred Stock and one share
of Liberty Media Group Preferred Stock. Currently, TCI and its subsidiaries do
not own any shares of UVSG Common Stock, and Mr. Flinn owns all of the issued
and outstanding shares of UVSG Class B Common Stock.
The shares of capital stock of Merger Sub outstanding immediately prior to
the Effective Time will be converted in the Merger into and represent the
right to receive, in the aggregate, that number of shares of Class A Common
Stock of the Surviving Corporation as is equal to the number of shares of UVSG
Class A Common Stock converted in the Merger into Merger Consideration and
that number of shares of Class B Common Stock of the Surviving Corporation as
is equal to the number of shares of UVSG Class B Common Stock converted in the
Merger into Merger Consideration.
Certain Adjustments. If, before the Effective Time, the TCI Group Series A
Common Stock or LMG Series A Common Stock is recapitalized or reclassified or
certain other actions such as stock splits or dividends with respect to the
TCI Group Series A Common Stock or LMG Series A Common Stock are taken, then
the shares of TCI Group Series A Common Stock or LMG Series A Common Stock, as
the case may be, to be delivered upon conversion of the TCI/LMG Preferred
Stock will be appropriately adjusted so that holders of TCI/LMG Preferred
Stock will receive upon conversion of the TCI/LMG Preferred Stock the kind and
amount of TCI securities and property that they would have been entitled to
receive had they converted their shares into TCI Group Series A Common Stock
or LMG Series A Common Stock, as the case may be, prior to such event.
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Election to Receive Merger Consideration. A Form of Election is being mailed
by the Exchange Agent to each holder of record of shares of UVSG Class A
Common Stock as of the Record Date to be used to make an Election and for
forwarding his or her certificates evidencing such shares for surrender and
exchange for certificates evidencing the shares of TCI/LMG Preferred Stock to
which he or she becomes entitled as a result of the Merger. For an Election to
be validly made, the Form of Election properly completed and signed and
accompanied by certificates for the shares of UVSG Class A Common Stock to
which it relates, duly endorsed in blank or otherwise in a form acceptable for
transfer on the books of UVSG, together with any other documents required by
the Form of Election, must be received by The Bank of New York, as Exchange
Agent, no later than 5:00 p.m., Eastern Standard Time, on January 22, 1996,
the Election Date. Forms of Election received by the Exchange Agent after such
Election deadline and any Forms of Election that are unsigned or otherwise
incomplete or improperly completed or that otherwise fail to comply with the
requirements for making Elections as set forth in the instructions contained
in the Form of Election will not be valid. In lieu of delivering the
certificates evidencing the UVSG Class A Common Stock relating to the
election, the stockholder may make a guarantee of delivery of such
certificates from a member of any registered national securities exchange or
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States, provided such certificates are in fact
delivered by the time set forth in the guarantee of delivery. Promptly
following the Effective Time, the Exchange Agent will deliver to each
stockholder from whom it has received a valid, non-revoked Election,
certificates evidencing the whole number of shares of TCI/LMG Preferred Stock
to which such stockholder is entitled.
Any UVSG stockholder may at any time prior to the Election Date revoke his
or her Election by notice received by the Exchange Agent no later than 5:00
p.m., Eastern Standard Time, on the Election Date. At any time after the
expiration of the period of 30 days following the Election Date if the Merger
shall not have been consummated prior thereto, any UVSG stockholder who has
deposited certificates for UVSG Class A Common Stock with the Exchange Agent
has the right to withdraw such certificates and thereby revoke his or her
Election as of the Election Date, by written notice to such effect received by
the Exchange Agent by no later than 5:00 p.m., Eastern Standard Time, on the
fifth business day immediately prior to the Effective Time. All Elections
shall automatically be revoked if the Exchange Agent is notified in writing by
UVSG and TCI that the Merger Agreement has been terminated.
CONDITIONS TO THE MERGER
The respective obligations of UVSG and TCI to consummate the transactions
contemplated by the Merger Agreement are subject to the satisfaction or, where
permissible, waiver of the following conditions: (a) approval of the Merger
Agreement by the requisite vote of the stockholders of UVSG; (b) filing of the
certificates of designations with the Delaware Secretary of State with respect
to the TCI/LMG Preferred Stock; (c) expiration or termination of all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"); (d) effective registration under the Act of the
shares of TCI/LMG Preferred Stock to be issued in connection with the Merger
and receipt of all state securities law permits and authorizations necessary
to carry out the transactions contemplated by the Merger Agreement; (e) the
absence of any permanent or preliminary injunction or similar order issued by
a court or other governmental entity of competent jurisdiction preventing
consummation of the transactions contemplated by the Merger Agreement as
provided therein; (f) receipt of the opinion of Holme Roberts & Owen LLC, to
the effect that no gain or loss will be recognized by the stockholders of UVSG
upon the receipt of the TCI/LMG Preferred Stock in exchange for their UVSG
Common Stock in the Merger; and (g) receipt of Furman Selz' consent to the
inclusion of its opinion in this Proxy Statement/Prospectus.
The obligation of TCI to consummate the transaction contemplated by the
Merger Agreement is also subject to the satisfaction or waiver of the
following conditions: (a) the material accuracy of the representations and
warranties and the performance, in all material respects, of the obligations,
agreements and covenants made by UVSG in the Merger Agreement; (b) receipt of
certain legal opinions and closing certificates from UVSG; (c) receipt of all
material consents by or approvals of, and all material notices having been
given to, all third parties
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under any note, bond, lease, franchise, permit, license, contract or other
agreement to which UVSG or any of its subsidiaries is a party; (d) the absence
after July 10, 1995, in the reasonable judgment of TCI, of any material
adverse change in the business, assets, results of operations, financial
condition or prospects of UVSG and its subsidiaries, taken as a whole
(excluding events or conditions generally affecting the cable television or
satellite television industry or affecting general business or economic
conditions in the United States); (e) the reasonable satisfaction of counsel
to TCI with certain actions, proceedings, instruments and documents required
to carry out the transaction contemplated by the Merger Agreement; (f) receipt
of all material governmental consents, approvals and authorizations; (g) no
action having been taken, nor any statute, rule, regulation, order, judgment
or decree proposed, enacted, issued, enforced or deemed applicable by any
foreign or United States federal, state or local governmental entity, and the
absence of any pending or threatened action, suit or proceeding, which, in
TCI's reasonable judgment, (i) makes the transactions contemplated by the
Merger Agreement illegal or imposes or may impose material damages or
penalties in connection therewith, (ii) requires or may require the
divestiture of a material portion of the business of TCI and its subsidiaries,
taken as a whole, (iii) imposes or may impose material limitations on the
ability of TCI effectively to exercise full rights of ownership of shares of
capital stock of UVSG, (iv) requires or may require TCI, UVSG or their
material subsidiaries to refrain from engaging in any material business if the
Merger is consummated, or (v) otherwise prohibits or restricts the Merger or
materially increases TCI's obligations in connection therewith; (h) the
execution and delivery by UVSG of the Stockholder Agreement; and (i) the Flinn
Agreement remaining in full force and effect.
The Flinn Agreement provides for Mr. Flinn to vote, consistent with his
fiduciary obligations, if any, as a stockholder of UVSG, all of his shares of
UVSG Common Stock in favor of the Merger and for Mr. Flinn to pay a
termination fee to TCI under certain circumstances if the Merger is not
consummated. The Flinn Agreement also provides that Mr. Flinn will take such
actions as may be necessary to amend UVSG's Bylaws and elect to the Board of
Directors of the Surviving Corporation persons nominated by TCI. See "THE
MERGER--Interest of Certain Persons in the Merger" and "TERMS OF THE MERGER--
Other Agreements."
The obligation of UVSG to consummate the transaction contemplated by the
Merger Agreement is also subject to the satisfaction or waiver of the
following conditions: (a) the material accuracy of the representations and
warranties and the performance, in all material respects, of the obligations,
agreement and covenants made by TCI in the Merger Agreement; (b) receipt of
certain legal opinions and closing certificates from TCI; (c) receipt of all
material consents by or approvals of, and all material notices having been
given to, all third parties under any note, bond, lease, franchise, permit,
license, contract or other agreement to which TCI or any of its subsidiaries
is a party; (d) the absence, after July 10, 1995, in the reasonable judgment
of UVSG, of any material adverse change in the business, assets, results of
operations, financial condition or prospects of TCI and its subsidiaries,
taken as a whole (excluding events or conditions generally affecting the cable
television or satellite television industry or affecting general business or
economic conditions in the United States); (e) the reasonable satisfaction of
counsel to UVSG with certain actions, proceedings, instruments and documents
required to carry out the transaction contemplated by the Merger Agreement;
(f) receipt of all material governmental consents, approvals and
authorizations; (g) no action having been taken, nor any statute, rule,
regulation, order, judgment or decree proposed, enacted, issued, enforced or
deemed applicable by any foreign or United States federal, state or local
governmental entity, and the absence of any pending or threatened action, suit
or proceeding, which (i) makes the transactions contemplated by the Merger
Agreement illegal or may impose material damages or penalties in connection
therewith, or (ii) would so materially adversely impact the economic or
business benefits of the consummation of the Merger so as to render such
consummation inadvisable; and (h) the execution and delivery by TCI of the
Stockholder Agreement.
COVENANTS
UVSG has agreed, except as permitted, required or specifically contemplated
by the Merger Agreement or consented to in writing by TCI, to conduct its
business in the ordinary and usual course consistent with past practice, and
to use its reasonable efforts to preserve intact its business organization, to
preserve its licenses and other permits in full force and effect, to keep
available the services of its present officers and key employees and to
preserve the good will of those with which it has business relationships. UVSG
has also agreed that except as
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permitted, required or specifically contemplated by the Merger Agreement or
consented to in writing by TCI, it will not and will not permit any of its
subsidiaries to, prior to the Effective Time, (a) amend its charter or bylaws;
(b) issue, grant or sell any shares of its capital stock or any of its other
securities, or any securities convertible into, or options, warrants or rights
of any kind to subscribe to or acquire, any shares of its capital stock or
other securities, except pursuant to stock options outstanding as of the date
of and disclosed pursuant to the Merger Agreement; (c) split, combine or
reclassify the outstanding shares of its capital stock or issue any capital
stock or other securities in exchange for any such shares; (d) redeem,
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock or other securities or the capital stock or other securities of
any of its subsidiaries; (e) amend or modify any outstanding options, warrants
or rights to acquire, or securities convertible into, shares of its capital
stock or other securities, amend or modify UVSG's Equity Incentive Plan or its
Stock Option Plan for Non-Employee Directors, or adopt or authorize any other
stock or equity appreciation rights, restricted stock or equity, stock or
equity purchase, stock or equity bonus or similar plan, arrangement or
agreement; (f) make any other changes in its capital structure; (g) declare,
set aside, pay or make any dividend or other distribution or payment (whether
in cash, property or securities) with respect to its capital stock or other
securities, except for dividends by a subsidiary of UVSG paid ratably to its
stockholders (other than any director, officer, employee or affiliate of
UVSG); (h) sell or pledge any stock, equity or partnership interest owned by
it in any subsidiary or equity affiliate of UVSG, except for dispositions in
the ordinary course of business consistent with prior practice; or (i) enter
into or assume any contract, agreement, commitment or arrangement with respect
to any of the foregoing.
Except as permitted, required or specifically contemplated by the Merger
Agreement or consented to in writing by TCI, UVSG has also agreed that it will
not, and will cause its subsidiaries not to, (i) modify in any material
respect any license or contract, other than in the ordinary course of
business; (ii) enter into any new employment, consulting, agency or commission
agreement or make any amendment or modification to any existing such agreement
or grant any increases in compensation, other than (x) in the ordinary course
of business and consistent with past practice and with or granted to persons
who are not officers or directors and which in the aggregate do not materially
increase compensation expense, (y) regular annual salary increases granted in
the ordinary course of business consistent with past practice to officers who
are not directors or executive officers and the payment of bonuses to
employees or directors during 1995 in the ordinary course of business
consistent with past practice, and (z) severance agreements with certain
officers and the employment agreements described below under "--Certain
Personnel Matters"; (iii) establish, amend or modify any employee benefit
plan, except to the extent required by applicable law or the existing terms of
such plan or the provisions of the Merger Agreement; (iv) make capital
expenditures which in the aggregate exceed the amount provided for in UVSG's
1995 capital budget; (v) secure any of its outstanding unsecured indebtedness,
provide any additional security for any of its outstanding secured
indebtedness or create or suffer to exist any lien on any of its assets, other
than specified permitted encumbrances; (vi) pay, discharge or satisfy claims,
liabilities or obligations, other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in UVSG's balance sheet as of March
31, 1995 or incurred subsequent thereto in the ordinary course of business and
consistent with past practice and scheduled repayments of indebtedness
reflected on the March 31, 1995 balance sheet; (vii) cancel any debts or waive
any claims or rights except in the ordinary course of business consistent with
past practice; (viii) prepay any indebtedness for borrowed money; (ix) other
than in connection with normal cash management practices conducted in the
ordinary and usual course of business and consistent with past practice, make
any advance or loan to or engage in any transaction with any director,
officer, partner or affiliate; (x) enter into or assume any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(xi) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or rights to acquire the
same, other than in the ordinary course of business consistent with past
practice; (xii) other than dispositions in the ordinary course of business
consistent with past practice, sell, lease, encumber or otherwise dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its material
assets; (xiii) acquire or agree to acquire by merging or consolidating or by
purchasing a substantial equity interest in or a substantial portion of the
assets of or by any other manner, any business or any business organization or
division thereof or any assets which are material, individually or in the
aggregate, other than acquisitions in existing or related lines of business of
UVSG or the
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applicable subsidiary not exceeding $5 million in the aggregate; or (xiv) take
any action likely to result in any of its representations and warranties in
the Merger Agreement being untrue or the conditions to the closing of the
Merger not being met.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that, subject to the fiduciary duties of
UVSG's Board of Directors under applicable law, UVSG will not, directly or
indirectly, solicit or initiate the submission of proposals or offers from,
cooperate with or furnish or cause to be furnished any nonpublic information
to, or negotiate or enter into any agreement or understanding with any other
person or entity relating to, or with the intent to effect, any Takeover
Proposal. "Takeover Proposal" is defined in the Merger Agreement to mean any
proposal for a merger, consolidation, reorganization, other business
combination or recapitalization involving UVSG or any of its subsidiaries, for
the acquisition of a 5% or greater interest in the equity or in any class or
series of capital stock of UVSG or any of its subsidiaries, for the
acquisition of the right to cast 5% or more of the votes on any matter with
respect to UVSG or any of its subsidiaries, or for the acquisition of a
substantial portion of the assets of UVSG or any of its subsidiaries or the
effect of which may be to prohibit, restrict or delay the consummation of, or
impair the contemplated benefits to TCI of, the Merger or any of the other
transactions contemplated by the Merger Agreement. The Merger Agreement does
not prohibit UVSG's Board of Directors, to the extent required by their
fiduciary duties under applicable law, from providing information to, or
participating in discussions with, any party that makes an unsolicited inquiry
with respect to UVSG if UVSG's Board of Directors reasonably believes that
such party may propose a Takeover Proposal on terms that are superior (a
"Superior Takeover Proposal") from a financial point of view, to the terms of
the Merger for the stockholders of UVSG. UVSG has agreed to provide TCI with
written notice of its receipt of any Takeover Proposal or inquiry and with
such information regarding the person making the same as TCI may request.
CERTAIN PERSONNEL MATTERS
Each UVSG stock option outstanding immediately prior to the Effective Time
will represent following the Effective Time the right to purchase the same
number of shares of UVSG Class A Common Stock as the number of shares of UVSG
Class A Common Stock it represented the right to purchase immediately prior to
the Effective Time and at the same purchase price and on, and subject to, the
same terms and conditions without any changes thereto resulting from the
Merger, except that upon the consummation of the Merger, unvested stock
options previously granted to Messrs. Bliss, Boylan and Morton to purchase
225,000, 75,000 and 12,000 shares, respectively, of UVSG Class A Common Stock
will vest and become immediately exercisable.
Each UVSG stock appreciation right outstanding immediately prior to the
Effective Time will continue to be outstanding immediately following the
Effective Time without any change in any terms or conditions thereof resulting
from the Merger, except that UVSG is required under the Merger Agreement to
use all commercially reasonable efforts to amend the terms of the stock
appreciation right to provide that all new businesses entered into between TCI
or any of its affiliates and UVSG, as the Surviving Corporation, or any of its
affiliates following the Effective Time shall, unless otherwise agreed in
writing by TCI, be deemed the acquisition of a new business under the terms of
the stock appreciation right. As a consequence of such amendment, the stock
appreciation right would exclude any value attributable to new business
entered into between TCI or any of its affiliates and the surviving
corporation or any of its affiliates after the Effective Time.
Pursuant to the terms of the existing employment agreements between Mr.
Bliss and UVSG and Mr. Boylan and UVSG, if the employment of Mr. Bliss or Mr.
Boylan is terminated by UVSG, or if Mr. Bliss or Mr. Boylan resigns after
being assigned to a position of lesser responsibilities, within six months
following a "Change of Control" (as defined) of UVSG, then Mr. Bliss or Mr.
Boylan, as applicable, would be entitled to receive a severance payment equal
to the amount of his base salary for the remainder of the two-year period
following the occurrence of such "Change of Control." Consummation of the
Merger will constitute a Change of Control within the meaning of such
employment agreements. In connection with the Merger, Mr. Boylan's employment
agreement with UVSG will be amended to extend the term thereof to the third
anniversary of the date the Merger
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is consummated and to provide for annual increases of 12.5% in his base salary
effective as of October 18, 1995. Effective as of the closing of the Merger,
Mr. Bliss' employment agreement with UVSG will be amended to extend the term
to the third anniversary of the closing date of the Merger and to provide for
annual increases of 12.5% in his base salary effective as of January 1, 1996.
If the employment of Mr. Bliss or Mr. Boylan is terminated without cause,
under his amended employment agreement such employee is entitled to (i) a
continuation of certain employee benefits, (ii) a severance payment equal to
the amount of his base salary that would have been receivable through the
later of the remainder of the agreement's term or one year from the date of
termination and (iii) payment, on a semi-monthly basis, of one-half of his
then applicable base salary until the earlier of (x) three years from the date
of termination of the agreement or (y) the date he commences full-time
employment or work as a full-time consultant (except that payments under
clause (ii) with respect to a period will reduce the amount of any payments
due under this clause (iii) for that period). If either Mr. Bliss' or Mr.
Boylan's employment is terminated by UVSG, or if Mr. Bliss or Mr. Boylan
resigns after being assigned to a position of lesser responsibility, within
the six-month period after a "Change of Control," such employee will be
entitled to a continuation of certain employee benefits and a severance
payment equal to the amount of his base salary for the remainder of the two-
year period following the occurrence of such "Change of Control." See "THE
MERGER--Interest of Certain Persons in the Merger."
Upon the closing of the Merger, UVSG and Mr. Flinn will enter into a three-
year employment agreement, pursuant to which Mr. Flinn will continue to be
employed as the Chairman and Chief Executive Officer of UVSG at his current
base salary with base salary increases of 12.5% effective as of January 1,
1996, and 8% for each of the two years after 1996. Mr. Flinn will be entitled
to the continuation during the term of his employment agreement of the
benefits he was receiving from UVSG as of the date of the Merger Agreement.
Mr. Flinn has agreed that he will not compete with UVSG in the United States
during the period he is employed by UVSG and for three years after termination
of his employment agreement. Mr. Flinn's employment may be terminated by UVSG
at any time, with or without cause. If his employment is terminated without
cause, Mr. Flinn is entitled to (i) a continuation of certain employee
benefits, (ii) a severance payment equal to the amount of his base salary that
would have been receivable through the later of the remainder of the
agreement's term or one year from the date of termination and (iii) payment,
on a semi-monthly basis, of one-half of his then applicable base salary until
the earlier of (x) three years from the date of termination of the agreement
or (y) the date Mr. Flinn commences full-time employment or work as a full-
time consultant (except that payments under clause (ii) with respect to a
period will reduce the amount of any payments due under this clause (iii) for
that period). If Mr. Flinn's employment is terminated by UVSG, or if he
resigns after being assigned to a position of lesser responsibility, within
the six-month period after a "Change of Control," Mr. Flinn will be entitled
to a continuation of certain employee benefits and a severance payment equal
to the amount of his base salary for the remainder of the two-year period
following the occurrence of such "Change of Control." See "THE MERGER--
Interest of Certain Persons in the Merger."
INDEMNIFICATION
The Merger Agreement provides that, after the Effective Time, UVSG, as the
Surviving Corporation, will indemnify each person who was, at any time prior
to the Effective Time, a director or officer of UVSG against all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts paid in
settlement with the approval of UVSG (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based on, or arising out of, in whole or in part, the fact that
such person was a director or officer of UVSG at any time prior to the
Effective Time, whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, at or
after the Effective Time (but excluding any claim by TCI under the Flinn
Agreement) (the "Indemnified Liabilities") and all Indemnified Liabilities
based on, or arising out of, in whole or in part, or pertaining to the Merger
Agreement or the transactions contemplated thereby, in each case to the full
extent that (i) a corporation is permitted under Delaware law to indemnify its
own directors or officers, as the case may be, (ii) such person would be
entitled to be indemnified by UVSG with respect to the Indemnified Liabilities
in question under UVSG's Certificate of Incorporation and Bylaws as in effect
on May 31, 1995 and (iii) such indemnification
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otherwise is permitted by applicable law. In the event any such claim, action,
suit, proceeding or investigation is asserted against such person, UVSG will
be entitled to participate and (providing there is not a conflict of interest
on any significant issue) assume the defense thereof, except that if UVSG does
not or cannot assume such defense, such person may retain counsel and UVSG
shall pay all reasonable fees and expenses of such counsel unless a court of
competent jurisdiction shall ultimately determine, after exhaustion of all
avenues of appeal, that such person is not entitled to indemnification.
SURVIVAL OF REPRESENTATIONS
In the Merger Agreement UVSG has made certain representations and warranties
concerning the completeness and truthfulness of information included in UVSG's
reports and financial statements filed with the Commission as well as
information included in this Proxy Statement/Prospectus and the Registration
Statement. These representations and warranties will survive for three years
following the closing of the Merger. In addition, certain representations made
by UVSG with respect to certain of its employee benefit plans will survive
until expiration of the applicable statute of limitations.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after approval by UVSG's
stockholders, (a) by mutual consent of UVSG and TCI; (b) by either UVSG or TCI
if (i) the Merger has not been consummated before January 31, 1996, unless the
absence of such occurrence is due to the failure of the party seeking to
terminate the Merger Agreement to perform any of its obligations thereunder,
(ii) there has been a material breach by the other party of any of its
representations, warranties, covenants or agreements that is not cured within
five business days after receipt by the party alleged to be in breach of
written notice thereof, (iii) any court of competent jurisdiction or other
competent governmental authority has issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such action has become final and nonappealable or
(iv) the requisite vote of stockholders in favor of the Merger Agreement is
not obtained at the Special Meeting and the party seeking to terminate the
Merger Agreement has complied with its obligations under the Merger Agreement
relating to such meeting; or (c) by TCI, if UVSG's Board of Directors
withdraws or modifies in any manner adverse to TCI its recommendation to UVSG
stockholders that they approve the Merger Agreement.
In the event of termination of the Merger Agreement by either UVSG or TCI as
provided above, the Merger Agreement will become void and there will be no
liability or obligation on the part of UVSG, TCI, Merger Sub or their
respective affiliates, stockholders, officers, directors, agents or
representatives (other than under certain specified provisions of the Merger
Agreement which will survive the termination thereof and other than to the
extent such termination results from the willful breach by TCI, Merger Sub or
UVSG of any of its respective representations, warranties, covenants or
agreements made in the Merger Agreement).
UVSG and TCI may amend the Merger Agreement, by action taken or authorized
by their respective Boards of Directors, either before or after approval by
the stockholders of UVSG of the Merger Agreement, except that after such
approval by the stockholders of UVSG, no amendment may be made which by law
requires further approval by such stockholders without such further approval.
At any time prior to the Effective Time, either UVSG or TCI, by action
authorized by such party's board of directors, may, to the extent legally
allowed, extend the time specified in the Merger Agreement for the performance
of any of the obligations of the other party, waive any inaccuracies in the
representations and warranties of the other party contained in the Merger
Agreement or in any document delivered pursuant thereto, waive compliance by
the other party with any of the agreements or covenants of such other party
contained in the Merger Agreement or waive any condition to such waiving
party's obligation to consummate the transactions contemplated by, or other
obligations under, the Merger Agreement.
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EXPENSES
If the Merger Agreement is terminated by UVSG or TCI as the result of a
material willful breach by the other party of its covenants or representations
and warranties in the Merger Agreement, the breaching party is required to
reimburse the non-breaching party for all out-of-pocket costs and expenses
incurred in connection with the transactions contemplated by the Merger
Agreement. Otherwise, if the Merger is not consummated for any reason, each
party will pay its own costs and expenses, except that the aggregate expenses
incurred in connection with the printing and mailing of this Proxy
Statement/Prospectus and the Registration Statement and the cost of filing
under the HSR Act will be borne equally by the parties.
CERTAIN RESTRICTIONS ON RESALE OF TCI/LMG PREFERRED STOCK
All shares of TCI/LMG Preferred Stock issuable in the Merger and the shares
of TCI Group Series A Common Stock and LMG Series A Common Stock into which
they may be converted will be registered under the Act and freely
transferable, except that any such shares received by persons who are deemed
"affiliates" (as such term is defined under the Act) of UVSG prior to the
Merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Act (or Rule 144 in the case of such persons
who become affiliates of TCI) or as otherwise permitted under the Act. Persons
who may be deemed to be affiliates of UVSG generally include individuals or
entities that control, are controlled by, or are under common control with
UVSG and may include certain officers and directors of UVSG, as well as Mr.
Flinn, the majority stockholder of UVSG. The Merger Agreement requires UVSG to
use reasonable efforts to cause each of its affiliates to execute a written
agreement to the effect that such person will not offer or sell or otherwise
dispose of any of the shares of TCI/LMG Preferred Stock issued to such person
in or pursuant to the Merger or TCI Group Series A Common Stock and LMG Series
A Common Stock into which it is converted in violation of the Act or the rules
and regulations promulgated by the Commission thereunder.
OTHER AGREEMENTS
In connection with the Merger, UVSG and TCI have agreed to execute the
Stockholder Agreement at the closing of the Merger. Pursuant to the
Stockholder Agreement, TCI will agree that it will cause all of its equity
securities of UVSG to be voted in any general election of directors in favor
of the election of Messrs. Bliss and Boylan as directors so long as they are
executive officers of UVSG. TCI will also vote its equity securities for the
election of Lawrence Flinn, Jr. to the Board of Directors as long as Mr. Flinn
owns at least 20% of the then outstanding equity securities of UVSG or, if
UVSG issues additional equity securities resulting in the equity securities of
Mr. Flinn representing less than 20% of the total equity securities of UVSG,
as long as Mr. Flinn beneficially owns at least 3.5 million shares of equity
securities (as adjusted for stock splits, reverse stock splits and stock
dividends) and he is one of the three largest stockholders of UVSG, including
TCI. In addition, under the Stockholder Agreement, TCI agrees that with
respect to any transaction for which approval by UVSG's stockholders is
required pursuant to the DGCL, if TCI or an affiliate of TCI (other than UVSG
and its subsidiaries) is a party to the transaction or would be a direct or
indirect beneficiary of the transaction (except in its capacity as a
stockholder of UVSG), then unless such transaction is approved by a majority
of the Disinterested Directors, TCI shall cause all of its equity securities
in UVSG to be voted in the same proportion for and against such transaction as
the equity securities of the other stockholders of UVSG voting thereon are
voted. The Disinterested Directors will initially include Messrs. Flinn, Bliss
and Boylan, as well as William J. Bresnan, Paul A. Gould and J.C. Sparkman,
who have been designated by TCI pursuant to the Merger Agreement and will be
elected to the UVSG Board of Directors immediately following consummation of
the Merger.
The Stockholder Agreement also provides that if UVSG proposes to enter into
any merger or consolidation subject to Article IV, Section A, paragraph 6 of
the Restated Certificate (which provision requires that in any merger or
consolidation of UVSG holders of Class A Common Stock and Class B Common Stock
receive, on a per share basis, consideration of substantially equivalent
value, as determined in good faith by the UVSG Board of Directors), then,
unless a majority of the Disinterested Directors of UVSG determines (and, if
requested by any Disinterested Director, UVSG obtains an opinion from an
independent financial advisor to that effect) that
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the consideration to be received by the holders of the Class A Common Stock in
such transaction is substantially equivalent in value, on a per share basis,
to the consideration to be received by the holders of the Class B Common Stock
in such transaction, taking into account all relevant factors, including,
without limitation, the anticipated tax treatment of such consideration to the
holders of the Class A Common Stock and Class B Common Stock, TCI shall not
permit its equity securities in UVSG to be voted in favor of such merger or
consolidation in any greater percentage than the percentage in which the
equity securities of the other stockholders of UVSG voting on such transaction
are voted in favor of such merger or consolidation. Notwithstanding the
foregoing, to the extent that the holders of the Class A Common Stock and the
holders of the Class B Common Stock, respectively, are entitled to receive in
any merger or consolidation (pursuant to any election or otherwise),
securities that do not differ in any respect other than their relative voting
rights and related differences in designation, conversion and share
distribution provisions, which differences would be permitted in a share
distribution under the Restated Certificate, such relative voting rights and
related differences in designation, conversion and share distribution
provisions are to be disregarded in determining the per share value of the
consideration to be received by the holders of the Class A Common Stock and
the Class B Common Stock, respectively, under the Restated Certificate.
In connection with the Merger Agreement, Mr. Flinn and TCI entered into the
Flinn Agreement pursuant to which Mr. Flinn agreed to vote, consistent with
his fiduciary obligations, if any, as a stockholder of UVSG, his shares of
UVSG Common Stock in favor of the Merger. Mr. Flinn currently holds shares of
UVSG Common Stock representing approximately 96% of the voting power of all
outstanding shares of UVSG Common Stock. Pursuant to the Flinn Agreement, Mr.
Flinn has agreed in connection with the Merger to convert 50% of the UVSG
Class B Common Stock beneficially owned by him at the Effective Time into an
equal number of shares of UVSG Class A Common Stock as contemplated by the
Merger Agreement. Pursuant to the terms of the Merger Agreement, the remaining
50% of Mr. Flinn's UVSG Class B Common Stock will be converted into Merger
Consideration at the Effective Time. Currently, Mr. Flinn owns all of the
issued and outstanding shares of UVSG Class B Common Stock, a total of
12,373,294 shares, of which 6,186,647 shares will be converted into an equal
number of shares of UVSG Class A Common Stock at the Effective Time and
6,186,647 shares will be converted into Merger Consideration. In consideration
of Mr. Flinn's agreements respecting voting and conversion of his shares of
UVSG Common Stock, TCI has agreed to enter into a registration rights
agreement with Mr. Flinn, pursuant to which TCI is required under certain
circumstances to register under the Act, for resale by Mr. Flinn, shares of
TCI Common Stock that may be acquired by Mr. Flinn upon conversion of the
TCI/LMG Preferred Stock he will receive as Merger Consideration.
Pursuant to the Flinn Agreement, Mr. Flinn has agreed that if he does not
vote or cause to be voted all of his shares of UVSG Common Stock in favor of
the Merger Agreement, if the Board of Directors of UVSG determines, in the
exercise of its fiduciary obligations not to submit the Merger Agreement for
consideration by stockholders of UVSG or if UVSG is the "breaching party," as
defined in the Merger Agreement, and the Merger Agreement is terminated or
expires as a result of the breach by UVSG, Mr. Flinn will pay a termination
fee in cash to TCI in an amount equal to the sum of $10 million, plus the
excess, if any, over $10 million of the product of (i) the positive difference
between (a) the value per share of any consideration Mr. Flinn receives for
his shares of UVSG Common Stock or any portion thereof in any transaction or
series of related transactions within two years following the termination of
the Merger Agreement and (b) $27 and (ii) the number of shares of UVSG Common
Stock sold or otherwise disposed of in such transactions. Mr. Flinn has also
agreed that until the earlier to occur of the Effective Time and the
termination of the Merger Agreement in his individual capacity he will not (i)
purchase or sell any securities of UVSG, (ii) enter into any agreement or
other obligation with respect to the purchase or sale of such securities or
solicit any offer to do so, or (iii) participate or engage in discussions or
negotiations regarding any such sale with any person other than TCI or provide
any material, nonpublic information regarding UVSG or any of its subsidiaries
to any person in connection with the foregoing. See "THE MERGER--Interest of
Certain Persons in the Merger."
In connection with the Merger, UVSG will enter into an employment agreement
with Mr. Flinn and amend the employment agreement with Messrs. Bliss and
Boylan as described under "--Certain Personnel Matters."
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AMENDMENT OF UVSG CERTIFICATE OF INCORPORATION AND BYLAWS
Upon the filing of the Certificate of Merger with the Delaware Secretary of
State and consummation of the Merger, UVSG's Certificate of Incorporation will
be amended and restated substantially in the form included as an exhibit to
the Merger Agreement and attached as Appendix IV to this Proxy
Statement/Prospectus to modify several of its provisions including, without
limitation, those regarding the number of authorized shares of UVSG Class A
Common Stock and Class B Common Stock, share distributions, merger
consideration, the number and term of UVSG's directors, removal of Board
members, amendment of Bylaws, the calling of special meetings, the ability of
the stockholders to act without a meeting and indemnification of directors and
officers. The Restated Certificate also clarifies that a number of its
provisions are subject to the rights of holders of UVSG's preferred stock, as
well as making certain other changes. Pursuant to the Merger Agreement,
immediately after the Effective Time the Board of Directors of the Surviving
Corporation will amend certain provisions of UVSG's Bylaws, including, without
limitation, provisions governing the election of directors, the vote of the
Board required to take certain actions (including increasing or decreasing the
size of the Board, filling vacancies on the Board, removing directors,
establishing an executive committee of the Board, appointing and removing
officers and calling special meetings of the Board), the ability of the
stockholders to amend the Bylaws, the ability of the stockholders to remove
directors, the procedures required for stockholders to nominate directors, the
notice procedures relating to calling meetings of the Board and the calling of
special meetings of stockholders. The indemnification provisions for UVSG's
officers and directors will be removed from the Bylaws and will be included in
the Restated Certificate. See "COMPARISON OF STOCKHOLDERS' RIGHTS."
CHANGE IN UVSG BOARD OF DIRECTORS AT CLOSING
The Merger Agreement provides that immediately after the Effective Time, all
directors of the Surviving Corporation, other than Mr. Flinn, shall resign and
Mr. Flinn, as the remaining director, shall cause to be elected as directors
Messrs. Bliss and Boylan as well as nominees designated by TCI. TCI has
selected the following nominees to be elected as directors of the Surviving
Corporation following the Merger: Colleen Abdoulah, David P. Beddow, William
J. Bresnan, Tony Coelho, Paul A. Gould, Bruce W. Ravenel, Larry E. Romrell,
J.C. Sparkman and J. David Wargo. See "MANAGEMENT OF UVSG FOLLOWING THE
MERGER." Following the Merger, the Board of Directors may be of such size and
include such additional nominees of TCI as TCI may determine in its sole
discretion.
REGULATORY APPROVALS
Consummation of the Merger is subject to the expiration or early termination
of the waiting period provided for under the HSR Act. UVSG and TCI filed with
the appropriate governmental agencies the notification and report form
required by the HSR Act on July 27, 1995, and the waiting period was scheduled
to expire on August 26, 1995. On August 25, 1995, the Federal Trade Commission
issued a request for additional information concerning the Merger and the
respective businesses of UVSG and TCI, thereby extending the waiting period.
UVSG and TCI responded informally to the request and early termination of the
waiting period was granted as of October 30, 1995.
Under Federal Communications Commission ("FCC") regulations, certain earth
station uplink licenses held by two subsidiaries of UVSG cannot be transferred
without prior FCC approval. A "transfer" that requires FCC approval includes
the transfer of control of the subsidiaries which hold such licenses through
the transfer of control of UVSG to TCI in the Merger. The FCC approved the
transfer of control of such licenses on December 6, 1995.
ACCOUNTING TREATMENT
The Merger will be accounted for by TCI under the purchase method of
accounting, whereby the consideration paid for UVSG will be allocated to the
identifiable assets and liabilities of UVSG based on their respective fair
values. Because TCI's economic ownership interest in UVSG following
consummation of the Merger is not expected to exceed 50% of the issued and
outstanding UVSG Common Stock, the allocation of
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the consideration paid for UVSG by TCI will not be "pushed down" to, or
otherwise be reflected in, UVSG's separate financial statements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
INTRODUCTION
In the opinion of Holme Roberts & Owen LLC, counsel to UVSG, the following
describes the principal federal income tax consequences expected to result to
the stockholders of USVG from the Merger, subject to the conditions and
limitations described herein, and Holme Robert & Owen LLC has delivered an
opinion to USVG to that effect. The following discussion is based on the
current provisions of the Internal Revenue Code (the "Code"), the applicable
Treasury Regulations ("Regulations") and the public administrative and
judicial interpretations of the Code and Regulations, all of which are subject
to change, which changes could be applied retroactively. The discussion
addresses only those stockholders who hold UVSG Common Stock, and would hold
the TCI/LMG Preferred Stock, as a capital asset within the meaning of Section
1221 of the Code.
No attempt has been made to comment on all federal income tax consequences
of the Merger that may be relevant to particular holders, including holders
that are subject to special tax rules such as dealers in securities, foreign
persons, mutual funds, insurance companies, tax-exempt entities and holders
who do not hold their shares as capital assets. The description does not
address state, local and foreign tax consequences.
Subject to the conditions and limitations described herein, the tax opinion
states that the Merger will qualify as a reorganization under Section 368(a)
of the Code and that no gain or loss will be recognized by the stockholders of
UVSG from their receipt of TCI/LMG Preferred Stock in exchange for their UVSG
Common Stock. The tax opinion also states that the discussion under "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" set forth herein describes the material
federal income tax consequences expected to result to the stockholders of UVSG
from the Merger, subject to the conditions and limitations described herein,
and that the discussion under the caption "--Ownership and Disposition of
TCI/LMG Preferred Stock" set forth below addresses the principal federal
income tax issues expected to arise with respect to the ownership and
disposition of the TCI/LMG Preferred Stock received in the Merger, subject to
the conditions and limitations described herein. Although a general discussion
of the federal income tax issues expected to arise from the ownership and
disposition of the TCI/LMG Preferred Stock is included herein, no tax opinion
has been obtained with respect to the specific tax consequences to any
stockholder of owning and disposing of the TCI/LMG Preferred Stock.
HOLDERS OF UVSG COMMON STOCK ARE ADVISED AND EXPECTED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND
THE OWNERSHIP AND DISPOSITION OF TCI/LMG PREFERRED STOCK IN LIGHT OF THEIR
PERSONAL CIRCUMSTANCES AND THE CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN TAX
LAWS, INCLUDING ANY POTENTIAL CHANGES IN LAWS.
THE MERGER TRANSACTION
The Merger is intended by the parties to qualify as a reorganization under
Section 368(a) of the Code. UVSG has received a tax opinion from its counsel
that, subject to the assumptions and conditions described herein, the Merger
will qualify as a reorganization for federal income tax purposes under Section
368(a) of the Code. The matter is not free from doubt and there are no court
decisions or published IRS rulings considering a similar transaction. It is a
condition to closing that the tax opinion of counsel has not been withdrawn or
modified in any material respect. No ruling from the Internal Revenue Service
(the "Service") has been or will be requested in connection with the Merger.
The tax opinion is based on the current provisions of the Code and the
applicable Regulations and the current public administrative and judicial
interpretations thereof. The Code and the Regulations and the
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interpretations thereof by the Service and the courts are subject to change
and any change could be applied retroactively. The tax opinion does not cover
the additional tax consequences, if any, that may result if the holder does
not hold the UVSG Common Stock as a capital asset or is a special taxpayer
(such as a foreign person, tax-exempt organization, retirement plan, regulated
investment company or a dealer in securities) and will not cover state, local
and foreign tax consequences.
The tax opinion is subject to a number of assumptions and conditions
including the following:
(a) The Merger Agreement, including the agreements referred to therein,
sets forth the complete agreement among the parties with respect to the
Merger and is binding and enforceable in accordance with its terms.
(b) The Merger and related transactions will take place as described in the
Merger Agreement, the facts and representations described in the Merger
Agreement are accurate, and the conduct of the parties will be
materially consistent with those facts.
(c) The Merger will be a valid merger under the applicable state law.
(d) The representation letters delivered to counsel by UVSG, TCI and Mr.
Flinn in connection with the tax opinion (which counsel has not
independently verified) are true and correct in all material respects.
(e) The Liberty Media Group Preferred Stock and the LMG Series A Common
Stock constitute voting stock of TCI for federal income tax purposes.
TCI's tax counsel has rendered a favorable opinion on this matter.
(f) At the Effective Time, the UVSG stockholders will not have any plan or
intention to sell, exchange, or otherwise dispose of more than 50% of
their stock interest in TCI that they receive pursuant to the Merger
transaction and will not have any plan or intention to sell, exchange
or otherwise dispose of more than 50% of their shares of UVSG Common
Stock remaining after the Merger. For this purpose, prior or subsequent
dispositions of stock related to the Merger would be considered in
determining whether the 50% requirement has been met.
If any assumption is not true or a condition is not satisfied, counsel's
opinion may be different.
If the Merger qualifies as a reorganization under Section 368(a) of the
Code:
(a) No gain or loss will be recognized by the stockholders of UVSG from
receipt of the TCI/LMG Preferred Stock in exchange for their UVSG
Common Stock;
(b) The aggregate tax basis of the TCI/LMG Preferred Stock received by the
stockholders of UVSG will be the same as the aggregate tax basis of
UVSG Common Stock exchanged therefor (adjusted to take into account the
receipt of any consideration in the Merger other than TCI/LMG Preferred
Stock); and
(c) The holding period of the shares of TCI/LMG Preferred Stock received by
the stockholders of UVSG will include the holding period of the UVSG
Common Stock exchanged for the TCI/LMG Preferred Stock, provided such
shares of UVSG Common Stock were held as a capital asset as of the
Effective Time.
If a holder of UVSG Common Stock who exchanges shares in the Merger were to
receive any consideration for his UVSG Common Stock other than TCI/LMG
Preferred Stock, such holder would recognize taxable income equal to the fair
market value of such additional consideration (but not in excess of the
amount, if any, by which the sum of the fair market value of such
consideration plus the fair market value of the TCI/LMG Preferred Stock
received by such holder exceeds the tax basis for the UVSG shares surrendered
in exchange therefor). UVSG does not believe that there is any material
additional consideration.
On December 7, 1995, the Treasury Department proposed legislation that would
treat certain preferred stock received in a corporate reorganization as "boot"
and not as qualified stock consideration. If the TCI/LMG Preferred Stock were
determined not to be qualified stock consideration, the receipt of TCI/LMG
Preferred Stock in the Merger would be taxable to any UVSG stockholder who
exchanges shares of UVSG Common Stock for
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Merger Consideration. As of the date hereof, the specific statutory language
for this proposal has not been released by the Treasury Department, but based
on the summary descriptions of the proposal that have been released, there is
a strong position that the proposal, if enacted, would not apply to the
TCI/LMG Preferred Stock or the Merger. However, there can be no assurance that
tax legislation enacted in the future would not result in the Merger being a
taxable transaction. The tax opinion is based on current federal income tax
law, and no opinion is expressed as to whether any future legislation (which
could have a retroactive effect) will apply to the Merger. As stated above,
under the Merger Agreement, UVSG is not obligated to close the Merger if, in
its reasonable judgment, any legislation proposed after the date of the Merger
Agreement would be reasonably likely to have a material adverse effect on the
transactions contemplated by the Merger Agreement. UVSG has advised TCI that
it would exercise its right not to consummate the Merger if any legislation
proposed after the date of the Merger Agreement would, as determined by UVSG
in its reasonable judgment, be reasonably likely to result in the Merger being
considered to be a taxable transaction. This Proxy Statement/Prospectus will
not be updated for new developments with respect to any tax legislation, and
UVSG stockholders are advised to consult their own tax advisors on these
matters.
An opinion of counsel does not provide the same degree of assurance with
respect to the tax consequences of a transaction as a private letter ruling
from the Service. An opinion of counsel, unlike a private letter ruling from
the Service, has no binding effect on the Service but rather represents
counsel's legal judgment based on the current law. The Service could take a
position contrary to counsel's opinion and, if the matter is litigated, a
court may reach a decision contrary to the opinion.
OWNERSHIP AND DISPOSITION OF TCI/LMG PREFERRED STOCK
The following is a general discussion of the principal federal income tax
issues expected to arise with respect to the ownership and disposition of the
TCI/LMG Preferred Stock received in the Merger. The description is based on
current law and is subject to the conditions and limitations discussed herein,
including those described in the "Introduction" to this tax discussion. No tax
opinion has been obtained with respect to the specific tax consequences to any
stockholder of owning and disposing of the TCI/LMG Preferred Stock.
DIVIDENDS
The dividends payable on the TCI/LMG Preferred Stock (whether in cash or in
shares of TCI stock) will be taxable as ordinary income to the extent paid out
of TCI's current or accumulated earnings and profits. Any portion not paid out
of earnings and profits will be applied against and reduce the tax basis of
the TCI/LMG Preferred Stock with the balance taxable as gain from the
disposition of that stock. Sections 243 through 247 and 1059 of the Code
provide for a dividends-received deduction for corporate stockholders, subject
to the limitations described therein. Corporate holders of the TCI/LMG
Preferred Stock should consider the potential tax consequences to them under
Section 1059 of the Code resulting from a distribution treated as a dividend.
CONSTRUCTIVE DIVIDENDS
Under Section 305 of the Code, holders of the TCI/LMG Preferred Stock could
have dividend income without a corresponding receipt of cash or additional
shares of TCI capital stock.
Redemption Premium. If the "redemption premium" with respect to the TCI/LMG
Preferred Stock is more than a de-minimis amount, the amount of the redemption
premium will be taxed as constructive dividends to the holders of the TCI/LMG
Preferred Stock over the 20-year life of the TCI/LMG Preferred Stock on an
economic accrual basis. Because TCI has the right to call the TCI/LMG
Preferred Stock after five years, it is possible, under certain circumstances,
that a redemption premium would be taxed as constructive dividends over the
initial five years rather than the 20-year term of the TCI/LMG Preferred
Stock.
The redemption premium will be computed on a per share basis and will equal
the excess of the redemption price of the TCI/LMG Preferred Stock over its
issue price. For this purpose, the redemption price will be at least equal to
the initial liquidation value per share for each series of TCI/LMG Preferred
Stock received (and might
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include any accrued and unpaid dividends on the stock) and the issue price
will be the per share fair market value of the TCI/LMG Preferred Stock at the
Effective Time.
The amount of the redemption premium, if any, will be determined by TCI and
it will deliver appropriate reporting information to the holders of the
TCI/LMG Preferred Stock. TCI's decision on these matters will be binding on
the holders of the TCI/LMG Preferred Stock unless they file an appropriate
notice in accordance with the applicable Regulations.
Adjustment to the Conversion Rights. Under various circumstances the
conversion rights of the TCI/LMG Preferred Stock will be adjusted. See
"DESCRIPTION OF TCI CAPITAL STOCK--TCI Preferred Stock--Series G Redeemable
Convertible TCI Group Preferred Stock" and "--Series H Redeemable Convertible
Liberty Media Group Preferred Stock." These adjustments could result in
constructive distributions taxable as dividends to the holders of the TCI/LMG
Preferred Stock. The holders of the TCI/LMG Preferred Stock will generally not
control the particular circumstances that result in an adjustment of the
conversion rights. In general, any adjustment in the conversion rights that
increases the interest of the holders of the TCI/LMG Preferred Stock in the
assets or earnings and profits of TCI will result in a constructive dividend
distribution to the holders of that preferred stock, unless the antidilution
safe harbor of the Treasury Regulations applies. The anti-dilution safe harbor
provides that changes in the conversion ratio made solely to avoid dilution in
the interests of holders of the TCI/LMG Preferred Stock will not result in a
constructive dividend, but the safe harbor specifically does not cover
conversion rights adjustments that are made to compensate the holders for
taxable cash or property distributions to other stockholders. The anti-
dilution safe harbor covers some but not all of the possible circumstances
that could result in an adjustment in the conversion rights of the TCI/LMG
Preferred Stock. The amount of any constructive dividend resulting from an
adjustment in the conversion rights will be determined by TCI in consultation
with its tax advisors.
Other Transactions. A stockholder could also have constructive distributions
that are taxed as dividends with respect to the TCI/LMG Preferred Stock as a
result of changes in the redemption price of the TCI/LMG Preferred Stock,
certain redemptions of stock treated as distributions under Section 301 of the
Code that increase the stockholder's proportionate interest in the assets or
earnings and profits of TCI or any other transaction (including a
recapitalization of TCI) having a similar effect on the stockholder's
proportionate interest in TCI.
Spinoff of LMG. Under various circumstances, the LMG Series A Common Stock
may be redeemed for the stock of a subsidiary that owns the Liberty Media
Group assets in a spinoff transaction and the holders of the Liberty Media
Group Preferred Stock could be given an opportunity to exchange their Liberty
Media Group Preferred Stock for a new preferred stock in the spinoff entity.
See "DESCRIPTION OF TCI CAPITAL STOCK--Series H Redeemable Convertible Liberty
Media Group Preferred Stock." The tax consequences of such a transaction will
depend on the terms of the transaction and the applicable tax law in effect at
the time of the transaction.
REDEMPTIONS OR SALES OF THE TCI/LMG PREFERRED STOCK IF NOT SECTION 306 STOCK
Redemptions. The TCI/LMG Preferred Stock may be redeemed by TCI at any time
after five years and must be redeemed by TCI in 2016 if not redeemed earlier.
See "DESCRIPTION OF TCI CAPITAL STOCK--TCI Preferred Stock--Series G
Redeemable Convertible TCI Group Preferred Stock" and "--Series H Redeemable
Convertible Liberty Media Group Preferred Stock." In general, the redemption
of the TCI/LMG Preferred Stock will be treated to the holder as either: (a) a
taxable sale of the redeemed stock; or (b) a distribution from TCI that may be
partially or wholly taxable as a dividend. For a discussion of the special
rules applicable to a redemption of the TCI/LMG Preferred Stock if that stock
constitutes "Section 306 stock" in the hands of the holder, see "Redemptions
or Sales of TCI/LMG Preferred Stock if Section 306 Stock" below.
A redemption of TCI/LMG Preferred Stock will be treated as a taxable sale if
it qualifies as: (a) a "substantially disproportionate" redemption with
respect to the stockholder; (b) a "complete termination" of the stockholder's
entire interest in TCI; or (c) a distribution that is "not essentially
equivalent to a dividend" with respect to the holder. Under the first test,
the redemption will be substantially disproportionate with respect
52
<PAGE>
to the stockholder if (i) the percentage of the voting stock of TCI actually
and constructively owned by the stockholder immediately following the
redemption is less than 80 % of the percentage of the voting stock of TCI
actually and constructively owned by the stockholder immediately before the
exchange; and (ii) the redemption results in a similar percentage reduction in
the stockholder's ownership of TCI's common stock.
Under the second test, the redemption will result in a "complete
termination" of the stockholder's interest in TCI if, after the redemption,
the stockholder does not own (actually or constructively) any TCI common or
preferred stock. Under the third test, the redemption will be "not essentially
equivalent to a dividend" if the redemption results in a "meaningful
reduction" in the stockholder's voting rights, participation in earnings and
liquidation rights arising from his actual and constructive ownership of TCI
stock. Whether the redemption will result in a "meaningful reduction" in such
interests of the stockholder in TCI will depend upon the holder's individual
circumstances.
In determining whether any of these three tests is satisfied, the TCI stock
actually owned and the TCI stock constructively owned by the stockholder must
be taken into account. Generally, under the constructive ownership rules
contained in Sections 302 and 318 of the Code, a stockholder is deemed to own:
(a) shares actually owned and, in some cases, constructively owned by certain
family members (including the stockholder's spouse, children, grandchildren
and parents); (b) a proportionate number of the shares owned (actually or
constructively) by a corporation in which the stockholder owns 50% or more of
the stock (actually or constructively); (c) a proportionate number of the
shares owned (actually or constructively) by a partnership (which for this
purpose includes an S corporation), trust or estate in which the stockholder
owns an interest; and (d) shares that the stockholder might acquire through
the exercise of stock options or stock purchase rights or through conversion
of preferred stock or debt instruments. The stock constructively owned by a
corporation, partnership, trust or estate may include stock owned by a
stockholder, partner or beneficiary thereof.
If any of the three tests is satisfied, the redemption will be treated as a
taxable sale and the holder will recognize gain or loss equal to the
difference between the amount received in the redemption and the holder's
adjusted tax basis for the redeemed stock. This gain or loss will be capital
gain or loss if the TCI/LMG Preferred Stock was held as a capital asset, and
the capital gain or loss will be long-term capital gain or loss if the TCI/LMG
Preferred Stock was held for the requisite holding period.
If none of the three tests is satisfied, the amount received in the
redemption will be taxable as a dividend to the extent of the current and
accumulated earnings and profits of TCI, without regard to any unrealized gain
or loss. Any excess of the amount received in the redemption over the amount
taxable as a dividend under the preceding sentence will reduce the holders'
adjusted tax basis in the redeemed stock (but not below zero). Any excess of
the amount received in the redemption over the dividend and basis reduction
amounts described in the preceding two sentences will be treated as gain from
the sale of property. This gain will be capital gain if the TCI/LMG Preferred
Stock was held as a capital asset, and the capital gain will be long-term
capital gain if the TCI/LMG Preferred Stock was held for the requisite holding
period. Any part of the amount received in the redemption that is attributable
to declared but unpaid dividends with respect to the redeemed stock will be
taxable as a dividend.
Sales. On the sale of TCI/LMG Preferred Stock (other than in a redemption by
TCI), the holder generally will recognize gain or loss equal to the difference
between the amount realized and the holder's tax basis for the TCI/LMG
Preferred Stock sold or disposed of. This gain or loss will be capital gain or
loss if the TCI/LMG Preferred Stock was held as a capital asset, and the
capital gain or loss will be long-term capital gain or loss if the TCI/LMG
Preferred Stock was held for the requisite holding period.
REDEMPTIONS OR SALES OF TCI/LMG PREFERRED STOCK IF SECTION 306 STOCK
If the TCI/LMG Preferred Stock is Section 306 stock, the holder of the
TCI/LMG Preferred Stock may recognize ordinary income on the redemption, sale
or other disposition of that stock, as discussed below. Any ordinary income
would not qualify for the dividends-received deduction applicable to corporate
shareholders,
53
<PAGE>
except to the extent that it is received upon a redemption of the TCI/LMG
Preferred Stock. The TCI/LMG Preferred Stock will be Section 306 stock in the
hands of the holder if, in the event that the holder had received cash in the
Merger in lieu of the TCI/LMG Preferred Stock, that cash would have been
treated as a dividend to any extent. The application of this "cash in lieu of
" rule, with respect to the TCI/LMG Preferred Stock received in the Merger, is
unclear, but it may be possible that, under this rule as applied to the
Merger, the TCI/LMG Preferred Stock will not be Section 306 stock. There are a
number of other exceptions in Section 306 that may be available to the
stockholders to avoid the adverse tax consequences that would result if the
TCI/LMG Preferred Stock is Section 306 stock.
If the TCI/LMG Preferred Stock is Section 306 stock and it is converted into
TCI Common Stock, the TCI Common Stock received will not be Section 306 stock
(provided the common stock is not convertible into preferred stock or other
property).
Redemptions. On redemption of TCI/LMG Preferred Stock that is Section 306
stock in the hands of the holder, the amount received in the redemption
generally will be taxable as a dividend to the extent of the current and
accumulated earnings and profits of TCI, without regard to any unrealized gain
or loss. However, if the redemption results in a "complete redemption" of the
holder's actual and constructive interests as a stockholder of TCI, then the
redemption will be treated as a taxable sale of the redeemed stock and the
holder will recognize gain or loss equal to the difference between the amount
received in the redemption and the holder's adjusted tax basis for the
redeemed stock. This gain or loss will be capital gain or loss if the TCI/LMG
Preferred Stock was held as a capital asset, and the capital gain or loss will
be long-term capital gain or loss if the TCI/LMG Preferred Stock was held for
the requisite holding period.
In addition, other exceptions, if applicable, may cause the redemption not
to be taxable as a dividend. If the TCI/LMG Preferred Stock is called for
redemption by TCI, the holder should consult his tax advisor concerning the
tax consequences of the proposed redemption and other alternatives available
to the holder.
Sales. On a sale of TCI/LMG Preferred Stock that is Section 306 stock in the
hands of the holder (other than in a redemption by TCI), the holder generally
will recognize ordinary income equal to the stock's ratable share of the
amount that would have been taxable as a dividend if the holder had received
cash in the Merger in lieu of the TCI/LMG Preferred Stock. The difference
between the amount received in the sale or other disposition and the amount
recognized as ordinary income under the preceding sentence will be treated as
gain from sale of the stock to the extent that it exceeds the holder's
adjusted tax basis for the stock immediately prior to the sale or other
disposition. The gain described in the preceding sentence will be capital gain
if the TCI/LMG Preferred Stock sold or disposed of was held as a capital
asset, and the capital gain will be long-term capital gain if the stock was
held for the requisite holding period. No loss will be recognized on the sale
or other disposition. However, if the sale or other disposition results in a
"complete redemption" of the holder's actual and constructive interest as a
stockholder of TCI and the sale is not to a related party, then that sale or
other disposition will be taxed as if the stock were not Section 306 stock.
Special rules may apply to a gift transfer of Section 306 stock.
In addition, other exceptions, if applicable, may cause the amounts received
in the sale or other disposition not to be taxable as a dividend.
CONVERSION OF TCI/LMG PREFERRED STOCK INTO TCI COMMON STOCK
The conversion of the TCI/LMG Preferred Stock into TCI Group Series A Common
Stock should be a nontaxable event to the holder because the conversion is
pursuant to the terms of the preferred stock. However, under the Treasury
Regulations, the stockholder will generally be taxed on any dividends in
arrears (and possibly any remaining redemption premium) that have not been
previously reported as income.
If the TCI/LMG Preferred Stock is converted into property other than TCI
stock or the conversion is not pursuant to the terms of the TCI/LMG Preferred
Stock, the conversion would be a taxable redemption of the
54
<PAGE>
preferred stock. The tax consequences of redemption transactions are discussed
above. See the discussion of the possible adjustments to the conversion rights
of the TCI/LMG Preferred Stock under "DESCRIPTION OF TCI CAPITAL STOCK--Series
G Redeemable Convertible TCI Group Preferred Stock" and "--Series H Redeemable
Convertible Liberty Media Group Preferred Stock."
SECTION 368 REPORTING REQUIREMENTS
Under Treasury Regulation Section 1.368-3, any UVSG stockholder who receives
TCI/LMG Preferred Stock in exchange for UVSG Common Stock as a result of the
Merger must file with his or her federal income tax return for the taxable
year during which the Merger is consummated a statement of the facts pertinent
to that exchange, as more fully described in that Section.
BACKUP WITHHOLDING
Under Section 3406 of the Code, the UVSG stockholders may be subject to
"backup withholding" at the rate of 31% on "reportable payments" to be
received by them if they fail to furnish their correct taxpayer identification
numbers or for certain other reasons. TCI will report to these persons and to
the Service for each calendar year the amount of any reportable payments
during that year and the amount of tax withheld, if any, with respect to those
reportable payments.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH STOCKHOLDER SHOULD CONSULT A TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE MERGER THAT MAY APPLY TO SUCH STOCKHOLDER,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE
CHANGES IN FEDERAL INCOME TAX LAW SINCE THE DATE OF THIS PROXY STATEMENT.
UVSG SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 14, 1995,
regarding ownership of UVSG Common Stock by (1) each person believed by UVSG
to be the beneficial owner of more than five percent of its outstanding Common
Stock; (2) each Director and by the Chief Executive Officer and each of the
four other most highly compensated executive officers for the fiscal year
1994, and (3) all current executive officers and directors of UVSG as a group.
The table also sets forth information regarding ownership of UVSG Common Stock
on a pro forma basis following the Merger, assuming that (i) Mr. Flinn
converts one-half of his shares of UVSG Class B Common Stock into UVSG Class A
Common Stock immediately prior to the Merger, pursuant to his agreement with
TCI, (ii) the remaining one-half of Mr. Flinn's shares of UVSG Class B Common
Stock are converted into Merger Consideration pursuant to the terms of the
Merger Agreement, and (iii) none of the other directors or executive officers
of UVSG will elect to receive Merger Consideration in the Merger. See "THE
MERGER--Interest of Certain Persons in the Merger." Shares of UVSG Class B
Common Stock are convertible immediately into shares of UVSG Class A Common
Stock on a one-for-one basis and, accordingly, holders of UVSG Class B Common
Stock are deemed to own beneficially the same number of shares of UVSG Class A
Common Stock. The table below does not reflect such beneficial ownership of
UVSG Class A Common Stock. Information in the table as to beneficial ownership
of more than five percent of UVSG's outstanding stock is based upon filings
made on Schedule 13G by the respective holders with the Commission, copies of
which were provided to UVSG as of December 14, 1995, and upon filings made on
Form 13F by the respective holders with the Commission through September 30,
1995, as determined through an inquiry of the Vickers Steele Research Corp.
database.
55
<PAGE>
<TABLE>
<CAPTION>
Actual
---------------------------------------------------
UVSG Class A UVSG Class B Percent of
Common Stock Common Stock Vote of All
------------------ ------------------- Outstanding
Number Percent Number Percent UVSG
Beneficial Owner of Shares of Class of Shares of Class Common Stock
- ---------------- --------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence Flinn,
Jr. (1)(2)..... 200,000 3.6% 12,373,294 100% 95.9%
Roy L. Bliss
(2)(3)......... 797,560 14.0% -- -- *
G.T. Capital
Management (4).. 605,000 10.9% -- -- *
Greenville
Capital
Management
(4)............ 469,417 8.5% -- -- *
Seligman J.W. &
Company (4).... 454,564 8.2% -- -- *
Trainer, Wortham
& Co. Inc.
(4)............ 359,500 6.5% -- -- *
Jerry D. Henshaw
(5)............ 144,242 2.6% -- -- *
James M. Rupp
(6)............ 40,000 * -- -- *
H. Arthur Bellows, Jr. (7).. 24,000 * -- -- *
Abraham H.
Frumkin (6).... 21,000 * -- -- *
Joe D. Batson
(8)............ 30,000 * -- -- *
Michael C.
Morton (9)..... 10,000 * -- -- *
Rick Brattin
(10)........... 13,633 * -- -- *
Peter C. Boylan,
III (11)....... 25,000 * -- -- *
All Directors
and Executive
Officers as a
Group
(12 persons)
(12)........... 1,411,377 23.8% 12,373,294 100.0% 96.5%
<CAPTION>
Adjusted for the Merger(13)
--------------------------------------------------
UVSG Class A UVSG Class B Percent of
Common Stock Common Stock Vote of All
------------------ ------------------ Outstanding
Number Percent Number Percent UVSG
Beneficial Owner of Shares of Class of Shares of Class Common Stock
- ---------------- --------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence Flinn,
Jr. (1)(2)..... 6,386,647 54.5% -- -- 8.7%
Roy L. Bliss
(2)(3)......... 1,022,560 8.5% -- -- *
G.T. Capital
Management (4).. 605,000 5.2% -- -- *
Greenville
Capital
Management
(4)............ 469,417 4.0% -- -- *
Seligman J.W. &
Company (4).... 454,564 3.9% -- -- *
Trainer, Wortham
& Co. Inc.
(4)............ 359,500 3.1% -- -- *
Jerry D. Henshaw
(5)............ 144,242 1.2% -- -- *
James M. Rupp
(6)............ 40,000 * -- -- *
H. Arthur Bellows, Jr. (7).. 24,000 * -- -- *
Abraham H.
Frumkin (6).... 21,000 * -- -- *
Joe D. Batson
(8)............ 30,000 * -- -- *
Michael C.
Morton (9)..... 22,000 * -- -- *
Rick Brattin
(10)........... 13,633 * -- -- *
Peter C. Boylan,
III (11)....... 100,000 * -- -- *
All Directors
and Executive
Officers as a
Group
(12 persons)
(12)........... 7,910,024 63.6% -- -- 9.8%
</TABLE>
- --------
* Less than 1%
(1) The Class A Common Stock shown is owned by the Lawrence Flinn, Jr.,
Charitable Trust of which Mr. Flinn is Trustee. Mr. Flinn disclaims
beneficial ownership of such shares.
(2) The address of Mr. Flinn is 100 First Stamford Place, Stamford,
Connecticut 06902. The address of Mr. Bliss is 7140 South Lewis, Tulsa,
Oklahoma 74136-5422.
(3) Includes 75,000 shares of UVSG Class A Common Stock subject to presently
exercisable options and 75,000 shares of UVSG Class A Common Stock
subject to options that will become exercisable within 60 days. At the
Effective Time of the Merger, options held by Mr. Bliss for an additional
225,000 shares of UVSG Class A Common Stock will become exercisable.
(4) The address of G.T. Capital Management is 50 California Street, San
Francisco, California 94111. The address of Greenville Capital Management
is P.O. Box 4589, Greenville, Delaware 19807. The address of Seligman
J.W. & Company is 100 Park Avenue, New York, New York 10017. The address
of Trainer, Wortham & Co. Inc. is 845 Third Avenue, New York, New York
10022.
(5) Includes 72,272 shares of UVSG Class A Common Stock subject to presently
exercisable options and 13,333 shares of UVSG Class A Common Stock
subject to options that will become exercisable within 60 days.
(6) Includes 20,000 shares of UVSG Class A Common Stock subject to presently
exercisable options.
(7) Includes 20,000 shares of UVSG Class A Common Stock subject to presently
exercisable options. Also includes 2,000 shares of UVSG Class A Common
Stock owned by Mr. Bellows' spouse, to which shares Mr. Bellows disclaims
beneficial ownership.
(8) Includes 15,000 shares of UVSG Class A Common Stock subject to presently
exercisable options and 15,000 shares of UVSG Class A Common Stock
subject to options that will become exercisable within 60 days.
(9) Includes 8,000 shares of UVSG Class A Common Stock subject to presently
exercisable options. At the Effective Time of the Merger, options held by
Mr. Morton for an additional 12,000 shares of UVSG Class A Common Stock
will become exercisable.
(10) Includes 8,000 shares of UVSG Class A Common Stock subject to presently
exercisable options and 4,000 shares of UVSG Class A Common Stock subject
to options that will become exercisable within 60 days.
(11) Represents 25,000 shares of UVSG Class A Common Stock subject to
presently exercisable options. At the Effective Time of the Merger,
options held by Mr. Boylan for 75,000 additional shares of UVSG Class A
Common Stock will become exercisable.
(12) Includes 281,272 shares of UVSG Class A Common Stock subject to presently
exercisable options and 125,333 shares of UVSG Class A Common Stock
subject to options that will become exercisable within 60 days. At the
Effective Time of the Merger, options for an additional 312,000 shares of
UVSG Class A Common Stock will become exercisable.
(13) Assumes that no director or executive officer of UVSG, other than Mr.
Flinn, elects to convert shares of UVSG Common Stock into the Merger
Consideration.
56
<PAGE>
MANAGEMENT OF UVSG FOLLOWING THE MERGER
Pursuant to the Merger Agreement all of the existing directors of UVSG,
other than Mr. Flinn, will resign immediately following consummation of the
Merger. Mr. Bliss, currently a Director and the President and Chief Operating
Officer of UVSG, and Mr. Boylan, currently a Director and the Executive Vice
President and Chief Financial Officer of UVSG, will be elected to the Board of
Directors of UVSG following the Merger. In addition, the following persons
nominated by TCI will also be elected to the UVSG Board of Directors: Colleen
Abdoulah, David P. Beddow, William J. Bresnan, Tony Coelho, Paul A. Gould,
Bruce W. Ravenel, Larry E. Romrell, J.C. Sparkman and J. David Wargo. UVSG
does not expect that its executive officers will change as a result of the
Merger.
In connection with the Merger, Mr. Flinn will enter into a three-year
employment agreement with UVSG and the employment agreements between UVSG and
each of Messrs. Bliss and Boylan will be amended to, among other things,
extend their terms of employment to the third anniversary following
consummation of the Merger. See "THE MERGER--Interest of Certain Persons in
the Merger" and "TERMS OF THE MERGER--Certain Personnel Matters." Other
information concerning compensation of UVSG's directors and executive officers
and certain relationships and related transactions is described in UVSG's
Annual Report on Form 10-K for the year ended December 31, 1994, as amended,
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
Information concerning the persons who will serve as directors of UVSG
following the Merger is set forth in Appendix III to this Proxy
Statement/Prospectus.
DESCRIPTION OF TCI CAPITAL STOCK
The following description of certain terms of the capital stock of TCI and
of the two new series of preferred stock of TCI to be issued in the Merger
does not purport to be complete and is qualified in its entirety by reference
to the Restated Certificate of Incorporation, as amended, of TCI (the "TCI
Charter") (including the Certificates of Designations for outstanding series
of TCI Preferred Stock) and to the Certificates of Designations for the
TCI/LMG Preferred Stock which have been filed as exhibits to the Registration
Statement of which this Proxy Statement/Prospectus is a part.
GENERAL
The TCI Charter provides that TCI is authorized to issue 2,777,375,096
shares of capital stock, including (i) 2,725,000,000 shares of common stock,
par value $1.00 per share (the "TCI Common Stock"), of which 1,750,000,000
shares are designated Tele-Communications, Inc. Series A TCI Group Common
Stock, 150,000,000 shares are designated Tele-Communications, Inc. Series B
TCI Group Common Stock (collectively the "TCI Group Common Stock"),
750,000,000 shares are designated Tele-Communications, Inc. Series A Liberty
Media Group Common Stock, and 75,000,000 shares are designated Tele-
Communications, Inc. Series B Liberty Media Group Common Stock (collectively,
the "Liberty Media Group Common Stock"), and (ii) 52,375,096 shares of
preferred stock (the "TCI Preferred Stock"), of which 700,000 shares are
designated Class A Preferred Stock, par value $0.01 per share (the "Class A
Preferred Stock"), 1,675,096 shares are designated Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share (the
"Class B Preferred Stock"), and 50,000,000 shares are designated Series
Preferred Stock, par value $.01 per share (the "Series Preferred Stock"),
issuable in series. Of the Series Preferred Stock, 80,000 shares are
designated Convertible Preferred Stock, Series C (the "Series C Preferred
Stock"), 1,000,000 shares are designated Convertible Preferred Stock, Series D
(the "Series D Preferred Stock"), 400,000 shares are designated Redeemable
Convertible Preferred Stock, Series E (the "Series E Preferred Stock"), and
500,000 shares are designated Convertible Redeemable Participating Preferred
Stock, Series F (the "Series F Preferred Stock"). Pursuant to the Certificates
of Designations for the TCI/LMG Preferred Stock, up to 9,175,459 shares of the
Series Preferred Stock will be designated as TCI Group Preferred Stock and up
to 9,175,459 shares of the Series Preferred Stock will be designated as
Liberty Media Group Preferred Stock.
57
<PAGE>
As of November 1, 1995, 571,576,645 shares of TCI Group Series A Common
Stock, 84,801,554 shares of TCI Group Series B Common Stock, 142,892,796
shares of LMG Series A Common Stock and 21,200,336 shares of LMG Series B
Common Stock (in each case net of shares held in treasury), 1,620,026 shares
of Class B Preferred Stock, 70,575 shares of Series C Preferred Stock, 999,569
shares of Series D Preferred Stock and 277,064 shares of Series F Preferred
Stock have been issued and are outstanding. All of the shares of Class A
Preferred Stock have previously been redeemed and retired and may not be
reissued, thereby reducing the number of authorized shares of TCI Preferred
Stock. All 400,000 shares of Series E Preferred Stock have previously been
redeemed and retired with the effect that such shares have been restored to
the status of authorized and unissued shares of Series Preferred Stock, may be
reissued as shares of another series of Series Preferred Stock, but such
shares may not be reissued as Series E Preferred Stock. All of the outstanding
shares of Series F Preferred Stock are held by subsidiaries of TCI.
After giving effect to the designations of the TCI/LMG Preferred Stock, at
least 30,069,082 shares of Series Preferred Stock shall remain available for
designation pursuant to the TCI Charter.
TCI GROUP COMMON STOCK AND LIBERTY MEDIA GROUP COMMON STOCK
CERTAIN DEFINITIONS
As used herein, the following terms have the meanings specified below:
"Committed Acquisition Shares" means (a) the shares of LMG Series A Common
Stock that TCI had, prior to the record date for the Distribution, agreed to
issue, but as of such record date had not issued, and (b) the shares of LMG
Series A Common Stock that are issuable upon conversion, exercise or exchange
of Convertible Securities that TCI had, prior to the record date for the
Distribution, agreed to issue, but as of such record date had not issued, in
each case including obligations of TCI to issue shares of TCI's Class A Common
Stock, par value $1.00 per share (which has been redesignated TCI Group Series
A Common Stock), which as a result of the Distribution, constitute obligations
to issue, among other securities, LMG Series A Common Stock or Convertible
Securities which are convertible into or exercisable or exchangeable for LMG
Series A Common Stock; provided, however that Committed Acquisition Shares
will not include any shares of Liberty Media Group Common Stock issuable upon
conversion, exercise or exchange of Pre-Distribution Convertible Securities.
The type and amount of Committed Acquisition Shares issuable will be
appropriately adjusted to reflect subdivisions and combinations of the LMG
Series A Common Stock and dividends or distributions of shares of LMG Series A
Common Stock or LMG Series B Common Stock to holders of LMG Series A Common
Stock and other reclassifications of the LMG Series A Common Stock, in each
case occurring (or the record date for which occurs) after the Distribution.
The shares of LMG Series A Common Stock that will be issuable upon conversion
of the Liberty Media Group Preferred Stock will constitute Committed
Acquisition Shares.
"Convertible Securities" means any securities of TCI (other than any series
of TCI Common Stock) that are convertible into, exchangeable for or evidence
the right to purchase any shares of any series of TCI Common Stock, whether
upon conversion, exercise, exchange, pursuant to anti-dilution provisions of
such securities or otherwise.
The "Distribution" means the distribution paid by TCI on August 10, 1995 of
one-fourth of one share of LMG Series A Common Stock on each outstanding share
of TCI Group Series A Group Common Stock and one-fourth of one share of LMG
Series B Common Stock on each outstanding share of TCI Group Series B Group
Common Stock to holders of record on August 4, 1995.
The "Inter-Group Interest" means any equity value of TCI attributable to the
Liberty Media Group that is not represented by outstanding shares of Liberty
Media Group Common Stock. The Inter-Group Interest is represented by the
Number of Shares Issuable with Respect to the Inter-Group Interest.
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The "Inter-Group Interest Fraction" means a fraction the numerator of which
is the Number of Shares Issuable with Respect to the Inter-Group Interest and
the denominator of which is the sum of such Number of Shares Issuable with
Respect to the Inter-Group Interest and the aggregate number of shares of
Liberty Media Group Common Stock outstanding.
The "Liberty Media Group" means:
(a) the interest of TCI or any of its subsidiaries in Liberty Media
Corporation or any of its subsidiaries (including any successor thereto by
merger, consolidation or sale of all or substantially all of its assets,
whether or not in connection with a Related Business Transaction (as
defined below under "--Conversion and Redemption--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock")) and their
respective properties and assets,
(b) all assets and liabilities of TCI or any of its subsidiaries to the
extent attributed to any of the properties or assets referred to in clause
(a) of this sentence, whether or not such assets or liabilities are assets
and liabilities of Liberty Media Corporation or any of its subsidiaries (or
a successor as described in clause (a) of this sentence),
(c) all assets and properties contributed or otherwise transferred to the
Liberty Media Group from the TCI Group, and
(d) the interest of TCI or any of its subsidiaries in the businesses,
assets and liabilities acquired by TCI or any of its subsidiaries for the
Liberty Media Group, as determined by the Board of Directors of TCI (the
"TCI Board of Directors");
provided that (i) from and after any dividend or other distribution with
respect to any shares of Liberty Media Group Common Stock (other than a
dividend or other distribution payable in shares of Liberty Media Group Common
Stock, with respect to which adjustment will be made as described in clause
(a) of the definition of "Number of Shares Issuable with Respect to the Inter-
Group Interest," or in other securities of TCI attributed to the Liberty Media
Group for which provision will be made as described in the penultimate
sentence of this definition), the Liberty Media Group will no longer include
an amount of assets or properties equal to the aggregate amount of such kind
of assets or properties so paid in respect of shares of Liberty Media Group
Common Stock multiplied by a fraction the numerator of which is equal to the
Inter-Group Interest Fraction in effect immediately prior to the record date
for such dividend or other distribution and the denominator of which is equal
to the Outstanding Interest Fraction in effect immediately prior to the record
date for such dividend or other distribution and (ii) from and after any
transfer of assets or properties from the Liberty Media Group to the TCI
Group, the Liberty Media Group will no longer include the assets or properties
so transferred. If TCI pays a dividend or makes any other distribution with
respect to shares of Liberty Media Group Common Stock payable in securities of
TCI attributed to the Liberty Media Group other than Liberty Media Group
Common Stock, the TCI Group will be deemed to hold an amount of such other
securities equal to the amount so distributed multiplied by the fraction
specified in clause (i) of this definition (determined as of a time
immediately prior to the record date for such dividend or other distribution),
and to the extent interest or dividends are paid or other distributions are
made on such other securities so distributed to the holders of Liberty Media
Group Common Stock, the Liberty Media Group will no longer include a
corresponding ratable amount of the kind of assets paid as such interest or
dividends or other distributions in respect of such securities so deemed to be
held by the TCI Group. TCI may also, to the extent any such other securities
constitute Convertible Securities which are at the time convertible,
exercisable or exchangeable, cause such Convertible Securities deemed to be
held by the TCI Group to be deemed to be converted, exercised or exchanged
(and to the extent the terms of such Convertible Securities require payment or
delivery of consideration in order to effect such conversion, exercise or
exchange, the Liberty Media Group will in such case include an amount of the
kind of properties or assets required to be paid or delivered as such
consideration for the amount of the Convertible Securities deemed converted,
exercised or exchanged as if such Convertible Securities were outstanding), in
which case such Convertible Securities will no longer be deemed to be held by
the TCI Group or attributed to the Liberty Media Group.
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"Market Value" of any class or series of capital stock of TCI on any day
means the average of the high and low reported sale prices regular way of a
share of such class or series on such day (if such day is a trading day, and
if such day is not a trading day, on the trading day immediately preceding
such day) or in case no such reported sale takes place on such trading day the
average of the reported closing bid and asked prices regular way of a share of
such class or series on such trading day, in either case on the Nasdaq
National Market, or if the shares of such class or series are not quoted on
such Nasdaq National Market on such trading day, the average of the closing
bid and asked prices of a share of such class or series in the over-the-
counter market on such trading day as furnished by any New York Stock Exchange
member firm selected from time to time by TCI, or if such closing bid and
asked prices are not made available by any such New York Stock Exchange member
firm on such trading day, the market value of a share of such class or series
as determined by the TCI Board of Directors; provided that for purposes of
determining the ratios described under "--Conversion and Redemption--
Conversion at the Option of TCI" and "--Mandatory Dividend, Redemption or
Conversion of Liberty Media Group Common Stock" and "--Liquidation," (a) the
"Market Value" of any share of any series of TCI Common Stock on any day prior
to the "ex" date or any similar date for any dividend or distribution paid or
to be paid with respect to such series of TCI Common Stock will be reduced by
the fair market value of the per share amount of such dividend or distribution
as determined by the TCI Board of Directors and (b) the "Market Value" of any
share of any series of TCI Common Stock on any day prior to (i) the effective
date of any subdivision (by stock split or otherwise) or combination (by
reverse stock split or otherwise) of outstanding shares of such series of TCI
Common Stock or (ii) the "ex" date or any similar date for any dividend or
distribution with respect to any such series of TCI Common Stock in shares of
such series of TCI Common Stock will be appropriately adjusted to reflect such
subdivision, combination, dividend or distribution.
The "Number of Shares Issuable with Respect to the Inter-Group Interest" is
currently zero and will from time to time be
(a) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
LMG Series A Common Stock and dividends or distributions of shares of LMG
Series A Common Stock or LMG Series B Common Stock to holders of LMG
Series A Common Stock and other reclassifications of LMG Series A Common
Stock,
(b) decreased (but not to less than zero) by (i) the aggregate number of
shares of LMG Series A Common Stock issued or sold by TCI after the
Distribution other than Committed Acquisition Shares, the proceeds of which
are attributed to the TCI Group, (ii) the aggregate number of shares of LMG
Series A Common Stock issued or delivered upon conversion, exercise or
exchange of Convertible Securities (other than Pre-Distribution Convertible
Securities and Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares), the proceeds
of which are attributed to the TCI Group, (iii) the aggregate number of
shares of LMG Series A Common Stock issued or delivered by TCI as a
dividend or distribution to holders of TCI Group Series A Common Stock and
TCI Group Series B Common Stock, (iv) the aggregate number of shares of LMG
Series A Common Stock issued or delivered upon the conversion, exercise or
exchange of any Convertible Securities (other than Pre-Distribution
Convertible Securities and Convertible Securities which are convertible
into or exercisable or exchangeable for Committed Acquisition Shares)
issued or delivered by TCI after the Distribution as a dividend or
distribution or by reclassification or exchange to holders of TCI Group
Series A Common Stock and TCI Group Series B Common Stock and (v) the
aggregate number of shares of LMG Series A Common Stock (rounded, if
necessary, to the nearest whole number), equal to the aggregate fair value
(as determined by the TCI Board of Directors) of assets or properties
attributed to the Liberty Media Group that are transferred from the Liberty
Media Group to the TCI Group in consideration of a reduction in the Number
of Shares Issuable with Respect to the Inter-Group Interest, divided by the
Market Value of one share of LMG Series A Common Stock as of the date of
such transfer, and
(c) increased by (i) the aggregate number of any shares of LMG Series A
Common Stock and LMG Series B Common Stock which are retired or otherwise
cease to be outstanding following their purchase with funds attributed to
the TCI Group, (ii) a number (rounded, if necessary, to the nearest whole
number), equal to the fair value (as determined by the TCI Board of
Directors) of assets or properties, theretofore
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attributed to the TCI Group that are contributed to the Liberty Media Group
in consideration of an increase in the Number of Shares Issuable with
Respect to the Inter-Group Interest, divided by the Market Value of one
share of LMG Series A Common Stock as of the date of such contribution and
(iii) the aggregate number of shares of LMG Series A Common Stock and LMG
Series B Common Stock into or for which Convertible Securities are deemed
to be converted, exercised or exchanged pursuant to the last sentence of
the definition of "TCI Group."
TCI will not issue or sell shares of LMG Series B Common Stock in respect of a
reduction in the Number of Shares Issuable with Respect to the Inter-Group
Interest. Whenever a change in the Number of Shares Issuable with Respect to
the Inter-Group Interest occurs, TCI will prepare and file a statement of such
change with the Secretary of TCI.
The "Outstanding Interest Fraction" means a fraction the numerator of which
is the aggregate number of shares of Liberty Media Group Common Stock
outstanding and the denominator of which is the sum of such aggregate number
of shares of Liberty Media Group Common Stock outstanding and the Number of
Shares Issuable with Respect to the Inter-Group Interest.
"Pre-Distribution Convertible Securities" means Convertible Securities that
were outstanding on the record date for the Distribution and were, prior to
such date, convertible into or exercisable or exchangeable for shares of TCI's
Class A Common Stock, par value $1.00 per share (which has been redesignated
TCI Group Series A Common Stock).
The "TCI Group" means as of any date of determination thereof:
(a) the interest of TCI or any of its subsidiaries in all of the
businesses in which TCI or any of its subsidiaries (or any of their
predecessors or successors) is or has been engaged, directly or indirectly,
and the respective assets and liabilities of TCI or any of its
subsidiaries, other than any businesses, assets or liabilities of the
Liberty Media Group;
(b) a proportionate interest in the businesses, assets and liabilities of
the Liberty Media Group equal to the Inter-Group Interest Fraction as of
such date;
(c) from and after any dividend or other distribution with respect to
shares of Liberty Media Group Common Stock (other than a dividend or other
distribution payable in shares of Liberty Media Group Common Stock, with
respect to which adjustment will be made as described in clause (a) of the
definition of "Number of Shares Issuable with Respect to the Inter-Group
Interest," or in other securities of TCI attributed to the Liberty Media
Group, for which provision will be made as described in the penultimate
sentence of this definition), an amount of assets or properties theretofore
included in the Liberty Media Group equal to the aggregate amount of such
kind of assets or properties so paid in respect of such dividend or other
distribution with respect to shares of Liberty Media Group Common Stock
multiplied by a fraction the numerator of which is equal to the Inter-Group
Interest Fraction in effect immediately prior to the record date for such
dividend or other distribution and the denominator of which is equal to the
Outstanding Interest Fraction in effect immediately prior to the record
date for such dividend or other distribution; and
(d) any assets or properties transferred from the Liberty Media Group to
the TCI Group;
provided that, from and after any contribution or transfer of any assets or
properties from the TCI Group to the Liberty Media Group, the TCI Group will
no longer include such assets or properties so contributed or transferred
(other than pursuant to its interest in the businesses, assets and liabilities
of the Liberty Media Group described in clause (b) above). If TCI pays a
dividend or makes any other distribution with respect to shares of Liberty
Media Group Common Stock payable in other securities of TCI attributed to the
Liberty Media Group, the TCI Group will be deemed to hold an amount of such
other securities equal to the amount so distributed multiplied by the fraction
specified in clause (c) of this definition (determined as of a time
immediately prior to the record date for such dividend or other distribution),
and to the extent interest or dividends are paid or other distributions are
made on such other securities so distributed to holders of Liberty Media Group
Common Stock,
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the TCI Group will include a corresponding ratable amount of the kind of
assets paid as such interest or dividends or other distributions in respect of
such securities so deemed to be held by the TCI Group. TCI may also, to the
extent any such other securities constitute Convertible Securities which are
at the time convertible, exercisable or exchangeable, cause such Convertible
Securities deemed to be held by the TCI Group to be deemed to be converted,
exercised or exchanged (and to the extent the terms of such Convertible
Securities require payment or delivery of consideration in order to effect
such conversion, exercise or exchange, the TCI Group will in such case no
longer include an amount of the kind of properties or assets required to be
paid or delivered as such consideration for the amount of the Convertible
Securities deemed converted, exercised or exchanged as if such Convertible
Securities were outstanding), in which case such Convertible Securities will
no longer be deemed to be held by the TCI Group or attributed to the Liberty
Media Group.
VOTING RIGHTS
Holders of TCI Group Series A Common Stock are entitled to one vote for each
share of such stock held, holders of TCI Group Series B Common Stock are
entitled to ten votes for each share of such stock held, holders of LMG Series
A Common Stock are entitled to one vote for each share of such stock held and
holders of LMG Series B Common Stock are entitled to ten votes for each share
of such stock held, on all matters presented to such stockholders. Except as
may otherwise be required by the laws of the State of Delaware or, with
respect to any class of TCI Preferred Stock or any series of such a class, in
the TCI Charter (including any resolution or resolutions providing for the
establishment of such class or series pursuant to authority vested in the TCI
Board of Directors by the TCI Charter), the holders of TCI Group Common Stock
and the holders of Liberty Media Group Common Stock and the holders of each
class or series of TCI Preferred Stock, if any, entitled to vote thereon will
vote as one class for all purposes. See "--Other Matters."
Neither the holders of TCI Group Series A Common Stock or TCI Group Series B
Common Stock, nor the holders of LMG Series A Common Stock or LMG Series B
Common Stock, have any rights to vote as a separate class or series on any
matter coming before the stockholders of TCI, except with respect to certain
limited class and series voting rights provided under the DGCL. Under the
DGCL, the approval of the holders of a majority of the outstanding shares of
any class of capital stock of a corporation, voting separately as a class, is
required to approve any amendment to the charter that would alter or change
the powers, preferences or special rights of the shares of such class so as to
affect them adversely, provided that, if any amendment would alter or change
the powers, preferences or special rights of one or more series of the class
so as to affect them adversely, but would not so affect the entire class, then
only the shares of the series so affected by the amendment would be entitled
to vote thereon separately as a class.
DIVIDENDS
Subject to the prior payment of dividends on outstanding shares of TCI
Preferred Stock, dividends may be paid as determined by the TCI Board of
Directors (i) on the TCI Group Common Stock out of the lesser of (x) the TCI
Group Available Dividend Amount and (y) funds of TCI legally available
therefor under the DGCL and (ii) on the Liberty Media Group Common Stock out
of the lesser of (x) the Liberty Media Group Available Dividend Amount and (y)
funds of TCI legally available therefor under the DGCL. Under the DGCL the
amount of the funds of TCI legally available for the payment of dividends on
any series of TCI Common Stock is determined on the basis of the entire
corporation and not just the Liberty Media Group or the TCI Group.
Consequently, the amount of legally available funds will be reduced by the
amount of any net losses of the Liberty Media Group or the TCI Group and any
dividends or distributions on, or repurchases of, the TCI Group Common Stock
or the Liberty Media Group Common Stock and dividends on, or certain
repurchases of, TCI Preferred Stock. Certain loan agreements to which certain
subsidiaries of TCI are parties or are subject contain restricted payment
provisions that limit the amount of dividends, other than stock dividends,
that those companies may pay. Future loan agreements may also contain similar
restrictions and limits.
The "TCI Group Available Dividend Amount," as of any date, means either (a)
the excess of (i) an amount equal to the total assets of the TCI Group less
the total liabilities (not including preferred stock) of the TCI Group
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as of such date over (ii) the aggregate par value of, or any greater amount
determined to be capital in respect of, all outstanding shares of TCI Group
Common Stock and each class or series of TCI Preferred Stock attributed to the
TCI Group or (b) in case there is no such excess, an amount equal to TCI
Earnings (Loss) Attributable to the TCI Group (if positive) for the fiscal
year in which such date occurs and/or the preceding fiscal year. The TCI Group
Preferred Stock and the Liberty Media Group Preferred Stock will be attributed
to the TCI Group. "TCI Earnings (Loss) Attributable to the TCI Group," for any
period, means the net earnings or loss of the TCI Group for such period
determined on a basis consistent with the determination of the net earnings or
loss of the TCI Group for such period as presented in the combined financial
statements of the TCI Group for such period, including income and expenses of
TCI attributed to the operations of the TCI Group on a substantially
consistent basis, including without limitation, corporate administrative
costs, net interest and income taxes. The TCI Group Available Dividend Amount
is intended to be similar to the amount that would be legally available for
the payment of dividends on the TCI Group Common Stock under the DGCL if the
TCI Group were a separate Delaware corporation. There can be no assurance that
there will be a TCI Group Available Dividend Amount.
The "Liberty Media Group Available Dividend Amount," as of any date, means
the product of the Outstanding Interest Fraction and either (a) the excess of
(i) an amount equal to the total assets of the Liberty Media Group less the
total liabilities (not including preferred stock) of the Liberty Media Group
as of such date over (ii) the aggregate par value of, or any greater amount
determined to be capital in respect of, all outstanding shares of Liberty
Media Group Common Stock and each class or series of TCI Preferred Stock
attributed to the Liberty Media Group or (b) in case there is no such excess,
an amount equal to TCI Earnings (Loss) Attributable to the Liberty Media Group
(if positive) for the fiscal year in which such date occurs and/or the
preceding fiscal year. The "TCI Earnings (Loss) Attributable to the Liberty
Media Group," for any period, means the net earnings or loss of the Liberty
Media Group for such period determined on a basis consistent with the
determination of the net earnings or loss of the Liberty Media Group for such
period as presented in the combined financial statements of the Liberty Media
Group for such period, including income and expenses of TCI attributed to the
operations of the Liberty Media Group on a substantially consistent basis,
including, without limitation, corporate administrative costs, net interest
and income taxes. The Liberty Media Group Available Dividend Amount is
intended to be similar to the amount that would be legally available for the
payment of dividends on the Liberty Media Group Common Stock under the DGCL if
the Liberty Media Group were a separate Delaware corporation. There can be no
assurance that there will be a Liberty Media Group Available Dividend Amount.
Except for dividends declared or paid as described below under "--Share
Distributions" and "--Conversion and Redemption-Mandatory Dividend, Redemption
or Conversion of Liberty Media Group Common Stock," any dividends paid on the
TCI Group Series A Common Stock or the TCI Group Series B Common Stock will be
paid only on both series, in equal amounts per share, and any dividends paid
on the LMG Series A Common Stock or the LMG Series B Common Stock will be paid
only on both series, in equal amounts per share.
The TCI Board of Directors, subject to the provisions described herein under
"--Dividends" and below under "--Share Distributions," has the authority and
discretion to declare and pay dividends on the TCI Group Common Stock or the
Liberty Media Group Common Stock in equal or unequal amounts, notwithstanding
the relationship between the TCI Group Available Dividend Amount and the
Liberty Media Group Available Dividend Amount, the respective amounts of prior
dividends declared on, or liquidation rights of, the TCI Group Common Stock or
the Liberty Media Group Common Stock or any other factor.
At the time of any dividend or other distribution on the outstanding shares
of Liberty Media Group Common Stock (including any dividend of Net Proceeds
from the Disposition of all or substantially all of the properties and assets
of the Liberty Media Group as described below under "--Conversion and
Redemption-Mandatory Dividend, Redemption or Conversion of Liberty Media Group
Common Stock"), the TCI Group will (if at such time there is an Inter-Group
Interest) be credited, and the Liberty Media Group will be charged (in
addition to the charge for the dividend or other distribution paid or
distributed in respect of outstanding shares of Liberty Media Group Common
Stock), with an amount equal to the product of (i) the aggregate amount of
such dividend
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or distribution paid or distributed in respect of outstanding shares of
Liberty Media Group Common Stock times (ii) a fraction the numerator of which
is the Inter-Group Interest Fraction and the denominator of which is the
Outstanding Interest Fraction.
SHARE DISTRIBUTIONS
Distributions on TCI Group Common Stock. If at any time after the
Distribution a distribution paid in TCI Group Common Stock, Liberty Media
Group Common Stock, any other securities of TCI or any other person (a "share
distribution") is to be made with respect to the TCI Group Common Stock, such
share distribution will be declared and paid only as follows:
(i) a share distribution consisting of shares of TCI Group Series A Common
Stock (or Convertible Securities convertible into or exercisable or
exchangeable for shares of TCI Group Series A Common Stock) to holders
of TCI Group Series A Common Stock and TCI Group Series B Common Stock,
on an equal per share basis; or consisting of shares of TCI Group
Series B Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of TCI Group Series B Common
Stock) to holders of TCI Group Series A Common Stock and TCI Group
Series B Common Stock, on an equal per share basis; or consisting of
shares of TCI Group Series A Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI Group
Series A Common Stock) to holders of TCI Group Series A Common Stock
and, on an equal per share basis, shares of TCI Group Series B Common
Stock (or like Convertible Securities convertible into or exercisable
or exchangeable for shares of TCI Group Series B Common Stock) to
holders of TCI Group Series B Common Stock;
(ii) a share distribution consisting of shares of LMG Series A Common Stock
(or Convertible Securities convertible into or exercisable or
exchangeable for shares of LMG Series A Common Stock) to holders of
TCI Group Series A Common Stock and TCI Group Series B Common Stock,
on an equal per share basis; provided that the sum of (a) the
aggregate number of shares of LMG Series A Common Stock to be so
issued (or the number of such shares which would be issuable upon
conversion, exercise or exchange of any Convertible Securities to be
so issued) and (b) the number of shares of such series that are
subject to issuance upon conversion, exercise or exchange of any
Convertible Securities then outstanding that are attributed to the TCI
Group (other than Pre-Distribution Convertible Securities and other
than Convertible Securities convertible into or exercisable or
exchangeable for Committed Acquisition Shares) is less than or equal
to the Number of Shares Issuable with Respect to the Inter- Group
Interest; and
(iii) a share distribution consisting of any class or series of securities
of TCI or any other person other than TCI Group Common Stock or
Liberty Media Group Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI
Group Common Stock or Liberty Media Group Common Stock), either on
the basis of a distribution of identical securities, on an equal per
share basis, to holders of TCI Group Series A Common Stock and TCI
Group Series B Common Stock or on the basis of a distribution of one
class or series of securities to holders of TCI Group Series A Common
Stock and another class or series of securities to holders of TCI
Group Series B Common Stock, provided that the securities so
distributed (and, if the distribution consists of Convertible
Securities, the securities into which such Convertible Securities are
convertible or for which they are exercisable or exchangeable) do not
differ in any respect other than their relative voting rights and
related differences in designation, conversion, redemption and share
distribution provisions, with holders of shares of TCI Group Series B
Common Stock receiving the class or series having the higher relative
voting rights (without regard to whether such rights differ to a
greater or lesser extent than the corresponding differences in voting
rights, designation, conversion, redemption and share distribution
provisions between the TCI Group Series A Common Stock and the TCI
Group Series B Common Stock), provided that if the securities so
distributed constitute capital stock of a subsidiary of TCI, such
rights will not differ to a greater extent than the corresponding
differences in voting rights, designation, conversion, redemption and
share distribution provisions between the TCI Group Series A Common
Stock and the TCI Group Series B Common Stock, and provided in each
case that such distribution is otherwise made on an equal per share
basis.
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TCI will not reclassify, subdivide or combine the TCI Group Series A Common
Stock without reclassifying, subdividing or combining the TCI Group Series B
Common Stock, on an equal per share basis, and TCI will not reclassify,
subdivide or combine the TCI Group Series B Common Stock without
reclassifying, subdividing or combining the TCI Group Series A Common Stock,
on an equal per share basis.
Distributions on Liberty Media Group Common Stock. If at any time a share
distribution is to be made with respect to the Liberty Media Group Common
Stock, such share distribution will be declared and paid only as follows (or
as described under "--Conversion and Redemption" with respect to the
redemptions and other distributions referred to therein):
(i) a share distribution consisting of shares of LMG Series A Common Stock
(or Convertible Securities convertible into or exercisable or
exchangeable for shares of LMG Series A Common Stock) to holders of LMG
Series A Common Stock and LMG Series B Common Stock, on an equal per
share basis; or consisting of shares of LMG Series B Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of LMG Series B Common Stock) to holders of LMG Series A
Common Stock and LMG Series B Common Stock, on an equal per share
basis; or consisting of shares of LMG Series A Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of LMG Series A Common Stock) to holders of LMG Series A
Common Stock and, on an equal per share basis, shares of LMG Series B
Common Stock (or like Convertible Securities convertible into or
exercisable or exchangeable for shares of LMG Series B Common Stock) to
holders of LMG Series B Common Stock; and
(ii) a share distribution consisting of any class or series of securities
of TCI or any other person other than as described in the immediately
preceding clause (i) and other than TCI Group Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of TCI Group Series A Common Stock or TCI Group Series B
Common Stock), either on the basis of a distribution of identical
securities, on an equal per share basis, to holders of LMG Series A
Common Stock and LMG Series B Common Stock or on the basis of a
distribution of one class or series of securities to holders of LMG
Series A Common Stock and another class or series of securities to
holders of LMG Series B Common Stock, provided that the securities so
distributed (and, if the distribution consists of Convertible
Securities, the securities into which such Convertible Securities are
convertible or for which they are exercisable or exchangeable) do not
differ in any respect other than their relative voting rights and
related differences in designation, conversion, redemption and share
distribution provisions, with holders of shares of LMG Series B Common
Stock receiving the class or series having the higher relative voting
rights (without regard to whether such rights differ to a greater or
lesser extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions
between the LMG Series A Common Stock and the LMG Series B Common
Stock), provided that if the securities so distributed constitute
capital stock of a subsidiary of TCI, such rights will not differ to a
greater extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions
between the LMG Series A Common Stock and the LMG Series B Common
Stock, and provided in each case that such distribution is otherwise
made on an equal per share basis.
TCI will not reclassify, subdivide or combine the LMG Series A Common Stock
without reclassifying, subdividing or combining the LMG Series B Common Stock,
on an equal per share basis, and TCI will not reclassify, subdivide or combine
the LMG Series B Common Stock without reclassifying, subdividing or combining
the LMG Series A Common Stock, on an equal per share basis.
CONVERSION AND REDEMPTION
Conversion of TCI Group Series B Common Stock and LMG Series B Common Stock
at the Option of the Holder. Each share of TCI Group Series B Common Stock is
convertible, at the option of the holder thereof, into one share of TCI Group
Series A Common Stock. Each share of LMG Series B Common Stock is convertible,
at the option of the holder thereof, into one share of LMG Series A Common
Stock. Shares of TCI Group Series A Common Stock are not convertible into
shares of TCI Group Series B Common Stock, and shares of LMG Series A Common
Stock are not convertible into shares of LMG Series B Common Stock.
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Conversion of Liberty Media Group Common Stock at the Option of TCI. The TCI
Board of Directors may at any time declare that (i) all of the outstanding
shares of LMG Series A Common Stock will be converted into a number (or
fraction) of fully paid and nonassessable shares of TCI Group Series A Common
Stock equal to the Optional Conversion Ratio, and (ii) all of the outstanding
shares of LMG Series B Common Stock will be converted into a number (or
fraction) of fully paid and nonassessable shares of TCI Group Series B Common
Stock equal to the Optional Conversion Ratio.
For these purposes, the "Optional Conversion Ratio" means the quotient
(calculated to the nearest five decimal places) obtained by dividing (x) the
Liberty Media Group Common Stock Per Share Value by (y) the average Market
Value of one share of TCI Group Series A Common Stock over the 20-trading day
period ending on the trading day preceding the Appraisal Date.
The "Liberty Media Group Private Market Value" means an amount equal to the
private market value of the Liberty Media Group as of the last day of the
calendar month preceding the month in which the last of the two appraisers
referred to in the immediately following sentence are selected (the last day
of such calendar month is hereinafter referred to as the "Appraisal Date"). In
the event that TCI determines to establish the Liberty Media Group Private
Market Value, two investment banking firms of recognized national standing
will be designated to determine the private market value of the Liberty Media
Group, one designated by TCI (the "First Appraiser") and one designated by a
committee of the TCI Board of Directors all of whose members are independent
directors as determined under Nasdaq National Market rules (the "Second
Appraiser"). The date upon which the last of such appraisers is selected is
hereinafter referred to as the "Selection Date." Not later than 20 days after
the Selection Date, the First Appraiser and the Second Appraiser will each
determine its initial view as to the private market value of the Liberty Media
Group as of the Appraisal Date and will consult with one another with respect
thereto. Not later than the 30th day after the Selection Date, the First
Appraiser and the Second Appraiser will each have determined its final view as
to such private market value. If the higher of the respective final views of
the First Appraiser and the Second Appraiser as to such private market value
(the "Higher Appraised Amount") is not more than 120% of the lower of such
respective final views (the "Lower Appraised Amount"), the Liberty Media Group
Private Market Value (subject to any adjustment described in the second
succeeding paragraph) will be the average of those two amounts. If the Higher
Appraised Amount is more than 120% of the Lower Appraised Amount, the First
Appraiser and the Second Appraiser will agree upon and jointly designate a
third investment banking firm of recognized national standing (the "Mutually
Designated Appraiser") to determine such private market value. The Mutually
Designated Appraiser will not be provided with any of the work of the First
Appraiser and Second Appraiser. The Mutually Designated Appraiser will, no
later than the 20th day after the date the Mutually Designated Appraiser is
designated, determine such private market value (the "Mutually Appraised
Amount"), and the Liberty Media Group Private Market Value (subject to any
adjustment described in the second succeeding paragraph) will be (i) if the
Mutually Appraised Amount is between the Lower Appraised Amount and the Higher
Appraised Amount, (a) the average of (1) the Mutually Appraised Amount and (2)
the Lower Appraised Amount or the Higher Appraised Amount, whichever is closer
to the Mutually Appraised Amount, or (b) the Mutually Appraised Amount, if
neither the Lower Appraised Amount nor the Higher Appraised Amount is closer
to the Mutually Appraised Amount, or (ii) if the Mutually Appraised Amount is
greater than the Higher Appraised Amount or less than the Lower Appraised
Amount, the average of the Higher Appraised Amount and the Lower Appraised
Amount. For these purposes, if any such investment banking firm expresses its
final view of the private market value of the Liberty Media Group as a range
of values, such investment banking firm's final view of such private market
value will be deemed to be the midpoint of such range of values.
Each of the investment banking firms referred to in the immediately
preceding paragraph will be instructed to determine the private market value
of the Liberty Media Group as of the Appraisal Date based upon the amount a
willing purchaser would pay to a willing seller, in an arm's length
transaction, if it were acquiring the Liberty Media Group, as if the Liberty
Media Group were a publicly traded non-controlled corporation and the
purchaser was acquiring all of the capital stock of such corporation and
without consideration of any potential regulatory constraints limiting the
potential purchasers of the Liberty Media Group other than that which would
have existed if the Liberty Media Group were a publicly traded non-controlled
entity.
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Following the determination of the Liberty Media Group Private Market Value,
the investment banking firms whose final views of the private market value of
the Liberty Media Group were used in the calculation of the Liberty Media
Group Private Market Value will determine the Adjusted Outstanding Shares of
Liberty Media Group Common Stock together with any further appropriate
adjustments to the Liberty Media Group Private Market Value resulting from
such determination. The "Adjusted Outstanding Shares of Liberty Media Group
Common Stock" means a number, as determined by such investment banking firms
as of the Appraisal Date, equal to the sum of the number of shares of Liberty
Media Group Common Stock outstanding, the Number of Shares Issuable with
Respect to the Inter-Group Interest, the number of Committed Acquisition
Shares issuable, the number of shares of Liberty Media Group Common Stock
issuable upon the conversion, exercise or exchange of all Pre-Distribution
Convertible Securities and the number of shares of Liberty Media Group Common
Stock issuable upon the conversion, exercise or exchange of those Convertible
Securities (other than Pre-Distribution Convertible Securities and other than
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares) the holders of which would
derive an economic benefit from conversion, exercise or exchange of such
Convertible Securities which exceeds the economic benefit of not converting,
exercising or exchanging such Convertible Securities. The "Liberty Media Group
Common Stock Per Share Value" means the quotient obtained by dividing the
Liberty Media Group Private Market Value by the Adjusted Outstanding Shares of
Liberty Media Group Common Stock, provided that if such investment banking
firms do not agree on the determinations provided for in this paragraph, the
Liberty Media Group Common Stock Per Share Value will be the average of the
quotients so obtained on the basis of the respective determinations of such
firms.
If TCI determines to convert shares of LMG Series A Common Stock into TCI
Group Series A Common Stock and shares of LMG Series B Common Stock into TCI
Group Series B Common Stock at the Optional Conversion Ratio, such conversion
will occur on a conversion date on or prior to the 120th day following the
Appraisal Date. If TCI determines not to undertake such conversion, TCI may at
any time thereafter undertake to reestablish the Liberty Media Group Common
Stock Per Share Value as of a subsequent date.
Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock. Upon the sale, transfer, assignment or other disposition, whether by
merger, consolidation, sale or contribution of assets or stock or otherwise (a
"Disposition"), in one transaction or a series of related transactions by TCI
and its subsidiaries of all or substantially all of the properties and assets
of the Liberty Media Group to one or more persons, entities or groups (other
than (a) in connection with the Disposition by TCI of all of TCI's properties
and assets in one transaction or a series of related transactions in
connection with the liquidation, dissolution or winding up of TCI, (b) a
dividend, other distribution or redemption in accordance with any provision
described under "--Dividends," "--Share Distributions," "--Redemption in
Exchange for Stock of Subsidiary" or "--Liquidation Rights," (c) to any
person, entity or group which TCI, directly or indirectly, after giving effect
to the Disposition, controls or (d) in connection with a Related Business
Transaction), TCI will on or prior to the 85th trading day following the
consummation of such Disposition, either:
(i) subject to the limitations described above under "--Dividends," declare
and pay a dividend in cash and/or securities or other property (other
than a dividend or distribution of TCI Common Stock) to the holders of
the outstanding shares of Liberty Media Group Common Stock equally on a
share for share basis (subject to the provisions described in the last
sentence of the paragraph herein which defines the term "Net
Proceeds"), in an aggregate amount equal to the product of the
Outstanding Interest Fraction as of the record date for determining the
holders entitled to receive such dividend and the Net Proceeds of such
Disposition;
(ii) provided that there are funds of TCI legally available therefor and
the Liberty Media Group Available Dividend Amount would have been
sufficient to pay a dividend in lieu thereof as described in clause
(i) of this paragraph:
(a) if such Disposition involves all (not merely substantially all) of
the properties and assets of the Liberty Media Group, redeem all
outstanding shares of LMG Series A Common Stock and LMG Series B
Common Stock in exchange for cash and/or securities or other
property (other than TCI
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Common Stock) in an aggregate amount equal to the product of the
Adjusted Outstanding Interest Fraction as of the date of such
redemption and the Net Proceeds of such Disposition, such aggregate
amount to be allocated (subject to the provisions described in the
last sentence of the paragraph herein which defines the term "Net
Proceeds") to shares of LMG Series A Common Stock and LMG Series B
Common Stock in the ratio of the number of shares of each such series
outstanding (so that the amount of consideration paid for the
redemption of each share of LMG Series A Common Stock and each share
of LMG Series B Common Stock is the same); or
(b) if such Disposition involves substantially all (but not all) of the
properties and assets of the Liberty Media Group, apply an aggregate
amount of cash and/or securities or other property (other than TCI
Common Stock) equal to the product of the Outstanding Interest
Fraction as of the date shares are selected for redemption and the
Net Proceeds of such Disposition to the redemption of outstanding
shares of LMG Series A Common Stock and LMG Series B Common Stock,
such aggregate amount to be allocated (subject to the provisions
described in the last sentence of the paragraph herein which defines
the term "Net Proceeds") to shares of LMG Series A Common Stock and
LMG Series B Common Stock in the ratio of the number of shares of
each such series outstanding, and the number of shares of each such
series to be redeemed to equal the lesser of (x) the whole number
nearest the number determined by dividing the aggregate amount so
allocated to the redemption of such series by the average Market
Value of one share of LMG Series A Common Stock during the ten-
trading day period beginning on the 16th trading day following the
consummation of such Disposition and (y) the number of shares of
such series outstanding (so that the amount of consideration paid
for the redemption of each share of LMG Series A Common Stock and
each share of LMG Series B Common Stock is the same); or
(iii) convert (a) each outstanding share of LMG Series A Common Stock into
a number (or fraction) of fully paid and nonassessable shares of TCI
Group Series A Common Stock and (b) each outstanding share of LMG
Series B Common Stock into a number (or fraction) of fully paid and
nonassessable shares of TCI Group Series B Common Stock, in each case
equal to 110% of the average daily ratio (calculated to the nearest
five decimal places) of the Market Value of one share of LMG Series A
Common Stock to the Market Value of one share of TCI Group Series A
Common Stock during the ten-trading day period referred to in clause
(ii)(b) of this paragraph.
For these purposes, "substantially all of the properties and assets of the
Liberty Media Group" as of any date means a portion of such properties and
assets that represents at least 80% of the then-current market value (as
determined by the TCI Board of Directors) of the properties and assets of the
Liberty Media Group as of such date.
A "Related Business Transaction" means any Disposition of all or
substantially all of the properties and assets of the Liberty Media Group in
which TCI receives as proceeds of such Disposition primarily equity securities
(including, without limitation, capital stock, convertible securities,
partnership or limited partnership interests and other types of equity
securities, without regard to the voting power or contractual or other
management or governance rights related to such equity securities) of the
purchaser or acquirer of such assets and properties of the Liberty Media
Group, any entity which succeeds (by merger, formation of a joint venture
enterprise or otherwise) to such assets and properties of the Liberty Media
Group or a third party issuer, which purchaser, acquirer or other issuer is
engaged or proposes to engage primarily in one or more businesses similar or
complementary to the businesses conducted by the Liberty Media Group prior to
such Disposition, as determined in good faith by the TCI Board of Directors.
The "Adjusted Outstanding Interest Fraction" means a fraction the numerator
of which is the number of outstanding shares of Liberty Media Group Common
Stock and the denominator of which is the sum of (a) such number of
outstanding shares, (b) the Number of Shares Issuable with Respect to the
Inter-Group Interest, (c) the number of shares of Liberty Media Group Common
Stock issuable upon conversion, exercise or exchange of Pre-Distribution
Convertible Securities and (d) the number of Committed Acquisition Shares
issuable.
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The "Net Proceeds" with respect to any Disposition of any of the properties
and assets of the Liberty Media Group means an amount, if any, equal to the
gross proceeds of such Disposition after any payment of, or reasonable
provision for, (a) any taxes payable by TCI in respect of such Disposition or
in respect of any resulting dividend or redemption (or which would have been
payable but for the utilization of tax benefits attributable to the TCI
Group), (b) any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses and (c) any liabilities
and other obligations (contingent or otherwise) of, or attributed to, the
Liberty Media Group, including, without limitation, any indemnity or guarantee
obligations incurred in connection with the Disposition or any liabilities for
future purchase price adjustments and any preferential amounts plus any
accumulated and unpaid dividends and other obligations (without duplication of
amounts allocated for the satisfaction of TCI's obligations with respect to
Pre-Distribution Convertible Securities and Committed Acquisition Shares
issuable which are included in the determination of the Adjusted Outstanding
Interest Fraction) in respect of TCI Preferred Stock attributed to the Liberty
Media Group. TCI may elect to pay the dividend or redemption price referred to
in clause (i) or (ii) above either in the same form as the proceeds of the
Disposition were received or in any other combination of cash or securities or
other property (other than TCI Common Stock) that the TCI Board of Directors
determines will have an aggregate market value on a fully distributed basis,
of not less than the amount of the Net Proceeds. If the dividend or redemption
price is paid in the form of securities of an issuer other than TCI, the TCI
Board of Directors may determine either to (i) pay the dividend or redemption
price in the form of separate classes or series of securities, with one class
or series of such securities to holders of LMG Series A Common Stock and
another class or series of securities to holders of LMG Series B Common Stock,
provided that such securities (and, if such securities are convertible into or
exercisable or exchangeable for shares of another class or series of
securities, the securities so issuable upon such conversion, exercise or
exchange) do not differ in any respect other than their relative voting rights
and related differences in designation, conversion, redemption and share
distribution provisions with holders of shares of LMG Series B Common Stock
receiving the class or series having the higher relative voting rights
(without regard to whether such rights differ to a greater or lesser extent
than the corresponding differences in voting rights, designation, conversion,
redemption and share distribution provisions between the LMG Series A Common
Stock and the LMG Series B Common Stock), provided that if such securities
constitute capital stock of a subsidiary of TCI, such rights will not differ
to a greater extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions between
the LMG Series A Common Stock and LMG Series B Common Stock, and otherwise
such securities will be distributed on an equal per share basis, or (ii) pay
the dividend or redemption price in the form of a single class of securities
without distinction between the shares received by the holders of LMG Series A
Common Stock and LMG Series B Common Stock.
At the time of any dividend made as a result of a Disposition referred to
above, the TCI Group will be credited, and the Liberty Media Group will be
charged (in addition to the charge for the dividend paid in respect of
outstanding shares of Liberty Media Group Common Stock), with an amount equal
to the product of (i) the aggregate amount paid in respect of such dividend
times (ii) a fraction the numerator of which is the Inter-Group Interest
Fraction and the denominator of which is the Outstanding Interest Fraction.
Redemption in Exchange for Stock of Subsidiary. At any time at which all of
the assets and liabilities attributed to the Liberty Media Group are held
directly or indirectly by any one or more corporations all of the capital
stock of which is owned by TCI (the "Liberty Media Group Subsidiaries"), the
TCI Board of Directors may, subject to there being funds of TCI legally
available therefor, redeem on a pro rata basis, all of the outstanding shares
of Liberty Media Group Common Stock in exchange for an aggregate number of
outstanding fully paid and nonassessable shares of common stock of each
Liberty Media Group Subsidiary equal to the product of the Adjusted
Outstanding Interest Fraction and the number of all of the outstanding shares
of common stock of such Liberty Media Group Subsidiary.
In effecting such a redemption, the TCI Board of Directors may determine
either to (i) redeem shares of LMG Series A Common Stock and LMG Series B
Common Stock in exchange for shares of separate classes or series of common
stock of each Liberty Media Group Subsidiary with relative voting rights and
related
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differences in designation, conversion, redemption and share distribution
provisions not greater than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions between
the LMG Series A Common Stock and LMG Series B Common Stock, with holders of
shares of LMG Series B Common Stock receiving the class or series having the
higher relative voting rights, or (ii) redeem shares of LMG Series A Common
Stock and LMG Series B Common Stock in exchange for shares of a single class
of common stock of each Liberty Media Group Subsidiary without distinction
between the shares distributed to the holders of the two series of Liberty
Media Group Common Stock. If TCI determines to undertake a redemption as
described in clause (i) of the preceding sentence, the outstanding shares of
common stock of each Liberty Media Group Subsidiary not distributed to holders
of Liberty Media Group Common Stock would consist solely of the class or
series having the lower relative voting rights.
Certain Provisions Respecting Convertible Securities. Unless the provisions
of any class or series of Pre-Distribution Convertible Securities or
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares provide specifically to the
contrary, after any conversion date or redemption date on which all
outstanding shares of Liberty Media Group Common Stock were converted or
redeemed, any share of Liberty Media Group Common Stock that is issued on
conversion, exercise or exchange of any Pre-Distribution Convertible
Securities or any Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares will, immediately
upon issuance pursuant to such conversion, exercise or exchange and without
any notice or any other action on the part of TCI or the TCI Board of
Directors or the holder of such share of Liberty Media Group Common Stock, be
converted into or redeemed in exchange for, as applicable, the kind and amount
of shares of capital stock, cash and/or other securities or property that a
holder of such Pre-Distribution Convertible Securities or any Convertible
Securities which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares would have been entitled to receive pursuant to
the terms of such securities had such terms provided that the conversion,
exercise or exchange privilege in effect immediately prior to any such
conversion or redemption of all outstanding shares of Liberty Media Group
Common Stock would be adjusted so that the holder of any such Pre-Distribution
Convertible Securities or any Convertible Securities which are convertible
into or exercisable or exchangeable for Committed Acquisition Shares
thereafter surrendered for conversion, exercise or exchange would be entitled
to receive the kind and amount of shares of capital stock, cash and/or other
securities or property such holder would have received as a result of such
action had such securities been converted, exercised or exchanged immediately
prior thereto. With respect to any Convertible Securities which are created,
established or otherwise first authorized for issuance subsequent to the
record date for the Distribution (other than Pre-Distribution Convertible
Securities and Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares), the terms and
provisions of which do not provide for adjustments specifying the kind and
amount of capital stock, cash and/or securities or other property that such
holder would be entitled to receive upon the conversion, exercise or exchange
of such Convertible Securities following any conversion date or redemption
date on which all outstanding shares of Liberty Media Group Common Stock were
converted or redeemed, then upon such conversion, exercise or exchange of such
Convertible Securities, any share of Liberty Media Group Common Stock that is
issued on conversion, exercise or exchange of any such Convertible Securities
will, immediately upon issuance pursuant to such conversion, exercise or
exchange and without any notice or any other action on the part of TCI or the
TCI Board of Directors or the holder of such share of Liberty Media Group
Common Stock, be redeemed in exchange for, to the extent assets of TCI are
legally available therefor, the amount of $.01 per share in cash.
General Conversion and Redemption Provisions. Not later than the 10th
trading day following the consummation of a Disposition referred to above
under "--Mandatory Dividend, Redemption or Conversion of Liberty Media Group
Common Stock," TCI will announce publicly by press release (i) the Net
Proceeds of such Disposition, (ii) the number of outstanding shares of LMG
Series A Common Stock and LMG Series B Common Stock, (iii) the number of
shares of LMG Series A Common Stock and LMG Series B Common Stock into or for
which Convertible Securities are then convertible, exercisable or exchangeable
and the conversion, exercise or exchange prices thereof (and stating which, if
any, of such Convertible Securities constitute Pre-Distribution Convertible
Securities or Convertible Securities which are convertible into or exercisable
or exchangeable for
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Committed Acquisition Shares) and the number of Committed Acquisition Shares
issuable, (iv) the Outstanding Interest Fraction as of a recent date preceding
the date of such notice and (v) the Adjusted Outstanding Interest Fraction as
of a recent date preceding the date of such notice. Not earlier than the 26th
trading day and not later than the 30th trading day following the consummation
of such Disposition, TCI will announce publicly by press release which of the
actions described in clauses (i), (ii) or (iii) of the first paragraph under
"--Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock" it has irrevocably determined to take.
TCI also will cause to be given to each holder of outstanding shares of LMG
Series A Common Stock and LMG Series B Common Stock and to each holder of
Convertible Securities convertible into or exercisable or exchangeable for
shares of either such series (unless provision for notice is otherwise made
pursuant to the terms of such Convertible Securities) a notice setting forth
(i) if TCI has determined to pay a dividend described in clause (i) of the
first paragraph under "--Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock" (a "Dividend Election"), (x) the record date
for determining holders entitled to receive such dividend, which will not be
earlier than the 40th trading day, nor later than the 50th trading day,
following the consummation of such Disposition and (y) the anticipated payment
date of such dividend (which will not be more than 85 trading days following
the consummation of such Disposition), (ii) if TCI has determined to redeem
shares of Liberty Media Group Common Stock following a Disposition of all (and
not merely substantially all) of the properties and assets of the Liberty
Media Group as described in clause (ii)(a) of the first paragraph under "--
Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock" (a "Full Redemption Election"), (x) the redemption date (which will not
be more than 85 trading days following the consummation of such Disposition)
and (y) a statement that all shares of Liberty Media Group Common Stock
outstanding on the redemption date will be redeemed, (iii) if TCI has
determined to redeem shares of Liberty Media Group Common Stock following a
Disposition of substantially all (but not all) of the properties and assets of
the Liberty Media Group as described in clause (ii)(b) of the first paragraph
under "--Mandatory Dividend, Redemption or Conversion of Liberty Media Group
Common Stock" (a "Partial Redemption Election"), (x) a date not earlier than
the 40th trading day and not later than the 50th trading day following the
consummation of such Disposition on which shares of Liberty Media Group Common
Stock then outstanding will be selected for redemption and (y) the anticipated
redemption date (which will not be more than 85 trading days following the
consummation of such Disposition) and (iv) in the event of any conversion as
described above under "--Conversion at the Option of TCI" or as described in
clause (iii) of the first paragraph under "--Mandatory Dividend, Redemption or
Conversion of Liberty Media Group Common Stock" (a "Conversion Election"), (x)
a statement that all outstanding shares of Liberty Media Group Common Stock
will be converted and (y) the conversion date (which will not be more than 85
trading days following the consummation of the Disposition in the event of
conversion pursuant to the provisions described under "--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock" and which will
not be more than 120 days after the Appraisal Date in the event of conversion
pursuant to the provisions described under "--Conversion at the Option of
TCI"). Each notice of a Dividend Election, a Full Redemption Election or a
Partial Redemption Election also will state, as applicable, (i) the kind of
shares of capital stock, cash and/or other securities or property to be
distributed in respect of shares of Liberty Media Group Common Stock (in the
case of a Dividend Election) or paid as the redemption price with respect to
shares of Liberty Media Group Common Stock outstanding on the redemption date
(in the case of a Full Redemption Election) or selected for redemption (in the
case of a Partial Redemption Election); (ii) the Net Proceeds of such
Disposition; (iii) in the case of a Dividend Election and a Partial Redemption
Election, the Outstanding Interest Fraction as of a recent date preceding the
date of such notice, and in the case of a Full Redemption Election, the
Adjusted Outstanding Interest Fraction as of a recent date preceding the date
of such notice; (iv) the number of outstanding shares of LMG Series A Common
Stock and LMG Series B Common Stock and the number of shares of LMG Series A
Common Stock and LMG Series B Common Stock into or for which outstanding
Convertible Securities are then convertible, exercisable or exchangeable and
the conversion, exercise or exchange price thereof (and, in the case of a Full
Redemption Election, stating which, if any, of such Convertible Securities
constitute Pre-Distribution Convertible Securities or Convertible Securities
which are convertible into or exercisable or exchangeable for Committed
Acquisition Shares and the number of Committed Acquisition Shares issuable);
(v) in the case of a
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Full Redemption Election, the place or places where certificates for shares of
Liberty Media Group Common Stock properly endorsed or assigned for transfer
(unless TCI waives such requirement), are to be surrendered for delivery of
certificates for shares of such capital stock, cash and/or other securities or
property; (vi) in the case of notice to holders of Convertible Securities, a
statement to the effect that holders of such Convertible Securities will be
entitled to receive such dividend (in the case of a Dividend Election) or
participate in such redemption (in the case of a Full Redemption Election) or
in the selection of shares for redemption (in the case of a Partial Redemption
Election) only if such holders appropriately convert, exercise or exchange
such Convertible Securities on or prior to the record date for determining
holders entitled to receive such dividend, the redemption date, or the date
fixed for the selection of shares to be redeemed, respectively, and a
statement as to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if applicable, the
provisions described under "--Certain Provisions Respecting Convertible
Securities" if such holder converts, exercises or exchanges such Convertible
Securities following such redemption date or date for selection of shares to
be redeemed, as applicable, and (vii) in the case of a Partial Redemption
Election, a statement that TCI will not be required to register a transfer of
any shares of Liberty Media Group Common Stock for a period of 15 trading days
next preceding the date fixed for selection of shares to be redeemed. In the
case of a Partial Redemption Election, TCI also will cause to be given to each
holder of shares of Liberty Media Group Common Stock selected for redemption,
a notice setting forth (i) the number of shares of LMG Series A Common Stock
and LMG Series B Common Stock held by such holder to be redeemed, (ii) a
statement that such shares of LMG Series A Common Stock and LMG Series B
Common Stock will be redeemed, (iii) the redemption date (which will not be
more than 85 trading days following the consummation of such Disposition),
(iv) the kind and per share amount of shares of capital stock, cash and/or
other securities or property to be received by such holder with respect to
each share of such Liberty Media Group Common Stock to be redeemed, including
details as to the calculation thereof, and (v) the place or places where
certificates for shares of such Liberty Media Group Common Stock, properly
endorsed or assigned for transfer (unless TCI waives such requirement), are to
be surrendered for delivery of certificates for shares of such capital stock,
cash and/or other securities or property. The outstanding shares of Liberty
Media Group Common Stock to be redeemed will be redeemed by TCI pro rata among
the holders of Liberty Media Group Common Stock or by such other method as may
be determined by the TCI Board of Directors to be equitable.
In the case of a Conversion Election, TCI's notice also will state (i) the
per share number of shares of TCI Group Series A Common Stock or TCI Group
Series B Common Stock, as applicable, to be received with respect to each
share of LMG Series A Common Stock or LMG Series B Common Stock, including
details as to the calculation thereof, (ii) the place or places where
certificates for shares of Liberty Media Group Common Stock, properly endorsed
or assigned for transfer (unless TCI waives such requirement), are to be
surrendered, (iii) the number of outstanding shares of LMG Series A Common
Stock and LMG Series B Common Stock, the number of Committed Acquisition
Shares issuable and the number of shares of LMG Series A Common Stock and LMG
Series B Common Stock into or for which outstanding Convertible Securities are
then convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof and (iv) in the case of a notice to holders of
Convertible Securities, a statement to the effect that holders of such
Convertible Securities will be entitled to participate in such conversion only
if such holders appropriately convert, exercise or exchange such Convertible
Securities on or prior to the conversion date and a statement as to what, if
anything, such holders will be entitled to receive pursuant to the terms of
such Convertible Securities or, if applicable, the provision described under
"--Certain Provisions Respecting Convertible Securities" if such holders
convert, exercise or exchange such Convertible Securities following such
conversion date.
Notice of a Dividend Election will be given not later than the 30th trading
day following the consummation of the Disposition; notice of a Full Redemption
Election will be given not less than 35 trading days nor more than 45 trading
days prior to the redemption date; notice of a Partial Redemption Election
will be given not later than the 30th trading day following the consummation
of the Disposition and the notice to holders of shares selected for redemption
will be given promptly following such selection, but not earlier than the 40th
trading day and not later than the 50th trading day following the consummation
of the Disposition; and notice of a Conversion Election will be given not less
than 35 trading days nor more than 45 trading days prior to the
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conversion date. All such notices will be sent by first-class mail, postage
prepaid, to a holder at such holder's address as the same appears on the
transfer books of TCI.
If TCI determines to redeem shares of LMG Series A Common Stock and LMG
Series B Common Stock as described above under "--Redemption in Exchange for
Stock of Subsidiary," TCI will promptly cause to be given to each holder of
LMG Series A Common Stock and LMG Series B Common Stock and to each holder of
Convertible Securities convertible into or exercisable or exchangeable for
shares of either such series (unless provision for such notice is otherwise
made pursuant to the terms of such Convertible Securities), a notice setting
forth (i) a statement that all outstanding shares of Liberty Media Group
Common Stock will be redeemed in exchange for shares of common stock of the
Liberty Media Group Subsidiaries, (ii) the redemption date, (iii) the Adjusted
Outstanding Interest Fraction as of a recent date preceding the date of such
notice, (iv) the place or places where certificates for shares of Liberty
Media Group Common Stock, properly endorsed or assigned for transfer (unless
TCI waives such requirement), are to be surrendered for delivery of
certificates for shares of common stock of the Liberty Media Group
Subsidiaries, (v) the number of outstanding shares of LMG Series A Common
Stock and LMG Series B Common Stock and the number of shares of LMG Series A
Common Stock and LMG Series B Common Stock into or for which outstanding
Convertible Securities are then convertible, exercisable or exchangeable and
the conversion, exercise or exchange prices thereof (and stating which, if
any, of such Convertible Securities constitute Pre-Distribution Convertible
Securities or Convertible Securities which are convertible into or exercisable
or exchangeable for Committed Acquisition Shares) and the number of Committed
Acquisition Shares issuable, and (vi) in the case of a notice to holders of
Convertible Securities, a statement to the effect that holders of such
Convertible Securities will be entitled to receive shares of common stock of
the Liberty Media Group Subsidiaries upon redemption only if such holders
appropriately convert, exercise or exchange such Convertible Securities on or
prior to the redemption date referred to in clause (ii) of this sentence and a
statement as to what, if anything, such holders will be entitled to receive
pursuant to the terms of such Convertible Securities or, if applicable, the
provisions described under "--Certain Provisions Respecting Convertible
Securities" if such holders convert, exercise or exchange such Convertible
Securities following the redemption date. Such notice will be sent by first-
class mail, postage prepaid, not less than 35 trading days nor more than 45
trading days prior to the redemption date, at such holder's address as the
same appears on the transfer books of TCI.
Neither the failure to mail any notice to any particular holder of Liberty
Media Group Common Stock or of Convertible Securities nor any defect therein
will affect the sufficiency thereof with respect to any other holder of
outstanding shares of Liberty Media Group Common Stock or of Convertible
Securities, or the validity of any conversion or redemption.
TCI will not be required to issue or deliver fractional shares of any class
of capital stock or any fractional securities to any holder of Liberty Media
Group Common Stock upon any conversion, redemption, dividend or other
distribution described above. In connection with the determination of the
number of shares of any class of capital stock that is issuable or the amount
of securities that is deliverable to any holder of record upon any such
conversion, redemption, dividend or other distribution (including any
fractions of shares or securities), TCI may aggregate the number of shares of
Liberty Media Group Common Stock held at the relevant time by such holder of
record. If the number of shares of any class of capital stock or the amount of
securities remaining to be issued or delivered to any holder of Liberty Media
Group Common Stock is a fraction, TCI will, if such fraction is not issued or
delivered to such holder, pay a cash adjustment in respect of such fraction in
an amount equal to the fair market value of such fraction on the fifth trading
day prior to the date such payment is to be made (without interest). For
purposes of the preceding sentence, "fair market value" of any fraction will
be (i) in the case of any fraction of a share of capital stock of TCI, the
product of such fraction and the Market Value of one share of such capital
stock and (ii) in the case of any other fractional security, such value as is
determined by the TCI Board of Directors.
No adjustments in respect of dividends will be made upon the conversion or
redemption of any shares of Liberty Media Group Common Stock; provided,
however, that if the conversion date or the redemption date with respect to
the Liberty Media Group Common Stock is subsequent to the record date for the
payment of a dividend
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or other distribution thereon or with respect thereto, the holders of shares
of Liberty Media Group Common Stock at the close of business on such record
date will be entitled to receive the dividend or other distribution payable on
or with respect to such shares on the date set for payment of such dividend or
other distribution, notwithstanding the conversion or redemption of such
shares or TCI's default in payment of the dividend or distribution due on such
date.
Before any holder of shares of Liberty Media Group Common Stock will be
entitled to receive certificates representing shares of any kind of capital
stock or cash and/or securities or other property to be received by such
holder with respect to any conversion or redemption of shares of Liberty Media
Group Common Stock, such holder is required to surrender at such place as TCI
will specify certificates for such shares, properly endorsed or assigned for
transfer (unless TCI waives such requirement). TCI will as soon as practicable
after such surrender of certificates representing shares of Liberty Media
Group Common Stock deliver to the person for whose account such shares were so
surrendered, or to the nominee or nominees of such person, certificates
representing the number of whole shares of the kind of capital stock or cash
and/or securities or other property to which such person is entitled, together
with any payment for fractional securities referred to above. If less than all
of the shares of Liberty Media Group Common Stock represented by any one
certificate are to be redeemed, TCI will issue and deliver a new certificate
for the shares of Liberty Media Group Common Stock not redeemed. TCI will not
be required to register a transfer of (i) any shares of Liberty Media Group
Common Stock for a period of 15 trading days next preceding any selection of
shares of Liberty Media Group Common Stock to be redeemed or (ii) any shares
of Liberty Media Group Common Stock selected or called for redemption. Shares
selected for redemption may not thereafter be converted pursuant to the
provisions described under "--Conversion at the Option of the Holder."
From and after any applicable conversion date or redemption date, all rights
of a holder of shares of Liberty Media Group Common Stock that were converted
or redeemed will cease except for the right, upon surrender of the
certificates representing shares of Liberty Media Group Common Stock, to
receive certificates representing shares of the kind and amount of capital
stock or cash and/or securities or other property for which such shares were
converted or redeemed, together with any payment for fractional securities and
such holder will have no other or further rights in respect of the shares of
Liberty Media Group Common Stock so converted or redeemed, including, but not
limited to, any rights with respect to any cash, securities or other property
which are reserved or otherwise designated by TCI as being held for the
satisfaction of TCI's obligations to pay or deliver any cash, securities or
other property upon the conversion, exercise or exchange of any Convertible
Securities outstanding as of the date of such conversion or redemption or any
Committed Acquisition Shares which may then be issuable. No holder of a
certificate that, immediately prior to the applicable conversion date or
redemption date for the Liberty Media Group Common Stock, represented shares
of Liberty Media Group Common Stock will be entitled to receive any dividend
or other distribution with respect to shares of any kind of capital stock into
or in exchange for which the Liberty Media Group Common Stock was converted or
redeemed until surrender of such holder's certificate for a certificate or
certificates representing shares of such kind of capital stock. Upon such
surrender, there will be paid to the holder the amount of any dividends or
other distributions (without interest) which theretofore became payable with
respect to a record date after the conversion date or redemption date, as the
case may be, but that were not paid by reason of the foregoing, with respect
to the number of whole shares of the kind of capital stock represented by the
certificate or certificates issued upon such surrender. From and after a
conversion date or redemption date, as the case may be, for any shares of
Liberty Media Group Common Stock, TCI will, however, be entitled to treat the
certificates for shares of Liberty Media Group Common Stock that have not yet
been surrendered for conversion or redemption as evidencing the ownership of
the number of whole shares of the kind or kinds of capital stock for which the
shares of Liberty Media Group Common Stock represented by such certificates
have been converted or redeemed, notwithstanding the failure to surrender such
certificates.
TCI will pay any and all documentary, stamp or similar issue or transfer
taxes that may be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on conversion or redemption of shares of
Liberty Media Group Common Stock. TCI will not, however, be required to pay
any tax that may be
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payable in respect of any transfer involved in the issue and delivery of any
shares of capital stock in a name other than that in which the shares of
Liberty Media Group Common Stock so converted or redeemed were registered and
no such issue or delivery will be made unless and until the person requesting
such issue has paid to TCI the amount of any such tax, or has established to
the satisfaction of TCI that such tax has been paid.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of TCI, whether
voluntary or involuntary, after payment or provision for payment of the debts
and other liabilities of TCI and subject to the prior payment in full of the
preferential amounts to which any class or series of TCI Preferred Stock is
entitled, (i) the holders of the shares of TCI Group Common Stock will share
equally, on a share for share basis, in a percentage of the funds of TCI
remaining for distribution to its common stockholders equal to 100% multiplied
by the average daily ratio (expressed as a decimal) of X/Z for the 20-trading
day period ending on the trading day prior to the date of the public
announcement of such liquidation, dissolution or winding up, and (ii) the
holders of the shares of Liberty Media Group Common Stock will share equally,
on a share for share basis, in a percentage of the funds of TCI remaining for
distribution to its common stockholders equal to 100% multiplied by the
average daily ratio (expressed as a decimal) of Y/Z for such 20-trading day
period, where X is the aggregate Market Capitalization of the TCI Group Series
A Common Stock and the TCI Group Series B Common Stock, Y is the aggregate
Market Capitalization of the LMG Series A Common Stock and the LMG Series B
Common Stock, and Z is the aggregate Market Capitalization of the TCI Group
Series A Common Stock, the TCI Group Series B Common Stock, the LMG Series A
Common Stock and the LMG Series B Common Stock. Neither a consolidation,
merger nor sale of assets will be construed to be a "liquidation,"
"dissolution" or "winding up" of TCI. The "Market Capitalization" of any class
or series of capital stock of TCI on any trading day means the product of (i)
the Market Value of one share of such class or series on such trading day and
(ii) the number of shares of such class or series outstanding on such trading
day.
No holder of Liberty Media Group Common Stock will have any special right to
receive specific assets of the Liberty Media Group in the case of any
dissolution, liquidation or winding up of TCI.
DETERMINATIONS BY THE TCI BOARD OF DIRECTORS
The TCI Charter provides that any determinations made by the TCI Board of
Directors under any provision described under "--TCI Group Common Stock and
Liberty Media Group Common Stock" above will be final and binding on all
stockholders of TCI, except as may otherwise be required by law. Such a
determination would not be binding if it were established that the
determination was made in breach of a fiduciary duty of the TCI Board of
Directors. TCI will prepare a statement of any such determination by the TCI
Board of Directors respecting the fair market value of any properties, assets
or securities and will file such statement with the Secretary of TCI.
PREEMPTIVE RIGHTS
Holders of the TCI Group Common Stock and Liberty Media Group Common Stock
do not have any preemptive rights to subscribe for any additional shares of
capital stock or other obligations convertible into or exercisable for shares
of capital stock that may hereafter be issued by TCI.
TCI PREFERRED STOCK
CLASS B 6% CUMULATIVE REDEEMABLE EXCHANGEABLE JUNIOR PREFERRED STOCK
Subject to the prior preferences and other rights of any class or series of
TCI Preferred Stock ranking prior to the Class B Preferred Stock with respect
to the payment of dividends, the holders of Class B Preferred Stock are
entitled to receive cumulative dividends, when and as declared by the TCI
Board of Directors out of unrestricted funds legally available therefor, in
preference to dividends on TCI Common Stock. Dividends accrue cumulatively
(but without compounding) at an annual rate of 6% of the stated liquidation
value of $100 per share
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(the "Stated Liquidation Value"), whether or not such dividends are declared
or funds are legally available for payment of dividends. Accrued dividends are
payable annually and, in the sole discretion of the TCI Board of Directors,
may be declared and paid in cash, in shares of TCI Group Series A Common Stock
or in any combination of the foregoing. Accrued dividends not paid as provided
above on any dividend payment date accumulate and such accumulated unpaid
dividends may be declared and paid in cash, shares of TCI Group Series A
Common Stock or any combination thereof at any time without reference to any
regular dividend payment date, to holders of record of Class B Preferred Stock
as of a special record date fixed by the TCI Board of Directors. No Interest
or additional dividends will accrue or be payable with respect to any dividend
payment on the Class B Preferred Stock that may be in arrears or with respect
to that portion of any other payment on the Class B Preferred Stock that is in
arrears which consists of accumulated or accrued and unpaid dividends.
Upon the liquidation, dissolution or winding up of TCI, the holders of Class
B Preferred Stock will be entitled, after payment of preferential amounts on
any class or series of TCI Preferred Stock ranking prior to the Class B
Preferred Stock with respect to liquidating distributions, to receive from the
assets of TCI available for distribution to stockholders an amount in cash or
property or a combination thereof, per share, equal to the Stated Liquidation
Value thereof, plus all accumulated and accrued but unpaid dividends thereon
to the date of payment.
Subject to the rights of any class or series of TCI Preferred Stock ranking
prior to or on a parity with the Class B Preferred Stock, the Class B
Preferred Stock is redeemable at the option of TCI, in whole at any time or in
part from time to time, for a redemption price per share payable in cash equal
to the Stated Liquidation Value thereof, plus all accumulated and accrued but
unpaid dividends thereon to and including the redemption date. TCI does not
have any mandatory obligation to redeem the Class B Preferred Stock as of any
fixed date, at the option of the holders or otherwise.
The Class B Preferred Stock is exchangeable at the option of TCI in whole
but not in part at any time for junior subordinated debt securities of TCI
("Junior Exchange Notes"). If TCI exercises its optional exchange right, each
holder of outstanding shares of Class B Preferred Stock will be entitled to
receive in exchange therefor newly issued Junior Exchange Notes of a series
authorized and established for the purpose of such exchange, the aggregate
principal amount of which will be equal to the aggregate Stated Liquidation
Value of the shares of Class B Preferred Stock so exchanged by such holder,
plus all accumulated and accrued but unpaid dividends thereon to and including
the exchange date. The Junior Exchange Notes will mature on the 15th
anniversary of the date of issuance and will be subject to earlier redemption
at the option of TCI, in whole or in part, for a redemption price equal to the
principal amount thereof plus accrued but unpaid interest. Interest will
accrue, and be payable annually, on the principal amount of the Junior
Exchange Notes at a rate per annum to be determined prior to issuance by
adding a spread of 215 basis points to the "Fifteen Year Treasury Rate" (as
defined in the Indenture pursuant to which the Junior Exchange Notes will be
issued). Interest will accrue on overdue principal at the same rate, but will
not accrue on overdue interest.
The Class B Preferred Stock ranks senior to the TCI Group Common Stock and
the Liberty Media Group Common Stock, ranks junior to the Series C Preferred
Stock, the Series D Preferred Stock and the Series F Preferred Stock and will
rank junior to the TCI/LMG Preferred Stock as to dividend rights, rights to
redemption and rights on liquidation.
For so long as any dividends are in arrears on the Class B Preferred Stock
or any class or series of TCI Preferred Stock ranking pari passu with the
Class B Preferred Stock which is entitled to payment of cumulative dividends
prior to the redemption, exchange, purchase, or other acquisition of the Class
B Preferred Stock, and until all dividends accrued up to the immediately
preceding dividend payment date on the Class B Preferred Stock and such parity
stock have been paid or declared and set apart so as to be available for
payment in full thereof and for no other purpose, neither TCI nor any
subsidiary thereof may redeem, exchange, purchase, or otherwise acquire any
shares of Class B Preferred Stock, any such parity stock or any class or
series of its capital stock ranking junior to the Class B Preferred Stock, or
set aside any money or assets for such purpose, unless all of the outstanding
shares of Class B Preferred Stock and such parity stock are redeemed. For so
long as any dividends are in arrears on the Class B Preferred Stock and until
all dividends accrued up to the immediately
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preceding dividend payment date on the Class B Preferred Stock have been paid
or declared and set apart so as to be available for payment in full thereof
and for no other purpose, TCI may not declare or pay any dividend on or make
any distribution with respect to any junior stock or parity stock or set aside
any money or assets for any such purpose, except for dividends declared and
paid on parity stock contemporaneously and on a pro rata basis with dividends
declared and paid on the Class B Preferred Stock. If TCI fails to redeem or
exchange shares of Class B Preferred Stock on a date fixed for redemption or
exchange, and until such shares are redeemed or exchanged in full, TCI may not
redeem or exchange any parity stock or junior stock, declare or pay any
dividend on or make any distribution with respect to any junior stock, or set
aside money or assets for such purpose and neither TCI nor any subsidiary
thereof may purchase or otherwise acquire any Class B Preferred Stock, parity
stock or junior stock or set aside any money or assets for any such purpose.
The failure of TCI to pay any dividends on any class or series of parity stock
or to redeem or exchange on any date fixed for redemption or exchange any
shares of Class B Preferred Stock will not prevent TCI from (i) paying any
dividends on junior stock solely in shares of junior stock or the redemption,
purchase or other acquisition of junior stock solely in exchange for (together
with a cash adjustment for fractional shares, if any), or (but only in the
case of a failure to pay dividends on any parity stock) through the
application of the proceeds from the sale of, shares of junior stock; or (ii)
the payment of dividends on any parity stock solely in shares of parity stock
and/or junior stock or the redemption, exchange, purchase, or other
acquisition of Class B Preferred Stock or parity stock solely in exchange for
(together with a cash adjustment for fractional shares, if any), or (but only
in the case of a failure to pay dividends on any parity stock) through the
application of the proceeds from the sale of, parity stock and/or junior
stock.
The Class B Preferred Stock has no voting rights, except as required by the
DGCL, and except that the holders of Class B Preferred Stock have the right to
vote with the TCI Group Common Stock and the Liberty Media Group Common Stock,
on the basis of one vote per share, in any general election of directors of
TCI.
SERIES PREFERRED STOCK
The Series Preferred Stock is issuable, from time to time, in one or more
series, with such power, designations, preferences and relative participating,
optional or other rights, and qualifications, limitations or restrictions
thereof, as is stated and expressed in a resolution or resolutions providing
for the issue of each such series adopted by the TCI Board of Directors.
All shares of any one series of the Series Preferred Stock are required to
be alike in every particular. Except to the extent otherwise provided in the
resolution or resolutions providing for the issue of any series of Series
Preferred Stock, the holders of shares of such series will have no voting
rights except as may be required by Delaware law.
SERIES C CONVERTIBLE PREFERRED STOCK
Each share of Series C Preferred Stock is convertible, at the option of the
holder, into 100 shares of TCI Group Series A Common Stock and 25 shares of
LMG Series A Common Stock, subject to anti-dilution adjustments. The dividend,
liquidation and redemption features of the Series C Preferred Stock, each of
which is discussed in greater detail below, are determined by reference to the
liquidation value of the Series C Preferred Stock, which as of any date of
determination is equal, on a per share basis, to the sum of (i) $2,375, plus
(ii) all dividends accrued on such share through the dividend payment date on
or immediately preceding such date of determination to the extent not paid on
or before such date, plus (iii) for purposes of determining liquidation and
redemption payments, all unpaid dividends accrued on the sums of clauses (i)
and (ii) above, to such date of determination.
Subject to the prior preferences and other rights of any class or series of
preferred stock ranking senior to or on a parity with the Series C Preferred
Stock, the holders of Series C Preferred Stock are entitled to receive
preferential cumulative cash dividends out of funds legally available
therefor. Dividends accrue cumulatively at an annual rate of 5 1/2% of the
liquidation value per share, whether or not such dividends are declared or
funds
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are legally or contractually available for payment of dividends, except that
if TCI fails to redeem shares of Series C Preferred Stock required to be
redeemed on a redemption date, dividends will thereafter accrue cumulatively
at an annual rate of 15% of the liquidation value per share. Dividends not
paid on any dividend payment date will be added to the liquidation value on
such date and remain a part thereof until such dividends and all dividends
accrued thereon are paid in full. Dividends will accrue on unpaid dividends at
the rate of 5 1/2% per annum (15% under the circumstances described above),
unless such dividends remain unpaid for two consecutive quarters in which
event such rate will increase to 15% per annum until such dividends and all
dividends, accrued thereon, are paid in full.
Upon the dissolution, liquidation or winding up of TCI, holders of the
Series C Preferred Stock will be entitled to receive from the assets of TCI
available for distribution to stockholders an amount in cash, per share, equal
to the liquidation value of the Series C Preferred Stock.
The Series C Preferred Stock is subject to optional redemption by TCI at any
time after August 8, 2001, in whole or in part, at a redemption price, per
share, equal to the then liquidation value of the Series C Preferred Stock.
Subject to the prior preferences and other rights of any other class or series
of TCI Preferred Stock ranking senior to or on a parity with the Series C
Preferred Stock and subject to any prohibition or restriction contained in any
instrument evidencing indebtedness of TCI, the Series C Preferred Stock is
required to be redeemed by TCI at any time on or after August 8, 2001 at the
option of the holder, in whole or in part (provided that the aggregate
liquidation value of the shares to be redeemed is in excess of $1 million), in
each case at a redemption price, per share, equal to the then liquidation
value.
The Series C Preferred Stock ranks senior to the TCI Group Common Stock, the
Liberty Media Group Common Stock and the Class B Preferred Stock, ranks on a
parity basis with the Series D Preferred Stock and the Series F Preferred
Stock and will rank on a parity basis with the TCI/LMG Preferred Stock as to
dividend rights, rights to redemption and rights on liquidation.
For so long as any dividends are in arrears on the Series C Preferred Stock
and until all dividends accrued up to the immediately preceding dividend
payment date on the Series C Preferred Stock have been paid or declared and
set apart so as to be available for payment in full thereof and for no other
purpose, TCI may not redeem or otherwise acquire any shares of Series C
Preferred Stock or any shares of any class or series of its capital stock
ranking junior to the Series C Preferred Stock, unless all of the outstanding
shares of Series C Preferred Stock are redeemed. For so long as any dividends
are in arrears on the Series C Preferred Stock and until all dividends accrued
up to the immediately preceding dividend payment date on the Series C
Preferred Stock have been paid or declared and set apart so as to be available
for payment in full thereof and for no other purpose, TCI may not declare or
pay any dividend on or make any other distribution with respect to any junior
stock or set aside any money or assets for such purpose, except that TCI may
pay a dividend on any class or series of junior stock solely in shares of
capital stock ranking junior to the Series C Preferred Stock. If TCI fails to
redeem shares of Series C Preferred Stock required to be redeemed on a
redemption date, and until all then outstanding shares of Series C Preferred
Stock are redeemed in full, TCI may not redeem any junior stock, or otherwise
acquire any shares of such stock or Series C Preferred Stock, except that TCI
may acquire shares of Series C Preferred Stock pursuant to a purchase or
exchange offer made to holders of all outstanding shares of Series C Preferred
Stock, if as to holders of all outstanding shares of Series C Preferred Stock,
the terms of the purchase or exchange offer for all such shares are identical.
The holders of Series C Preferred Stock are entitled to vote on an as
converted basis on all matters submitted to a vote of holders of TCI Group
Common Stock and Liberty Media Group Common Stock and any other class of
capital stock of TCI entitled to vote generally on the election of directors.
Holders of Series C Preferred Stock are not entitled to vote as a separate
class except as otherwise may be required by the DGCL.
SERIES D CONVERTIBLE PREFERRED STOCK
The Certificate of Designation for the Series D Preferred Stock provides
that each share of Series D Preferred Stock is convertible, at the option of
the holder, into 10 shares of Class A Common Stock, subject to
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anti-dilution adjustments. After giving effect to the redesignation of the
Class A Common Stock and Class B Common Stock of TCI as TCI Group Series A
Common Stock and TCI Group Series B Common Stock, respectively, and the
Distribution, each share of Series D Preferred Stock is convertible, at the
option of the holder, into 10 shares of TCI Group Series A Common Stock and
two and one-half shares of LMG Series A Common Stock, subject to anti-dilution
adjustments. The Certificate of Designations for the Series D Preferred Stock
further provides that if TCI distributes to all holders of Class A Common
Stock rights or warrants to subscribe for or purchase shares of capital stock
of TCI (other than shares of Class A or Class B Common Stock) or a subsidiary
of TCI, which capital stock (a) is common stock of its issuer or (b)
participates in one or more business operations of the issuer thereof in such
a manner that if such operations were owned by a corporation and such capital
stock were issued thereby such capital stock would be common stock of such
corporation ("Special Securities"), each holder of Series D Preferred Stock
will have the option, in lieu of any anti-dilution adjustment that would
otherwise apply to the conversion rate of the Series D Preferred Stock, to
exchange a specified portion of its shares of Series D Preferred Stock for
shares of a new series of convertible preferred stock of the issuer of the
Special Securities having terms similar to the Series D Preferred Stock but
convertible into Special Securities.
The dividend, liquidation and redemption features of the Series D Preferred
Stock, each of which is discussed below, are determined by reference to the
liquidation value of the Series D Preferred Stock, which as of any date of
determination is equal, on a per share basis, to the sum of (i) $300, plus
(ii) all dividends accrued on such share through the dividend payment date on
or immediately preceding such date of determination to the extent not paid on
or before such date, plus (iii) for purposes of determining liquidation and
redemption payments, an amount equal to all unpaid dividends accrued on the
sum of clauses (i) and (ii) above, to such date of determination.
Subject to the prior preferences and other rights of any class or series of
preferred stock ranking senior to or on a parity with the Series D Preferred
Stock with respect to the payment or declaration of dividends, the holders of
Series D Preferred Stock are entitled to receive preferential cumulative cash
dividends out of funds legally available therefor. Dividends accrue on a daily
basis at an annual rate of 5 1/2% of the liquidation value per share, whether
or not such dividends are declared or funds are legally or contractually
available for payment of dividends, except that if TCI fails to redeem shares
of Series D Preferred Stock required to be redeemed on a redemption date,
dividends thereafter will accrue cumulatively at an annual rate of 10% of the
liquidation value per share until such shares are redeemed. To the extent any
cash dividends are not paid on any dividend payment date, the amount of such
dividends will be automatically converted, to the extent permissible under the
DGCL, into shares of Class A Common Stock at a conversion rate equal to 95% of
the then "current market price" (as defined in the Certificate of Designations
establishing the Series D Preferred Stock) of the Class A Common Stock, and
upon issuance of shares of Class A Common Stock to holders of Series D
Preferred Stock in respect of such conversion such dividend will be deemed
paid for all purposes. Dividends not so paid or deemed paid on any dividend
payment date are added to the liquidation value on such date and remain a part
thereof until such dividends and all dividends accrued thereon are paid in
full. Dividends will accrue on such unpaid dividends at the rate of 5 1/2% per
annum (10% under the circumstances described above), unless such dividends
remain unpaid for two consecutive quarters, in which event such rate will
increase to 10% per annum until such dividends and all dividends accrued
thereon are paid in full.
Upon the dissolution, liquidation or winding up of TCI, holders of the
Series D Preferred Stock will be entitled to receive from the assets of TCI
available for distribution to stockholders an amount in cash, per share, equal
to the liquidation value of the Series D Preferred Stock.
The Series D Preferred Stock is subject to optional redemption by TCI at any
time after the fifth anniversary of its issuance, in whole or from time to
time in part, at a redemption price, per share, equal to the then liquidation
value of the Series D Preferred Stock. Shares of Series D Preferred Stock may
also be redeemed at the option of TCI after the third anniversary of the issue
date, in whole or from time to time part, at a redemption price per share
equal to the then liquidation value of the Series D Preferred Stock, if the
market value per share of the Class A Common Stock has exceeded $37.50 for the
period specified in the Certificate of Designations
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establishing the Series D Preferred Stock. Subject to the prior preferences
and other rights of any other class or series of TCI Preferred Stock ranking
senior to or on a parity basis with the Series D Preferred Stock and subject
to any prohibition or restriction contained in any instrument evidencing
indebtedness of TCI, any holder of Series D Preferred Stock, at such holder's
option, may require TCI, at any time after the tenth anniversary of the
issuance of such Series D Preferred Stock, to redeem all or a portion of such
holder's shares of Series D Preferred Stock, provided that the aggregate
liquidation value of the shares to be redeemed is in excess of $50,000 (or, if
all of the shares of Series D Preferred Stock held by such holder have an
aggregate liquidation value of less than $50,000, all but not less than all of
such shares of Series D Preferred Stock), in each case at a redemption price,
per share, equal to the then liquidation value of the Series D Preferred
Stock. If TCI fails to effect any redemption of Series D Preferred Stock
called for redemption or which a holder has validly requested be redeemed, the
holders thereof will have the option to convert their shares of Series D
Preferred Stock into Class A Common Stock at a conversion rate equal to the
quotient obtained by dividing the redemption price by 95% of the "current
market price" of the Class A Common Stock on the redemption date, provided
that in the case of a failure by TCI to redeem shares at the request of a
holder, the exercise of the foregoing conversion right will be delayed for one
year.
The Series D Preferred Stock ranks senior to the TCI Group Common Stock, the
Liberty Media Group Common Stock, the Class B Preferred Stock, ranks on a
parity basis with the Series C Preferred Stock and the Series F Preferred
Stock and will rank on a parity basis with the TCI/LMG Preferred Stock as to
dividend rights, rights to redemption and rights on liquidation.
For so long as any dividends are in arrears on the Series D Preferred Stock
and until all dividends accrued up to the immediately preceding dividend
payment date on the Series D Preferred Stock have been paid or declared and
set apart so as to be available for payment in full thereof and for no other
purpose, TCI may not redeem or otherwise acquire any shares of Series D
Preferred Stock or any shares of any class or series of its capital stock
ranking pari passu with or junior to the Series D Preferred Stock, unless all
of the outstanding shares of Series D Preferred Stock are redeemed. For so
long as any dividends are in arrears on the Series D Preferred Stock and until
all dividends accrued up to the immediately preceding dividend payment date on
the Series D Preferred Stock have been paid or declared and set apart so as to
be available for payment in full thereof and for no other purpose, TCI may not
declare or pay any dividend on or make any other distribution with respect to
any junior stock or set aside any money or assets for such purpose, except
that TCI may pay a dividend on any class or series of junior stock solely in
shares of capital stock ranking junior to the Series D Preferred Stock. If TCI
fails to redeem shares of Series D Preferred Stock required to be redeemed on
a redemption date, and until all then outstanding shares of Series D Preferred
Stock are redeemed in full, TCI may not redeem any junior stock, or otherwise
acquire any shares of such stock or Series D Preferred Stock, except that TCI
may acquire shares of Series D Preferred Stock pursuant to a purchase or
exchange offer made to holders of all outstanding shares of Series D Preferred
Stock, if as to holders of all outstanding shares of Series D Preferred Stock
the terms of the purchase or exchange offer for all such shares are identical.
The Series D Preferred Stock has no voting rights, except as required by the
DGCL and except that without the consent of the holders of 66 2/3% in
liquidation value of the Series D Preferred Stock, TCI may not create any
series of TCI Preferred Stock that is senior as to dividend rights, rights to
redemption, or rights on liquidation to the Series D Preferred Stock.
SERIES F CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK
Shares of Series F Preferred Stock are convertible, at the option of the
holder, into TCI Group Series A Common Stock at a rate of 1287.51 shares of
TCI Group Series A Common Stock for each share of Series F Preferred Stock,
subject to anti-dilution adjustments. In addition, any shares of Series F
Preferred Stock which cease to be held by TCI or a subsidiary of TCI will
automatically be converted into shares of TCI Group Series A Common Stock. The
anti-dilution provisions of the Series F Preferred Stock provide that the
conversion rate of the Series F Preferred Stock will be adjusted (i) in the
event of a dividend or distribution on the outstanding shares of TCI Group
Series A Common Stock in shares of TCI Group Series A Common Stock, by
adjusting the
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then-current conversion rate such that the holder of Series F Preferred Stock
thereafter surrendered for conversion would receive the number of shares of
TCI Group Series A Common Stock which it would have been entitled to receive
had such shares of Series F Preferred Stock been converted prior to the record
date for such dividend or distribution and (ii) in the event of a dividend or
distribution to holders of TCI Group Series A Common Stock of any securities,
evidences of indebtedness or other assets (other than cash dividends or shares
of TCI Group Series A Common Stock), then the conversion rate will be adjusted
by multiplying the then-current conversion rate by a fraction, the numerator
of which is the current market price of a share of TCI Group Series A Common
Stock and the denominator of which is such current market price less the fair
market value (as determined by the Board of Directors) of the securities,
evidences of indebtedness or assets so distributed.
The holders of the Series F Preferred Stock are entitled to participate, on
an as-converted basis, with the holders of the TCI Group Series A Common
Stock, with respect to any cash dividends or distributions declared and paid
on the TCI Group Series A Common Stock. Dividends or distributions on the TCI
Group Series A Common Stock which are not paid in cash would result in the
adjustment of the applicable conversion rate as described above.
Upon the dissolution, liquidation or winding up of TCI, holders of the
Series F Preferred Stock are entitled to receive from the assets of TCI
available for distribution to stockholders an amount in cash or property or a
combination thereof, per share of Series F Preferred Stock, equal to the sum
of (x) $.01 and (y) the amount to be distributed per share of TCI Group Series
A Common Stock in such liquidation, dissolution or winding up multiplied by
the applicable conversion rate of a share of Series F Preferred Stock.
The Series F Preferred Stock is subject to optional redemption by TCI at any
time after the 30th business day following issuance, in whole or in part, at a
redemption price, per share, equal to $24,875 (as adjusted in respect of stock
splits, reverse splits and other events affecting the shares of Series F
Preferred Stock), plus any dividends which have been declared but are unpaid
as of the date fixed for such redemption. TCI will pay the redemption price
(or designated portion thereof) of the shares of Series F Preferred Stock
called for redemption by issuing to the holder thereof, in respect of its
shares to be redeemed, a number of shares of TCI Group Series A Common Stock
equal to the aggregate redemption price (or designated portion thereof) of
such shares divided by the average market price of the TCI Group Series A
Common Stock for a period specified, and subject to the adjustments described,
in the certificate of designations establishing the Series F Preferred Stock.
The Series F Preferred Stock ranks senior to the TCI Group Common Stock, the
Liberty Media Group Common Stock and the Class B Preferred Stock, ranks on a
parity basis with the Series C Preferred Stock and the Series D Preferred
Stock and will rank on a parity basis with the TCI/LMG Preferred Stock as to
dividend rights, rights to redemption and rights on liquidation.
If at any time TCI has declared a dividend on the Series F Preferred Stock
and failed to pay or set aside consideration sufficient to pay such dividend,
or if TCI declares a cash dividend on the shares of TCI Group Series A Common
Stock and fails to pay or set aside the participating dividend required to be
paid to the holders of the Series F Preferred Stock, then (i) TCI may not
declare or pay any dividend on or make any distribution with respect to any
parity stock or junior stock or set aside any money or assets for any such
purpose until such dividend payable to the holders of Series F Preferred Stock
has been paid or consideration sufficient to pay such dividend has been set
aside for such purpose, and (ii) neither TCI nor any subsidiary thereof may
redeem, exchange, purchase or otherwise acquire any shares of Series F
Preferred Stock, parity stock or junior stock, or set aside any money or
assets for any such purpose, unless all then outstanding shares of such parity
stock required to be redeemed under such circumstances are redeemed. If TCI
fails to redeem shares of Series F Preferred Stock required to be redeemed on
a redemption date, TCI may not declare or pay any dividend on or make any
distribution with respect to any junior stock or set aside money or assets for
any such purpose, and neither TCI nor any subsidiary may redeem any parity
stock or junior stock, or purchase or otherwise acquire any Series F Preferred
Stock, parity stock or junior stock, or set aside any money or assets for any
such purpose, until such shares of Series F Preferred Stock are redeemed. The
failure of TCI to pay any dividends on any class or series of parity stock or
to redeem on any date fixed for redemption any shares of Series F Preferred
Stock
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will not prevent TCI from (i) paying any dividends on junior stock solely in
shares of junior stock or the redemption or other acquisition of junior stock
solely in exchange for (together with a cash adjustment for fractional shares,
if any) shares of junior stock; or (ii) the payment of dividends on any parity
stock solely in shares of parity stock and/or junior stock or the redemption
or other acquisition of parity stock solely in exchange for (together with a
cash adjustment for fractional shares, if any), or through the application of
the proceeds from the sale of, shares of parity stock and/or junior stock.
The Series F Preferred Stock has no voting rights, except as required by the
DGCL, and except that such shares will vote with the TCI Group Common Stock
and the Liberty Media Group Common Stock and any class or series of Preferred
Stock entitled to vote thereon, on the basis of one vote per share, in any
general election of directors of TCI.
SERIES G REDEEMABLE CONVERTIBLE TCI GROUP PREFERRED STOCK
If the sum of (i) the last reported sale price of the TCI Group Series A
Common Stock plus (ii) one-fourth of the last reported sale price of the LMG
Series A Common Stock, equals or exceeds $27 (as adjusted for stock dividends,
stock splits, reclassifications or combinations of the TCI Group Series A
Common Stock and the LMG Series A Common Stock) for any ten consecutive
trading days during the 65 consecutive trading days ending on the last trading
day immediately preceding the first anniversary of the date on which the TCI
Group Preferred is first issued (the "Contingency"), then no dividends will
accrue or be payable on the TCI Group Preferred Stock. If the Contingency is
not met, and only in such event, then subject to the prior preferences and
other rights of any class or series of TCI Preferred Stock ranking prior to
the TCI Group Preferred Stock with respect to the payment of dividends, the
holders of TCI Group Preferred Stock will be entitled to receive cumulative
dividends, when and as declared by the TCI Board of Directors out of
unrestricted funds legally available therefor, in preference to dividends on
TCI Common Stock and the Class B Preferred Stock. Dividends will accrue on the
TCI Group Preferred Stock from and after the first anniversary of issuance if
the Contingency is not met, on a daily basis at the rate of 4% per annum of
the Liquidation Preference per share, whether or not such dividends are
declared or funds are available for payment of dividends. The "Liquidation
Preference" of a share of TCI Group Preferred Stock as of any date in question
means an amount equal to the sum of (i) the stated liquidation value of $21.60
per share, plus (ii) an amount equal to all dividends accrued on such share
which have been added to and remain a part of the Liquidation Preference as of
such date, plus (iii) for purposes of determining liquidation and redemption
payments, an amount equal to all unpaid dividends accrued on the sum of the
amounts specified in clauses (i) and (ii) above during the period from the
immediately preceding dividend payment date through and including the date in
question. Dividends not paid on any dividend payment date are added to the
Liquidation Preference on such date and remain a part thereof until such
dividends are paid. The rate per annum at which dividends will accrue on that
portion of the Liquidation Preference that consists of unpaid dividends that
were added to the Liquidation Preference on a dividend payment date and that
remain unpaid on the next succeeding dividend payment date will increase to
8.625% per annum from and after such next succeeding dividend payment date.
Accrued dividends are payable semiannually on each February 1 and August 1 to
holders of record of the shares on the preceding January 15 and July 15,
respectively, and, in the sole discretion of the TCI Board of Directors, may
be declared and paid in cash, in shares of TCI Group Series A Common Stock or
in any combination of the foregoing. Accrued dividends not paid as provided
above on any dividend payment date accumulate and such accumulated unpaid
dividends may be declared and paid in cash, shares of TCI Group Series A
Common Stock or any combination thereof at any time without reference to any
regular dividend payment, to holders of record of TCI Group Preferred Stock as
of a special record date fixed by the TCI Board of Directors.
Upon the liquidation, dissolution or winding up of TCI, the holders of TCI
Group Preferred Stock will be entitled, after payment of preferential amounts
on any class or series of TCI Preferred Stock ranking prior to the TCI Group
Preferred Stock with respect to liquidating distributions, to receive from the
assets of TCI available for distribution to stockholders an amount in cash or
property or a combination thereof, per share, equal to the Liquidation
Preference thereof as of the date of payment or distribution.
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Subject to the rights of any class or series of TCI Preferred Stock ranking
prior to or on a parity with TCI Group Preferred Stock, the TCI Group
Preferred Stock is redeemable at the option of TCI, in whole at any time or in
part from time to time on or after February 1, 2001 for a redemption price per
share payable in cash equal to the Liquidation Preference thereof on such
redemption date. Subject to the rights of any class or series of TCI Preferred
Stock ranking prior to or on a parity with the TCI Group Preferred Stock, TCI
shall redeem the TCI Group Preferred Stock out of funds legally available
therefor on February 1, 2016, for a redemption price per share payable in cash
equal to the Liquidation Preference thereof on such redemption date.
The TCI Group Preferred Stock ranks senior to the TCI Group Common Stock and
Liberty Media Group Common Stock and the TCI Class B Preferred Stock and on a
parity with all other currently outstanding classes and series of TCI
Preferred Stock as to dividend rights, rights to redemption and rights on
liquidation.
Each share of TCI Group Preferred Stock is convertible, at the option of the
holder, at any time prior to the close of business on the business day
immediately prior to the redemption thereof, into 1.05 shares of TCI Group
Series A Common Stock, subject to adjustment upon the occurrence of certain
events described below. The kind and amount of securities, assets or other
property that as of any date are issuable or deliverable upon conversion of a
share of TCI Group Preferred Stock are referred to herein as the "Conversion
Rate." No fractional shares of TCI Group Series A Common Stock or scrip will
be issued upon conversion of the TCI Group Preferred Stock. A holder otherwise
entitled to a fractional share shall receive cash, which may be paid by check,
in an amount equal to the same fraction of the last reported sale price of a
share of TCI Group Series A Common Stock on the last full trading day prior to
the conversion date. Upon conversion of shares of TCI Group Preferred Stock,
the rights of the holder of the shares so converted, as a holder thereof, will
cease.
To convert a share of TCI Group Preferred Stock, a holder must surrender the
certificate(s) representing the shares to be converted at the office of TCI or
any transfer agent for the TCI Group Preferred Stock, which certificate(s)
shall be duly endorsed to TCI or accompanied by duly executed instruments of
transfer to TCI, with signatures guaranteed (such endorsements or instruments
of transfer to be in form satisfactory to TCI), together with a written notice
to TCI at such office of the election to convert the same, specifying the
number of shares to be converted and the name(s) (with addresses) in which the
certificate(s) for shares of TCI Group Series A Common Stock are to be issued.
If any transfer is involved in the issuance or delivery of any certificate(s)
for shares of TCI Group Series A Common Stock in a name other than that of the
registered holder of the shares of TCI Group Preferred Stock surrendered for
conversion, such holder shall also deliver to TCI a sum sufficient to pay all
transfer or similar taxes (or evidence satisfactory to TCI of payment
thereof). The date on which the foregoing requirements are satisfied is the
conversion date.
The Conversion Rate of the TCI Group Preferred Stock is subject to
adjustment upon the occurrence of certain events, including (i) the payment of
a dividend or the making of a distribution in shares of TCI Group Series A
Common Stock to holders of TCI Group Series A Common Stock, (ii) the payment
of a dividend or the making of a distribution to holders of TCI Group Series A
Common Stock payable in shares of TCI's capital stock (other than TCI Group
Series A Common Stock or rights, warrants or options for its capital stock),
(iii) the subdivision of the outstanding shares of TCI Group Series A Common
Stock into a greater number of shares, (iv) the combination of the outstanding
shares of TCI Group Series A Common Stock into a smaller number of shares, (v)
the issuance by reclassification of the shares of TCI Group Series A Common
Stock of any shares of TCI's capital stock (other than rights, warrants or
options for its capital stock), (vi) the distribution to all holders of TCI
Group Series A Common Stock of rights, warrants or options entitling them (for
a period expiring within 45 days after the record date for the determination
of stockholders entitled to receive such distribution) to purchase shares of
TCI Group Series A Common Stock or securities convertible into TCI Group
Series A Common Stock (other than the TCI Group Series B Common Stock) at a
price per share (or, in the case of such convertible securities, having a
conversion price per share after adding thereto an allocable portion of the
exercise price of the right, warrant or option to purchase such convertible
securities) less than the Current Market Price on the Determination Date (each
as defined in the Certificate of Designations) per share of TCI Group Series A
Common Stock, (vii) the distribution to all holders of TCI Group Series A
Common Stock of assets or debt securities or rights, warrants or options to
purchase securities (excluding cash dividends or distributions other
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than any Extraordinary Cash Dividend (as defined in the Certificate of
Designations) and excluding dividends and distributions referred to in the
preceding clauses of this sentence) and (viii) certain mergers,
consolidations, sales of assets or binding share exchanges. In the case of any
such dividend or distribution on the TCI Group Series A Common Stock of shares
of capital stock, subdivision, combination or reclassification (other than a
dividend, distribution or reclassification in which the TCI Group Preferred
Stock becomes convertible into shares of more than one class or series of TCI
capital stock, any one of which is redeemable or exchangeable at the election
of TCI ("Redeemable Capital Stock"), if TCI elects to treat such dividend,
distribution or reclassification as a distribution of assets by TCI), the
holder of each outstanding share of TCI Group Preferred Stock will have the
right to convert such share of TCI Group Preferred Stock into the kind and
amount of securities which such holder would have owned immediately after such
event if such share of TCI Group Preferred Stock had been converted
immediately before the record date for or effective date of, as the case may
be, such event. In the case of any such merger, consolidation, binding share
exchange or sale of assets, the holder of each outstanding share of TCI Group
Preferred Stock will have the right to convert such share of TCI Group
Preferred Stock into the kind and amount of securities, cash or other assets
receivable upon such transaction by a holder of the number of shares of TCI
Group Series A Common Stock into which such share of TCI Group Preferred Stock
could have been converted immediately before the effective date of such
transaction (assuming, if applicable, such holder failed to exercise any
rights of election and received per share of TCI Group Series A Common Stock
the kind and amount of securities, cash or other assets received per share by
a plurality of the non-electing shares of the TCI Group Series A Common
Stock). In the case of any such issuance of rights, warrants or options which
expire within 45 days after the record date for the determination of
stockholders entitled to receive the rights, warrants or options, or any such
distribution of assets, debt securities or certain rights, warrants or options
to purchase securities (or, in the case of any dividend, distribution or
reclassification in which the TCI Group Preferred Stock becomes convertible
into shares of more than one class or series of TCI capital stock, any one of
which is Redeemable Capital Stock, if TCI elects to treat such dividend,
distribution or reclassification as a distribution of assets by TCI), the
Conversion Rate will be adjusted pursuant to formulas contained in the
Certificate of Designations. In certain cases of distributions of assets, debt
securities or certain rights, warrants or options to purchase securities to
holders of TCI Group Series A Common Stock, rather than being entitled to an
adjustment in the Conversion Rate, the holder of a share of TCI Group
Preferred Stock upon conversion thereof will be entitled to receive, in
addition to the shares of TCI Group Series A Common Stock into which such
share of TCI Group Preferred Stock is convertible, the kind and amount of
assets, debt securities, rights, warrants or options comprising the
distribution that such holder would have received if such holder had converted
such share of TCI Group Preferred Stock immediately prior to the record date
for determining the holders of TCI Group Series A Common Stock entitled to
receive the distribution.
Subject to the provisions described in the immediately following paragraph,
if the holders of TCI Group Preferred Stock would be entitled to receive upon
conversion thereof any Redeemable Capital Stock, and such Redeemable Capital
Stock is redeemed, exchanged or otherwise acquired in full, then, from and
after such event (a "Redemption Event"), the holders of TCI Group Preferred
Stock then outstanding shall be entitled to receive upon conversion of such
shares, in lieu of shares of such Redeemable Capital Stock, the kind and
amount of securities, cash or other assets receivable upon such Redemption
Event by a holder of the number of shares of Redeemable Capital Stock into
which such shares of TCI Group Preferred Stock could have been converted
immediately prior to the effectiveness of such Redemption Event (assuming that
such holder failed to exercise any applicable right of election with respect
thereto and received per share of such Redeemable Capital Stock the kind and
amount of securities, cash or other assets received per share by the holders
of a plurality of the non-electing shares thereof) and, thereafter, the
holders of the TCI Group Preferred Stock shall have no other conversion rights
with respect to such Redeemable Capital Stock.
Notwithstanding the foregoing, the provisions described in the immediately
preceding paragraph shall not apply, and the holders of any shares of TCI
Group Preferred Stock that are not exchanged as described in the second
sentence of this paragraph shall not have any conversion rights with respect
to Redeemable Capital Stock so redeemed, exchanged or otherwise acquired,
after the Redemption Event relating thereto, if (i) the redemption price for
the shares of such Redeemable Capital Stock is paid in whole or in part in
securities ("Redemption
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Securities") of an issuer other than TCI (the "Other Issuer") and (ii) in
connection with such Redemption Event, the "Mirror Preferred Stock Condition"
is met, as such term is defined in the Certificate of Designation. Generally,
the Mirror Preferred Stock Condition shall be satisfied if TCI makes
appropriate provisions so that holders of TCI Group Preferred Stock shall have
the right, exercisable on the effective date of the Redemption Event, to
exchange their shares of TCI Group Preferred Stock for convertible preferred
stock of TCI and convertible preferred stock of the Other Issuer that together
have an aggregate liquidation preference equal to the liquidation preference
of the TCI Group Preferred Stock to be so exchanged (as in effect on the
effective date of the Redemption Event) and that otherwise each have terms,
conditions, designations, dividend rights, voting powers, rights on
liquidation and other preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions
applicable to such convertible preferred stock that are identical, or as
nearly so as is practicable in the good faith judgment of the Board of
Directors of TCI, to those of the TCI Group Preferred Stock for which such
convertible preferred stock is to be exchanged, except that applicable time
periods under the TCI Group Preferred Stock will be tacked to corresponding
time periods under such convertible preferred stock, and except that (x) the
convertible preferred stock of the Other Issuer will be convertible into the
kind and amount of Redemption Securities, cash and other assets that the
holder of a share of TCI Group Preferred Stock in respect of which such
convertible preferred stock is issued would have received in the Redemption
Event, had such shares of TCI Group Preferred Stock been converted prior to
the Redemption Event, and (y) the convertible preferred stock of TCI will not
be convertible into, and the holders thereof will have no conversion rights
thereunder with respect to, the Redeemable Capital Stock subject to the
Redemption Event. The Mirror Preferred Stock Condition shall be deemed to have
been satisfied in connection with any Redemption Event only if the Board of
Directors of TCI determines (i) that receipt of such convertible preferred
stock of TCI and/or the Other Issuer in exchange for the TCI Group Preferred
Stock in connection with such Redemption Event would not result in the
recognition of gain or loss by the holders of such TCI Group Preferred Stock
for United States federal income tax purposes; (ii) that an adjustment made in
the Conversion Rate of the TCI Group Preferred Stock with respect to such
Redemption Event, as described in the immediately preceding paragraph, would
result in the recognition of gain or loss by the holders of TCI Group
Preferred Stock for United States federal income tax purposes; or (iii) that
receipt of Redemption Securities in redemption of the Redeemable Capital Stock
to be redeemed in such Redemption Event would result in the recognition of
gain or loss by the holders of such Redeemable Capital Stock.
No adjustment in the Conversion Rate need be made unless the adjustment
would require an increase or decrease of at least 1% in the Conversion Rate;
but any such adjustment which is not made shall be carried forward and taken
into account in any subsequent adjustment. No adjustment to the Conversion
Rate need be made if the holders of TCI Group Preferred Stock may participate
in the transaction or in certain other cases.
For so long as any dividends are in arrears on the TCI Group Preferred Stock
or any class or series of TCI Preferred Stock ranking on a parity with the TCI
Group Preferred Stock which is entitled to payment of cumulative dividends
prior to the redemption, exchange, purchase, or other acquisition of the TCI
Group Preferred Stock, and until all dividends accrued up to the immediately
preceding dividend payment date on the TCI Group Preferred Stock and such
parity stock have been paid or declared and set apart so as to be available
for payment in full thereof and for no other purpose, neither TCI nor any
subsidiary thereof may redeem, exchange, purchase, or otherwise acquire any
shares of TCI Group Preferred Stock, any parity stock or any class or series
of its capital stock ranking junior to the TCI Group Preferred Stock, or set
aside any money or assets for such purpose, unless all of the then outstanding
shares of TCI Group Preferred Stock and such parity stock and any other parity
stock that by its terms is required to be redeemed under such circumstances
are redeemed. For so long as any dividends are in arrears on the TCI Group
Preferred Stock and until all dividends accrued up the immediately preceding
dividend payment date on the TCI Group Preferred Stock have been paid or
declared and set apart so as to be available for payment in full thereof and
for no other purpose, TCI may not declare or pay any dividend on or make any
distribution with respect to any junior stock or parity stock or set aside any
money or assets for any such purpose, except for dividends declared and paid
on parity stock contemporaneously and on a pro rata basis with dividends
declared and paid on the TCI Group Preferred Stock. If TCI fails to redeem
shares of TCI Group Preferred Stock on a date fixed for redemption, and until
such shares are redeemed in full,
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TCI may not redeem any junior stock or, except for contemporaneous pro rata
redemptions, any parity stock, declare or pay any dividend on or make any
distribution with respect to any junior stock, or, except as provided above,
parity stock or set aside money or assets for such purpose and neither TCI nor
any subsidiary thereof may purchase or otherwise acquire any TCI Group
Preferred Stock, parity stock or junior stock or set aside any money or assets
for any such purpose. The failure of TCI to pay any dividends on any class or
series of parity stock or to redeem on any date fixed for redemption any
shares of TCI Group Preferred Stock will not prevent (i) the payment of
dividends on junior stock solely in shares of junior stock or the redemption,
purchase or other acquisition of junior stock solely in exchange for (together
with a cash adjustment for fractional shares, if any), or (but only in the
case of a failure to pay dividends on any parity stock) through the
application of the proceeds from the sale of, shares of junior stock; (ii) the
payment of dividends on any parity stock solely in shares of parity stock
and/or junior stock or the redemption, exchange, purchase, or other
acquisition of TCI Group Preferred Stock or parity stock solely in exchange
for (together with a cash adjustment for fractional shares, if any), or (but
only in the case of a failure to pay dividends on any parity stock) through
the application of the proceeds from the sale of, parity stock and/or junior
stock; or (iii) the purchase or acquisition of shares of TCI Group Preferred
Stock pursuant to a purchase or exchange offer made to all holders of
outstanding shares of TCI Group Preferred Stock, provided that the terms of
the purchase or exchange offer shall be identical for all shares of TCI Group
Preferred Stock and all accrued dividends on such shares shall have been paid
or shall have been declared and irrevocably set apart in trust for the benefit
of the holders of shares of TCI Group Preferred Stock and for no other
purpose.
The TCI Group Preferred Stock has no voting rights, except (i) as required
by the DGCL, and (ii) that the holders of TCI Group Preferred Stock have the
right to vote with the TCI Group Common Stock, the Liberty Media Group Common
Stock, the TCI Class B Preferred Stock and any other class or series of TCI
Preferred Stock entitled to vote in any general election of directors, on the
basis of one vote per share, in any general election of directors of TCI. The
number of authorized shares of TCI Group Preferred Stock may be increased or
decreased (but not below the number of shares of TCI Group Preferred Stock
then outstanding) by the affirmative vote of the holders of at least 66 2/3%
of the then outstanding Voting Securities (as defined in the TCI Charter)
voting together as a single class.
SERIES H REDEEMABLE CONVERTIBLE LIBERTY MEDIA GROUP PREFERRED STOCK
If the sum of (i) the last reported sale price of the TCI Group Series A
Common Stock plus (ii) one-fourth of the last reported sale price of the LMG
Series A Common Stock, equals or exceeds $27 (as adjusted for stock dividends,
stock splits, reclassifications or combinations of the TCI Group Series A
Common Stock and the LMG Series A Common Stock) for any ten consecutive
trading days during the 65 consecutive trading days ending on the last trading
day immediately preceding the last trading day immediately preceding the first
anniversary of the date on which the Liberty Media Group Preferred Stock is
first issued (the "Contingency"), then no dividends will accrue or be payable
on the Liberty Media Group Preferred Stock. If the Contingency is not met, and
only in such event, then subject to the prior preferences and other rights of
any class or series of TCI Preferred Stock ranking prior to the Liberty Media
Group Preferred Stock with respect to the payment of dividends, the holders of
Liberty Media Group Preferred Stock will be entitled to receive cumulative
dividends, when and as declared by the TCI Board of Directors out of
unrestricted funds legally available therefor, in preference to dividends on
TCI Common Stock and the Class B Preferred Stock. Dividends will accrue on the
Liberty Media Group Preferred Stock from and after the first anniversary of
issuance, if the Contingency is not met, on a daily basis at the rate of 4%
per annum of the Liquidation Preference per share, whether or not such
dividends are declared or funds are available for payment of dividends. The
"Liquidation Preference" of a share of Liberty Media Group Preferred Stock as
of any date in question means an amount equal to the sum of (i) the stated
liquidation value of $5.40 per share, plus (ii) an amount equal to all
dividends accrued on such share which have been added to and remain a part of
the Liquidation Preference as of such date, plus (iii) for purposes of
determining liquidation and redemption payments, an amount equal to all unpaid
dividends accrued on the sum of the amounts specified in clauses (i) and (ii)
above during the period from the immediately preceding dividend payment date
through and including the date in question. Dividends not paid on any dividend
payment date are added to the Liquidation
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Preference on such date and remain a part thereof until such dividends are
paid. The rate per annum at which dividends will accrue on that portion of the
Liquidation Preference that consists of unpaid dividends that were added to
the Liquidation Preference on a dividend payment date and that remain unpaid
on the next succeeding dividend payment date will increase to 8.625% per annum
from and after such next succeeding dividend payment date. Accrued dividends
are payable semiannually on each February 1 and August 1 to holders of record
of the shares on the preceding January 15 and July 15, respectively, and, in
the sole discretion of the TCI Board of Directors, may be declared and paid in
cash, in shares of TCI Group Series A Common Stock or in any combination of
the foregoing. Accrued dividends not paid as provided above on any dividend
payment date accumulate and such accumulated unpaid dividends may be declared
and paid in cash, shares of TCI Group Series A Common Stock or any combination
thereof at any time without reference to any regular dividend payment, to
holders of record of Liberty Media Group Preferred Stock as of a special
record date fixed by the TCI Board of Directors.
Upon the liquidation, dissolution or winding up of TCI, the holders of
Liberty Media Group Preferred Stock will be entitled, after payment of
preferential amounts on any class or series of TCI Preferred Stock ranking
prior to the Liberty Media Group Preferred Stock with respect to liquidating
distributions, to receive from the assets of TCI available for distribution to
stockholders an amount in cash or property or a combination thereof, per
share, equal to the Liquidation Preference thereof as of the date of payment
or distribution.
Subject to the rights of any class or series of TCI Preferred Stock ranking
prior to or on a parity with Liberty Media Group Preferred Stock, the Liberty
Media Group Preferred Stock is redeemable at the option of TCI, in whole at
any time or in part from time to time on or after February 1, 2001, for a
redemption price per share payable in cash equal to the Liquidation Preference
thereof on such redemption date. Subject to the rights of any class or series
of TCI Preferred Stock ranking prior to or on a parity with the Liberty Media
Group Preferred Stock, TCI shall redeem the Liberty Media Group Preferred
Stock out of funds legally available therefor on February 1, 2016, for a
redemption price per share payable in cash equal to the Liquidation Preference
thereof on such redemption date.
The Liberty Media Group Preferred Stock ranks senior to the TCI Group Common
Stock and Liberty Media Group Common Stock and the TCI Class B Preferred Stock
and on a parity with all other currently outstanding classes and series of TCI
Preferred Stock as to dividend rights, rights to redemption and rights on
liquidation.
Each share of Liberty Media Group Preferred Stock is convertible, at the
option of the holder, at any time prior to the close of business on the
business day immediately prior to the redemption thereof, into .2625 of one
share of LMG Series A Common Stock, subject to adjustment upon the occurrence
of certain events described below. The kind and amount of securities, assets
or other property that as of any date are issuable or deliverable upon
conversion of a share of Liberty Media Group Preferred Stock are referred to
hereafter as the "Conversion Rate." No fractional shares of LMG Series A
Common Stock or scrip will be issued upon conversion of the Liberty Media
Group Preferred Stock. A holder otherwise entitled to a fractional share shall
receive cash, which may be paid by check, in an amount equal to the same
fraction of the last reported sale price of a share of LMG Series A Common
Stock on the last full trading day prior to the conversion date. Upon
conversion of shares of Liberty Media Group Preferred Stock, the rights of the
holder of the shares so converted, as a holder thereof, will cease.
To convert a share of Liberty Media Group Preferred Stock, a holder must
surrender the certificate(s) representing the shares to be converted at the
office of TCI or any transfer agent for the Liberty Media Group Preferred
Stock, which certificate(s) shall be duly endorsed to TCI or accompanied by
duly executed instruments of transfer to TCI, with signatures guaranteed (such
endorsements or instruments of transfer to be in form satisfactory to TCI),
together with a written notice to TCI at such office of the election to
convert the same, specifying the number of shares to be converted and the
name(s) (with addresses) in which the certificate(s) for shares of LMG Series
A Common Stock are to be issued. If any transfer is involved in the issuance
or delivery of any certificate(s) for shares of LMG Series A Common Stock in a
name other than that of the registered holder of the shares of Liberty Media
Group Preferred Stock surrendered for conversion, such holder shall also
deliver
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to TCI a sum sufficient to pay all transfer or similar taxes (or evidence
satisfactory to TCI of payment thereof). The date on which the foregoing
requirements are satisfied is the conversion date.
The Conversion Rate of the Liberty Media Group Preferred Stock is subject to
adjustment upon the occurrence of certain events, including (i) the payment of
a dividend or the making of a distribution in shares of LMG Series A Common
Stock to holders of LMG Series A Common Stock, (ii) the payment of a dividend
or the making of a distribution to holders of LMG Series A Common Stock
payable in shares of TCI's capital stock (other than LMG Series A Common Stock
or rights, warrants or options for its capital stock), (iii) the subdivision
of the outstanding shares of LMG Series A Common Stock into a greater number
of shares, (iv) the combination of the outstanding shares of LMG Series A
Common Stock into a smaller number of shares, (v) the issuance by
reclassification of the shares of LMG Series A Common Stock of any shares of
TCI's capital stock (other than rights, warrants or options for its capital
stock), (vi) the distribution to all holders of LMG Series A Common Stock of
rights, warrants or options entitling them (for a period expiring within 45
days after the record date for the determination of stockholders entitled to
receive such distribution) to purchase shares of LMG Series A Common Stock or
securities convertible into LMG Series A Common Stock (other than the LMG
Series B Common Stock) at a price per share (or, in the case of such
convertible securities, having a conversion price per share after adding
thereto an allocable portion of the exercise price of the right, warrant or
option to purchase such convertible securities) less than the Current Market
Price on the Determination Date (each as defined in the Certificate of
Designations) per share of LMG Series A Common Stock, (vii) the distribution
to all holders of LMG Series A Common Stock of assets or debt securities or
rights, warrants or options to purchase securities (excluding cash dividends
or distributions other than any Extraordinary Cash Dividend (as defined in the
Certificate of Designations) and excluding dividends and distributions
referred to in the preceding clauses of this sentence), and (viii) certain
mergers, consolidations, sales of assets or binding share exchanges. In the
case of any such dividend or distribution on the LMG Series A Common Stock of
shares of capital stock, subdivision, combination or reclassification (other
than a dividend, distribution or reclassification in which the Liberty Media
Group Preferred Stock becomes convertible into shares of more than one class
or series of TCI capital stock, any of which is Redeemable Capital Stock, if
TCI elects to treat such dividend, distribution or reclassification as a
distribution of assets by TCI), the holder of each outstanding share of
Liberty Media Group Preferred Stock will have the right to convert such share
of Liberty Media Group Preferred Stock into the kind and amount of securities
which such holder would have owned immediately after such event if such share
of Liberty Media Group Preferred Stock had been converted immediately before
the record date for or effective date of, as the case may be, such event. In
the case of any such merger, consolidation, binding share exchange or sale of
assets, the holder of each outstanding share of Liberty Media Group Preferred
Stock will have the right to convert such share of Liberty Media Group
Preferred Stock into the kind and amount of securities, cash or other assets
receivable upon such transaction by a holder of the number of shares of LMG
Series A Common Stock into which such share of Liberty Media Group Preferred
Stock could have been converted immediately before the effective date of such
transaction (assuming, if applicable, such holder failed to exercise any
rights of election and received per share of LMG Series A Common Stock the
kind and amount of securities, cash or other assets received per share by a
plurality of the non-electing shares of the LMG Series A Common Stock). In the
case of any such issuance of rights, warrants or options which expire within
45 days after the record date for the determination of stockholders entitled
to receive the rights, warrants or options, or any such distribution of
assets, debt securities or certain rights, warrants or options to purchase
securities (or, in the case of any dividend, distribution or reclassification
in which the Liberty Media Group Preferred Stock becomes convertible into
shares of more than one class or series of TCI capital stock, any of which is
Redeemable Capital Stock, if TCI elects to treat such dividend, distribution
or reclassification as a distribution of assets by TCI), the Conversion Rate
will be adjusted pursuant to formulas contained in the Certificate of
Designations. In certain cases of distributions of assets, debt securities or
certain rights, warrants or options to purchase securities to holders of LMG
Series A Common Stock, rather than being entitled to an adjustment in the
Conversion Rate, the holder of a share of Liberty Media Group Preferred Stock
upon conversion thereof will be entitled to receive, in addition to the shares
of LMG Series A Common Stock into which such share of Liberty Media Group
Preferred Stock is convertible, the kind and amount of assets, debt
securities, rights, warrants or options comprising the distribution that such
holder would have received if such holder had converted such share of Liberty
Media Group Preferred Stock
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immediately prior to the record date for determining the holders of LMG Series
A Common Stock entitled to receive the distribution.
Subject to the provisions described in the immediately following paragraph,
if (i) TCI redeems all the outstanding shares of LMG Series A Common Stock in
accordance with the terms thereof, or (ii) the holders of Liberty Media Group
Preferred Stock would be entitled to receive upon conversion thereof any other
Redeemable Capital Stock, and such Redeemable Capital Stock is redeemed,
exchanged or otherwise acquired in full, then, from and after either such
event (a "Redemption Event"), the holders of Liberty Media Group Preferred
Stock then outstanding shall be entitled to receive upon conversion of such
shares of Liberty Media Group Preferred Stock, in lieu of shares of LMG Series
A Common Stock or such Redeemable Capital Stock, as the case may be, the kind
and amount of securities, cash or other assets receivable upon such Redemption
Event by a holder of the number of shares of LMG Series A Common Stock or such
Redeemable Capital Stock, as the case may be, into which such shares of
Liberty Media Group Preferred Stock could have been converted immediately
prior to the effectiveness of such Redemption Event (assuming that such holder
failed to exercise any applicable right of election with respect thereto and
received per share of LMG Series A Common Stock or per share of such
Redeemable Capital Stock, as the case may be, the kind and amount of
securities, cash or other assets received per share by the holders of a
plurality of the non-electing shares thereof) and, thereafter, the holders of
the Liberty Media Group Preferred Stock shall have no other conversion rights
with respect to the LMG Series A Common Stock or such Redeemable Capital
Stock, as the case may be.
Notwithstanding the foregoing, the provisions described in the immediately
preceding paragraph shall not apply, and the holders of any shares of Liberty
Media Group Preferred Stock that are not exchanged as described in the second
sentence of this paragraph shall not have any conversion rights with respect
to the LMG Series A Common Stock or such Redeemable Capital Stock, as the case
may be, after the Redemption Event relating thereto, if (i) the redemption
price for the shares of LMG Series A Common Stock or such Redeemable Capital
Stock, as the case may be, is paid in whole or in part in securities
("Redemption Securities") of an issuer other than TCI (the "Other Issuer") and
(ii) in connection with such Redemption Event, the "Mirror Preferred Stock
Condition" is met, as such term is defined in the Certificate of Designation.
Generally, the Mirror Preferred Stock Condition shall be satisfied if TCI
makes appropriate provisions so that holders of Liberty Media Group Preferred
Stock shall have the right, exercisable on the effective date of the
Redemption Event, to exchange their shares of Liberty Media Group Preferred
Stock for (A) if the Liberty Media Group Preferred Stock is not then
convertible into any security, cash or assets other than the stock that is the
subject of the Redemption Event (i.e., LMG Series A Common Stock or such
Redeemable Capital Stock, as the case may be), convertible preferred stock of
the Other Issuer having a liquidation preference equal to the liquidation
preference of the Liberty Group Preferred Stock to be so exchanged, as in
effect on the effective date of the Redemption Event, or (B) if the Liberty
Media Group Preferred Stock is then convertible into any security, cash or
assets in addition to the stock that is the subject of the Redemption Event
(any such additional securities, cash or assets, collectively, the "Additional
Conversion Property"), convertible preferred stock of TCI and convertible
preferred stock of the Other Issuer having an aggregate liquidation preference
equal to the liquidation preference of the Liberty Group Preferred Stock to be
so exchanged, as in effect on the effective date of the Redemption Event;
provided, however, that in either case, the convertible preferred stock into
which shares of Liberty Media Group Preferred Stock may be exchanged shall
otherwise have terms, conditions, designations, dividend rights, voting
powers, rights on liquidation and other preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions applicable to such convertible preferred stock
that are identical, or as nearly so as is practicable in the good faith
judgment of the Board of Directors of TCI, to those of the Liberty Media Group
Preferred Stock for which such convertible preferred stock is to be exchanged,
except that applicable time periods under the Liberty Media Group Preferred
Stock will be tacked to corresponding time periods under such convertible
preferred stock, and except that (x) the convertible preferred stock of the
Other Issuer will be convertible into the kind and amount of Redemption
Securities, cash and other assets that the holders of shares of Liberty Media
Group Preferred Stock in respect of which such convertible preferred stock is
issued would have received in the Redemption Event had such shares of Liberty
Media Group Preferred Stock been converted in full prior to the Redemption
Event, and (y) any convertible preferred stock of TCI will be
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convertible into the Additional Conversion Property, and will not be
convertible into, and the holders thereof will have no conversion rights
thereunder with respect to, the LMG Series A Common Stock or Redeemable
Capital Stock, as the case may be, subject to the Redemption Event. The Mirror
Preferred Stock Condition shall be deemed to have been satisfied in connection
with any Redemption Event only if the Board of Directors of TCI determines (i)
that receipt of such convertible preferred stock of TCI and/or the Other
Issuer in exchange for Liberty Media Group Preferred Stock in connection with
such Redemption Event would not result in the recognition of gain or loss by
the holders of such Liberty Media Group Preferred Stock for United States
federal income tax purposes; (ii) that an adjustment made in the Conversion
Rate of the Liberty Media Group Preferred Stock with respect to such
Redemption Event, as described in the immediately preceding paragraph, would
result in the recognition of gain or loss by the holders of Liberty Media
Group Preferred Stock for United States federal income tax purposes; or (iii)
that receipt of Redemption Securities in redemption of the LMG Series A Common
Stock or Redeemable Capital Stock to be redeemed in such Redemption Event
would result in the recognition of gain or loss by the holders of such LMG
Series A Common Stock or Redeemable Capital Stock, as the case may be.
No adjustment in the Conversion Rate need be made unless the adjustment
would require an increase or decrease of at least 1% in the Conversion Rate;
but any such adjustment which is not made shall be carried forward and taken
into account in any subsequent adjustment. No adjustment to the Conversion
Rate need be made if the holders of Liberty Media Group Preferred Stock may
participate in the transaction or in certain other cases.
For so long as any dividends are in arrears on the Liberty Media Group
Preferred Stock or any class or series of TCI Preferred Stock ranking on a
parity with the Liberty Media Group Preferred Stock which is entitled to
payment of cumulative dividends prior to the redemption, exchange, purchase,
or other acquisition of the Liberty Media Group Preferred Stock, and until all
dividends accrued up to the immediately preceding dividend payment date on the
Liberty Media Group Preferred Stock and such parity stock have been paid or
declared and set apart so as to be available for payment in full thereof and
for no other purpose, neither TCI nor any subsidiary thereof may redeem,
exchange, purchase, or otherwise acquire any shares of Liberty Media Group
Preferred Stock, any parity stock or any class or series of its capital stock
ranking junior to the Liberty Media Group Preferred Stock, or set aside any
money or assets for such purpose, unless all of the then outstanding shares of
Liberty Media Group Preferred Stock and such parity stock and any other parity
stock that by its terms is required to be redeemed under such circumstances
are redeemed. For so long as any dividends are in arrears on the Liberty Media
Group Preferred Stock and until all dividends accrued up the immediately
preceding dividend payment date on the Liberty Media Group Preferred Stock
have been paid or declared and set apart so as to be available for payment in
full thereof and for no other purpose, TCI may not declare or pay any dividend
on or make any distribution with respect to any junior stock or parity stock
or set aside any money or assets for any such purpose, except for dividends
declared and paid on parity stock contemporaneously and on a pro rata basis
with dividends declared and paid on the Liberty Media Group Preferred Stock.
If TCI fails to redeem shares of Liberty Media Group Preferred Stock on a date
fixed for redemption, and until such shares are redeemed in full, TCI may not
redeem any junior stock or, except for contemporaneous pro rata redemptions,
any parity stock, declare or pay any dividend on or make any distribution with
respect to any junior stock or, except as provided above, parity stock, or set
aside money or assets for such purpose and neither TCI nor any subsidiary
thereof may purchase or otherwise acquire any Liberty Media Group Preferred
Stock, parity stock or junior stock or set aside any money or assets for any
such purpose. The failure of TCI to pay any dividends on any class or series
of parity stock or to redeem on any date fixed for redemption any shares of
Liberty Media Group Preferred Stock will not prevent (i) the payment of
dividends on junior stock solely in shares of junior stock or the redemption,
purchase or other acquisition of junior stock solely in exchange for (together
with a cash adjustment for fractional shares, if any), or (but only in the
case of a failure to pay dividends on any parity stock) through the
application of the proceeds from the sale of, shares of junior stock; (ii) the
payment of dividends on any parity stock solely in shares of parity stock
and/or junior stock or the redemption, exchange, purchase, or other
acquisition of Liberty Media Group Preferred Stock or parity stock solely in
exchange for (together with a cash adjustment for fractional shares, if any),
or (but only in the case of a failure to pay dividends on any parity stock)
through the application
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of the proceeds from the sale of, parity stock and/or junior stock; or (iii)
the purchase or acquisition of shares of Liberty Media Group Preferred Stock
pursuant to a purchase or exchange offer made to all holders of outstanding
shares of Liberty Media Group Preferred Stock, provided that the terms of the
purchase or exchange offer shall be identical for all shares of Liberty Media
Group Preferred Stock and all accrued dividends on such shares shall have been
paid or shall have been declared and irrevocably set apart in trust for the
benefit of the holders of shares of Liberty Media Group Preferred Stock and
for no other purpose.
The Liberty Media Group Preferred Stock has no voting rights, except (i) as
required by the DGCL, and (ii) that the holders of Liberty Media Group
Preferred Stock have the right to vote with the TCI Group Common Stock, the
Liberty Media Group Common Stock, the TCI Class B Preferred Stock and any
other class or series of TCI Preferred Stock entitled to vote in any general
election of directors, on the basis of one vote per share, in any general
election of directors of TCI. The number of authorized shares of Liberty Media
Group Preferred Stock may be increased or decreased (but not below the number
of shares of Liberty Media Group Preferred Stock then outstanding) by the
affirmative vote of the holders of at least 66 2/3% of the then outstanding
Voting Securities (as defined in the TCI Charter) voting together as a single
class.
OTHER MATTERS
The DGCL, the TCI Charter and TCI's Bylaws contain provisions which may
serve to discourage or make more difficult a change in control of TCI without
the support of the TCI Board of Directors or without meeting various other
conditions. The principal provisions of the DGCL and the aforementioned
corporate governance documents are outlined below.
DGCL Section 203, in general, prohibits a "business combination" between a
corporation and an "interested stockholder" within three years of the date
such stockholder became an "interested stockholder," unless (i) prior to such
date the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, exclusive of shares owned
by directors who are also officers and by certain employee stock plans or
(iii) on or after such date, the business combination is approved by the board
of directors and authorized by the affirmative vote at a stockholders' meeting
of at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. The term "business combination" is defined to include,
among other transactions between the interested stockholder and the
corporation or any direct or indirect majority-owned subsidiary thereof, a
merger or consolidation; a sale, pledge, transfer or other disposition
(including as part of a dissolution) of assets having an aggregate market
value equal to 10% or more of either the aggregate market value of all assets
of the corporation on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation; certain transactions that would
increase the interested stockholder's proportionate share ownership of the
stock of any class or series of the corporation or such subsidiary; and any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation or any such subsidiary. In general, and subject to certain
exceptions, an "interested stockholder" is any person who is the owner of 15%
or more of the outstanding voting stock (or, in the case of a corporation with
classes of voting stock with disparate voting power, 15% or more of the voting
power of the outstanding voting stock) of the corporation, and the affiliates
and associates of such person. The term "owner" is broadly defined to include
any person that individually or with or through his or its affiliates or
associates, among other things, beneficially owns such stock, or has the right
to acquire such stock (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement or understanding or upon
the exercise of warrants or options or otherwise or has the right to vote such
stock pursuant to any agreement or understanding, or has an agreement or
understanding with the beneficial owner of such stock for the purpose of
acquiring, holding, voting or disposing of such stock. The restrictions of
DGCL Section 203 do not apply to corporations that have elected, in the manner
provided therein, not to be subject to such section or, with certain
exceptions, which do not have a class of voting stock that is listed on a
national securities exchange or authorized for quotation on an interdealer
quotation system of a registered national securities association or held of
record
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by more than 2,000 stockholders. The TCI Charter does not contain any
provision "opting out" of the application of DGCL Section 203 and TCI has not
taken any of the actions necessary for it to "opt out" of such provision. As a
result, the provisions of Section 203 will remain applicable to transactions
between TCI and any of its "interested stockholders."
The TCI Charter also contains certain provisions which could make a change
in control of TCI more difficult. For example, the TCI Charter requires,
subject to the rights, if any, of any class or series of TCI Preferred Stock,
the affirmative vote of 66 2/3% of the total voting power of the outstanding
shares of Voting Securities, voting together as a single class, to approve (i)
a merger or consolidation of TCI with, or into, another corporation, other
than a merger or consolidation which does not require the consent of
stockholders under the DGCL or a merger or consolidation which has been
approved by 75% of the members of the TCI Board of Directors (in which case,
in accordance with the DGCL, the affirmative vote of a majority of the total
voting power of the outstanding Voting Securities would, with certain
exceptions, be required for approval), (ii) the sale, lease or exchange of all
or substantially all of the property and assets of TCI or (iii) the
dissolution of TCI. "Voting Securities" is currently defined as the TCI Group
Common Stock, the Liberty Media Group Common Stock and any class or series of
TCI Preferred Stock entitled to vote generally with the holders of TCI Common
Stock on matters submitted to stockholders for a vote. The TCI Charter also
provides for a TCI Board of Directors of not less than three members, divided
into three classes of approximately equal size, with each class to be elected
for a three-year term at each annual meeting of stockholders. The exact number
of directors, currently nine, is fixed by the TCI Board of Directors. The
holders of TCI Group Common Stock, Liberty Media Group Common Stock, Class B
Preferred Stock and Series C Preferred Stock, voting together as a single
class, vote in elections for directors. (TCI's Series F Preferred Stock has
voting rights, but outstanding shares are not entitled to vote because they
are held by subsidiaries of TCI.) Stockholders of TCI do not have cumulative
voting rights.
The TCI Charter authorizes the issuance of 50,000,000 shares of Series
Preferred Stock, of which 48,020,000 shares remain available for designation
before giving effect to the TCI/LMG Preferred Stock. Under the TCI Charter,
the TCI Board of Directors is authorized, without further action by the
stockholders of TCI, to establish the preferences, limitations and relative
rights of the Series Preferred Stock. In addition, 1,900,000,000 shares of the
TCI Group Common Stock and 825,000,000 shares of Liberty Media Group Common
Stock are currently authorized by the TCI Charter, of which 1,243,621,801 and
660,906,868, respectively, remain available for issuance. The issue and sale
of shares of TCI Group Common Stock, Liberty Media Group Common Stock and/or
Series Preferred Stock could occur in connection with an attempt to acquire
control of TCI, and the terms of such shares of Series Preferred Stock could
be designed in part to impede the acquisition of such control.
The TCI Charter requires the affirmative vote of 66 2/3% of the total voting
power of the outstanding shares of Voting Securities, voting together as a
single class, to approve any amendment, alteration or repeal of any provision
of the TCI Charter or the addition or insertion of other provisions therein.
The TCI Charter and TCI's Bylaws provide that a special meeting of
stockholders will be held at any time, subject to the rights of the holders of
any class or series of TCI Preferred Stock, upon the call of the Secretary of
TCI upon (i) the written request of the holders of not less than 66 2/3% of
the total voting power of the outstanding shares of Voting Securities or (ii)
at the request of not less than 75% of the members of the TCI Board of
Directors. Subject to the rights of any class or series of TCI Preferred
Stock, TCI's Bylaws require that written notice of the intent to make a
nomination at a meeting of stockholders must be received by the Secretary of
TCI, at TCI's principal executive offices, not later than (a) with respect to
an election of directors to be held at an annual meeting of stockholders, 90
days in advance of such meeting, and (b) with respect to an election of
directors to be held at a special meeting of stockholders, the close of
business on the seventh day following the day on which notice of such meeting
is first given to stockholders. The notice must contain: (1) the name and
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (2) a representation that the stockholder
is a holder of record of TCI's Voting Securities entitled to vote at the
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (3) a description of all
arrangements or understandings between the stockholder and each nominee
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and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder; (4)
such other information regarding each nominee proposed by such stockholder as
would have been required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had each proposed
nominee been nominated, or intended to be nominated, by the TCI Board of
Directors; and (5) the consent of each nominee to serve as a director of TCI
if so elected. Any actions to remove directors is required to be for "cause"
(as defined in the TCI Charter) and be approved by the holders of 66 2/3% of
the total voting power of the outstanding shares entitled to vote in the
election of directors.
COMPARISON OF STOCKHOLDERS' RIGHTS
UVSG's Certificate of Incorporation will be amended upon the filing of the
Certificate of Merger and pursuant to the Merger Agreement, immediately after
the Effective Time, the Board of Directors of the Surviving Corporation will
amend the Bylaws of the Surviving Corporation. Stockholders who elect to
receive Merger Consideration in the Merger will receive shares of TCI Group
Preferred Stock and Liberty Media Group Preferred Stock which are convertible
into shares of TCI Group Series A Common Stock and LMG Series A Common Stock,
respectively. See "DESCRIPTION OF TCI CAPITAL STOCK." The rights of the
holders of UVSG Common Stock are different under the current Certificate of
Incorporation and Bylaws of UVSG than under such documents as they are
proposed to be amended and the rights of holders of TCI Group Preferred Stock,
Liberty Media Group Preferred Stock, TCI Group Series A Common Stock and LMG
Series A Common Stock, as TCI stockholders, are different from the rights of
holders of UVSG Common Stock as UVSG stockholders. Below is a comparison of
certain stockholders' rights with respect to UVSG Common Stock before and
after the proposed amendments to the Certificate of Incorporation and Bylaws
and a comparison of such stockholders' rights as holders of UVSG Common Stock
as compared to holders of TCI Group Preferred Stock, LMG Preferred Stock, TCI
Group Series A Common Stock and LMG Series A Common Stock. Both UVSG and TCI
are Delaware corporations and as such are subject to the same governing law.
The following comparison of stockholder rights does not purport to be
complete and is qualified in its entirety by reference to the complete text of
UVSG's current Certificate of Incorporation and Bylaws, the Restated
Certificate, the UVSG Bylaws as they are to be amended after the Merger (the
"Amended Bylaws"), the TCI Charter and TCI's Bylaws, all of which have been
filed as exhibits to or are incorporated by reference in the Registration
Statement of which this Proxy Statement/Prospectus is a part. A copy of the
Restated Certificate is included as Appendix IV to this Proxy
Statement/Prospectus.
AUTHORIZED CAPITAL STOCK
UVSG. UVSG's authorized capitalization currently consists of a total of
30,000,000 shares of UVSG Class A Common Stock, 15,000,000 shares of UVSG
Class B Common Stock and 2,000,000 shares of preferred stock. The Restated
Certificate increases the number of authorized shares of UVSG Class A Common
Stock to 60,000,000 shares, the number of authorized shares of UVSG Class B
Common Stock to 30,000,000 and leaves the number of shares of authorized
preferred stock unchanged. The rights of holders of UVSG Class A Common Stock
and UVSG Class B Common Stock under the current Certificate of Incorporation
are identical in all respects except for voting and conversion rights. Under
the Restated Certificate, the rights of holders of UVSG Class A Common Stock
and UVSG Class B Common Stock are identical in all respects except for voting
and conversion rights, with respect to dividends and distributions payable in
securities of UVSG or another person and with respect to the type of
consideration receivable in a merger or consolidation. No shares of the
authorized preferred stock of UVSG are currently outstanding.
TCI. The TCI Charter provides that TCI is authorized to issue 2,777,375,096
shares of capital stock, including (i) 2,725,000,000 shares of TCI Common
Stock of which 1,750,000,000 shares are designated TCI Group Series A Common
Stock, 150,000,000 shares are designated TCI Group Series B Common Stock,
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750,000,000 shares are designated LMG Series A Common Stock and 75,000,000
shares are designated LMG Series B Common Stock, and (ii) 52,375,096 shares of
TCI Preferred Stock. See "DESCRIPTION OF TCI CAPITAL STOCK--General."
VOTING RIGHTS
UVSG. Under the Restated Certificate, UVSG Class A Common Stock will
continue to have one vote per share and UVSG Class B Common Stock will
continue to have 10 votes per share. The Restated Certificate provides that
except where otherwise required by law or with respect to any provisions of
any series of UVSG's preferred stock, the holders of UVSG Class A Common
Stock, Class B Common Stock and preferred stock entitled to vote thereon shall
vote together as one class with respect to the election of directors and other
matters, including increasing or decreasing the number of authorized shares of
any class or series of stock, which provisions are essentially unchanged from
UVSG's current Certificate of Incorporation.
TCI. The holders of shares of TCI Group Preferred Stock and Liberty Media
Group Preferred Stock will have voting rights with respect to the election of
directors of TCI and will have no other voting rights except as may be
required by Delaware law. Each share of TCI Group Preferred Stock and Liberty
Media Group Preferred Stock will be entitled to one vote for such purpose.
Holders of TCI Group Series A Common Stock are entitled to one vote for each
share of such stock held, holders of TCI Group Series B Common Stock are
entitled to ten votes for each share of such stock held, holders of LMG Series
A Common Stock are entitled to one vote for each share of such stock held and
holders of LMG Series B Common Stock are entitled to ten votes for each share
of such stock held, on all matters presented to stockholders. Except as may
otherwise be required by the laws of the State of Delaware or, with respect to
any class of TCI Preferred Stock or any series of such a class, in the TCI
Charter (including any resolution or resolutions providing for the
establishment of such class or series pursuant to authority vested in the TCI
Board of Directors by the TCI Charter), the holders of TCI Group Common Stock
and the holders of Liberty Media Group Common Stock and the holders of each
class or series of TCI Preferred Stock, if any, entitled to vote thereon will
vote as one class for all purposes. See "DESCRIPTION OF TCI CAPITAL STOCK--TCI
Preferred Stock--Series G Redeemable Convertible TCI Group Preferred Stock"
and "--Series H Redeemable Convertible Liberty Media Group Preferred Stock"
and "DESCRIPTION OF TCI CAPITAL STOCK--TCI Group Common Stock and Liberty
Media Group Common Stock--Voting Rights."
CONVERSION RIGHTS
UVSG. The Restated Certificate will continue to provide that shares of UVSG
Class B Common Stock are convertible into UVSG Class A Common Stock on a share
for share basis and that shares of UVSG Class A Common Stock cannot be
converted into UVSG Class B Common Stock.
TCI. Each share of TCI Group Preferred Stock will be convertible at the
option of the holder at any time prior to the close of business on the last
business day prior to redemption into 1.05 shares of TCI Group Series A Common
Stock and each share of Liberty Media Group Preferred Stock will be
convertible at any time prior to the close of business on the last business
day prior to redemption into .2625 of one share of LMG Series A Common Stock.
See "DESCRIPTION OF TCI CAPITAL STOCK--TCI Preferred Stock--Series G
Redeemable Convertible TCI Group Preferred Stock and--Series H Redeemable
Convertible Liberty Media Group Preferred Stock." Shares of TCI Group Series A
Common Stock are not convertible into shares of TCI Group Series B Common
Stock, and shares of LMG Series A Common Stock are not convertible into shares
of LMG Series B Common Stock. Each share of TCI Group Series B Common Stock is
convertible, at the option of the holder thereof, into one share of TCI Group
Series A Common Stock, and each share of LMG Series B Common Stock is
convertible, at the option of the holder thereof, into one share of LMG Series
A Common Stock. The TCI Board of Directors may at any time declare that all of
the outstanding shares of LMG Series A Common Stock be converted into TCI
Group Series A Common Stock. See "DESCRIPTION OF TCI CAPITAL STOCK--TCI Group
Common Stock and Liberty Media Group Common Stock--Conversion and Redemption."
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DIVIDENDS AND SHARE DISTRIBUTIONS
UVSG. UVSG's current Certificate of Incorporation provides that the holders
of UVSG Class A Common Stock and UVSG Class B Common Stock have the same
rights to dividends and share distributions, but that dividends or share
distributions in the form of either UVSG Class A Common Stock or UVSG Class B
Common Stock may only be paid to holders of the same class of common stock.
The Restated Certificate, however, allows UVSG to pay dividends or make share
distributions to either class of common stock in the form of UVSG Class A
Common Stock, UVSG Class B Common Stock, other securities of UVSG or
securities of any other entity. The Restated Certificate also provides that
the holders of UVSG Class A Common Stock and UVSG Class B Common Stock will be
entitled to receive dividends or share distributions on an equal per share
basis, with certain exceptions, which are summarized below.
In the event that dividends or share distributions consist of any class or
series of securities of UVSG or securities of any other corporation,
partnership, limited liability company, trust or other legal entity other than
UVSG Class A Common Stock or UVSG Class B Common Stock (and other than
securities of UVSG that are convertible into, exercisable for or evidence the
right to purchase any shares of UVSG Class A Common Stock or UVSG Class B
Common Stock), the Restated Certificate allows holders of UVSG Class A Common
Stock and UVSG Class B Common Stock to receive such securities either (i) on
the basis of a distribution of identical securities, on an equal per share
basis, or (ii) on the basis of a distribution of different series or classes
to the holders of the UVSG Class A Common Stock than to the holders of the
UVSG Class B Common Stock; provided, however, such different series or classes
must not differ in any respect other than their relative voting rights and
related differences in designation, conversion and share distribution
provisions with the holders of UVSG Class B Common Stock receiving the series
or class with the higher relative voting rights. For distributions under
clause (ii), such voting rights may differ to a greater or lesser extent than
the corresponding differences in voting rights and related differences in
designation, conversion and share distribution provisions between the UVSG
Class A Common Stock and the UVSG Class B Common Stock, except in the case of
a dividend or share distribution of securities of a subsidiary of UVSG, in
which case such rights shall not differ to a greater extent than the
corresponding differences in voting rights, designation, conversion and share
distribution provisions between the UVSG Class A Common Stock and the UVSG
Class B Common Stock.
TCI. Except in the case of dividends paid as share distributions and in
certain other circumstances, any dividends paid on the TCI Group Series A
Common Stock or the TCI Group Series B Common Stock will be paid only on both
series, in equal amounts per share, and any dividends paid on the LMG Series A
Common Stock or the LMG Series B Common Stock will be paid only on both
series, in equal amounts per share. See "DESCRIPTION OF TCI CAPITAL STOCK--TCI
Group Common Stock and Liberty Media Group Common Stock--Dividends" "--Share
Distributions" and "--Conversion and Redemption--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock."
BOARD OF DIRECTORS
UVSG. The Restated Certificate provides for a UVSG Board of Directors
consisting of not less than three members to be elected annually. The current
UVSG Certificate of Incorporation provides for a staggered Board of Directors,
the members of which are elected for three-year terms.
TCI. The TCI Charter provides for a TCI Board of Directors of not less than
three members, divided into three classes of approximately equal size, with
each class to be elected for a three-year term at each annual meeting of
stockholders. The exact number of directors, currently nine, is fixed by the
TCI Board of Directors. See "DESCRIPTION OF TCI CAPITAL STOCK--Other Matters."
ELECTION OF DIRECTORS
UVSG. Directors may be elected under the Amended Bylaws by a plurality of
the combined voting power of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of
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directors. Under the current UVSG Certificate of Incorporation and Bylaws,
election of directors requires the vote of a majority of the voting power of
all shares entitled to vote on the election of directors. Stockholders of UVSG
do not have cumulative voting rights.
TCI. The holders of TCI Group Common Stock, Liberty Media Group Common
Stock, Class B Preferred Stock, Series C Preferred Stock, TCI Group Preferred
Stock and Liberty Media Group Preferred Stock, voting together as a single
class, vote in elections for directors. (TCI Series F Preferred Stock has
voting rights, but outstanding shares are not entitled to vote because they
are held by subsidiaries of TCI.) Stockholders of TCI do not have cumulative
voting rights. Directors may be elected under TCI's Bylaws by a plurality of
the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors.
REMOVAL OF DIRECTORS
UVSG. The Restated Certificate provides that subject to the rights of the
holders of any one or more classes or series of stock issued by UVSG voting
separately by class or series to elect directors, directors may be removed
with or without cause upon the affirmative vote of the holders of at least 66
2/3% of the total voting power of UVSG's outstanding voting stock. Under the
current UVSG Certificate of Incorporation, the affirmative vote of at least
80% of the total voting power of UVSG's outstanding voting stock is required
to remove directors; and such removal may only be for cause.
TCI. TCI directors only may be removed for "cause" (as defined in the TCI
Charter) upon the affirmative vote of 66 2/3% of the total voting power of the
outstanding shares entitled to vote in an election of directors. See
"DESCRIPTION OF TCI CAPITAL STOCK--Other Matters."
SPECIAL MEETINGS OF STOCKHOLDERS
UVSG. Under the current UVSG Certificate of Incorporation and Bylaws,
special meetings of stockholders may be called only by the chairman of the
board or by the Board of Directors pursuant to the affirmative vote of a
majority of the directors then in office. The Restated Certificate and the
Amended Bylaws provide that special meetings of stockholders may be called by
the Secretary of UVSG (i) upon the written request of 66 2/3% of the total
voting power of the outstanding capital stock of UVSG entitled to vote at such
special meeting or (ii) at the request of 66 2/3% of the members of the Board
of Directors then in office.
TCI. The TCI Charter and TCI's Bylaws provide that a special meeting of
stockholders will be held at any time, subject to the rights of the holders of
any class or series of TCI Preferred Stock, upon the call of the Secretary of
TCI upon (i) the written request of the holders of not less than 66 2/3% of
the total voting power of the outstanding shares of Voting Securities or (ii)
at the request of not less than 75% of the members of the TCI Board of
Directors. See "DESCRIPTION OF TCI CAPITAL STOCK--Other Matters."
MERGER, CONSOLIDATION, SALE OF ASSETS AND DISSOLUTION
UVSG. Under Delaware law, a merger, consolidation, sale of substantially all
the assets or dissolution of UVSG may be authorized by the affirmative vote of
a majority of the voting power of the outstanding stock entitled to vote
thereon (whether or not present in person or represented by proxy at the
meeting). Neither the current Certificate of Incorporation nor the Restated
Certificate requires any greater percentage vote to approve such transactions.
Under UVSG's current Certificate of Incorporation, the holders of UVSG Class A
Common Stock and UVSG Class B Common Stock are entitled to receive the same
per share consideration in the event of a merger or consolidation. The
Restated Certificate provides that the holders of UVSG Class A Common Stock
and UVSG Class B Common Stock are entitled to receive, in the event of a
merger or consolidation, consideration of substantially equivalent value as
determined in good faith by the UVSG Board of Directors, taking into account
all relevant factors, including, without limitation, the anticipated tax
treatment of such consideration to the holders of Class A Common Stock and
Class B Common Stock. To the extent that the
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holders of the Class A Common Stock and the holders of the Class B Common
Stock are entitled to receive in any merger or consolidation (pursuant to any
election or otherwise), securities that do not differ in any respect other
than their relative voting rights and related differences in designation,
conversion and share distribution provisions, which differences would be
permitted for securities distributed in a share distribution, such relative
voting rights and related differences in designation, conversion and share
distribution provisions are to be disregarded in determining the per share
value of the consideration to be received by the holders of the Class A Common
Stock and the holders of the Class B Common Stock. See "--Dividends and Share
Distributions."
TCI. The TCI Charter requires, subject to the rights, if any, of any class
or series of TCI Preferred Stock, the affirmative vote of 66 2/3% of the total
voting power of the outstanding shares of Voting Securities, voting together
as a single class, to approve (i) a merger or consolidation of TCI with, or
into, another corporation, other than a merger or consolidation which does not
require the consent of stockholders under the DGCL or a merger or
consolidation which has been approved by at least 75% of the members of the
Board of Directors (in which case, in accordance with the DGCL, the
affirmative vote of a majority of the total voting power of the outstanding
Voting Securities would, with certain exceptions, be required for approval),
(ii) the sale, lease or exchange of all or substantially all of the property
and assets of TCI or (iii) the dissolution of TCI.
CHANGE OF CONTROL
UVSG. UVSG's current Certificate of Incorporation and Bylaws contain
provisions such as a staggered Board of Directors and super-majority voting
requirements to amend certain provisions of the Certificate of Incorporation
and the Bylaws that may have an anti-takeover effect. Those provisions have
largely been eliminated in the Restated Certificate and Amended Bylaws.
TCI. The TCI Charter contains certain provisions which could make a change
of control of TCI difficult. See "DESCRIPTION OF TCI CAPITAL STOCK--Other
Matters."
AMENDMENTS TO CERTIFICATE OF INCORPORATION
UVSG. The current UVSG Certificate of Incorporation provides that the vote
of 80% of the voting power of the outstanding voting stock is required to
amend, repeal or adopt provisions to alter the provisions of the Certificate
of Incorporation governing the number, term, rights and obligations of the
Board of Directors, the ability of the stockholders to act without a meeting,
special meetings of the stockholders, amendment of bylaws, use of ballots in
an election of directors and the provision regarding the amendment of certain
provisions in the Certificate of Incorporation. The Restated Certificate does
not contain such super-majority voting requirements to adopt, amend or repeal
the provisions of the Restated Certificate.
TCI. The TCI Charter requires the affirmative vote of 66 2/3% of the total
voting power of the outstanding shares of Voting Securities, voting together
as a single class, to approve any amendment, alteration or repeal of any
provision of the TCI Charter or the addition or insertion of other provisions
therein. See "DESCRIPTION OF TCI CAPITAL STOCK--Other Matters."
AMENDMENTS TO BYLAWS
UVSG. The current UVSG Certificate of Incorporation requires the affirmative
vote of a majority of the directors then in office to adopt, amend or repeal
any provision of the Bylaws and allows stockholders to adopt, amend or repeal
any provision of the Bylaws by the affirmative vote of 80% of the votes of the
outstanding capital stock generally entitled to vote in the election of
directors. The Restated Certificate provides that the affirmative vote of not
less than 66 2/3% of UVSG's directors then in office is required to adopt,
amend or repeal any provision of UVSG's Bylaws.
TCI. Subject to the rights of the holders of any class or series of TCI
Preferred Stock, the affirmative vote of the holders of at least 66 2/3% of
the total voting power of the outstanding shares of Voting Securities, voting
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together as a single class, to approve the adoption, amendment or repeal of
any provision of the Bylaws of TCI; provided, however, that this voting
requirement shall not apply to, and no vote of the stockholders of TCI is
required to authorize the adoption, amendment or repeal of the Bylaws of TCI
by the TCI Board of Directors by action taken by the affirmative vote of not
less than 75% of the members of the Board then in office.
LEGAL MATTERS
The validity of the TCI Group Preferred Stock and the Liberty Media Group
Preferred Stock to be issued in connection with the Merger will be passed upon
by Baker & Botts, L.L.P., 885 Third Avenue, New York, New York, 10022. Mr.
Jerome Kern, a partner of Baker & Botts, L.L.P., is a director of TCI. Mr.
Kern holds options to purchase shares of TCI Group Series A Common Stock and
LMG Series A Common Stock.
EXPERTS
The consolidated financial statements of UVSG at December 31, 1994 and 1993,
and for each of the three years in the period ended December 31, 1994, that
appear in UVSG's Annual Report (Form 10-K) for the year ended December 31,
1994, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The financial statements of SSDS, Inc. at January 27, 1995 and January 28,
1994, and for each of the three years in the period ended January 27, 1995
that appear in UVSG's Current Report on Form 8-K dated July 20, 1995, have
been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1994, and the related
financial statement schedules, which appear in Tele-Communications, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1994, as amended,
have been incorporated by reference herein in reliance upon the reports, dated
March 27, 1995, of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The reports of KPMG Peat Marwick
LLP covering the December 31, 1994 consolidated financial statements refer to
the adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
The consolidated balance sheets of TeleWest Communication plc and
subsidiaries as of 31 December 1994 and 1993, and the related consolidated
statements of operations and cash flows for each of the years in the three-
year period ended 31 December 1994, which appear in the 31 December 1994
Annual Report on Form 10-K of Tele-Communications, Inc., as amended, have been
incorporated by reference herein in reliance upon the report of KPMG,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The combined balance sheets of Cablevision (A combination of certain cable
television assets of Cablevision S.A., Televisora Belgrano S.A., Construred
S.A., and Univent's S.A.) as of December 31, 1994 and 1993, and the related
combined statements of operations and deficit and cash flows for each of the
years in the three-year period ended December 31, 1994, which appear in the
Current Report on Form 8-K of Tele-Communications, Inc. dated April 20, 1995,
as amended, have been incorporated by reference herein in reliance
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upon the report of KPMG Finsterbusch Pickenhayn Sibille, independent certified
public accountants, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The consolidated balance sheets of QVC, Inc. and subsidiaries as of January
31, 1994 and 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-year
period ended January 31, 1994, which appear in the Current Report on Form 8-K
of Tele-Communications, Inc. dated February 3, 1995, as amended, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP covering the January 31,
1994 consolidated financial statements refers to a change in the method of
accounting for income taxes.
The financial statements of TeleCable Corporation as of December 31, 1993
and 1992, and for each of the two years in the period ended December 31, 1993,
incorporated herein by reference to the Current Report on Form 8-K of Tele-
Communications, Inc. dated August 26, 1994, have been so incorporated by
reference in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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APPENDIX I-A
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- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 10, 1995
AMONG
TELE-COMMUNICATIONS, INC., TCI MERGER SUB, INC.
AND
UNITED VIDEO SATELLITE GROUP, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND CONSTRUCTION................................. 1
1.1 Certain Definitions.............................................. 1
1.2 Additional Definitions........................................... 3
1.3 Terms Generally.................................................. 4
ARTICLE II THE MERGER AND RELATED MATTERS.............................. 5
2.1 The Merger....................................................... 5
2.2 Closing.......................................................... 5
2.3 Conversion of Securities......................................... 6
2.4 Election Procedure............................................... 7
2.5 Exchange of Shares............................................... 8
2.6 Treatment of Company Stock Options, Company SARs................. 9
2.7 Changes in TCI Class A Stock..................................... 10
ARTICLE III CERTAIN ACTIONS............................................ 10
3.1 Stockholder Meeting.............................................. 10
3.2 Proxy Statements and Other Commission Filings.................... 10
3.3 Identification of Affiliates..................................... 11
3.4 State Takeover Statutes.......................................... 12
3.5 Reasonable Efforts............................................... 12
3.6 Stock and Other Plans............................................ 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 13
4.1 Organization and Qualification................................... 13
4.2 Authorization and Validity of Agreement.......................... 13
4.3 Capitalization................................................... 14
4.4 Reports and Financial Statements................................. 15
4.5 No Approvals or Notices Required; No Conflict with Instruments... 16
4.6 Absence of Certain Changes or Events............................. 17
4.7 Registration Statement; Proxy Statement.......................... 17
4.8 Legal Proceedings................................................ 18
4.9 Licenses; Compliance with Regulatory Requirements................ 18
4.10 Brokers or Finders............................................... 19
4.11 Tax Matters...................................................... 19
4.12 Employee Matters................................................. 20
4.13 Fairness Opinion................................................. 23
4.14 Recommendation of the Company Board.............................. 23
4.15 Vote Required; Consents Under Employee Plans..................... 23
4.16 Adequacy of Properties; Intangible Property...................... 23
4.17 Full Disclosure.................................................. 24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF TCI........................ 24
5.1 Organization..................................................... 24
5.2 Authorization and Validity of Agreement.......................... 24
5.3 Capitalization of TCI............................................ 25
5.4 TCI Reports and Financial Statements............................. 25
5.5 No Approvals or Notices Required; No Conflict with Instruments... 26
5.6 Absence of Certain Changes or Events............................. 27
5.7 Registration Statement; Proxy Statement.......................... 27
5.8 Legal Proceedings................................................ 27
Licenses; Compliance with Regulatory Requirements; Intangible
5.9 Property......................................................... 28
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5.10 Brokers or Finders............................................... 28
5.11 Tax Matters...................................................... 28
5.12 Interim Operations of Merger Sub................................. 29
ARTICLE VI TRANSACTIONS PRIOR TO CLOSING .............................. 29
6.1 Access to Information Concerning Properties and Records.......... 29
6.2 Confidentiality.................................................. 29
6.3 Public Announcements............................................. 30
6.4 Conduct of the Company's Business Pending the Effective Time..... 30
6.5 No Solicitation.................................................. 32
6.6 Expenses......................................................... 32
6.7 Notification of Certain Matters.................................. 33
6.8 Defense of Litigation............................................ 33
6.9 Additional Financial Statements.................................. 33
6.10 Actions by Merger Sub............................................ 33
6.11 Certain Personnel Matters........................................ 34
ARTICLE VII CONDITIONS PRECEDENT....................................... 34
Conditions Precedent to the Obligations of TCI, Merger Sub and
7.1 the Company...................................................... 34
7.2 Conditions Precedent to the Obligations of Merger Sub and TCI.... 35
7.3 Conditions Precedent to the Obligations of the Company........... 37
ARTICLE VIII TERMINATION............................................... 38
8.1 Termination and Abandonment...................................... 38
8.2 Effect of Termination............................................ 39
8.3 No Employment.................................................... 39
ARTICLE IX MISCELLANEOUS............................................... 39
9.1 Survival of Certain Representations and Warranties............... 39
9.2 Indemnification.................................................. 39
9.3 Notices.......................................................... 40
9.4 Entire Agreement................................................. 41
9.5 Assignment; Binding Effect; Benefit.............................. 41
9.6 Amendment........................................................ 41
9.7 Extension; Waiver................................................ 41
9.8 Headings......................................................... 42
9.9 Counterparts..................................................... 42
9.10 Applicable Law................................................... 42
9.11 No Remedy in Certain Circumstances............................... 42
9.12 Certain Tax Positions............................................ 42
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of this
tenth day of July 1995, by and among Tele-Communications, Inc., a Delaware
corporation ("TCI"), TCI Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), and United Video Satellite Group, Inc., a Delaware corporation (the
"Company").
WHEREAS, the parties wish to provide for the terms and conditions upon which
a voting interest in the Company of not less than 80% will be acquired by TCI
by means of a merger of Merger Sub, a direct wholly owned subsidiary of TCI,
with and into the Company (the "Merger"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(E) of the Internal Revenue Code of 1986 (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
An "Affiliate" of any Person shall mean any other Person which, directly
or indirectly, controls or is controlled by or is under common control with
such Person (excluding any trustee under, or any committee with
responsibility for administering, any Company Plan). A Person shall be
deemed to "control," be "controlled by" or be "under common control with"
any other Person if such other Person possesses, directly or indirectly,
power (a) to vote 10 percent or more of the securities having ordinary
voting power for the election of directors or other similar management
personnel of such Person or (b) to direct or cause the direction of the
management or policies of such Person whether by contract or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including all
Exhibits and Schedules hereto.
"Closing" shall mean the consummation of the transactions contemplated by
this Agreement.
"Closing Date" shall mean the date on which the Closing occurs pursuant
to Section 2.2.
"Commission" shall mean the Securities and Exchange Commission.
"Company Class A Stock" shall mean the Class A Common Stock, par value
$.01 per share, of the Company.
"Company Class B Stock" shall mean the Class B Common Stock, par value
$.01 per share, of the Company.
"Company Stock" shall mean the Company Class A Stock and the Company
Class B Stock.
"Class A Share" shall mean a share of the Class A Common Stock, par value
$.01 per share, of the Surviving Corporation.
"Class B Share" shall mean a share of the Class B Common Stock, par value
$.01 per share, of the Surviving Corporation.
"Disclosure Schedule" shall mean the Schedules constituting a part of
this Agreement as contemplated by Article IV.
"Effective Time" shall mean the time when the Merger of Merger Sub with
and into the Company becomes effective under applicable law as provided in
Section 2.1(a).
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
rules and regulations thereunder.
"Flinn" shall mean Lawrence Flinn, Jr.
"GAAP" shall mean generally accepted accounting principles as accepted by
the accounting profession in the United States as in effect from time to
time.
"Hart-Scott Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and the rules and regulations thereunder.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation,
charge, claim, option, right to acquire, adverse interest, assignment,
deposit arrangement, encumbrance, restriction, lien (statutory or other),
or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any financing lease involving
substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Merger" shall have the meaning specified in the preamble hereto.
"Merger Consideration" shall mean the TCI Preferred Stock into which
shares of Company Stock are converted pursuant to Section 2.3(a)(ii) and
(v).
"Permitted Encumbrances" shall mean the following Liens with respect to
the properties and assets of the Company: (a) Liens for taxes, assessments
or other governmental charges or levies not at the time delinquent or
thereafter payable without penalty or being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on the Company's books; (b) Liens of
carriers, warehousemen, mechanics, materialmen and landlords incurred in
the ordinary course of business for sums not overdue or being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on the Company's books; (c)
Liens incurred in the ordinary course of business in connection with
workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; (d) purchase money security interests or Liens on
property acquired or held by the Company in the ordinary course of business
to secure the purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of such
property, provided that the security interests permitted under the clause
(d) shall not exceed $1,000,000 at any time outstanding; and (e) easements,
restrictions and other minor defects of title which are not, in the
aggregate, material and which do not, individually or in the aggregate,
materially and adversely affect the value of the property affected thereby.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or
joint venture or a government, agency, political subdivision, or
instrumentality thereof.
"Restriction", with respect to any capital stock or other security, shall
mean any voting or other trust or agreement, option, warrant, escrow
arrangement, proxy, buy-sell agreement, power of attorney or other
Contract, any law, rule, regulation, order, judgment or decree which,
conditionally or unconditionally, (i) grants to any Person the right to
purchase or otherwise acquire, or obligates any Person to sell or otherwise
dispose of or issue, or otherwise results or, whether upon the occurrence
of any event or with notice or lapse of time or both or otherwise, may
result in any person acquiring, (A) any of such capital stock or other
security; (B) any of the proceeds of, or any distributions paid or which
are or may become payable with respect to, any of such capital stock or
other security; or (C) any interest in such capital stock or other security
or any such proceeds or distributions; (ii) restricts or, whether upon the
occurrence of any event or with notice or lapse of time or both or
otherwise, may restrict the transfer or voting of, or the exercise of any
rights or the enjoyment of any benefits arising by reason of ownership of,
any such capital stock or other security or any such proceeds or
distributions; or (iii) creates or, whether upon the occurrence of any
event or with notice or lapse of time or both or otherwise, may create a
Lien or purported Lien affecting such capital stock or other security,
proceeds or distributions.
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"Securities Act" shall mean the Securities Act of 1933, and the rules and
regulations thereunder.
"Surviving Corporation" shall mean the Company as the Surviving
Corporation after the Merger as provided in Section 2.1(a).
"TCI Class A Stock" shall mean the Class A Common Stock, $1.00 par value
per share, of TCI.
1.2 ADDITIONAL DEFINITIONS. The following additional terms have the meaning
ascribed thereto in the Section indicated below next to such term:
<TABLE>
<CAPTION>
DEFINED TERM SECTION DEFINED IN
------------ ------------------
<S> <C>
Benefit Liabilities.................................... 4.12(c)
Certificate............................................ 2.5(a)
Certificate of Designations............................ 7.1(b)
Certificate of Merger.................................. 2.1(a)
Class A Preferred...................................... 5.3
Class B Preferred...................................... 5.3
Code................................................... Preamble
Communications Act..................................... 4.5(ii)
Company................................................ Preamble
Company Board.......................................... 3.1
Company Charter........................................ 3.1
Company Commission Filings............................. 4.4
Company Form 10-Q...................................... 4.4
Company Plans.......................................... 4.12(a)
Company SARs........................................... 4.3
Company Stock Options.................................. 4.3
Company Stock Plans.................................... 4.3
Consolidated Returns................................... 4.11
Contract Consent....................................... 4.5(iii)
Contract Notice........................................ 4.5(iii)
Contracts.............................................. 4.5(iv)
DGCL................................................... 2.1(a)
Election............................................... 2.4(a)
Election Date.......................................... 2.4(b)
Environmental and Health Laws.......................... 4.9
Equity Affiliate....................................... 4.1
ERISA.................................................. 4.12(a)
ERISA Affiliate........................................ 4.12(a)
Exchange Agent......................................... 2.4(b)
Fairness Opinion....................................... 4.13
FCC.................................................... 4.9
FCC Approvals.......................................... 4.5(ii)
FCC Licenses........................................... 4.9
Flinn Agreement........................................ 7.2(m)
Form of Election....................................... 2.4(b)
Furman Selz............................................ 4.10
Governmental Entity.................................... 4.5(v)
Governmental Filing.................................... 4.5(ii)
Government Consent..................................... 4.5(ii)
Indemnified Liabilities................................ 9.2(a)
Indemnified Parties.................................... 9.2(a)
Injunction............................................. 3.5
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM SECTION DEFINED IN
------------ ------------------
<S> <C>
IRS.................................................... 4.11
Licenses............................................... 4.9
Local Approvals........................................ 4.5(ii)
Merger................................................. Preamble
Merger Proposal........................................ 3.1
Merger Sub............................................. Preamble
Multiemployer Plan..................................... 4.12(g)
PBGC................................................... 4.12(g)
Permits................................................ 4.9
Preliminary Proxy Statement............................ 3.2(a)
Proprietary Information................................ 6.2
Proxy Statement........................................ 4.7
Record Date............................................ 2.4(b)
Registration Statement................................. 4.7
Representatives........................................ 6.2
Scheduled Subsidiaries................................. 4.1
Series C Preferred..................................... 5.3
Series D Preferred..................................... 5.3
Series E Preferred..................................... 5.3
Series F Preferred..................................... 5.3
Series Preferred Stock................................. 5.3
Special Meeting........................................ 3.1
Stockholder Agreement.................................. 7.3(j)
TCI.................................................... Preamble
TCI Charter............................................ 5.3
TCI Class B Stock...................................... 5.3
TCI Commission Filings................................. 5.4
TCI Consolidated Returns............................... 5.11
TCI Equity Affiliates.................................. 5.1
TCI Preferred Stock.................................... 2.3(a)(ii)
Violation.............................................. 4.5(iv)
Voting Debt............................................ 4.3
</TABLE>
1.3 TERMS GENERALLY. The definitions in Sections 1.1 and 1.2 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The words "herein", "hereof" and "hereunder" and words of similar import refer
to this Agreement (including the Exhibits and Schedules) in its entirety and
not to any part hereof unless the context shall otherwise require. All
references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Unless the context
shall otherwise require, any references to any agreement or other instrument
or statute or regulation are to it as amended and supplemented from time to
time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a business day, then such action or notice shall be
deferred until, or may be taken or given on, the next business day.
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<PAGE>
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 THE MERGER.
(a) Merger; Effective Time. At the Effective Time and subject to and upon
the terms and conditions of this Agreement, Merger Sub shall merge with and
into the Company in accordance with the provisions of the General Corporation
Law of the State of Delaware (the "DGCL"), the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation. The Effective Time shall occur upon the filing with the Delaware
Secretary of State of a certificate of merger (the "Certificate of Merger")
substantially in the form of Exhibit 2.1(a) and executed in accordance with
the applicable provisions of the DGCL, or at such later time as may be agreed
to by TCI and the Company and specified in the Certificate of Merger. Provided
that this Agreement has not been terminated pursuant to Article VIII, the
parties will cause the Certificate of Merger to be filed with the Delaware
Secretary of State as soon as practicable after the Closing.
(b) Effects of the Merger. The Merger shall have the effects set forth in
Sections 259, 260 and 261 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation. If, at any time after the Effective Time, the
Surviving Corporation considers or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties, or assets of either the Company or Merger Sub, or otherwise to
carry out the intent and purposes of this Agreement, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of each of the Company and Merger Sub, all
such deeds, bills of sale, assignments and assurances and to take and do, in
the name and on behalf of each of the Company and Merger Sub, all such other
actions and things as the Board of Directors of the Surviving Corporation may
determine to be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out the intent and purposes
of this Agreement.
(c) Certificate of Incorporation of Surviving Corporation. The Certificate
of Incorporation of the Company in effect immediately prior to the Effective
Time shall be amended by virtue of the Merger, so as to read in its entirety
in the form set forth in Exhibit 2.1(c), and as so amended shall, from and
after the Effective Time, be the Certificate of Incorporation of the Surviving
Corporation until thereafter further amended as provided by law.
(d) By-laws of the Surviving Corporation. Immediately after the Effective
Time, the Board of Directors of the Surviving Corporation shall amend the By-
laws of the Surviving Corporation so as to read in their entirety in the form
set forth in Exhibit 2.1(d), and as amended such By-laws shall be the By-laws
of the Surviving Corporation until thereafter further amended as provided by
law.
(e) Directors of Surviving Corporation. Immediately after the Effective
Time, all directors of the Surviving Corporation, other than Flinn, shall
resign and Flinn shall take all necessary action to fill the resulting
vacancies on the Board of Directors of the Surviving Corporation by electing
the Persons to the Board as determined in accordance with Section 7.2(l), and
all such directors will hold office until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and By-laws of the Surviving Corporation, or as otherwise
provided by applicable law.
2.2 CLOSING.
(a) Closing Date and Location. The Closing shall take place (i) at 10:00
a.m. (Denver time) at the executive offices of TCI in Denver, Colorado, on the
first business day following the date on which the last of the conditions set
forth in Article VII (other than the filing of the Certificate of Merger and
the Certificate of
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<PAGE>
Designations and other than any such conditions which by their terms are not
capable of being satisfied until the Closing Date or thereafter) is satisfied
or, when permissible, waived, or (ii) on such other date and at such other
time or place as is mutually agreed by the parties hereto.
(b) Obligations of the Company. At the Closing, the Company shall deliver,
or use all commercially reasonable efforts to cause to be delivered, to TCI
the following documents:
(i) evidence satisfactory to TCI that fifty percent (50%) of the number
of shares of Company Class B Stock outstanding on the date hereof has been
converted in accordance with the terms of the Company Class B Stock into an
equal number of shares of Company Class A Stock and that upon consummation
of the Merger TCI will own securities of the Surviving Corporation
representing not less than eighty percent (80%) of the total voting power
of the then outstanding securities of the Surviving Corporation;
(ii) a certificate of good standing for the Company from the State of
Delaware certified by the appropriate official of Delaware and dated as of
a date not more than one (1) business day prior to the Closing Date
certifying that the Company is duly qualified and in good standing as of
the date of such certificate;
(iii) the certificates of the executive officers of the Company pursuant
to Section 7.2(c);
(iv) the opinions of Holme Roberts & Owen, LLC, as counsel for the
Company, pursuant to Sections 7.1(g) and 7.2(e), and of Cole, Raywid &
Braverman, as special communications counsel to the Company, pursuant to
Section 7.2(e);
(v) the consents and approvals, if any, pursuant to Section 4.5;
(vi) resignation of directors of the Company other than Flinn, effective
immediately after the Effective Time, and evidence of the appointment,
effective immediately after the Effective Time, by Flinn, as the sole
remaining director of the Surviving Corporation, of TCI's designees for
directors of the Surviving Corporation pursuant to Section 7.2(l);
(vii) the written consent, effective immediately after the Effective
Time, of Flinn, as the sole remaining director of the Surviving
Corporation, to the amendment of the By-laws of the Surviving Corporation
to read in their entirety as set forth in Exhibit 2.1(d);
(viii) the executed Certificate of Merger substantially in the form of
Exhibit 2.1(a);
(ix) agreements pursuant to Section 3.3 executed by each "affiliate" of
the Company under Rule 145 of the Securities Act who receives TCI Preferred
Stock, as identified by the Company;
(x) the Stockholder Agreement pursuant to Section 7.2(l); and
(xi) such other documents or instruments of further assurance as may be
reasonably requested by TCI or Merger Sub.
(c) Obligations of TCI and Merger Sub. TCI and Merger Sub shall deliver to
the Company the following documents on the Closing Date:
(i) the certificate of the executive officers of TCI pursuant to Section
7.3(c);
(ii) the opinions of TCI's General Counsel and Baker & Botts, L.L.P., or
other counsel reasonably acceptable to the Company, as counsel for TCI and
Merger Sub pursuant to Section 7.3(d);
(iii) the consents and approvals, if any, pursuant to Section 5.5;
(iv) the Stockholder Agreement pursuant to Section 7.3(j); and
(v) the executed Certificate of Merger in the form of Exhibit 2.1(a).
2.3 CONVERSION OF SECURITIES.
(a) Conversion of Company Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of TCI, Merger Sub, the Company or
the holders of any of their securities:
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<PAGE>
(i) Each share of Company Stock that immediately prior to the Effective
Time is held by the Company as a treasury share or is then held by any
direct or indirect subsidiary of the Company shall be cancelled and retired
without payment of any consideration thereof and without any conversion
thereof into the Merger Consideration;
(ii) Each share of Company Class A Stock outstanding immediately prior to
the Effective Time (other than shares referred to in Section 2.3(a)(i)
above and other than shares held by TCI or any of its direct or indirect
wholly owned subsidiaries) that is subject to a valid Election to convert
such share into the Merger Consideration pursuant to Section 2.4 shall be
converted into and represent the right to receive, and shall be
exchangeable for, one validly issued, fully paid and non-assessable share
of the Redeemable Convertible Preferred Stock, Series G, par value $.01 per
share, of TCI (the "TCI Preferred Stock") having the terms set forth in
Exhibit 2.3(a);
(iii) Each share of Company Class A Stock outstanding immediately prior
to the Effective Time (other than shares referred to in Section 2.3(a)(i)
above and other than shares held by TCI or any of its direct or indirect
wholly owned subsidiaries) that is not subject to a valid Election to
convert such share into the Merger Consideration pursuant to Section 2.4
shall remain outstanding and continue as one Class A Share of the Surviving
Corporation and each certificate evidencing ownership of such shares of
Company Class A Stock shall continue to evidence ownership of the same
number of Class A Shares of the Surviving Corporation;
(iv) Each share of Company Class A Stock and Company Class B Stock
outstanding immediately prior to the Effective Time that is held by TCI or
any of its direct or indirect wholly owned subsidiaries shall remain
outstanding and continue as one Class A Share (in the case of Company Class
A Stock) and one Class B Share (in the case of Company Class B Stock) of
the Surviving Corporation and each certificate evidencing ownership of any
such shares of Company Stock shall continue to evidence ownership of the
same number and kind of shares of the Surviving Corporation; and
(v) Each share of Company Class B Stock outstanding immediately prior to
the Effective Time (other than shares referred to in Section 2.3(a)(i) or
(iv)) shall be converted into and represent the right to receive, and shall
be exchangeable for, one validly issued, fully paid and non-assessable
share of TCI Preferred Stock.
(b) Conversion of Merger Sub Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of TCI, Merger Sub, the Company or
the holders of any of their securities, the shares of capital stock of Merger
Sub outstanding immediately prior to the Effective Time shall be converted
into and represent the right to receive, and shall be exchangeable for, in the
aggregate, (i) that number of Class A Shares of the Surviving Corporation as
is equal to the number of shares of Company Class A Stock that was converted
into the Merger Consideration in accordance with Section 2.3(a)(ii), and (ii)
that number of Class B Shares of the Surviving Corporation as is equal to the
number of shares of Company Class B Stock that was converted into the Merger
Consideration in accordance with Section 2.3(a)(v).
(c) No Future Ownership Rights in Company Stock. All shares of Company Stock
that are converted into the right to receive the Merger Consideration shall,
after the Effective Time, no longer be outstanding and shall automatically be
cancelled and retired, and each holder of a certificate representing any such
shares shall cease to have any rights with respect to such Company Stock,
except the right to receive the Merger Consideration for such Company Stock
upon the surrender of such certificate in accordance with the provisions of
Section 2.5.
2.4 ELECTION PROCEDURE.
(a) Each holder of shares of Company Class A Stock (other than the Company,
any direct or indirect subsidiary of the Company, TCI, any direct or indirect
wholly owned subsidiary of TCI, or Flinn) shall have the right to submit a
request in accordance with the provisions of this Section 2.4 specifying (i)
the number of shares of Company Class A Stock owned by such holder and (ii)
the number of such shares (which shall not be more than fifty percent (50%) of
the number set forth in clause (i) that such holder desires to have converted
into the right to receive the Merger Consideration (an "Election").
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<PAGE>
(b) TCI shall enter into an agreement with one or more exchange agents
designated by it and reasonably acceptable to the Company (the "Exchange
Agent"), authorizing such Exchange Agent to receive Elections and to act as
Exchange Agent hereunder. TCI shall prepare a form pursuant to which holders
of Company Class A Stock (other than Flinn) may make Elections and a form
letter of transmittal (which shall state that delivery shall be effected, and
risk of loss and title to shares of Company Class A Stock shall pass, only
upon proper delivery of the certificates representing such shares to the
Exchange Agent) with instructions for use in effecting the surrender of shares
of Company Class A Stock (collectively, a "Form of Election"). The Form of
Election, together with the Proxy Statement, shall be mailed to stockholders
of record of the Company as of the record date for the Special Meeting (the
"Record Date"), which date shall be selected by the Company and shall be
satisfactory to TCI. TCI and the Company shall agree upon a date by which
Elections must be made in order to be effective (the "Election Date"), except
that the Election Date shall not be later than the third business day
immediately prior to the date of the Special Meeting. The Company shall use
its commercially reasonable efforts to make the Forms of Election (and the
Proxy Statement) available to all Persons who become stockholders of record of
the Company during the period between the Record Date and the Election Date.
(c) An Election shall be validly made only if the Exchange Agent receives at
its office designated in the Form of Election, no later than 5:00 P.M. (local
time in the city in which such office is located) on the Election Date, a Form
of Election properly completed and signed and accompanied by certificates for
the shares of Company Class A Stock to which such Form of Election relates (or
by an appropriate guarantee of delivery of such certificates as set forth in
such Form of Election from a member of any registered national securities
exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States, provided such
certificates are in fact delivered by the time set forth in such guarantee of
delivery), duly endorsed in blank or otherwise in a form acceptable for
transfer on the books of the Company, together with any other documents
required by the Form of Election.
(d) Any holder of shares of Company Class A Stock may at any time prior to
the Election Date revoke his Election by written notice received by the
Exchange Agent at its office designated in the Form of Election no later than
5:00 P.M. (local time in the city in which such office is located) on the
Election Date. At any time after the expiration of the period of 30 days
following the Election Date if the Merger shall not have been consummated
prior thereto, any stockholder of the Company who shall have deposited
certificates for Company Class A Stock (or delivered a guaranty of delivery
thereof) with the Exchange Agent shall again have the right to withdraw such
certificates (or guarantee of delivery), and thereby revoke his Election as of
the Election Date, by written notice to such effect received by the Exchange
Agent at its office designated in the Form of Election no later than 5:00 P.M.
(local time in the city in which such office is located) on the fifth business
day immediately prior to the Effective Time. All Elections shall automatically
be revoked if the Exchange Agent is notified in writing by the Company and TCI
that this Agreement has been terminated. If an Election is revoked, the
certificate(s) (or guarantee of delivery, as appropriate) for the shares of
Company Class A Stock to which such Election relates shall be promptly
returned to the Person submitting the same to the Exchange Agent.
(e) TCI shall have the right to make rules reasonably acceptable to the
Company and not inconsistent with the terms of this Agreement, governing the
validity of the Elections, whether any revocation thereof shall be treated as
effective, and the issuance and delivery upon consummation of the Merger of
the Merger Consideration. All such rules and determinations by TCI shall be
final and binding on all holders of shares of Company Stock.
2.5 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time and surrender to the
Exchange Agent or TCI, as applicable, of any certificate that immediately
prior to the Effective Time represented any shares of Company Class A Stock or
Company Class B Stock, TCI shall, subject to Section 2.5(b), if such
certificate represented shares of Company Stock which were converted in the
Merger into the right to receive the Merger Consideration (a "Certificate"),
distribute to the Person in whose name such Certificate shall have been
issued, a certificate registered in the name of such Person representing the
Merger Consideration payable in respect of such shares,
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<PAGE>
and if such Certificate represented shares of Company Class A Stock and less
than all of such shares were converted into the right to receive the Merger
Consideration, then the Surviving Corporation shall distribute to such Person
a certificate registered in the name of such Person for a number of Class A
Shares equal to the number of shares of Company Class A Stock represented by
such Certificate that were not so converted into the Merger Consideration.
Each Certificate so surrendered shall forthwith be cancelled.
(b) If the Merger Consideration (or any portion thereof) is to be delivered
to a Person other than the Person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the payment of
such Merger Consideration that the Certificate so surrendered shall be
properly endorsed for transfer or accompanied by appropriate and properly
endorsed stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the Person requesting such transfer pay
to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid and if such Person
establishes to the satisfaction of TCI that such transfer would not violate
applicable federal or state securities laws.
(c) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed satisfactory to TCI and complying with any other
reasonable requirements imposed by TCI, TCI will cause to be delivered in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof. When authorizing such delivery
of the Merger Consideration in exchange therefor, TCI may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed Certificate to give TCI a bond in such sum as
it may direct as indemnity against any claim that may be made against TCI or
the Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of shares of Company Stock
that were converted into the right to receive the Merger Consideration or of
shares of Company Class B Stock that were converted into the right to receive
Class A Shares. Each share of TCI Preferred Stock into which shares of Company
Stock shall be converted in the Merger and each Class A Share into which
shares of Company Class B Stock shall be so converted shall be deemed to have
been issued at the Effective Time.
(e) Until the surrender of a Certificate, dividends or other distributions
in respect of shares of TCI Preferred Stock, the ownership of which is
evidenced by such Certificate, shall be accumulated and not paid or delivered,
but (i) any such dividends or distributions which shall have become payable
with respect to such TCI Preferred Stock between the Effective Time and the
time of such surrender shall be paid upon the surrender of such Certificate
(without interest thereon) to the Person in whose name the certificates
representing the TCI Preferred Stock issued in exchange therefor shall have
been registered and (ii) any such dividends or distributions which shall have
a record date prior to such surrender and a payment date after such surrender,
shall be paid (without interest thereon) on such payment date to the Person in
whose name the certificates representing the TCI Preferred Stock issued in
exchange therefor shall have been registered. Payment of the Merger
Consideration and any such accumulated dividends or distributions shall be
subject to applicable escheat, abandoned property and similar laws, and
neither TCI nor the Surviving Corporation shall be liable to any holder of
shares of Company Stock or TCI Preferred Stock for the Merger Consideration
for any such shares or for any dividends or distributions with respect thereto
which may be delivered to any public official pursuant to any escheat,
abandoned property or similar law.
2.6 TREATMENT OF COMPANY STOCK OPTIONS, COMPANY SARS
(a) Each Company Stock Option outstanding immediately prior to the Effective
Time shall represent following the Effective Time the right to purchase the
same number of Class A Shares of the Surviving Corporation as the number of
shares of Company Stock it represented the right to purchase immediately prior
to the Effective Time and at the same purchase price and on, and subject to,
the same terms and conditions (including the vesting schedule and termination
provisions) without any change thereto (including any
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acceleration of vesting) resulting from the Merger, except that effective as
of the Effective Time, by virtue of the Merger, the Company Stock Options
owned by Roy Bliss and Peter C. Boylan as of the date hereof shall vest and
become exercisable in full at any time thereafter to the extent not previously
exercised.
(b) Each Company SAR outstanding immediately prior to the Effective Time
shall continue to be outstanding immediately following the Effective Time
without any change in any of the terms or conditions thereof (including any
acceleration of vesting or of any obligation to make payments thereunder)
resulting from the Merger, except that for purposes of valuing a Company SAR
pursuant to Section 2 (or any equivalent provision) of such Company SAR, all
new business entered into by TCI or any of its affiliates with the Surviving
Corporation or any of its affiliates following the Effective Time (the "New
Business") shall, unless otherwise agreed in writing by TCI, be deemed the
acquisition of a new business within the meaning of Section 2.d (or equivalent
provision) thereof for all periods (notwithstanding anything to the contrary
contained in a Company SAR) between the Effective Time and the Valuation Date
(as defined therein).
2.7 CHANGES IN TCI CLASS A STOCK. If prior to the Effective Time, the TCI
Class A Stock shall be recapitalized or reclassified or TCI shall effect any
stock dividend, stock split, or reverse stock split of TCI Class A Stock, then
the shares of TCI Class A Stock to be delivered upon conversion of the TCI
Preferred Stock to be delivered under this Agreement shall be appropriately
and equitably adjusted to the kind and amount of shares of stock and other
securities and property which the holders of such shares of TCI Preferred
Stock would have been entitled to receive had they converted such shares into
shares of TCI Class A Stock prior to the record date for determining
stockholders entitled to participate in such corporate event. Notwithstanding
the foregoing, if the "Liberty Media Group Stock Proposal" (as such term is
defined in the proxy statement/prospectus of TCI dated June 29, 1995) is
adopted by the stockholders of TCI, and the Distribution (as so defined)
contemplated thereby is made, prior to the Effective Time, then the TCI
Preferred Stock shall be adjusted as provided in Exhibit 2.7. In the event
that TCI is to issue as part of the Merger Consideration Liberty Media Group
Preferred Stock as provided in Exhibit 2.7, the Company shall have received an
opinion of counsel from Baker & Botts, L.L.P. to the effect that such stock is
voting stock of TCI for federal income tax purposes.
ARTICLE III
CERTAIN ACTIONS
3.1 STOCKHOLDER MEETING. The Company and its Board of Directors (the
"Company Board") shall take all action necessary in accordance with applicable
law and the Company's Amended and Restated Certificate of Incorporation (the
"Company Charter") and By-laws to duly call and hold, as soon as reasonably
practicable after the date hereof, a meeting of the Company's stockholders
(the "Special Meeting") for the purpose of considering and voting upon the
approval and adoption of this Agreement and the Merger contemplated hereby
(the "Merger Proposal"). Subject to the fiduciary duties of the Company Board
under applicable law, the only matter the Company shall propose to be acted on
by the Company's stockholders at the Special Meeting shall be the Merger
Proposal. Subject to the fiduciary duties of the Company Board under
applicable law, the Company Board will recommend that the Company's
stockholders vote in favor of approval of the Merger Proposal and the Company
will use its commercially reasonable efforts to solicit from its stockholders
proxies in favor of such approval and will take all other actions necessary
or, in the reasonable opinion of TCI, advisable to secure the vote of
stockholders of the Company required by the DGCL and the Company Charter to
effect the Merger. The Company shall not require any vote greater than a
majority of the combined voting power of the issued and outstanding shares of
Company Class A Stock and Company Class B Stock, voting together as a single
class, for approval of the Merger Proposal.
3.2 PROXY STATEMENTS AND OTHER COMMISSION FILINGS.
(a) Preliminary Proxy Statement. The Company shall, as soon as reasonably
practicable, prepare a preliminary form (the "Preliminary Proxy Statement") of
the Proxy Statement. The Company shall (i) file the Preliminary Proxy
Statement with the Commission promptly after it has been prepared in a form
reasonably
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satisfactory to the Company, and (ii) use its reasonable efforts to respond to
the comments of the Commission thereon in a manner reasonably satisfactory to
the Company. The Company shall promptly prepare any amendments to the
Preliminary Proxy Statement required in response to the Commission's comments
or which the Company, with the advice of counsel, deems necessary or
advisable, and the Company shall use its reasonable efforts to cause the Proxy
Statement to be filed with the Commission as soon as reasonably practicable
after the Preliminary Proxy Statement, as so amended, is cleared by the
Commission.
(b) Registration Statement. As soon as reasonably practicable after the
Preliminary Proxy Statement is cleared by the Commission, TCI shall file with
the Commission the Registration Statement, which will include the Proxy
Statement as the prospectus, provided that nothing has come to TCI's attention
that would give it reason to believe that the Company's representations and
warranties in Section 4.7 are untrue. TCI shall use its reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act as soon as reasonably practicable after such filing and to continue to be
effective as of the Effective Time. TCI also shall use its reasonable efforts
to take any reasonable action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified, subjecting itself to
taxation in any jurisdiction in which it is not now so subject, giving any
consent to general service of process in any jurisdiction in which it is not
now subject to such service or changing in any respect its authorized or
outstanding capital stock or the composition of its assets) required to be
taken under any applicable state securities or blue sky laws in connection
with the issuance of TCI Preferred Stock to be issued in the Merger and the
issuance of TCI Class A Stock to be issued upon conversion of the TCI
Preferred Stock to be issued in the Merger.
(c) Commission Comments; Amendments and Supplements. Each of the parties
shall notify the other party promptly after the receipt by such first party of
any comments of the Commission on, or of any request by the Commission for
amendments or supplements to, the Preliminary Proxy Statement, the Proxy
Statement or the Registration Statement. Each of the parties shall supply the
other party with copies of all correspondence between such party or any of its
representatives and the Commission with respect to any of the foregoing
filings. If at any time prior to the Effective Time, any event shall occur
relating to the Company or any of the Company's subsidiaries or any of their
respective officers, directors, partners or affiliates which should be
described in an amendment or supplement to the Proxy Statement or the
Registration Statement, the Company shall inform TCI promptly after becoming
aware of such event. If at any time prior to the Special Meeting, any event
shall occur relating to TCI or any of its subsidiaries or any of their
respective officers, directors, partners or affiliates which should be
described in an amendment or supplement to the Proxy Statement, TCI shall
inform the Company promptly after becoming aware of such event. Whenever TCI
and the Company learn of the occurrence of any event which should be described
in an amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, the parties shall cooperate to promptly cause such
amendment or supplement to be prepared, filed with and cleared by the
Commission and, if required by applicable law, disseminated to the persons and
in the manner required.
(d) Comfort Letters. The Company will use its reasonable efforts to cause to
be delivered to TCI a letter of Ernst & Young LLP, the Company's independent
auditors, dated a date within two business days before the date on which the
Registration Statement becomes effective and addressed to TCI, in form
reasonably satisfactory to TCI and customary in scope and substance for
letters delivered by nationally recognized independent auditors in connection
with registration statements similar to the Registration Statement. TCI will
use its reasonable efforts to cause to be delivered to the Company a letter of
KPMG Peat Marwick, TCI's independent auditors, dated a date within two
business days before the date on which the Registration Statement becomes
effective and addressed to the Company, in form reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
nationally recognized independent auditors in connection with registration
statements similar to the Registration Statement.
3.3 IDENTIFICATION OF AFFILIATES. Promptly after the Special Meeting and
before the Closing Date, the Company shall deliver to TCI a letter identifying
all Persons who the Company knows are or who the Company has reason to believe
may be, as of the date of the Special Meeting, "affiliates" of the Company for
purposes of
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Rule 145 under the Securities Act. The Company shall use reasonable efforts to
cause each Person who is identified as an "affiliate" in the letter referred
to above to deliver to TCI, on or prior to the Closing Date, a written
agreement, in substantially the form annexed hereto as Exhibit 3.3, that such
Person will not offer to sell or otherwise dispose of any of the shares of TCI
Preferred Stock issued to such person pursuant to the Merger or any of the
shares of TCI Class A Stock issuable upon conversion thereof in violation of
the Securities Act and the rules and regulations thereunder.
3.4 STATE TAKEOVER STATUTES. The Company will, upon the request of TCI, take
all reasonable steps to (i) exempt the Merger from the requirements of any
applicable state takeover law and (ii) assist in any challenge by TCI to the
validity or applicability to the Merger of any state takeover law.
3.5 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement and applicable law, each of the parties hereto shall use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable, including such actions or things as any
other party hereto may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate such transactions
specified in Article VII to be fully satisfied. Without limiting the
generality of the foregoing, the parties shall (and shall cause their
respective directors, officers and subsidiaries, and use their reasonable
efforts to cause their respective affiliates, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide reasonable assistance to each other in (i) the preparation and filing
with the Commission of the Registration Statement, the Preliminary Proxy
Statement and the Proxy Statement and any necessary amendments or supplements
to any thereof; (ii) seeking to have such preliminary proxy statement cleared,
and the Registration Statement declared effective, by the Commission as soon
as reasonably practicable after filing; (iii) subject to the last sentence of
Section 3.2(b), taking such actions as may reasonably be required under
applicable state securities or blue sky laws in connection with the issuance
of the TCI Preferred Stock pursuant to the Merger; (iv) obtaining all
necessary consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications, or other permission or action by, and giving
all necessary notices to and making all necessary filings with and
applications and submissions to, any Governmental Entity or other Person; (v)
filing all pre-merger notification and report forms required under the Hart-
Scott Act; (vi) lifting any permanent or preliminary injunction or restraining
order or other similar order issued or entered by any court or Governmental
Entity (an "Injunction") of any type referred to in Section 7.1(d); (vii)
obtaining the tax opinion referred to in Section 7.1(g); (viii) providing all
such information about such party, its subsidiaries and its officers,
directors, partners and affiliates and making all applications and filings as
may be necessary or reasonably requested in connection with any of the
foregoing; and (ix) in general, consummating and making effective the
transactions contemplated thereby; provided, however, that in order to obtain
any consent, approval, waiver, license, permit, authorization, registration,
qualification, or other permission or action or the lifting of any Injunction
referred to in clause (iv), (v) or (vi) of this sentence, (x) no party shall
be required to pay any consideration, to divest itself of any of, or otherwise
rearrange the composition of, its assets or to agree to any conditions or
requirements which are materially adverse or burdensome and (y) without TCI's
prior consent, the Company shall not, and shall not permit any of the
subsidiaries or affiliates to, amend any License or Contract, pay any
consideration or make any agreement or reach any understanding or arrangement.
Prior to making any application to or filing with any Governmental Entity or
other Person in connection with this Agreement, each party shall provide the
other party with drafts thereof and afford the other party a reasonable
opportunity to comment on such drafts.
3.6 STOCK AND OTHER PLANS. The Company shall use all commercially reasonable
efforts to take or cause to be taken such actions (including action by the
Company Board or, if appropriate, any committee administering or having
authority with respect to any Company Stock Plans, Company Stock Options or
Company SARs, to amend or modify the same or obtain appropriate waivers from
the participants in such Company Stock Plans and holders of such Company Stock
Options and Company SARs) as are necessary or which TCI reasonably requests to
carry out the provisions and intent of Section 2.6. Without limiting the
generality of the foregoing, the Company shall, if and to the extent necessary
to carry out such provisions and intent, use all commercially
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reasonable efforts to (i) amend any provision of a Company Stock Plan, Company
Stock Option (other than the ones held by Messrs. Bliss and Boylan referred to
in Section 2.6) or Company SAR that provides for acceleration of vesting
thereof or of any obligation to make payments thereunder in the event of a
change of control or a merger or consolidation of, or similar event with
respect to, the Company so that such acceleration shall not occur as a result
of the Merger and the change of control resulting therefrom and (ii) amend any
provision of a Company SAR or a Company Stock Plan pursuant to which Company
SARs have been granted which would otherwise take into account any New
Business in the valuation of such Company SAR (e.g., by including pre-tax
income associated with such New Business for any period in the calculation of
value), so that such New Business shall not affect such valuation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company makes the representations and warranties set forth below, except
as expressly set forth in the Disclosure Schedule. Each exception to the
representations and warranties set forth in the Disclosure Schedule shall
reference by Section number the representation and warranty to which it
applies.
4.1 ORGANIZATION AND QUALIFICATION. Each of the Company and each of its
subsidiaries (i) is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and (ii) has all requisite corporate or
partnership power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted. Each of the Company and
each of its subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the properties owned, leased or
operated by it or the nature of its activities makes such qualification
necessary, except in such jurisdictions where the failure to be so duly
qualified or in good standing has not had and is not reasonably likely to
have, individually or in the aggregate, a material adverse effect on the
business, assets, results of operations, financial condition or prospects of
the Company and its subsidiaries taken as a whole or of any of the
subsidiaries of the Company listed on Schedule 4.1 (the "Scheduled
Subsidiaries"). Each Person in which the Company, directly or through one or
more of its subsidiaries, has an investment accounted for by the equity method
(the "Equity Affiliates") (A) is a corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, (B) has all requisite corporate or
partnership power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted and (C) is duly
qualified to do business and is in good standing in each jurisdiction in which
the properties owned, leased or operated by it, or the nature of its
activities, makes such qualification necessary, except in each case where such
failure to be so existing and in good standing or to have such power and
authority or to be so qualified to do business and be in good standing has not
had and is not reasonably likely to have, individually or in the aggregate, a
material adverse effect on the business, assets, results of operations,
financial condition or prospects of the Company and its subsidiaries taken as
a whole or of any of the Scheduled Subsidiaries.
For purposes of this Article IV, an adverse effect of $5 million or more
shall in any event be deemed material.
The Company has delivered to TCI true and complete copies of the Company
Charter and By-laws, as amended through and in effect on the date hereof. The
Company's minute books, true and complete copies of which have been made
available to TCI, contain the minutes of all meetings of incorporators,
directors and stockholders of the Company since its inception and such minutes
completely and correctly reflect all of their respective actions in all
material respects.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject to
obtaining the approval of its stockholders specified in Section 4.15, to
perform its obligations hereunder and consummate the transactions contemplated
hereby. The
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execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Company Board and by all other corporate action on
the part of the Company, subject, in the case of the consummation by it of the
Merger, to such approval of the Company's stockholders. This Agreement has
been duly executed and delivered by the Company and is a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
4.3 CAPITALIZATION. The authorized capital stock of the Company consists of
30 million shares of Company Class A Stock, 15 million shares of Company Class
B Stock and two million shares of "blank-check" preferred stock, of which none
have been designated. As of the close of business on June 30, 1995, (i)
5,529,818 shares of Company Class A Stock were issued and outstanding,
1,035,606 shares of Company Class A Stock were reserved for issuance upon
exercise of outstanding Company Stock Options, and no shares were issued and
held by the Company in its treasury or by subsidiaries of the Company, (ii)
12,373,294 shares of Company Class B Stock were issued and outstanding, no
shares of Company Class B Stock were reserved for issuance upon exercise of
outstanding Company Stock Options, and no shares were issued and held by the
Company in its treasury or by subsidiaries of the Company. All issued and
outstanding shares of Company Stock have been validly issued and are fully
paid and non-assessable, are not subject to and have not been issued in
violation of any preemptive rights and have not been issued in violation of
any federal or state securities laws. There are no issued or outstanding
bonds, debentures, notes or other indebtedness of the Company or any of its
subsidiaries which have the right to vote (or which are convertible into other
securities having the right to vote) on any matters on which stockholders may
vote ("Voting Debt"). Schedule 4.3 includes a true and complete list of all
outstanding options ("Company Stock Options") to purchase Company Stock,
showing for each Company Stock Option the following: the holder thereof, the
date of issuance, the expiration date, the exercise price, the number of
shares of Company Class A Stock covered thereby and the vesting schedule for
such option. The Company has made available to TCI true and complete copies of
the Company Stock Options. Such copies represent the terms, conditions,
provisions, agreements, obligations and undertakings of the Company with
respect to all Company Stock Options. Schedule 4.3 also includes a true and
complete list and description of all outstanding stock appreciation rights and
agreements to grant stock appreciation rights (the "Company SARs") granted by
or relating to the Company or any of its divisions or subsidiaries, showing
for each: the holder thereof, date of grant, expiration date, number or
formula value of rights, whether such Company SAR relates to the Company or a
division or subsidiary thereof (identifying the same), the vesting schedule
therefor and any put or call rights with respect thereto. The Company has made
available to TCI true and complete copies of the Company SARs. Such copies
represent the terms, conditions, provisions, agreements, obligations and
undertakings of the Company or any of its subsidiaries with respect to all
Company SARs. Except for Company Stock Options and Company SARs outstanding as
of June 30, 1995 and the obligation of the Company, pursuant to the Company
Charter, to issue one share of Company Class A Stock for each share of
outstanding Company Class B Stock which the holder elects to convert, there
are not as of the date hereof, and will not at any time to and including the
Effective Time, be, any outstanding or authorized subscriptions, options,
warrants, calls, rights, commitments or any other agreements of any character
to or by which the Company or any of its subsidiaries is a party or is bound
which, directly or indirectly, obligate the Company or any of its subsidiaries
to issue, deliver or sell or cause to be issued, delivered or sold any
additional shares of Company Stock or any other capital stock, equity interest
or Voting Debt of the Company or any subsidiary of the Company, any securities
convertible into, or exercisable or exchangeable for, or evidencing the right
to subscribe for any such shares, interests or Voting Debt, or any phantom
shares, phantom equity interests or stock or equity appreciation rights, or
obligating the Company or any of its subsidiaries to grant, extend or enter
into any such subscription, option, warrant, call or right. Neither the
Company nor any subsidiary thereof is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock. Since the close of business on June 30, 1995, no shares of
capital stock of the Company have been issued or have been transferred from
the Company's treasury, except shares of Company Stock issued upon the
exercise or conversion, in accordance with their terms, of Company Stock
Options outstanding at the close of business on such date. Immediately after
the Effective
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Time, except for the Company Stock Options and Company SARs outstanding as of
June 30, 1995, there will be no subscription, option, warrant, call, right,
commitment or agreement which will entitle (conditionally or unconditionally)
any Person to purchase or otherwise acquire, or will obligate (conditionally
or unconditionally) the Surviving Corporation (as the Company's successor) or
any subsidiary of the Surviving Corporation that was a subsidiary of the
Company to sell, issue or deliver any shares of capital stock, any other
equity interest or any Voting Debt of the Surviving Corporation or any such
subsidiary or obligating the Surviving Corporation or any such subsidiary to
grant, extend or enter into any such subscription, warrant, call, right,
commitment or agreement. Except for the Equity Incentive Plan and Stock Option
Plan for Non-Employee Directors (collectively, the "Company Stock Plans") and
for those of the Company SARs and Company Stock Options granted pursuant to
individual agreements with the grantees and not pursuant to the Company Stock
Plans, true and complete copies of all of which have been provided to TCI by
the Company, neither the Company nor any of its subsidiaries has adopted,
authorized or assumed any plans, arrangements or practices for the benefit of
its officers, employees or directors which require or permit the issuance,
sale, purchase or grant of any capital stock, other equity interests or Voting
Debt of the Company or any subsidiary of the Company, any other securities
convertible into, or exercisable or exchangeable for, any such stock,
interests or Voting Debt, or any phantom shares, phantom equity interests or
stock or equity appreciation rights. All shares of capital stock of and all
partnership or other equity interests in each subsidiary of the Company and in
each Equity Affiliate owned directly or indirectly by the Company are owned
free and clear of any Lien or Restriction and the shares of capital stock of
each corporate subsidiary of the Company are validly issued, fully paid and
non-assessable. There are not, and immediately after the Effective Time, there
will not be, any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments or other agreements of any character that, directly
or indirectly, (x) call for or relate to the sale, pledge, transfer or other
disposition by the Company or any subsidiary of the Company of any shares of
capital stock, any partnership or other equity interests or any Voting Debt of
any subsidiary of the Company or any Equity Affiliate owned directly or
indirectly by the Company or any subsidiary of the Company, or (y) relate to
the voting or control of such capital stock, partnership or other equity
interests or Voting Debt.
4.4 REPORTS AND FINANCIAL STATEMENTS. True and complete copies of all
reports, registration statements, definitive proxy statements and other
documents (in each case together with all amendments thereto) filed by the
Company with the Commission (such reports, registration statements, definitive
proxy statements and other documents, together with any amendments thereto,
are sometimes collectively referred to as the "Company Commission Filings")
have, to the extent filed prior to the date hereof, heretofore been made
available by the Company to TCI and will, to the extent filed after the date
hereof, hereafter be made available by the Company to TCI. The Company
Commission Filings constitute all of the documents (other than preliminary
material) required to be filed by the Company with the Commission since the
Company's inception. As of their respective dates, each of the Company
Commission Filings complied and, in the case of filings after the date hereof,
will comply in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations under each such
Act, and none of the Company Commission Filings contained as of such date any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. When
filed with the Commission, the financial statements included in the Company
Commission Filings complied as to form in all material respects with the
applicable rules and regulations of the Commission and were prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
therein or in the notes or schedules thereto), and such financial statements
fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and their consolidated cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments. Except as and to the extent
reflected or reserved against in the financial statements included in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
(the "Company Form 10-Q") or as disclosed therein, none of the Company, any
subsidiary of the Company or, to the knowledge of the Company, any Equity
Affiliate had as of such date any liability or obligation of any kind, whether
accrued, absolute, contingent, unliquidated or other and whether due or to
become due (including any liability for breach of contract, breach of
warranty, torts, infringements,
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claims or lawsuits), which was material to the business, assets, results of
operations or financial condition of the Company and its subsidiaries taken as
a whole or of any of the Scheduled Subsidiaries. Since March 31, 1995, none of
the Company, any subsidiary of the Company or, to the knowledge of the
Company, any Equity Affiliate has incurred any liability or obligation of any
kind which, in any case or in the aggregate, is or may be material to the
business, assets, results of operations or financial condition of the Company
and its subsidiaries taken as a whole or of any of the Scheduled Subsidiaries,
except in the ordinary course of business.
4.5 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS. The
execution and delivery by the Company of this Agreement do not and the
performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby will not:
(i) assuming approval of the Merger Proposal by the Company's
stockholders as contemplated by Section 4.15, conflict with or violate the
Company Charter or By-laws or the charter or by-laws of any corporate
subsidiary of the Company or the partnership agreement of any partnership
subsidiary of the Company;
(ii) require any consent, approval, order or authorization of or other
action by any Governmental Entity (a "Government Consent") or any
registration, qualification, declaration or filing with or notice to any
Governmental Entity (a "Governmental Filing") in each case on the part of
or with respect to the Company, any subsidiary of the Company or, to the
knowledge of the Company, any Equity Affiliate, except for (A) the filing
with the Commission of the Proxy Statement and such reports under Sections
13(a) and 16(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (B) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, (C) such
Government Consents and Governmental Filings (the "FCC Approvals") as may
be required under the Communications Act of 1934, as amended (the
"Communications Act"), (D) such Government Consents and Governmental
Filings (the "Local Approvals") with foreign, state and local governmental
authorities as may be required with respect to the Licenses held by the
Company, any of its subsidiaries or any of the Equity Affiliates or as may
otherwise be required under laws applicable to the conduct of the
businesses of the Company and its subsidiaries in the ordinary course, (E)
the Governmental Filings to be made on the part of or with respect to TCI
and Merger Sub referred to in clause (ii) of Section 5.5 and such
Government Consents and Governmental Filings as may be required in
connection with the issuance of TCI Preferred Stock as contemplated hereby
pursuant to state securities and blue sky laws; and (F) the Governmental
Filings required to be made pursuant to the pre-merger notification
requirements of the Hart-Scott Act;
(iii) assuming approval of the Merger Proposal by the Company's
stockholders as contemplated by Section 4.15, require, on the part of the
Company, any subsidiary of the Company or, to the knowledge of the Company,
any Equity Affiliate, any consent by or approval or authorization of (a
"Contract Consent") or notice to (a "Contract Notice") any other Person
(other than a Governmental Entity), whether under any License or other
Contract or otherwise, except (A) as set forth on the Disclosure Schedule
and (B) for such Contract Consents and Contract Notices the absence or
omission of which will not, either individually or in the aggregate, have a
material adverse effect on the transactions contemplated hereby or on the
business, assets, results of operations, financial condition or prospects
of the Company and its subsidiaries, taken as a whole, or the Surviving
Corporation and its subsidiaries, taken as a whole, or of any Scheduled
Subsidiary of the Company or the Surviving Corporation;
(iv) assuming that the Contract Consents and Contract Notices described
on the Disclosure Schedule are obtained and given, conflict with or result
in any violation or breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation, suspension, modification or acceleration of any obligation or
any increase in any payment required by or the impairment, loss or
forfeiture of any material benefit, rights or privileges under or the
creation of a Lien or other encumbrance on any assets pursuant to (any such
conflict, violation, breach, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") any Contract (which term
shall mean and include any note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract,
I-A-16
<PAGE>
instrument, employee benefit plan or practice, or other agreement,
obligation, commitment or concession of any nature) to which the Company,
any subsidiary of the Company, or, to the knowledge of the Company, any
Equity Affiliate is a party, by which the Company, any subsidiary of the
Company or, to the knowledge of the Company, any Equity Affiliate or any of
their respective assets or properties is bound or affected or pursuant to
which the Company, any subsidiary of the Company or, to the knowledge of
the Company, any Equity Affiliate is entitled to any rights or benefits
(including the Licenses), except for such Violations which would not,
individually or in the aggregate, have a material adverse effect on the
transactions contemplated hereby or on the business, assets, results of
operations, financial condition or prospects of the Company and its
subsidiaries, taken as a whole, or the Surviving Corporation and its
subsidiaries, taken as a whole, or of any significant subsidiary of the
Company or the Surviving Corporation; or
(v) assuming that the Merger is so approved by the Company's stockholders
and assuming that the Government Consents and Governmental Filings
specified in clause (ii) of this Section 4.5 are obtained, made and given,
result in a Violation of, under or pursuant to any law, rule, regulation,
order, judgment or decree applicable to the Company, any subsidiary of the
Company or, to the knowledge of the Company, any Equity Affiliate or by
which any of their respective properties or assets are bound or affected,
except for such Violations which would not, individually or in the
aggregate, have a material adverse effect on the transactions contemplated
hereby or on the business, assets, results of operations, financial
condition or prospects of the Company and its subsidiaries, taken as a
whole, or the Surviving Corporation and its subsidiaries, taken as a whole,
or of any Scheduled Subsidiary of the Company or the Surviving Corporation.
As used herein, the term "Governmental Entity" means and includes any
court, arbitrators, administrative or other governmental department,
agency, commission, authority or instrumentality, domestic or foreign.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise disclosed in
the Company Commission Filings filed with the Commission prior to the date
hereof, since December 31, 1994, (i) there has not been any material adverse
change in, and no event has occurred and no condition exists which,
individually or together with other events or conditions, has had or, insofar
as the Company can reasonably foresee, is reasonably likely to have, a
material adverse effect on, the business, assets, results of operations,
financial condition or prospects of the Company and its subsidiaries taken as
a whole or of any of the Scheduled Subsidiaries (excluding events or
conditions generally affecting the cable television or satellite television
industry in the United States or affecting general business or economic
conditions in the United States) and (ii), other than actions that in the
ordinary course of the Company's business consistent with prior practice would
not have required, and would have been taken without, the approval of the
Company Board, no action has been taken by the Company or any subsidiary of
the Company which, if Section 6.4 had then been in effect, would have been
prohibited by such Section without the consent or approval of TCI, and no
agreements, understandings, obligations or commitments, whether in writing or
otherwise, to take any such action have been entered into.
4.7 REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by the Company or any of its affiliates, directors,
officers, employees, agents or representatives in writing specifically for
inclusion or incorporation by reference in, and which is included or
incorporated by reference in, (i) the Registration Statement (the
"Registration Statement") or any amendment or supplement thereto filed or to
be filed by TCI with the Commission under the Securities Act in connection
with the TCI Preferred Stock to be issued in the Merger and the TCI Class A
Stock to be issued upon conversion of the TCI Preferred Stock to be issued in
the Merger, (ii) the proxy statement to be mailed to the Company's
stockholders in connection with the Special Meeting (the "Proxy Statement") or
(iii) any other documents filed or to be filed with the Commission or any
other Governmental Entity in connection with the transactions contemplated
hereby, will, at the respective times such documents are filed, and, in the
case of the Registration Statement or any amendment or supplement thereto,
when the same becomes effective, at the time of the Special Meeting and at the
Effective Time, and, in the case of the Proxy Statement or any amendment or
supplement thereto, at the time of mailing of the Proxy Statement to the
Company's stockholders or at the time of the Special Meeting or any other
meeting of the Company's stockholders to be held in connection with the
Merger, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein, in
light of
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the circumstances under which they were made, not misleading or necessary to
correct any statement in any earlier communication. For this purpose, any such
information included or incorporated by reference in any such document will be
deemed to have been so supplied in writing specifically for inclusion or
incorporation therein if such document was available for review by the Company
a reasonable time before such document was filed (but the foregoing shall not
be the exclusive manner in which it may be established that such information
was so supplied). The Registration Statement (to the extent that the Proxy
Statement constitutes the prospectus thereunder) and the Proxy Statement will
comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the respective rules and regulations
under each such Act.
4.8 LEGAL PROCEEDINGS. Except as set forth in the Company Commission Filings
filed with the Commission prior to the date hereof or as arises in the
ordinary course of the Company's business and is not required to be disclosed
in any filings with the Commission by the Company, (i) there is no suit,
action or proceeding pending or, to the best knowledge of the Company, any
investigation pending or any suit, action, proceeding or investigation
threatened, against, involving or affecting the Company, any subsidiary of the
Company or, to the knowledge of the Company, any Equity Affiliate or any of
its or their properties or rights, which, if adversely determined, is, insofar
as the Company can reasonably foresee, reasonably likely to have, either
individually or in the aggregate, a material adverse effect on the business,
assets, results of operations, financial condition or prospects of the Company
and its subsidiaries, taken as a whole, or of any Scheduled Subsidiary; (ii)
there is no judgment, decree, Injunction, rule or order of any Governmental
Entity applicable to the Company, any subsidiary of the Company or, to the
knowledge of the Company, any Equity Affiliate having, or which, insofar as
the Company can reasonably foresee, is reasonably likely to have, either
individually or in the aggregate, any such effect; and (iii) to the best
knowledge of the Company, there is no action, suit, proceeding or
investigation pending or threatened against the Company which seeks to
restrain, enjoin or delay the consummation of the Merger or any of the other
transactions contemplated hereby or which seeks damages in connection
therewith, and no Injunction of any type referred to in Section 7.1(d) has
been entered or issued. The term "order" as used in the immediately preceding
sentence shall not be deemed to include any Licenses.
4.9 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS. The Company, its
subsidiaries and, to the knowledge of the Company, the Equity Affiliates, hold
all licenses, franchises, ordinances, authorizations, permits, certificates,
variances, exemptions, concessions, leases, rights of way, easements,
instruments, orders and approvals, domestic or foreign (collectively, the
"Licenses") which are material to the ownership of the assets and operation of
the businesses of the Company and its subsidiaries, taken as a whole, or of
any Scheduled Subsidiary. Each of the Company, its subsidiaries and, to the
knowledge of the Company, the Equity Affiliates is in compliance with, and has
conducted its business so as to comply with, the terms of their respective
Licenses and with all applicable laws, rules, regulations, ordinances and
codes, domestic or foreign, except where the failure so to comply has not had
and, insofar as reasonably can be foreseen, in the future will not have,
either individually or in the aggregate, a material adverse effect on the
business, assets, results of operations, financial condition or prospects of
the Company and its subsidiaries, taken as a whole, or of any Scheduled
Subsidiary. Without limiting the generality of the foregoing, the Company, its
subsidiaries and, to the knowledge of the Company, the Equity Affiliates, (i)
have all Licenses (the "FCC Licenses") issued by the Federal Communications
Commission (the "FCC") and all Licenses of foreign, state and local
governmental authorities (the "Permits") required for the operation of the
facilities being operated on the date hereof by the Company, any of its
subsidiaries or any of the Equity Affiliates, (ii) have duly and currently
filed all reports and other information required to be filed by the FCC or any
other Governmental Entity in connection with such FCC Licenses and Permits and
(iii) are not in violation of any of such FCC Licenses or Permits, other than
the lack of FCC Licenses or Permits, delays in filing reports or possible
violations which have not had and, insofar as can reasonably be foreseen, in
the future will not have a material adverse effect on the business, assets,
results of operations, financial condition or prospects of the Company and its
subsidiaries, taken as a whole, or of any Scheduled Subsidiary. Without
limiting the generality of the foregoing, to the best knowledge of the
Company, the Company has duly complied with, and the operation of its
business, equipment and other assets and the facilities owned or leased by the
Company are in compliance with the provisions of all applicable federal, state
and local environmental, health and safety laws, statutes, ordinances, rules
and regulations of any governmental
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<PAGE>
or a quasi governmental authority relating to (i) errors or omissions, (ii)
discharges to surface water or ground water, (iii) solid or liquid waste
disposal, (iv) the use, storage, generation, handling, transport, discharge,
release or disposal of toxic or hazardous substances or waste, (v) the
emission of non-ionizing electromagnetic radiation or (vi) other
environmental, health or safety matters, including without limitation, all
matters set forth in the Comprehensive Environmental Response Compensation and
Liability Act of 1980 as amended by the Superfund Amendments and Authorization
Act of 1986; the Occupational Safety and Health Act; the Resource Conservation
Recovery Act of 1976; the Federal Water Pollution Control Act of 1970; the
Safe Drinking Water Act of 1974; the Toxic Substances Control Act of 1976; the
Emergency Planning Community Right to Know Act of 1986, as amended; and the
Clean Air Act, as amended (collectively "Environmental and Health Laws"). To
the knowledge of the Company, there are no investigations, administrative
proceedings, judicial actions, orders, claims or notices that are pending,
anticipated or threatened against the Company relating to violations of the
Environmental and Health Laws. The Company has not received a notice of, and
does not know or have any reason to suspect, any facts which constitute a
violation of any Environmental and Health Laws which relate to the use,
ownership or occupancy of any property or facilities used by the Company in
connection with the operation of its business or any activity of the business
of the Company which would result in a violation or threatened violation of
any Environmental or Health Laws.
4.10 BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other Person is or will be entitled, by reason of any agreement,
act or statement by the Company or any of its subsidiaries, directors,
officers, employees or affiliates, to any financial advisory, broker's,
finder's or similar fee or commission, to reimbursement of expenses or to
indemnification or contribution in connection with any of the transactions
contemplated by this Agreement, except Furman Selz Incorporated ("Furman
Selz") whose fees and expenses and claims for indemnification or contribution
will be paid by the Company in accordance with the Company's agreement with
such firm (copies of which have been delivered by the Company to TCI prior to
the date of this Agreement), and the Company agrees to indemnify and hold TCI
and Merger Sub harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions, expenses or claims
for indemnification or contribution asserted by any Person on the basis of any
act or statement made or alleged to have been made by the Company or any of
its subsidiaries, directors, officers, employees or affiliates.
4.11 TAX MATTERS. To the best of the Company's knowledge, except as
disclosed to TCI with respect to certain claimed Illinois excise taxes, (i)
there has been duly filed by or on behalf of the Company and each of its
subsidiaries (and each of their respective predecessors, if any), or filing
extensions from the appropriate federal, state, foreign and local Governmental
Entities have been obtained with respect to, all federal, state, foreign and
material local tax returns and reports required to be filed on or prior to the
date hereof, (ii) payment in full or adequate provision for the payment of all
taxes required to be paid in respect of the periods covered by such tax
returns and reports has been made (except in respect of state, local and
foreign taxes which are in the aggregate immaterial in amount) and (iii) a
reserve which the Company reasonably believes to be adequate has been set up
for the payment of all such taxes anticipated to be payable in respect of
periods through the date hereof. No federal income tax returns required to be
filed by or on behalf of the Company and each of its subsidiaries consolidated
in such returns (and their respective predecessors, if any) under the Code or
any predecessor statute (the "Consolidated Returns") have been examined by or
settled with the Internal Revenue Service ("IRS") except for the Consolidated
Return for the fiscal year ended December 31, 1993, which is under review by
the IRS. No deficiencies or assessments have been asserted in writing by the
IRS with respect to the Consolidated Returns. Neither the Company nor any of
its subsidiaries (nor any of their respective predecessors) has, with regard
to any assets or property held, acquired or to be acquired by the Company or
any of its subsidiaries, filed a consent pursuant to Section 341(f) of the
Code or any predecessor statute. For the purpose of this Agreement, the term
"tax" (including, with correlative meaning, the terms "taxes" and "taxable")
shall include all federal, state, local and (to the extent material to the
Company and its consolidated subsidiaries, taken as a whole) foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts.
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<PAGE>
4.12 EMPLOYEE MATTERS.
(a) Schedule 4.12(a) contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to at any time since January 1,
1994 by the Company or by any trade or business, whether or not incorporated
("ERISA Affiliate"), that together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), for the benefit of any employee or
former employee of the Company or any ERISA Affiliate including any such type
of plan established, maintained or contributed to under the laws of any
foreign country (the "Company Plans"). Schedule 4.12(a) identifies each
Company Plan that is an "employee benefit plan," as defined in Section 3(3) of
ERISA. The Company has heretofore delivered to TCI true and complete copies of
each Company Plan and, if the Company Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding document.
(b) Except as set forth in Schedule 4.12(b), (i) no Company Plan is subject
to Title IV of ERISA or Section 412 of the Code and (ii) neither the Company
nor any ERISA Affiliate made, or was required to make, contributions to any
employee benefit plan subject to Title IV of ERISA during the five year period
ending on the Effective Time.
(c) Concerning each Company Plan that is or has been subject to the funding
requirements of Title I, Subtitle B, Part 3 of ERISA, the funding method used
in connection with such Company Plan is, and at all times has been, acceptable
under ERISA, each of the actuarial assumptions employed in connection with
determining the funding of each such Company Plan is, and at all times has
been, reasonable and satisfies the requirements of Section 12(c)(3) of the
Code and Section 302(c)(3) of ERISA, and Schedule 4.12(c) sets forth, as of
the date hereof, (A) the actuarially determined present value of all benefit
liabilities within the meaning of Section 4001(a)(16) of ERISA ("Benefit
Liabilities") determined on an ongoing plan basis, employing in making such
determination the same actuarial assumptions as were used in determining plan
fundings for the most recently completed plan year unless any such assumption
is not reasonable, in which event such assumption has been changed to a
reasonable assumption, (B) the actuarially determined present value of all
Benefit Liabilities under each such Company Plan employing in such
determination the same actuarial assumptions, except turnover assumptions, as
were used in determining funding for such plan for the most recently completed
plan year unless any such assumption is not reasonable, in which event such
assumption has been changed to a reasonable assumption, (C) the fair market
value of the assets held to fund each such Company Plan, (D) the funding
method used in connection with each such Company Plan and (E) identification
of the amount and related plan with respect to which there is or has been any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA.
Schedule 4.12(c) sets forth a reasonable good faith estimate of material
changes between January 1, 1994 and the date hereof in the value of benefits
or plan assets described in the preceding clause (A), (B) or (C); Schedule
4.12(c) sets forth the information described in said clauses (A), (B), (C) and
(D) as of the date hereof, including a separate statement of liabilities
attributable to unpredictable contingent event benefits within the meaning of
Section 412(l)(7)(B)(ii) of the Code and Section 302(d)(7)(B)(ii) of ERISA.
The sum of the amount of unfunded Benefit Liabilities under all Company Plans
(excluding each such plan with an amount of unfunded Benefit Liabilities of
zero or less) is not more than $1,000,000; all contributions required by
Section 515 of ERISA to be made by the Company or any ERISA Affiliate to
Company Plans have been timely made; with respect to any such Company Plan and
concerning each Company Plan which is in whole or in part an "individual
account plan" (as defined in Section 3(34) of ERISA), there is set forth in
Schedule 4.12(c) (A) the amount of any liability of the Company or any ERISA
Affiliate for contributions due or to become due with respect to each such
Company Plan for periods up to the date hereof, and the date any such amounts
were paid and (B) the amount of any contribution accrued or paid or expected
to be accrued or paid with respect to such Company Plan for the plan year in
which the Effective Time occurs; with respect to any such Company Plan no such
plan has been terminated or subject to a "spin-off" or "spin-off termination"
or partial termination and no assets of any such Company Plan have been used
or employed in a manner so as to subject them to an excise tax
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<PAGE>
imposed under Section 4980 of the Code; each such Company Plan permits
termination thereof, and distribution of any assets in excess of those
required to pay Benefit Liabilities may be distributed to or for the benefit
of the Company or any ERISA Affiliate, and Section 4044(d) of ERISA would not
prevent such reversion; and with respect to any such Company Plan, any
reduction in benefits was preceded by an adequate and appropriate notice to
the parties described in and as required by Section 204(h) of ERISA. There are
no former employees or participants who are entitled to earn additional
pension benefits by reason of "grow in" or other rights with respect to
service or time periods after such employees have been terminated from
employment with the Company, or any ERISA Affiliates.
(d) Neither the Company nor any ERISA Affiliate has engaged in any
transaction described under Section 4069 of ERISA nor can any claim,
encumbrance or other Lien be imposed on the Company, any ERISA Affiliate or
assets of any of the foregoing under Section 4068 of ERISA.
(e) Each Company Plan that utilizes a funding vehicle described in Section
501(c)(9) of the Code or is subject to the provisions of Section 505 of the
Code has been the subject of a notification by the IRS that such funding
vehicle qualifies for tax-exempt status under Section 501(c)(9) of the Code
and/or such Company Plan complies with Section 505 of the Code, unless the IRS
does not as a matter of policy issue such notification with respect to that
particular type of plan. Each such Company Plan satisfies, where appropriate,
the requirements of Sections 501(c)(9) and 505 of the Code.
(f) Schedule 4.12(f) contains a list of, and the Company has delivered to
TCI true and complete copies of, all other material personnel policy, stock
option plan, collective bargaining agreement, bonus, incentive award, vacation
pay, severance pay, consulting agreement or any other employee benefit plan,
agreement, arrangement or understanding which the Company or any ERISA
Affiliate maintains, or to which the Company or any ERISA Affiliate
contributes, is required to contribute or has contributed since January 1,
1994, and which is not required under paragraph (a) or (b) above to be listed
in Schedule 4.12(a) or (b), respectively (including, without limitation, with
respect to any plans which are unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and any
other matters which relate to the obligations of the Company or any ERISA
Affiliate).
(g) The Company and each ERISA Affiliate have complied in all material
respects with all requirements for premium payments, including any interest
and penalty charges for late payment, due the Pension Benefit Guaranty
Corporation ("PBGC") with respect to each Company Plan and each separate plan
year for which any premiums are required. Except for transactions required by
this Agreement, from the period commencing January 1, 1988 through the
Effective Time, there has been no "reportable event" (as defined in Section
4043(b) of ERISA and the regulations promulgated by the PBGC thereunder) with
respect to any Company Plan subject to Title IV of ERISA for which notice to
the PBGC has not, by rule or regulation, been waived. There is not any
unsatisfied material liability to the PBGC which has been incurred by the
Company or any ERISA Affiliate on account of any Company Plan subject to Title
IV of ERISA. From the period commencing January 1, 1988 through the Effective
Time, no filing has been or will be made by the Company or any ERISA Affiliate
with the PBGC to terminate, nor has any proceeding been commenced by the PBGC
to terminate, any Company Plan subject to Title IV of ERISA which was
maintained, or wholly or partially funded, by the Company or any ERISA
Affiliate. Neither the Company nor any ERISA Affiliate (i) has ceased
operations at a facility so as to become subject to the provisions of Section
4062(e) of ERISA, (ii) has withdrawn from any Company Plan with respect to
which it is a substantial employer so as to become subject to the provisions
of Section 4063 of ERISA, (iii) has ceased contributions on or before the
Effective Time to any Company Plan subject to Section 4064(a) of ERISA to
which the Company or any ERISA Affiliate has made contributions during the
five calendar years prior to the Effective Time, or (iv) has incurred a
complete or partial withdrawal from any Company Plan that is a multiemployer
plan (as defined in either Section 3(37) or Section 4001(a)(3) of ERISA (a
"Multiemployer Plan")) so as to incur withdrawal liability as defined in
Section 4201 of ERISA (without regard to any subsequent reduction or waiver of
such liability under Section 4207 or 4208 of ERISA). No employee pension
benefit plan which is a Multiemployer Plan to which the Company or any ERISA
Affiliate contributes is in
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<PAGE>
"reorganization" (as defined in Section 4241 of ERISA) or "insolvent" (as
defined in Section 4245 of ERISA). There is not now, nor can there ever be,
any liability under Section 4064 of ERISA to the Company or any ERISA
Affiliate by reason of participation in any Company Plan by the Company or any
ERISA Affiliate on or prior to the Effective Time. There has been no amendment
to any Company Plan that would require the furnishing of security under
Section 401(a)(29) of the Code. There has been no event or circumstance and
there can be no event or circumstance which has or may result in any liability
being asserted by any Company Plan, the PBGC or any other person or entity
under Title IV of ERISA against the Company or any ERISA Affiliate. Neither
the Company nor any ERISA Affiliate has any liability to any Company Plan for
contributions under Section 412(m) of the Code or Section 302(e) of ERISA, nor
has any claim, encumbrance or other Lien been imposed under Section 412(n) of
the Code or Section 302(f) of ERISA nor is there any liability for excise
taxes imposed under Section 4971 of the Code, and all liabilities arising
under Section 412(c)(11) of the Code with respect to contributions to any
Company Plan have been set forth in Schedule 4.12(g). Copies of any notices to
the PBGC under Section 412(n) of the Code or Section 302(f) of ERISA with
respect to any Company Plan have been delivered to TCI; and copies of notices
required to be given to participants under Section 101(d) of ERISA with
respect to any Company Plan have previously been delivered to TCI.
(h) True and complete copies of each plan, agreement, arrangement or
understanding referred to in Schedule 4.12(g), the most recent determination
letter issued by the IRS with respect to each Company Plan, annual reports on
Form 5500 required to be filed with any Governmental Entity for each Company
Plan which is an employee pension benefit plan for the three most recent plan
years and all actuarial reports for the last two plan years of each Company
Plan, other than an "individual account plan," have heretofore been delivered
by the Company to TCI.
(i) Except as set forth in Schedule 4.12(i), neither the Company nor any
ERISA Affiliate is a party to or bound by the terms of any collective
bargaining agreement. The Company and each ERISA Affiliate is in compliance in
all material respects with all applicable laws respecting the employment and
employment practices, terms and conditions of employment and wage and hours of
its employees and is not engaged in any unfair labor practice. To the
knowledge of the Company, all of the employees of the Company and the ERISA
Affiliates who work in the United States are lawfully authorized to work in
the United States according to federal immigration laws. There is no labor
strike or labor disturbance pending or, to the knowledge of the Company,
threatened against the Company or any ERISA Affiliate, and during the past
five years neither the Company nor any ERISA Affiliate has experienced a work
stoppage.
(j) Each Company Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including, but not
limited to, Section 406 of ERISA and Section 4975 of the Code.
(k) Each Company Plan which is intended to be "qualified" within the meaning
of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code.
(l) Except as set forth in Schedule 4.12(l), no Company Plan provides
benefits, including without limitation death or medical benefits, with respect
to current or former employees of the Company or any ERISA Affiliate beyond
their retirement or other termination of service (other than coverage mandated
by applicable law).
(m) Except as set forth in Schedule 4.12(m), there are no material pending,
threatened or anticipated claims by or on behalf of any Company Plan, by any
employee or beneficiary covered under any such Company Plan, or otherwise
involving any such Company Plan (other than routine claims for benefits).
(n) Schedule 4.12 sets forth a true and complete list of each of the
following agreements, arrangements and commitments to which the Company or any
of its subsidiaries is a party or by which any of them may be bound (true and
complete copies of which have been made available to TCI): (i) each
employment, consulting, agency or commission agreement not terminable without
liability to the Company or any of its subsidiaries upon 60 days' or less
prior notice to the employee, consultant or agent and involving compensation
or remuneration of
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more than $50,000 per annum; (ii) each labor union or collective bargaining
agreement; (iii) each agreement with any executive officer or other key
employee of the Company or any subsidiary of the Company the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated
by this Agreement; (iv) each agreement with respect to any officer or other
key employee of the Company or any subsidiary of the Company providing any
term of employment or compensation guarantee extending for a period longer
than one year; and (v) each Company Stock Plan and each other agreement or
plan any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Neither the Company nor any of its
subsidiaries is a party to any agreement, arrangement, commitment or
understanding that has resulted or would result, upon the consummation of the
transactions contemplated under this Agreement or otherwise, separately or in
the aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code.
4.13 FAIRNESS OPINION. Furman Selz has advised the Company Board in writing
of its opinion that, as of the date hereof, the Merger Consideration payable
with respect to the Company Class A Stock pursuant to the Merger and the
ownership of the Class A Shares to be retained in the Merger, taken as a
whole, is fair, from a financial point of view, to the holders of the Company
Class A Stock (other than TCI and its subsidiaries) (the "Fairness Opinion")
and has authorized the inclusion of such Fairness Opinion in the Proxy
Statement. The Company has provided TCI with a true and complete copy of the
Fairness Opinion and will include an executed copy of the Fairness Opinion in
the Proxy Statement. In addition, the Company will, if it or TCI is so
required by applicable law or requested by the Staff of any Division of the
Commission, file or provide supplementally to the Staff, or provide to TCI so
that it may file or provide supplementally to the Staff, as the case may be,
any written presentation or fairness opinion analysis made to the Company
Board (or any committee thereof) or delivered to the Company Board (or any
committee thereof) by Furman Selz, and the Company hereby represents and
warrants to TCI that any such material provided to TCI shall be the only
written materials in the possession of the Company that were furnished to the
Company Board by Furman Selz and that the Company is free to so file or
provide such materials under such circumstances.
4.14 RECOMMENDATION OF THE COMPANY BOARD. The Company Board, by unanimous
vote at meetings duly called and held, has approved the Merger, determined
that the Merger is fair to and in the best interests of the Company's
stockholders (other than TCI and its subsidiaries), has adopted resolutions
recommending approval and adoption of this Agreement and the Merger by the
stockholders of the Company, and has adopted resolutions having the effect of
causing TCI and its affiliates and associates not to be subject to the
restrictions on "business combinations" as set forth in Section 203(a) of the
DGCL or any other state takeover law that may purport to be applicable to the
Merger and the transactions contemplated by this Agreement.
4.15 VOTE REQUIRED; CONSENTS UNDER EMPLOYEE PLANS. The only vote of
stockholders of the Company required under the DGCL and the Company Charter
and By-laws in order to approve and adopt the Merger Proposal is the
affirmative vote of a majority of the aggregate voting power of the issued and
outstanding shares of Company Class A Stock and Company Class B Stock voting
together as a single class, and no other vote or approval of or other action
by the holders of any capital stock of the Company is required. No consent,
approval or other action by any holder of any Company Stock Option or Company
SAR or any participant in any Company Stock Plan is necessary in order to
effect the provisions of Section 2.6.
4.16 ADEQUACY OF PROPERTIES; INTANGIBLE PROPERTY. The properties and assets
owned or leased by the Company and its subsidiaries are suitable and adequate
for the conduct of their respective businesses and operations and, except as
otherwise disclosed in the Company Commission Filings filed with the
Commission prior to the date hereof, the Company and its subsidiaries have
good and marketable title to or valid leasehold or other contractual interests
in such properties and assets, free and clear of all Liens other than
Permitted Encumbrances.
The Company and its subsidiaries own or have adequate rights to use all
patents, trademarks, trade names, service marks, brands, logos, copyrights,
trade secrets, customer lists and other proprietary intellectual property
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rights required for, used in or incident to the businesses of the Company and
its subsidiaries as now conducted or proposed to be conducted. Except as
otherwise described in the Company Commission Filings, the Company has not
received notice, and has no reason to know, of any claim or threatened
infringement of the rights of others with respect to any patents, trademarks,
service marks, trade names, brands, logos, copyrights or licenses used or
owned by the Company, the loss of which could have a material adverse effect
upon the business, assets, results of operations, financial condition or
prospects of the Company and its subsidiaries, taken as a whole, or of any
Scheduled Subsidiary. The Company has no knowledge it is infringing upon or
otherwise violating, or has in the past infringed upon or otherwise violated,
the rights of any third party with respect to any patent, trademark, trade
name, service mark or copyright. To the best knowledge of the Company, no
current or former employee of the Company is or was a party to any
confidentiality agreement and/or agreement not to compete which restricts or
forbids or restricted or forbade at any time during such employee's employment
by the Company, such employee's performance of the Company's business, as the
case may be, or any activity that such employee was hired to perform. To the
best knowledge of the Company, the Company is not now using, and has not in
the past used without appropriate authorization, any confidential information
or trade secrets of any third party. The Company has never received any notice
alleging such conduct.
4.17 FULL DISCLOSURE. No statement in this Agreement or in any certificate
delivered pursuant to the requirements of this Agreement by or on behalf of
the Company to TCI contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TCI
TCI hereby represents and warrants to the Company as follows:
5.1 ORGANIZATION. Each of Merger Sub, TCI and TCI's "significant
subsidiaries" (as defined in Rule 1-02 of Regulation S-X of the Rules and
Regulations of the Commission) (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and (iii) is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing is not reasonably likely to have a
material adverse effect on the business, assets, results of operations or
financial condition of TCI and its subsidiaries taken as a whole. Each entity
in which TCI, directly or through one or more of its subsidiaries, has an
investment accounted for by the equity method which is material to the
business, assets, results of operations or financial condition of TCI and its
subsidiaries taken as a whole (the "TCI Equity Affiliates") is a corporation
or partnership (A) duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, (B) has all
requisite corporate or partnership power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted and (C) is duly qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it, or
the nature of its activities, makes such qualification necessary, except in
each case where such failure to be so existing and in good standing or to have
such power and authority or to be so qualified to do business and be in good
standing has not had and is not reasonably likely to have, individually or in
the aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of TCI and its subsidiaries taken as a
whole.
5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been duly
executed and delivered by TCI. Subject to the satisfaction of the conditions
set forth in Section 7.1, assuming that applicable state takeover laws, if
any, are complied with and assuming (without investigation) that all shares of
Company Stock outstanding at the Effective Time will be duly authorized,
validly issued, fully paid and non-assessable: (i) TCI has all requisite
corporate power and authority to enter into this Agreement and each of TCI and
Merger Sub has
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all requisite corporate power and authority to perform its obligations
hereunder and, subject to the approval of the Merger Proposal by the
stockholders of the Company in accordance with the DGCL and the Company
Charter and By-laws, to consummate the transactions contemplated hereby; (ii)
the execution, delivery and performance by TCI of this Agreement and the
consummation by each of TCI and Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on its
part; (iii) this Agreement is a valid and binding obligation of TCI,
enforceable in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies); (iv) the shares of TCI Preferred
Stock to be issued and delivered by TCI pursuant to Section 2.5 will be, when
the Merger has become effective and such shares are issued and delivered as
provided in Section 2.5 and as described in the Registration Statement, duly
authorized, validly issued, fully paid and non-assessable; and (v) the shares
of TCI Class A Stock issuable upon conversion of the TCI Preferred Stock will
be, when issued, duly authorized, validly issued, fully paid and non-
assessable.
5.3 CAPITALIZATION OF TCI. The authorized capital stock of TCI consists of
1.1 billion shares of TCI Class A Stock, 150 million shares of Class B Common
Stock, par value $1.00 per share (the "TCI Class B Stock"), 700,000 shares of
a class designated Class A Preferred Stock, par value $.01 per share ("Class A
Preferred"), 1,675,096 shares of a class designated Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share
("Class B Preferred"), and ten million shares of a class designated Series
Preferred Stock, par value $.01 per share (the "Series Preferred Stock"), such
class to be issuable in series of which three series have been designated
pursuant to TCI's Restated Certificate of Incorporation (the "TCI Charter")
and Section 151(g) of the DGCL. As of the close of business on June 9, 1995,
there were 571,499,424 shares of TCI Class A Stock and 84,864,800 shares of
TCI Class B Stock outstanding (excluding shares held by subsidiaries of TCI);
592,798 shares of Class A Preferred outstanding (all of which are held by
subsidiaries of TCI); 1,620,026 shares of Class B Preferred outstanding
(excluding shares held by subsidiaries of TCI); 70,559 shares of TCI's
Convertible Preferred Stock, Series C ("Series C Preferred") outstanding; one
million shares of TCI's Convertible Preferred Stock, Series D ("Series D
Preferred") outstanding; and 246,042 shares of TCI's Redeemable Convertible
Preferred Stock, Series E ("Series E Preferred") outstanding (all of which are
held by subsidiaries of TCI). As of the close of business on such date, TCI
had outstanding preferred stock and debt securities convertible into or
exchangeable for 55,763,474 shares of TCI Class A Stock and options to
purchase 12,757,328 shares of TCI Class A Stock (excluding shares issuable
upon conversion of convertible securities of TCI held by subsidiaries of TCI).
If the proposals being submitted to TCI's stockholders for approval (including
the Liberty Media Group Stock Proposal) as described in TCI's proxy
statement/prospectus dated June 29, 1995 are approved, then the authorized
capital stock of TCI will consist of the following: (i) 2.725 billion shares
of Common Stock, par value $1.00 per share, divided into four series
consisting of (A) 1.75 billion shares of Series A TCI Group Common Stock
created by redesignation of the TCI Class A Stock, (B) 150 million shares of
Series B TCI Group Common Stock created by redesignation of the TCI Class B
Stock, (C) 750 million shares designated Series A Liberty Media Group Common
Stock, (D) 75 million shares designated Series B Liberty Media Group Common
Stock, (ii) the Class A Preferred, (iii) the Class B Preferred and (iv) 50
million shares of Series Preferred Stock. In addition to the three existing
series of Series Preferred Stock, a new series will be designated Convertible
Redeemable Participating Preferred Stock, Series F (the "Series F Preferred"),
the shares of which will be issued in exchange for shares of TCI Class A Stock
and preferred stock held by certain wholly owned subsidiaries of TCI.
5.4 TCI REPORTS AND FINANCIAL STATEMENTS. TCI has heretofore made available
to the Company true and complete copies of all reports, registration
statements, definitive proxy statements and other documents (in each case
together with all amendments thereto) filed by TCI or its predecessor with the
Commission since September 30, 1994 (such reports, registration statements,
definitive proxy statements and other documents, together with any amendments
thereto, are sometimes collectively referred to as the "TCI Commission
Filings"). The TCI Commission Filings constitute all of the documents (other
than preliminary material) that TCI or its predecessor was required to file
with the Commission since such date. As of their respective dates, each of the
TCI Commission Filings complied in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations under each such Act, and none of the TCI
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Commission Filings contained as of such date any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When filed with the
Commission, the financial statements included in the TCI Commission Filings
complied as to form in all material respects with the applicable rules and
regulations of the Commission and were prepared in accordance with generally
accepted accounting principles (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and such financial statements fairly present the
consolidated financial position of TCI and its consolidated subsidiaries as at
the dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended, subject, in the case of
the unaudited interim financial statements, to normal, recurring year-end
audit adjustments. Except as and to the extent reflected or reserved against
in the financial statements included in TCI's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995 or as disclosed therein and except as set
forth on Schedule 5.4, none of TCI, any of TCI's subsidiaries or, to the
knowledge of TCI, any TCI Equity Affiliate had as of such date any liability
or obligation of any kind required to be reflected on a balance sheet of TCI
and its consolidated subsidiaries prepared in accordance with the applicable
rules and regulations of the Commission which was material to the business,
assets, results of operations or financial condition of TCI and its
subsidiaries taken as a whole. Since March 31, 1995, except as disclosed in
the TCI Commission Filings filed with the Commission prior to the date hereof,
none of TCI, any of TCI's subsidiaries or, to the knowledge of TCI, any TCI
Equity Affiliate has incurred any liability or obligation of any kind which,
in any case or in the aggregate, is or may be material to the business,
assets, results of operations or financial condition of TCI and its
subsidiaries taken as a whole, except in the ordinary course of business.
5.5 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS. Except
as set forth on Schedule 5.5, the execution and delivery by TCI of this
Agreement do not, and the performance by TCI and Merger Sub of their
obligations hereunder and the consummation of the transactions contemplated
hereby will not:
(i) conflict with or violate the TCI Charter or By-laws or the
Certificate of Incorporation or By-laws of Merger Sub;
(ii) assuming that the Company's representations and warranties in clause
(ii) of Section 4.5 are, and continue to be, accurate, require any
Government Consent or Governmental Filing on the part of or with respect to
TCI, any subsidiary of TCI or, to the knowledge of TCI, any TCI Equity
Affiliate, except for (A) the filing with the Commission of the
Registration Statement, and such reports and other documents, if any, under
Sections 12(g), 13(a), 13(d) and 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions
contemplated hereby, (B) the filing of the Certificate of Merger and the
Certificate of Designations with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which the Company or Merger Sub is qualified to do business, (C)
the FCC Approvals and the Local Approvals, (D) such Government Consents and
Governmental Filings as may be required in connection with the issuance of
TCI Preferred Stock as contemplated hereby pursuant to state securities and
blue sky laws, (E) the Governmental Filings to be made on the part of or
with respect to the Company referred to in clause (ii) of Section 4.5, (F)
the Governmental Filings required pursuant to the pre-merger notification
requirements of the Hart-Scott Act, and (G) such Government Consents and
Governmental Filings the absence or omission of which will not, either
individually or in the aggregate, have a material adverse effect on the
transactions contemplated hereby or on the business, assets, results of
operations, financial condition or prospects of TCI and its subsidiaries
taken as a whole;
(iii) require on the part of TCI, any subsidiary of TCI or, to the
knowledge of TCI, any TCI Equity Affiliate, any Contract Consent or
Contract Notice, except for such Contract Consents and Contract Notices the
absence or omission of which will not, either individually or in the
aggregate, have a material adverse effect on the transactions contemplated
hereby or on the business, assets, results of operations, financial
condition or prospects of TCI and its subsidiaries taken as a whole;
(iv) assuming that all of the assumptions specified in the second
sentence of Section 5.2 are valid, result in a Violation by TCI, Merger Sub
or any other subsidiary of TCI of any Contract to which TCI, Merger Sub,
any other subsidiary of TCI or, to the knowledge of TCI, any TCI Equity
Affiliate is a party,
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by which TCI, Merger Sub, any other subsidiary of TCI or, to the knowledge
of TCI, any TCI Equity Affiliate or any of their respective assets or
properties is bound or affected or pursuant to which TCI, Merger Sub, any
other subsidiary of TCI or, to the knowledge of TCI, any TCI Equity
Affiliate is entitled to any rights or benefits, except for such Violations
which would not, individually or in the aggregate, have a material adverse
effect on the transactions contemplated hereby or on the business, assets,
results of operations, financial condition or prospects of TCI and its
subsidiaries taken as a whole; or
(v) assuming that all of the assumptions specified in the second sentence
of Section 5.2 are valid, that the Merger Proposal is approved by the
Company's stockholders as required by the DGCL and the Company Charter and
By-laws, and that the Government Consents and Governmental Filings
specified in clause (ii) of this Section 5.5 are obtained, made and given,
result in a Violation of, under or pursuant to any law, rule, regulation,
order, judgment or decree applicable to TCI, Merger Sub, any other
subsidiary of TCI or, to the knowledge of TCI, any TCI Equity Affiliate or
by which any of their respective properties or assets are bound or
affected, except for such Violations which would not, individually or in
the aggregate, have a material adverse effect on the transactions
contemplated hereby or on the business, assets, results of operations,
financial condition or prospects of TCI and its subsidiaries taken as a
whole.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise disclosed in
the TCI Commission Filings filed with the Commission prior to the date hereof
or as disclosed in a Schedule to this Agreement, since December 31, 1994,
there has not been any material adverse change in, and no event has occurred
and no condition exists which, individually or together with other events or
conditions, has had or, insofar as TCI can reasonably foresee, is reasonably
likely to have, a material adverse effect on, the business, assets, results of
operations, financial condition or prospects of TCI and its subsidiaries taken
as a whole (excluding events or conditions generally affecting the cable
television industry or satellite television industry in the United States or
affecting general business or economic conditions in the United States).
5.7 REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by TCI or any of its affiliates, directors,
officers, employees, agents or representatives in writing specifically for
inclusion or incorporation by reference in, and which is included or
incorporated by reference in, (i) the Registration Statement or any amendment
or supplement thereto, (ii) the Proxy Statement or any amendment or supplement
thereto, or (iii) any other documents filed or to be filed by the Company with
the Commission or any other Governmental Entity in connection with the
transactions contemplated hereby, will, at the respective times such documents
are filed, and, in the case of the Registration Statement or any amendment or
supplement thereto, when the same becomes effective, at the time of the
Special Meeting and at the Effective Time, and, in the case of the Proxy
Statement or any amendment or supplement thereto, at the time of mailing
thereof to the Company's stockholders or at the time of the Special Meeting or
any other meeting of the Company's stockholders to be held in connection with
the Merger, be false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier communication with respect
to the solicitation of any proxy for the Special Meeting. For this purpose,
any such information included or incorporated by reference in any such
document will be deemed to have been so supplied in writing specifically for
inclusion or incorporation therein if such document was available for review
by TCI a reasonable time before such document was filed (but the foregoing
shall not be the exclusive manner in which it may be established that such
information was so supplied). The Registration Statement will comply as to
form in all material respects with the applicable provisions of the Securities
Act and the rules and regulations under such Act (except that no
representation is made as to the form of the Company Proxy Statement to be
included as the prospectus therein).
5.8 LEGAL PROCEEDINGS. Except as set forth in the TCI Commission Filings
filed with the Commission prior to the date hereof or as set forth on Schedule
5.8, (i) there is no suit, action or proceeding pending or, to the best
knowledge of TCI, any investigation pending or any suit, action, proceeding or
investigation threatened, against, involving or affecting TCI, any subsidiary
of TCI or, to the knowledge of TCI, any TCI Equity Affiliate or any of its or
their properties or rights (excluding suits, actions, proceedings or
investigations generally affecting the cable television industry or satellite
television industry in a particular state or in the United States
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<PAGE>
and to which neither TCI nor any subsidiary of TCI is a party), which, if
adversely determined, is, insofar as TCI can reasonably foresee, reasonably
likely to have, either individually or in the aggregate, a material adverse
effect on the business, assets, results of operations, financial condition or
prospects of TCI and its subsidiaries taken as a whole; (ii) there is no
judgment, decree, Injunction, rule or order of any Governmental Entity
applicable to TCI, any subsidiary of TCI or, to the knowledge of TCI, any TCI
Equity Affiliate having, or which, insofar as TCI can reasonably foresee, is
reasonably likely to have, either individually or in the aggregate, any such
effect; and (iii) to the best knowledge of TCI, there is no action, suit,
proceeding or investigation pending or threatened against TCI or Merger Sub
which seeks to restrain, enjoin or delay the consummation of the Merger or any
of the other transactions contemplated hereby and no Injunction of any type
referred to in Section 7.1(d) has been entered or issued against TCI or Merger
Sub. The term "order" as used in the immediately preceding sentence shall not
be deemed to include any Licenses.
5.9 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS; INTANGIBLE
PROPERTY. TCI, its subsidiaries and, to the knowledge of TCI, the TCI Equity
Affiliates hold all Licenses which are material to the operation of the
businesses of TCI and its subsidiaries taken as a whole. Each of TCI, its
subsidiaries and, to the knowledge of TCI, the TCI Equity Affiliates is in
compliance with, and has conducted its business so as to comply with, the
terms of their respective Licenses and with all applicable laws, rules,
regulations, ordinances and codes, domestic or foreign, including laws, rules,
regulations, ordinances and codes relating to the protection of the
environment, except where the failure so to comply has not had and, insofar as
reasonably can be foreseen, in the future will not have, either individually
or in the aggregate, a material adverse effect on the business, assets,
results of operations, financial condition or prospects of TCI and its
subsidiaries taken as a whole. Without limiting the generality of the
foregoing, TCI, its subsidiaries and, to the knowledge of TCI, the TCI Equity
Affiliates (i) have all FCC Licenses and Permits required for the operation of
the cable television systems and related facilities being operated on the date
hereof by TCI, any of its subsidiaries, or, to the knowledge of TCI, any TCI
Equity Affiliate, (ii) have duly and currently filed all reports and other
information required to be filed by the FCC or any other Governmental Entity
in connection with such FCC Licenses and Permits and (iii) are not in
violation of any of such FCC Licenses or Permits, other than the lack of FCC
Licenses or Permits, delays in filing reports or possible violations which
have not had and, insofar as can reasonably be foreseen, in the future will
not have a material adverse effect on the business, assets, results of
operations, financial condition or prospects of TCI and its subsidiaries taken
as a whole. TCI and its subsidiaries own or have adequate rights to use all
patents, trademarks, trade names, service marks, trade secrets, copyrights and
other proprietary intellectual property rights as are material in connection
with the businesses of TCI and its subsidiaries taken as a whole.
5.10 BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other person or entity is or will be entitled, by reason of any
agreement, act or statement by TCI, by Merger Sub, by any of TCI's other
subsidiaries or affiliates, or by any directors, officers or employees of TCI,
to any financial advisory, broker's, finder's or similar fee or commission, to
reimbursement of expenses or to indemnification or contribution in connection
with any of the transactions contemplated by this Agreement, and TCI agrees to
indemnify and hold the Company harmless from and against any and all claims,
liabilities or obligations with respect to any fees, commissions, expenses or
claims for indemnification or contribution asserted by any Person on the basis
of any act or statement made or alleged to have been made by TCI, Merger Sub,
any of TCI's other subsidiaries or affiliates or any of TCI's directors,
officers or employees.
5.11 TAX MATTERS. To the best of TCI's knowledge, (i) there has been duly
filed by or on behalf of TCI and each of its subsidiaries, or filing
extensions from the appropriate federal, state, foreign and local Governmental
Entities have been obtained with respect to, all material federal, state,
foreign and local tax returns and reports required to be filed on or prior to
the date hereof; (ii) payment in full or adequate provision for the payment of
all taxes required to be paid in respect of the periods covered by such tax
returns and reports has been made (except in respect of state, local and
foreign taxes which are in the aggregate immaterial in amount) and (iii) a
reserve which TCI reasonably believes to be adequate has been set up for the
payment of all such taxes anticipated to be payable in respect of periods
through the date hereof. Except as set forth on Schedule 5.11, none of the
federal income tax returns required to be filed by or on behalf of TCI and
each of its
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subsidiaries consolidated in such returns under the Code or any predecessor
statute (the "TCI Consolidated Returns") are currently under examination by
the IRS. Except as set forth on Schedule 5.11, there have not been any
deficiencies or assessments asserted in writing by the IRS with respect to the
TCI Consolidated Returns. Except as set forth on Schedule 5.11, neither TCI
nor any of its subsidiaries has, with regard to any assets or property held,
acquired or to be acquired by TCI or any of its subsidiaries, filed a consent
pursuant to Section 341(f) of the Code.
5.12 INTERIM OPERATIONS OF MERGER SUB. Merger Sub will be formed solely for
the purpose of engaging in the transactions contemplated hereby, and
immediately prior to the Effective Time will have engaged in no other business
activities, will have no subsidiaries, and will have conducted its operations
only as contemplated hereby.
ARTICLE VI
TRANSACTIONS PRIOR TO CLOSING
6.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. Upon reasonable
notice, the Company shall (and shall cause each of its subsidiaries, and use
its reasonable efforts to cause its other affiliates, to) afford to the
officers, employees, counsel, accountants and other authorized representatives
of TCI full access during normal business hours to all its properties,
personnel, books and records and furnish promptly to such Persons such
financial and operating data and other information concerning its business,
properties, personnel and affairs as such Persons shall from time to time
reasonably request and instruct the officers, directors, employees, counsel
and financial advisors of the Company to discuss the business operations,
affairs and assets of the Company and otherwise fully cooperate with the other
party in its investigation of the business of the Company. No investigation
pursuant to this Section 6.1 will affect any representation or warranty given
by the Company to TCI hereunder.
6.2 CONFIDENTIALITY. Unless otherwise agreed to in writing by the party
disclosing (or whose Representatives disclosed) the same (a "disclosing
party"), each party (a "receiving party") shall, and shall cause its
affiliates, directors, officers, employees, agents and controlling Persons
(such affiliates and other Persons with respect to any party being
collectively referred to as such party's "Representatives") to, (i) keep all
Proprietary Information of the disclosing party confidential and not disclose
or reveal any such Proprietary Information to any Person other than those
Representatives of the receiving party who are participating in effecting the
transactions contemplated hereby or who otherwise need to know such
Proprietary Information, (ii) use such Proprietary Information only in
connection with consummating the transactions contemplated hereby and
enforcing the receiving party's rights hereunder, and (iii) not use
Proprietary Information in any manner detrimental to the disclosing party. In
the event that a receiving party is requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any Proprietary
Information of the disclosing party, the receiving party shall provide the
disclosing party with prompt notice of such request(s) to enable the
disclosing party to seek an appropriate protective order. A party's
obligations hereunder with respect to Proprietary Information that (i) is
disclosed to a third party with the disclosing party's written approval, (ii)
is required to be produced under order of a court of competent jurisdiction or
other similar requirements of a governmental agency, or (iii) is required to
be disclosed by applicable law or regulation, will, subject in the case of
clauses (ii) and (iii) above to the receiving party's compliance with the
preceding sentence, cease to the extent of the disclosure so consented to or
required, except to the extent otherwise provided by the terms of such consent
or covered by a protective order. If a receiving party uses a degree of care
to prevent disclosure of the Proprietary Information that is at least as great
as the care it normally takes to preserve its own information of a similar
nature, it shall not be liable for any disclosure that occurs despite the
exercise of that degree of care, and in no event shall a receiving party be
liable for any indirect, punitive, special or consequential damages unless
such disclosure resulted from its willful misconduct or gross negligence in
which event it shall be liable in damages for the disclosing party's lost
profits resulting directly and solely from such disclosure. In the event this
Agreement is terminated, each party shall, if so requested by the other party,
promptly return or destroy all of
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the Proprietary Information of such other party, including all copies,
reproductions, summaries, analyses or extracts thereof or based thereon in the
possession of the receiving party or its Representatives; provided, however,
that the receiving party shall not be required to return or cause to be
returned summaries, analyses or extracts prepared by it or its
Representatives, but shall destroy (or cause to be destroyed) the same upon
request of the disclosing party.
For purposes of this Section 6.2, "Proprietary Information" of a party means
all proprietary or confidential information about such party that is furnished
by it or its Representatives to the other party or the other party's
Representatives, regardless of the manner in which it is furnished.
"Proprietary Information" does not include, however, information which (a) has
been or in the future is published or is now or in the future is otherwise in
the public domain through no fault of the receiving party or its
Representatives, (b) was available to the receiving party or its
Representatives on a non-confidential basis prior to its disclosure by the
disclosing party, (c) becomes available to the receiving party or its
Representatives on a non-confidential basis from a Person other than the
disclosing party or its Representatives who is not otherwise bound by a
confidentiality agreement with the disclosing party or its Representatives, or
is not otherwise prohibited from transmitting the information to the receiving
party or its Representatives, or (d) is independently developed by the
receiving party or its Representatives through Persons who have not had,
either directly or indirectly, access to or knowledge of such information.
6.3 PUBLIC ANNOUNCEMENTS. No party shall or shall permit any of its
subsidiaries to (and each party shall use its reasonable efforts to cause its
affiliates, directors, officers, employees, agents and representatives not to)
issue any press release, make any public announcement or furnish any written
statement to its employees or stockholders generally concerning the
transactions contemplated by this Agreement without the consent of the other
party (which consent shall not be unreasonably withheld), except to the extent
required by applicable law or the applicable requirements of the National
Association of Securities Dealers, Inc. with respect to issuers whose
securities are quoted on the Nasdaq Stock Market (and in either such case such
party shall, to the extent consistent with timely compliance with such
requirement, consult with the other party prior to making the required
release, announcement or statement).
6.4 CONDUCT OF THE COMPANY'S BUSINESS PENDING THE EFFECTIVE TIME. The
Company shall, and shall cause each of its subsidiaries to, except as
permitted, required or specifically contemplated by this Agreement or
consented to or approved in writing by TCI (which consent or approval shall
not be unreasonably withheld) during the period commencing on the date hereof
and ending at the Effective Time:
(a) conduct its business only in, and not take any action except in, the
ordinary and usual course of its business and consistent with past
practices;
(b) use reasonable efforts, in the ordinary and usual course of business
and consistent with past practices, to preserve intact its business
organization, to preserve its Licenses in full force and effect, to keep
available the services of its present officers and key employees, and to
preserve the good will of those having business relationships with it;
(c) not (i) make any change or amendments in its charter, by-laws or
partnership agreement (as the case may be); (ii) issue, grant, sell or
deliver any shares of its capital stock or any of its other equity
interests or securities, or any securities convertible into, or options,
warrants or rights of any kind to subscribe to or acquire, any shares of
its capital stock or any of its other equity interests or securities, or
any phantom shares, phantom equity interests or stock or equity
appreciation rights, other than issuances of Company Class A Stock upon
exercise of Company Stock Options outstanding on the date of and disclosed
pursuant to this Agreement in accordance with their existing terms, and
issuances of capital stock or partnership or other equity interests by a
wholly owned subsidiary of the Company to its parent; (iii) split, combine
or reclassify the outstanding shares of its capital stock or any of its
other outstanding equity interests or securities or issue any capital stock
or other equity interests or securities in exchange for any such shares or
interests; (iv) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of capital stock or any other securities of the
Company or any subsidiary of the Company; (v) amend or modify any
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outstanding options, warrants, or rights to acquire, or securities
convertible into shares of its capital stock or other equity interests or
securities, or any phantom shares, phantom equity interests or stock or
equity appreciation rights, or amend or modify any Company Stock Plan or
adopt or authorize any other stock or equity appreciation rights,
restricted stock or equity, stock or equity purchase, stock or equity bonus
or similar plan, arrangement or agreement; (vi) make any other changes in
its capital or partnership structure; (vii) declare, set aside, pay or make
any dividend or other distribution or payment (whether in cash, property or
securities) with respect to its capital stock or other securities, except
for dividends by a subsidiary of the Company paid ratably to its
stockholders or the partners thereof, as the case may be (provided in the
case of any non-wholly owned subsidiary of the Company that the other
stockholders of or partners in such subsidiary are not officers, directors,
employees or affiliates of the Company or any of its subsidiaries);
(viii) sell or pledge any stock, equity or partnership interest owned by it
in any subsidiary of the Company or any Equity Affiliate, except for
dispositions permitted by Section 6.4(f) hereof; or (ix) enter into or
assume any contract, agreement, obligation, commitment or arrangement with
respect to any of the foregoing;
(d) not (i) modify or change in any material respect any License or other
Contract, other than in the ordinary course of business; (ii) enter into
any new employment, consulting, agency or commission agreement, make any
amendment or modification to any existing such agreement or grant any
increases in compensation, (x) in each case other than in the ordinary
course of business and consistent with past practice and with or granted to
persons who are not officers or directors of the Company or any subsidiary
of the Company and which do not, in the aggregate, materially increase the
compensation or benefit expense of the Company or any subsidiary of the
Company or any Equity Affiliate, (y) other than the regular annual salary
increase granted in the ordinary course of business and consistent with
past practice to officers of the Company or its subsidiaries who are not
directors or executive officers of the Company and (z) other than entering
into the employment agreements with Messrs. Flinn, Bliss and Boylan
substantially in the applicable form of Exhibit 6.4d-1, 6.4d-2 or 6.4d-3
and other than entering into agreements having the terms, in the form and
with the Persons contemplated by Schedule 6.4(d) and Exhibit 6.4d-4; (iii)
establish, amend or modify any Company Plan or any other employee benefit
plan of any kind referred to in Section 4.12(a), except to the extent
required by any applicable law or the existing terms of such Company Plan
or by the provisions of this Agreement; (iv) secure any of its outstanding
unsecured indebtedness, provide additional security for any of its
outstanding secured indebtedness or grant, create or suffer to exist any
Lien on or with respect to any property, assets or rights of the Company or
any subsidiary of the Company, except for Permitted Encumbrances; (v) pay,
discharge or satisfy claims, liabilities or obligations (absolute, accrued,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in its latest balance sheet
included in the Company Form 10-Q or incurred since the date of such
balance sheet in the ordinary course of business and consistent with past
practice and scheduled repayments of indebtedness reflected on the latest
balance sheet included in the Company Form 10-Q; (vi) cancel any debts or
waive any claims or rights, except in the ordinary course of business and
consistent with past practice; (vii) make any capital expenditures which
individually or in the aggregate are in excess of the amount provided for
capital expenditures in the 1995 capital budget for the Company and its
subsidiaries approved by the Company Board prior to May 31, 1995 and in
effect on June 1, 1995 (the "1995 capital budget"); (viii) accelerate the
payment of, or otherwise prepay, any existing outstanding indebtedness for
borrowed money; (ix) other than as contemplated or otherwise permitted by
this Agreement and other than the normal cash management practices of the
Company and its subsidiaries conducted in the ordinary and usual course of
their business and consistent with past practice, make any advance or loan
to or engage in any transaction with any director, officer, partner or
affiliate not required by the terms of an existing Contract described on
Schedule 6.4(d); or (x) enter into or assume any contract, agreement,
obligation, commitment or arrangement with respect to any of the foregoing;
(e) other than acquisitions listed on Schedule 6.4(e) or acquisitions in
existing or related lines of business of the entity making such acquisition
not exceeding $5 million in the aggregate, not acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership,
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association or other business organization or division thereof or otherwise
acquire or agree to otherwise acquire any assets which are material,
individually or in the aggregate, to the Company and its subsidiaries taken
as a whole or to any significant subsidiary of the Company (it being
understood that any acquisition that would constitute a capital expenditure
within the meaning of the 1995 capital budget shall be subject to the
provisions of clause (d) of this Section and not to this clause (e));
(f) other than dispositions in the ordinary course of business consistent
with prior practice, not sell, lease or encumber or otherwise dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its
assets which are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole or to any of the Company's
significant subsidiaries;
(g) not incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries or
guarantee any debt securities of others other than in the ordinary course
of business consistent with past practice; and
(h) not take any action that would or is reasonably likely to result in
(i) any of the representations or warranties made in Article IV hereof
being untrue on and as of the Closing Date as though made on and as of the
Closing Date (except for changes permitted or contemplated by this
Agreement) or (ii) any of the conditions set forth in Section 7.1, 7.2 or
7.3 not being satisfied.
6.5 NO SOLICITATION. Subject to the fiduciary duties of the Company Board
under applicable law, the Company will not, directly or indirectly, through
any officer, director, employee, agent or representative or otherwise (i)
solicit or initiate the submission of proposals or offers from any Person
other than TCI relating to any Takeover Proposal (as defined below in this
Section); (ii) cooperate with, or furnish or cause to be furnished any non-
public information concerning the business, properties, or assets of the
Company or any of the Company's subsidiaries to, any Person other than TCI in
connection with any Takeover Proposal; (iii) negotiate with any Person other
than TCI with respect to any Takeover Proposal; or (iv) enter into any
agreement or understanding with any Person other than TCI with the intent to
effect any Takeover Proposal; provided that nothing contained in this Section
6.5 shall prohibit the Company or the Company Board, to the extent required by
their fiduciary duties under applicable law, from providing information to, or
participating in discussions with, any party that makes an unsolicited inquiry
with respect to the Company if the Company Board reasonably believes such
party may propose a Takeover Proposal on terms that are superior, from a
financial point of view, to the terms of the Merger for the stockholders of
the Company. The Company will immediately give written notice to TCI of its
receipt of any Takeover Proposal or inquiry with respect to making a Takeover
Proposal and provide TCI with such information regarding the Person making the
Takeover Proposal or inquiry as TCI shall reasonably request. As used in this
Section, "Takeover Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger, consolidation, reorganization,
other business combination, or recapitalization involving the Company or any
of its subsidiaries, for the acquisition of a 5% or greater interest in the
equity or in any class or series of capital stock of the Company or any of its
subsidiaries, for the acquisition of the right to cast 5% or more of the votes
on any matter with respect to the Company or any of its subsidiaries, or for
the acquisition of a substantial portion of any of their respective assets
other than in the ordinary course of their respective businesses or the effect
of which may be to prohibit, restrict or delay the consummation of the Merger
or any of the other transactions contemplated by this Agreement or impair the
contemplated benefits to TCI of the Merger or any of the other transactions
contemplated by this Agreement. Nothing contained herein shall be construed to
prohibit the Company or the Company Board from making any disclosure to its
stockholders which, in the judgment of the Company Board as advised by
counsel, may be required by applicable law in connection with any such
proposal or offer. The Company, for itself and the Company Board, acknowledges
that the agreements contained in this Section 6.5 are derived from and based
upon the Company Board's opinion that the Merger is fair to and in the best
interests of the Company and its stockholders.
6.6 EXPENSES. Except as otherwise provided in this Section 6.6, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such cost or expense, except that the costs and expenses
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incurred in connection with printing and mailing the Preliminary Proxy
Statement, the Proxy Statement, the Registration Statement (and any amendment
or supplement thereto) and any prospectus included in the Registration
Statement (and any amendment or supplement thereto) and the costs of filing
under the Hart-Scott Act shall be borne one-half by TCI and one-half by the
Company. Notwithstanding the foregoing, but subject to Section 9.11, if this
Agreement is terminated by a party (the "non-breaching party") as a result of
a material willful breach by the other party (the "breaching party") of its
covenants or agreements contained herein or the representations and warranties
made by it herein, the breaching party shall reimburse the non-breaching party
for all out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement. Such payment shall be made
against receipt of documentation in reasonable detail supporting the amount of
such costs and expenses. Any payment required to be made by the breaching
party hereunder shall be made within five (5) business days of the termination
of this Agreement by delivery to the non-breaching party of a certified or
bank cashier's check payable in next-day funds.
6.7 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Effective Time, each party will give prompt notice in writing to the other
party of: (i) any information that indicates that any of its representations
or warranties contained herein was not true and correct as of the date hereof
or will not be true and correct at and as of the Effective Time with the same
force and effect as if made at and as of the Effective Time (except for
changes permitted or contemplated by this Agreement), (ii) the occurrence of
any event which will result, or has a reasonable prospect of resulting, in the
failure of any condition specified in Article VII hereof to be satisfied,
(iii) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement or that such transactions
otherwise may violate the rights of or confer remedies upon such third party
and (iv) any notice of, or other communication relating to, any litigation
referred to in Section 6.8 or any order or judgment entered or rendered
therein.
6.8 DEFENSE OF LITIGATION. Each of the parties agrees to vigorously defend
against all actions, suits or proceedings in which such party is named as a
defendant which seek to enjoin, restrain or prohibit the transactions
contemplated hereby or seek damages with respect to such transactions. The
Company shall not settle any such action, suit or proceeding or fail to
perfect on a timely basis any right to appeal any judgment rendered or order
entered against the Company therein without the consent of TCI (which consent
shall not be withheld unreasonably). Each of the parties further agrees to use
its reasonable efforts to cause each of its affiliates, directors and officers
to vigorously defend any action, suit or proceeding in which such affiliate,
director or officer is named as a defendant and which seeks any such relief to
comply with this Section to the same extent as if such person were a party
hereto.
6.9 ADDITIONAL FINANCIAL STATEMENTS. Promptly after the same become
available, each of the Company and TCI shall furnish to the other such
additional financial data concerning the furnishing party and its subsidiaries
as such other party may reasonably request, including any audited consolidated
financial statements of the furnishing party for any year ending after the
date hereof, prepared in conformity with the requirements of the Commission
applicable to annual financial statements to be included in Form 10-K under
the Exchange Act, and all interim quarterly consolidated financial statements
of the furnishing party prepared after the date of this Agreement, accompanied
by a statement of the principal financial officer of the furnishing party
that, in the opinion of such officer, such quarterly financial statements were
prepared in conformity with the requirements of the Commission applicable to
financial statements to be included in Form 10-Q under the Exchange Act
applied on a consistent basis (except as otherwise stated in such quarterly
financial statements) and present fairly the consolidated financial position,
results of operations and cash flows of the furnishing party and its
consolidated subsidiaries as of the date and for the period indicated subject
to normal, recurring year-end audit adjustments.
6.10 ACTIONS BY MERGER SUB. In its capacity as the sole stockholder of
Merger Sub, TCI shall cause Merger Sub to approve and adopt the Merger
Proposal and to take all corporate action necessary on its part to consummate
the Merger Proposal and the transactions contemplated hereby. Merger Sub shall
not conduct any other business, and will have no other assets or liabilities.
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6.11 CERTAIN PERSONNEL MATTERS. The Company shall be entitled, prior to the
Closing Date, to enter into the employment agreements with Messrs. Flinn,
Bliss and Boylan substantially in the applicable form of Exhibit 6.4d-1, 6.4d-
2 or 6.4d-3 and may enter into agreements having the terms, in the form and
with the Persons contemplated by Schedule 6.4(d) and Exhibit 6.4d-4.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TCI, MERGER SUB AND THE
COMPANY. The respective obligations of TCI, Merger Sub and the Company to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which, to the extent permitted by applicable law, may be
waived by TCI, for itself and Merger Sub (but not for the Company), or by the
Company for itself (but not for TCI or Merger Sub):
(a) Approval of Stockholders. This Agreement shall have been adopted by
such vote of the stockholders of the Company as set forth in Section 4.15.
(b) Filing of Certificate of Designations. The Certificate of
Designations for the TCI Preferred Stock (or, if applicable as provided in
Section 2.7, the TCI Group Preferred Stock and the Liberty Media Group
Preferred Stock (as defined in Exhibit 2.7)) shall have been filed with the
Delaware Secretary of State.
(c) Registration. The Registration Statement (as amended or supplemented)
shall have become effective under the Securities Act and shall not be
subject to any stop order, and no action, suit, proceeding or investigation
seeking a stop order or to suspend the effectiveness of the Registration
Statement shall have been initiated and be continuing or shall have been
threatened and be unresolved. TCI shall have received all state securities
law or blue sky permits and authorizations necessary to carry out the
transactions contemplated hereby, such permits and authorizations shall be
in full force and effect and no action, suit, proceeding or investigation
seeking to revoke or suspend the effectiveness of any such permit or
authorization shall have been initiated and be continuing or shall have
been threatened and be unresolved.
(d) Absence of Injunctions. No permanent or preliminary Injunction or
restraining order or other order by any court or other Governmental Entity
of competent jurisdiction, or other legal restraint or prohibition,
preventing consummation of the transactions contemplated hereby as provided
herein shall be in effect.
(e) Hart-Scott. Any applicable waiting period under the Hart-Scott Act
shall have expired or been terminated without receipt of any objections or
commencement of litigation or threat thereof by the appropriate
Governmental Entity to restrain the transactions contemplated hereby.
(f) Fairness Option. The inclusion of the Fairness Opinion in the Proxy
Statement and the Registration Statement shall have been approved by Furman
Selz.
(g) Tax Opinion. The Company shall have received, prior to the effective
date of the Registration Statement, the opinion of Holme Roberts & Owen,
LLC, in form and substance reasonably satisfactory to TCI and the Company,
to the effect that (i) the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, (ii) no stockholder of the Company will recognize gain or loss to the
extent that such stockholder receives stock of TCI in exchange for his
stock of the Company in the Merger, and (iii) the Federal Income Tax
Consequences section of the Proxy Statement (which constitutes the
prospectus included in the Registration Statement) describes the material
federal income tax consequences to the Company's stockholders from the
Merger (subject to customary conditions and limitations described therein)
and fairly represents such counsel's opinion as to the federal income tax
matters discussed therein. Such firm shall have consented to the filing of
such opinion as an exhibit to the Registration Statement and to the
reference to such firm in the Registration Statement, and such firm shall
not have withdrawn such opinion prior to the Closing Date. TCI shall also
have received prior to the effective date of the Registration Statement an
opinion from such counsel to the effect set forth in clause
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(iii) of the first section of this Section 7.1(g); such firm shall not have
withdrawn such opinion prior to the Closing Date and TCI shall have
received such evidence as it may reasonably require that all assumptions or
conditions to such opinion are valid or have been satisfied. Counsel may
rely on representations from the parties in rendering the opinions
referenced in this Section 7.1(g).
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MERGER SUB AND TCI. The
obligations of Merger Sub and TCI to consummate the transactions contemplated
by this Agreement are also subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by TCI:
(a) Accuracy of Representations and Warranties. All representations and
warranties of the Company contained in this Agreement shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects in each case as of
the date of this Agreement and (except to the extent such representations
and warranties speak as of a specified earlier date) on and as of the
Closing Date as though made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
(b) Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) Officers' Certificates. TCI and Merger Sub shall have received such
certificates of the Company, dated the Closing Date, signed by executive
officers of the Company to evidence satisfaction of the conditions set
forth in Sections 7.1(a), 7.1(d), 7.2(a), 7.2(b), 7.2(f), 7.2(h), 7.2(i),
and 7.2(k) (insofar as each relates to the Company) as may be reasonably
requested by TCI. Such certificates shall include a certificate of the
Secretary of the Company certifying, among other things, (x) the incumbency
of all officers of the Company having authority to execute and deliver this
Agreement and the agreements and documents contemplated hereby and (y) the
resolutions of the Company Board referred to in Section 4.14 and any
subsequent resolutions of the Company Board with respect to, and the
resolution of the Company's stockholders, approving the Merger Proposal.
(d) Documents Under Section 3.3. TCI shall have received from each person
named in the letter referred to in Section 3.3 an executed copy of the
agreement specified in such Section.
(e) Opinion of Counsel for the Company. TCI and Merger Sub shall have
received (i) a favorable opinion from Holme Roberts & Owen, LLC, dated the
Closing Date, substantially to the effect set forth in Exhibit 7.2(e) and
(ii) a favorable opinion from Cole, Raywid & Braverman, special
communications counsel to the Company, in form and substance reasonably
satisfactory to TCI. In rendering their respective opinions, such counsel
may rely as to factual matters upon certificates or other documents
furnished by officers of the Company and by government officials, and upon
such other documents and data as such counsel deems appropriate as a basis
for the opinion. Such counsel may specify the jurisdiction or jurisdictions
in which the members or partners, as applicable, thereof are admitted to
practice, that they are not admitted to practice in any other jurisdiction
or experts in the law of any other jurisdiction and that, to the extent the
foregoing opinion concerns the laws of any other jurisdiction or pertains
to matters beyond the scope of such counsel's engagement, such counsel may
rely upon the opinion of counsel admitted to practice in such other
jurisdiction. Any opinion relied upon by such counsel shall be delivered
together with the opinion of such counsel, which shall state that such
counsel believes that reliance thereon is justified.
(f) Proceedings Satisfactory. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated hereby or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to and approved by counsel for TCI and such counsel
shall have been furnished with such certified copies of such corporate
actions and proceedings and such other instruments and documents as such
counsel shall have reasonably requested.
(g) No Adverse Enactments. There shall not have been any action taken, or
any statute, rule, regulation, order, judgment or decree proposed, enacted,
promulgated, entered, issued, enforced or deemed applicable by any foreign
or United States federal, state or local Governmental Entity, and there
shall be no
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action, suit or proceeding pending or threatened, which, in TCI's
reasonable judgment, (i) makes or may make this Agreement, the Merger, or
any of the other transactions contemplated by this Agreement illegal or
imposes or may impose material damages or penalties in connection
therewith, (ii) requires or may require the divestiture of a material
portion of the business of TCI and its subsidiaries taken as a whole, or of
the Company and its subsidiaries taken as a whole, if the Merger is
consummated, (iii) imposes or may result in imposition of material
limitations on the ability of TCI effectively to exercise full rights of
ownership of shares of capital stock of the Surviving Corporation
(including the right to vote such shares on all matters properly presented
to the stockholders of the Surviving Corporation) or makes the holding by
TCI of any such shares illegal or subject to any materially burdensome
requirement or condition, (iv) requires or may require TCI or the Company
or any of their respective material subsidiaries or affiliates to cease or
refrain from engaging in any material business, including any material
business conducted by the Company or any of its subsidiaries, if the Merger
is consummated, or (v) otherwise prohibits, restricts, or delays
consummation of the Merger or any of the other transactions contemplated by
this Agreement or increases or may increase in any material respect the
liabilities or obligations of TCI arising out of this Agreement, the
Merger, or any of the other transactions contemplated by this Agreement.
(h) Contract Consents and Notices. All Contract Consents and Contract
Notices which are referred to in Section 4.5 or 5.5 or otherwise required
in connection with the consummation of the transactions contemplated hereby
and which, if not obtained or given, would have, individually or in the
aggregate, in the reasonable judgment of TCI, a material adverse effect on
(i) the transactions contemplated hereby or TCI's liabilities or
obligations with respect to such transactions or (ii) the business, assets,
results of operations, financial condition or prospects of the Company and
its subsidiaries, taken as a whole, or of any significant subsidiary of the
Company, or TCI and its subsidiaries, taken as a whole, shall have been
obtained and given.
(i) No Material Adverse Change. Since the date hereof nothing shall have
occurred, and TCI shall not have become aware of any change or event having
occurred prior to such date, which individually or in the aggregate, has
had or, in the reasonable judgment of TCI, is reasonably likely to have, a
material adverse effect on (i) the transactions contemplated hereby or
TCI's liabilities or obligations with respect to such transactions or (ii)
the business, assets, results of operations, financial condition or
prospects of the Company and its subsidiaries, taken as a whole, or of any
significant subsidiary of the Company, or TCI and its subsidiaries, taken
as a whole (including any potential change or event disclosed on any
Schedule which, subsequent to the date hereof, actually occurs), excluding,
in all cases, events or conditions generally affecting the cable television
or satellite television industry or affecting general business or economic
conditions in the United States.
(j) Receipt of Licenses, Permits and Consents. Other than the filing of
the Certificate of Merger with the Delaware Secretary of State and filings
due after the Effective Time, all Local Approvals, all FCC Approvals and
all other Government Consents as are required in connection with the
consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect, all Governmental Filings as
are required in connection with the consummation of such transactions shall
have been made, and all waiting periods, if any, applicable to the
consummation of such transactions imposed by any Governmental Entity shall
have expired, other than those which, if not obtained, in force or effect,
made or expired (as the case may be) would not, either individually or in
the aggregate, have a material adverse effect on (i) the transactions
contemplated hereby or (ii) the business, assets, results of operations,
financial condition or prospects of the Company and its subsidiaries taken
as a whole, or of any significant subsidiary of the Company, or TCI and its
subsidiaries taken as a whole.
(k) Stockholder Agreement; Board of Directors. The Company shall have
executed and delivered to TCI the Stockholder Agreement and, effective
immediately after the Effective Time, all existing members of the Company
Board (other than Flinn) shall have resigned and Roy Bliss, Peter Boylan
and such number of Persons as TCI may designate shall have been appointed
by Flinn, effective immediately after the Effective Time, to the Board of
Directors of the Surviving Corporation so that the composition of the Board
of Directors of the Surviving Corporation shall be as contemplated by the
Stockholder Agreement.
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(l) Flinn Agreement. The agreement between Flinn and TCI dated the date
hereof and entered into in connection herewith (the "Flinn Agreement")
shall continue to be a legal, valid and binding obligation of the parties
thereto and in full force and effect on and as of the Closing Date.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the transactions contemplated by this Agreement
is also subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, unless waived by the Company:
(a) Accuracy of Representations and Warranties. All representations and
warranties of TCI contained herein shall, if specifically qualified by
materiality, be true and correct and, if not so qualified, be true and
correct in all material respects in each case on and as of the Closing
Date, with the same force and effect as though made on and as of the
Closing Date, except for changes permitted or contemplated by this
Agreement.
(b) Performance of Agreements. Each of Merger Sub and TCI shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants and conditions,
contained in this Agreement to be performed or complied with by it prior to
or on the Closing Date.
(c) Officers' Certificates. The Company shall have received such
certificate of TCI, dated the Closing Date, signed by executive officers of
TCI to evidence satisfaction of the conditions set forth in Sections
7.1(b), 7.1(c), 7.1(d), 7.3(a), 7.3(b), 7.3(f), 7.3(g) and 7.3(i) (insofar
as each relates to TCI or Merger Sub) as may be reasonably requested by the
Company.
(d) Opinions of Counsel for TCI. The Company shall have received a
favorable opinion from TCI's General Counsel, dated the Closing Date,
substantially to the effect set forth in Exhibit 7.3(d). In rendering such
opinion, such counsel may rely as to factual matters upon certificates or
other documents furnished by officers of TCI and Merger Sub and by
government officials, and upon such other documents and data as such
counsel deems appropriate as a basis for the opinion. Such counsel may
specify the jurisdiction or jurisdictions in which the partners thereof are
admitted to practice, that they are not admitted to practice in any other
jurisdiction or experts in the law of any other jurisdiction and that, to
the extent the foregoing opinion concerns the laws of any other
jurisdiction or pertains to matters beyond the scope of such counsel's
engagement, such counsel may rely upon the opinion of counsel admitted to
practice in such other jurisdiction. Any opinion relied upon by such
counsel shall be delivered together with the opinion of such counsel, which
shall state that such counsel believes that reliance thereon is justified.
The Company shall also have received an opinion from Baker & Botts, L.L.P.,
dated the Closing Date, that is substantially to the same effect as the
opinion of such firm that is to be filed as Exhibit 5 to the Registration
Statement.
(e) Proceedings Satisfactory. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated hereby or
incidental hereto and all other related legal matters shall have been
reasonably satisfactory to and approved by counsel for the Company and such
counsel shall have been furnished with such certified copies of such
corporate actions, and proceedings and such other instruments and documents
as it shall have reasonably requested.
(f) No Adverse Enactments. There shall not have been any action taken, or
any statute, rule, regulation, order, judgment or decree proposed, enacted,
promulgated, entered, issued, enforced or deemed applicable by any foreign
or United States federal, state or local Governmental Entity, and there
shall be no action, suit or proceeding pending or threatened, which (i)
makes or may make this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement illegal or imposes or may
impose material damages or penalties in connection therewith or (ii) has
any material adverse effect referred to in Section 7.3(h).
(g) Contract Consents and Notices. All Contract Consents and Contract
Notices which are referred to in Section 4.5 or 5.5 or otherwise required
in connection with the consummation of the transactions contemplated hereby
and which, if not obtained or given, would have, individually or in the
aggregate, in the reasonable judgment of the Company, a material adverse
effect, after the Effective Time and assuming
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consummation of the Merger, on the business, assets, results of operations,
financial condition or prospects of TCI and its subsidiaries, taken as a
whole, or the Company and its subsidiaries, taken as a whole, shall have
been obtained and given.
(h) No Material Adverse Change. Since the date hereof nothing shall have
occurred, and the Company shall not have become aware of any change or
event having occurred prior to such date, which, individually or in the
aggregate, (i) has had or, in the reasonable judgment of the Company, is
reasonably likely to have, a material adverse effect on the transactions
contemplated hereby or (ii) assuming consummation of the Merger, is
reasonably likely to have, in the reasonable judgment of the Company, a
material adverse effect, as of or after the Effective Time, on the
business, assets, results of operations, financial condition or prospects
of TCI and its subsidiaries, taken as a whole, or the Company and its
subsidiaries, taken as a whole, excluding, in all cases, events or
conditions generally affecting the cable television or satellite television
industry or affecting general business or economic conditions.
(i) Receipt of Licenses, Permits and Consents. Other than the filing of
the Certificate of Merger with the Delaware Secretary of State and filings
due after the Effective Time, all Local Approvals, all FCC Approvals and
all other Government Consents as are required in connection with the
consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect, all Governmental Filings as
are required in connection with the consummation of such transactions shall
have been made, and all waiting periods, if any, applicable to the
consummation of such transactions imposed by any Governmental Entity shall
have expired, other than those which, if not obtained, in force or effect,
made or expired (as the case may be), would not, either individually or in
the aggregate, (i) have a material adverse effect on the transactions
contemplated hereby or (ii) assuming consummation of the Merger, have a
material adverse effect, as of or after the Effective Time, on the
business, assets, results of operations, financial condition or prospects
of TCI and its subsidiaries, taken as a whole, or the Company and its
subsidiaries, taken as a whole.
(j) Stockholder Agreement. TCI shall have executed and delivered to the
Company the agreement substantially in the form of Exhibit 7.3j-1 (the
"Stockholder Agreement"); provided, however, that the option of the
company, exercised by notice given to TCI at any time prior to the filing
of the Preliminary Proxy Statement with the Commission, the Stockholder
Agreement shall include the covenant set forth on Exhibit 7.3j-2.
ARTICLE VIII
TERMINATION
8.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company: (i) by mutual
consent of TCI and the Company; or (ii) by either the Company, on the one
hand, or TCI and Merger Sub, on the other hand: (A) if the Merger shall not
have been consummated before December 31, 1995, provided that the right to
terminate this Agreement pursuant to this clause (ii)(A) shall not be
available to any party whose failure to perform any of its obligations under
this Agreement required to be performed by it at or prior to the Effective
Time has resulted in the failure of the Merger to be consummated before such
date, (B) if there has been a material breach of any representation, warranty,
covenant or agreement on the part of the other party (or by Merger Sub, if the
party seeking to terminate this Agreement is the Company) contained in this
Agreement and such breach shall not have been cured within five business days
after written notice thereof shall have been received by the party alleged to
be in breach, (C) if any court of competent jurisdiction or other competent
governmental authority shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable, or (D) if any required approval of the Merger by the
stockholders of the Company shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at a
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duly held meeting of stockholders or at any adjournment thereof and if the
terminating party has complied with its obligations under Section 3.1; or
(iii) by TCI, if the Company Board shall have withdrawn or modified in any
manner adverse to TCI its recommendation to the Company stockholders that they
approve and adopt the Merger Proposal.
8.2 EFFECT OF TERMINATION. In the event of any termination of this Agreement
by the Company or TCI pursuant to Section 8.1, this Agreement forthwith shall
become void and there shall be no liability or obligation on the part of TCI,
Merger Sub, the Company or their respective affiliates, stockholders,
directors, officers, agents or representatives except (i) as provided in the
last sentence of Section 4.10, in the last sentence of Section 5.10 and in
Sections 6.2, 6.6 and 8.3, which shall survive such termination (for a period
of three years in the case of Section 6.2 and, in the case of Section 8.3, for
the period specified in such Section); and (ii) subject to Section 9.11, to
the extent such termination results from the willful breach by TCI, Merger Sub
or the Company of any of its representations, warranties, covenants or
agreements contained in this Agreement.
8.3 NO EMPLOYMENT. In the event of the termination of this Agreement
pursuant to Section 8.1, TCI shall not, at any time prior to June 20, 1997,
solicit any person employed by the Company to leave the Company's employ and
join the employ of TCI or any of its subsidiaries without the Company's prior
written consent.
ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL OF CERTAIN REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of TCI, Merger Sub and the Company contained
herein or in any certificate or other instrument delivered pursuant hereto
prior to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party hereto. The representations and warranties
of the Company in the second, third and fourth sentences of Section 4.4, in
Section 4.7 and in Section 4.12(b) hereof shall survive the Closing and the
delivery of the Merger Consideration without limitation and shall remain in
full force and effect for a period of three years, except that the
representation in Section 4.12(b) shall survive until expiration of the
applicable statute of limitations. All other representations and warranties
made by the parties herein shall expire at the Effective Time.
9.2 INDEMNIFICATION.
(a) Post-Merger Indemnification of Company Directors and Officers. After the
Effective Time, the Surviving Corporation shall indemnify and hold harmless
each person who was, at any time prior to the Effective Time, a director or
officer of the Company (individually an "Indemnified Party" and, collectively,
the "Indemnified Parties") against (i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the Surviving Corporation (which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole
or in part out of the fact that such Person was at any time prior to the
Effective Time a director or officer of the Company, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, at or after the Effective Time (but excluding
any claims by TCI under the Flinn Agreement) ("Indemnified Liabilities") and
(ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the transactions
contemplated hereby (and the Surviving Corporation will pay expenses in
advance of the final disposition of any such action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by law
upon receipt of any undertaking contemplated by Section 145(e) of the DGCL),
in each case to the full extent that (x) a corporation is permitted under
Delaware law to indemnify its own directors or officers, as the case may be,
(y) such Indemnified Party would be entitled to be indemnified by or to
receive advances from the Company with respect to the Indemnified Liabilities
in question under the Company Charter and By-Laws as in effect on May 31, 1995
and (z) such indemnification or advances otherwise are permitted by applicable
law. In the event any such claim, action, suit, proceeding or investigation is
asserted or commenced against any Indemnified Party (whether before or after
the Effective Time), the Surviving Corporation will be
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<PAGE>
entitled to participate in and, to the extent that it may wish, to assume the
defense thereof, except that if the Surviving Corporation also is a subject of
such claim, action, suit, proceeding or investigation and there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the position of the Surviving Corporation and the position of
such Indemnified Party, or if the Surviving Corporation shall fail to assume
responsibility for such defense, such Indemnified Party may, subject to
Section 9.2(b), retain counsel who will represent such Indemnified Party, and
the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel promptly as statements therefor are received; provided that such
Indemnified Party shall vigorously defend (or, if the defense is assumed by
the Surviving Corporation, use his best efforts to assist in the vigorous
defense of) any such matter; provided, further, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent;
and provided, further, that the Surviving Corporation shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, after exhaustion of all avenues of
appeal, that such Indemnified Party is not entitled to indemnification or to
receive advances hereunder.
(b) Procedures. Any Indemnified Party wishing to claim indemnification or
the right to advances under Section 9.2(a), upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify the Surviving
Corporation and shall deliver to the Surviving Corporation an undertaking to
repay any amounts advanced pursuant thereto when and if it is determined by
the Board of Directors of the Surviving Corporation that such Indemnified
Party is not entitled to indemnification hereunder. In no event may the
Indemnified Parties retain more than one law firm to represent them with
respect to any such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the position
of any two or more Indemnified Parties in which case the Indemnified Parties
may (unless the defense of such matter has been assumed by the Surviving
Corporation as provided herein) retain, at the expense of the Surviving
Corporation, such number of additional counsel as are necessary to eliminate
all conflicts of the type referred to above.
(c) Survival. This Section 9.2 is intended to be for the benefit of and
shall be enforceable by each of the Indemnified Parties and his heirs and
legal representatives.
9.3 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
telegram or confirmed telex or telecopier, as follows:
(a) if to TCI or Merger Sub, to:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attn: Larry Romrell, President,
TCI Technology Ventures, Inc.
Telecopier: (303) 488-3244
with a copy similarly addressed
to the attention of: Legal Department
and with a copy to:
Baker & Botts, L.L.P
885 Third Avenue
New York, New York 10022
Attn: Elizabeth M. Markowski, Esq.
Telecopier: (212) 705-5125
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<PAGE>
(b) if to the Company, to:
United Video Satellite Group, Inc.
7140 S. Lewis Avenue
Tulsa, Oklahoma 74136-5422
Attn: Roy Bliss, President
Telecopier: (918) 488-4928
and
Attn: Peter C. Boylan, III, Executive Vice President
Telecopier: (918) 488-4928
and
Lawrence Flinn, Jr., Chief Executive Officer
United Video Satellite Group, Inc.
100 First Stamford Place
Stamford, Connecticut 06902
Telecopier: (203) 977-7673
with a copy to:
Holme Roberts & Owens, LLC
1700 Lincoln
Suite 4100
Denver, Colorado 80203
Attn: Francis Wheeler, Esq.
Telecopier: (303) 866-0200
or to such other Person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery
or on the third business day after the mailing thereof, except that any notice
of a change of address shall be effective only upon actual receipt thereof.
9.4 ENTIRE AGREEMENT. This Agreement (including the Schedules, Annexes,
Exhibits and other documents referred to herein) constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, oral and written, between the parties with respect to the
subject matter hereof.
9.5 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor any of
the rights, benefits or obligations hereunder may be assigned by any party
(whether by operation of law or otherwise) without the prior written consent
of the other party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, other than rights conferred
upon Indemnified Parties under Section 9.2.
9.6 AMENDMENT. This Agreement may be amended by the parties, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval of any matters presented in connection with the Merger by the
stockholders of the Company, but, after any such approval by the stockholders
of the Company, no amendment shall be made which by law requires further
approval by such stockholders of the Company without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
9.7 EXTENSION; WAIVER. At any time prior to the Effective Time, either of
the parties, by action taken or authorized by such party's Board of Directors,
may, to the extent legally allowed, (i) extend the time specified herein for
the performance of any of the obligations of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto,
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<PAGE>
(iii) waive compliance by the other party with any of the agreements or
covenants of such other party contained herein or (iv) waive any condition to
such waiving party's obligation to consummate the transactions contemplated
hereby or to any of such waiving party's other obligations hereunder. Any
agreement on the part of a party hereto any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such
party. Any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. Any such extension or
waiver by any party shall be binding on such party but not on the other party
entitled to the benefits of the provision of this Agreement affected unless
such other party also has agreed to such extension or waiver. No such waiver
shall constitute a waiver of, or estoppel with respect to, any subsequent or
other breach of failure to strictly comply with the provisions of this
Agreement. The failure of any party to insist on strict compliance with this
Agreement or to assert any of its rights or remedies hereunder or with respect
hereto shall not constitute a waiver of such rights or remedies. Whenever this
Agreement requires or permits consent or approval by any party, such consent
or approval shall be effective if given in writing in a manner consistent with
the requirements for a waiver of compliance as set forth in this Section 9.7.
9.8 HEADINGS. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
9.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
9.10 APPLICABLE LAW. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to the conflict of laws rules thereof.
9.11 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should any
court or other competent governmental authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach thereof or of any other provision of this Agreement
or part hereof as a result of such holding or order.
9.12 CERTAIN TAX POSITIONS. The parties intend the Merger to qualify as a
non-taxable reorganization under Sections 368(a)(1)(A) and (a)(2)(E) of the
Code; neither party nor any affiliate shall take any action that would cause
the Merger not to qualify as a reorganization under those sections; and the
parties will take the position for tax purposes that the Merger qualifies as a
reorganization under those sections.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan
of Merger as of the date first above written.
TELE-COMMUNICATIONS, INC.
/s/ Larry Romrell
By: _________________________________
Name: Larry Romrell
Title: Executive Vice President
UNITED VIDEO SATELLITE GROUP, INC.
/s/ Lawrence Flinn, Jr.
By: _________________________________
Name: Lawrence Flinn Jr.
Title: Chairman & CEO
TCI MERGER SUB, INC.
/s/ Larry Romrell
By: _________________________________
Name: Larry Romrell
Title: President
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<PAGE>
APPENDIX I-B
AMENDMENT No. 1 (this "Amendment") dated as of December 18, 1995, by and
among Tele- Communications, Inc., a Delaware corporation ("TCI"), TCI Merger
Sub, Inc., a Delaware corporation ("Merger Sub"), and United Video Satellite
Group, Inc., a Delaware corporation (the "Company"), to the Agreement and Plan
of Merger dated as of July 10, 1995 (the "Merger Agreement"), among TCI,
Merger Sub and the Company.
WHEREAS TCI, Merger Sub and the Company are parties to the Merger Agreement,
which provides, among other things, for the merger of Merger Sub with and into
the Company (the "Merger"); and
WHEREAS, for the mutual convenience of the parties hereto (and not in
derogation of the agreements of the parties set forth in the Merger
Agreement), the parties hereto desire to amend the Merger Agreement to extend
the date by which the Merger must be consummated, to amend the forms of
certain exhibits to the Merger Agreement and to clarify the terms and
conditions of the preferred stock of TCI to be issued as Merger Consideration
thereunder.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby agree as follows:
1. Capitalized Terms. Capitalized terms used in this Amendment and not
otherwise defined shall have the meanings attributed to such terms in the
Merger Agreement.
2. Amendments to the Merger Agreement.
(a) The Merger Agreement is hereby amended by deleting from clause
(ii)(A) of Section 8.1 of the Merger Agreement as originally executed
the date "December 31, 1995" and inserting in lieu thereof the date
"January 31, 1996."
(b) The Merger Agreement is hereby further amended by deleting, each
in its entirety, the forms of Exhibits 2.1(c), 2.1(d), 6.4d-1, 6.4d-2,
6.4d-3 and 7.3j-1 attached to the Merger Agreement as originally
executed, and substituting therefor the forms of such exhibits attached
to this Amendment. All references in the Merger Agreement to the
foregoing Exhibits shall be deemed to refer to such Exhibits as amended
hereby.
(c) The Merger Agreement is hereby further amended by deleting, each
in its entirety, subsections 2.3(a)(ii) and 2.3(a)(v) of the Merger
Agreement as originally executed and inserting in lieu thereof the
following new subsections:
(ii) Each share of Company Class A Stock outstanding immediately
prior to the Effective Time (other than shares referred to in
Section 2.3(a)(i) above and other than shares held by TCI or any of
its direct or indirect wholly owned subsidiaries) that is subject to
a valid Election to convert such share into the Merger Consideration
pursuant to Section 2.4 shall be converted into and represent the
right to receive, and shall be exchangeable for (A) one validly
issued, fully paid and non-assessable share of the Redeemable
Convertible TCI Group Preferred Stock, Series G, par value $.01 per
share, of TCI (the "TCI Group Preferred Stock") having the terms set
forth in Exhibit 2.3(a)-1 and (B) one validly issued, fully paid and
non-assessable share of the Redeemable Convertible Liberty Media
Group Preferred Stock, Series H, par value $.01 per share, of TCI
(the "Liberty Media Group Preferred Stock" and, together with the
TCI Group Preferred Stock, the "TCI/LMG Preferred Stock") having the
terms set forth in Exhibit 2.3(a)-2.
* * * * *
(v) Each share of Company Class B Stock outstanding immediately
prior to the Effective Time (other than shares referred to in
Section 2.3(a)(i) or (iv)) shall be converted into and represent the
right to receive, and shall be exchangeable for (A) one validly
issued, fully paid and non-assessable share of TCI Group Preferred
Stock and (B) one validly issued, fully paid and non-assessable
share of Liberty Media Group Preferred Stock.
<PAGE>
(d) All references in the Merger Agreement to the shares of TCI Class
A Stock issuable upon conversion of the TCI Preferred Stock are hereby
amended to refer to (i) the shares of TCI's Series A TCI Group Common
Stock, par value $1.00 per share, issuable upon conversion of the TCI
Group Preferred Stock and (ii) the shares of TCI's Series A Liberty
Media Group Common Stock, par value $1.00 per share, issuable upon
conversion of the Liberty Media Group Preferred Stock. All references
in the Merger Agreement to the "TCI Preferred Stock" are hereby amended
to refer to the "TCI/LMG Preferred Stock."
(e) The Merger Agreement is hereby further amended by deleting
Section 2.7 of the Merger Agreement as originally executed, in its
entirety (and by deleting Exhibit 2.7 to the Merger Agreement as
originally executed, in its entirety), and inserting in lieu thereof
the following new Section 2.7:
Section 2.7 Changes in Common Stock. If, prior to the Effective Time, the
Series A TCI Group Common Stock or the Series A Liberty Media Group Common
Stock shall be recapitalized or reclassified, or TCI shall effect any stock
dividend, stock split, or reverse stock split of the Series A TCI Group
Common Stock or the Series A Liberty Media Group Common Stock, then the
shares of Series A TCI Group Common Stock to be delivered upon conversion
of the TCI Group Preferred Stock to be delivered under this Agreement, or
the shares of Series A Liberty Media Group Common Stock to be delivered
upon conversion of the Liberty Media Group Preferred Stock to be delivered
under this Agreement, as the case may be, shall be appropriately and
equitably adjusted to the kind and amount of shares of stock and other
securities and property which the holders of such shares of TCI/LMG
Preferred Stock would have been entitled to receive had they converted such
shares into shares of Series A TCI Group Common Stock or Series A Liberty
Media Group Common Stock, as the case may be, prior to the record date for
determining stockholders entitled to participate in such corporate event.
The obligation of the Company to consummate the transactions contemplated
by this Agreement is subject to the receipt of an opinion of counsel from
Baker & Botts, L.L.P. to the effect that the Liberty Media Group Preferred
Stock to be issued as part of the Merger Consideration is voting stock of
TCI for federal income tax purposes.
(f) The Merger Agreement is hereby further amended by deleting
Section 7.1(b) of the Merger Agreement as originally executed, in its
entirety, and inserting in lieu thereof the following new Section
7.1(b):
(b) Filing of Certificate of Designations. The Certificate of
Designations for the TCI Group Preferred Stock and the Certificate
of Designations for the Liberty Media Group Preferred Stock shall
each have been filed with the Delaware Secretary of State.
(h) All references in the Merger Agreement to the "Merger Agreement"
shall mean the Merger Agreement as amended hereby, unless the context
shall otherwise require.
3. Representations and Warranties.
(a) The Company hereby represents and warrants to TCI and Merger Sub as
follows:
(i) The Company (A) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, (B) has
all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being
conducted and (C) is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure
to be so duly qualified or licensed and in good standing is not
reasonably likely to have a material adverse effect on the business,
assets, results of operations or financial condition of the Company and
its subsidiaries taken as a whole.
(ii) The Company has all requisite corporate power and authority to
execute and deliver this Amendment and to amend the Merger Agreement as
provided herein and, subject to obtaining the approval of its
stockholders specified in Section 4.15 of the Merger Agreement, to
perform its obligations under the Merger Agreement as amended hereby
and to consummate the transactions contemplated thereby.
I-B-2
<PAGE>
(iii) The execution, delivery and performance by the Company of this
Amendment, the amendment of the Merger Agreement as provided herein and
the consummation by the Company of the transactions contemplated by the
Merger Agreement as amended hereby have been duly and validly
authorized by the Company Board and by all other corporate action on
the part of the Company, subject, in the case of the consummation by it
of the Merger, to the approval of the Company's stockholders specified
in Section 4.15 of the Merger Agreement.
(iv) This Amendment has been duly executed and delivered by the
Company, and each of this Amendment and the Merger Agreement as amended
hereby is a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies).
(b) TCI hereby represents and warrants to the Company as follows:
(i) Each of TCI and Merger Sub (A) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (B) has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and (C) is duly qualified
or licensed and in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except in
such jurisdictions where the failure to be so duly qualified or
licensed and in good standing is not reasonably likely to have a
material adverse effect on the business, assets, results of operations
or financial condition of TCI and its subsidiaries taken as a whole.
(ii) This Amendment has been duly executed and delivered by TCI.
(iii) Subject to the satisfaction of the conditions set forth in
Section 7.1 of the Merger Agreement, assuming that applicable state
takeover laws, if any, are complied with and assuming (without
investigation) that all shares of Company Stock outstanding at the
Effective Time will be duly authorized, validly issued, fully paid and
non-assessable: (A) TCI has all requisite corporate power and authority
to execute and deliver this Amendment and to amend the Merger Agreement
as provided herein and each of TCI and Merger Sub has all requisite
corporate power and authority to perform its obligations under the
Merger Agreement as amended hereby and, subject to the approval of the
Merger Proposal by the stockholders of the Company in accordance with
the DGCL and the Company Charter and By-laws, to consummate the
transactions contemplated by the Merger Agreement as amended hereby;
(B) the execution, delivery and performance by TCI of this Amendment,
the amendment of the Merger Agreement as provided herein and the
consummation by each of TCI and Merger Sub of the transactions
contemplated by the Merger Agreement as amended hereby have been duly
authorized by all necessary corporate action on its part; and (C) each
of this Amendment and the Merger Agreement as amended hereby is a valid
and binding obligation of TCI, enforceable in accordance with its terms
(except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
4. Full Force and Effect. Except as expressly provided in this Amendment, the
Merger Agreement shall remain unchanged and in full force and effect.
5. Counterparts. This Amendment may be executed and delivered in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Amendment by signing
any such counterpart.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws rules thereof.
I-B-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
Tele-Communications, Inc.
/s/ Larry Romrell
By: _________________________________
Name: Larry Romrell
Title: Executive Vice President
TCI Merger Sub, Inc.
/s/ Larry Romrell
By: _________________________________
Name: Larry Romrell
Title: President
United Video Satellite Group, Inc.
/s/ Lawrence Flinn, Jr.
By: _________________________________
Name: Lawrence Flinn, Jr.
Title: Chairman & CEO
I-B-4
<PAGE>
APPENDIX II
[LETTERHEAD OF FURMAN SELZ INCORPORATED APPEARS HERE]
July 10, 1995
Board of Directors
United Video Satellite Group, Inc.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
Gentlemen:
We understand that Tele-Communications, Inc. (together with its
subsidiaries and affiliates, the "Parent"), TCI Merger Sub, a wholly-owned
subsidiary of the Parent ("Newco"), and United Video Satellite Group, Inc. (the
"Company") propose to enter into a Merger Agreement substantially in the form of
the draft dated July 7, 1995 which has been furnished to us (the "Agreement"),
whereby, among other things, Newco will be merged with and into the Company in a
transaction (the"Merger") in which (i) each holder of the Company's outstanding
Class A common stock, par value $.01 per share ("Class A Common"), will have the
right to convert up to 50% of such holder's Class A Common into shares of a
newly created series of convertible preferred stock (as more fully described in
the Agreement, "Preferred Stock") of Parent, on a one for one basis, (ii) any
shares of Class A Common not converted into Preferred Stock would remain
outstanding as shares of Class A common stock ("Survivor Class A Common") of the
surviving corporation in the Merger, (iii) 50% of the outstanding shares of the
Company's Class B common stock, par value $.01 per share, owned by Larry Flinn
would be converted into Preferred Stock and the balance would have been
converted into Survivor Class A Common, and (vi) the outstanding shares of
common stock of Newco would be converted into the same number of shares of
Survivor Class A Common and shares of Class B common stock of the surviving
corporation in the Merger as the number of shares of Class A Common and Class B
Common, respectively, that were converted into shares of Preferred Stock
(the"Proposed Transaction"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the Agreement.
You have requested our opinion, as investment bankers as to the
fairness, from a financial point of view, to the holders (other than the
Parent) of the Class A Common of the Company of the consideration to be received
and the ownership interests to be retained by such holders in the Proposed
Transaction.
<PAGE>
July 10, 1995
Page 2
In conducting our analysis and arriving at our opinion as expressed
herein, we have reviewed and analyzed, among other things, the following:
a. the Agreement and the financial terms of the Proposed Transaction
set forth therein;
b. an outline of the principal terms relating to the Proposed
Transaction, executed on June 20, 1995;
c. the Company's Annual Reports on Form 10-K for the fiscal years
ended December 31, 1993 and 1994;
d. the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1995;
e. the Company's initial public offering prospectus dated November
18, 1993;
f. certain other publicly available information concerning the
Company and the trading market for the Class A Common;
g. certain internal information relating to the Company, including
various financial forecasts and projections based upon differing assumptions,
provided to us by management of the Company;
h. certain publicly available information, including research
reports, concerning certain other companies engaged in businesses which we
believe to be comparable to the Company and the trading markets for certain of
such other companies' securities; and
i. the terms of certain recent business combinations which we believe
to be relevant.
We have also met with certain officers and employees of the Company
concerning its business and operations, assets, present condition and future
prospects and undertaken such other studies, analyses and investigations as we
deemed appropriate.
II-2
<PAGE>
July 10, 1995
Page 3
In addition, we have reviewed and analyzed:
a. the Parent's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1992, 1993 and 1994;
b. the Parent's Quarterly Report on Form 10-Q for the period ended
March 31, 1995;
c. the Parent's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission ("SEC") on June 13, 1995, relating to the
Parent's Liberty Media Group Stock Proposal;
d. the Registration Statement of Tele-Communications International,
Inc. filed with the SEC on Form S-1 on June 14, 1995;
e. certain other public available information, including research
reports, concerning the Parent and the trading market for the common stock of
the Parent; and
f. certain publicly available information, including research reports,
concerning certain other companies engaged in businesses which we believe to be
comparable to the Parent.
We have also conducted discussions with certain members of senior
management of the Parent with respect to the Parent's business and operations,
assets, present condition and future prospects, and undertaken such other
studies, analyses and investigations as we deemed appropriate, but we have not
received or reviewed financial forecasts and projections of Parent.
In arriving at our opinion, we have not visited or conducted a
physical inspection of the properties and facilities of the Company or the
Parent (although we have visited the Company's headquarters), nor have we made,
obtained or assumed any responsibility for any independent evaluation or
appraisal of any such properties and facilities or of the assets and liabilities
of the Company or the Parent. We have assumed and relied upon the accuracy and
completeness of the financial and other information supplied to or otherwise
used by us in arriving at our opinion and have not attempted independently to
verify, or undertaken and obligation to verify, such information. In addition,
we have assumed that the Company's
II-3
<PAGE>
July 10, 1995
Page 4
forecasts and projections supplied to us represent the best current judgment of
the Company's management as to the future financial condition and results of
operations of the Company, and have assumed that such forecasts and projections
have been reasonably prepared based on such current judgment. We assume no
responsibility for and express no view as to such forecasts and projections or
the assumptions on which they are based.
We were not asked to and did not participate in any efforts to solicit
third-party offers to acquire all or part of the Company, nor did we evaluate
potential alternative transactions. The management of the Company has instructed
us to provide this opinion on that basis.
We have also taken into account our assessment of general economic,
market and financial conditions and our experience in similar transactions, as
well as our experience in securities valuation in general. Our opinion
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof, and does not represent an opinion as to what the trading value of
the preferred Stock or the Survivor Class A Common will be when the Merger is
consummated.
We do not express any view as to any terms of the Proposed Transaction
other than the fairness from a financial point of view of the consideration to
be received and the ownership interests to be retained by the holders, other
than the Parent, of Class A Common. In particular, we express no view as to any
agreements or arrangements which might be concluded between the Parent and the
Company after the date hereof.
In addition, upon the advice of the Company and its legal advisors, we
have assumed that the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended, and
therefore as a tax-free transaction to the holders of the Class A Common.
As you are aware, we have performed various investment banking services
for the Company in the past, including acting as a managing underwriter for the
Company's initial public offering in November 1993, and have received customary
fees for such services. In the ordinary course of our business, we may actively
trade in the equity securities of the Company and the Parent for our own account
and for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
II-4
<PAGE>
July 10, 1995
Page 5
It is understood that this letter is solely for the benefit and use of
the Board of Directors of the Company in its consideration of the Proposed
Transaction. This letter does not constitute a recommendation to any holder of
the Class A Common as to whether to convert shares of Class A Common into
Preferred Stock pursuant to the Merger or whether to vote in favor of the Merger
and should not be relied upon by any stockholder as such. This opinion does not
address the relative merits of the Proposed Transaction and any other
transactions or business strategies discussed by the Board of Directors of the
Company as alternatives to the Proposed Transaction or the underlying business
decision of the Board of Directors of the Company to proceed with or effect the
Proposed Transaction. This opinion may be included in its entirety in any proxy
statement/prospectus with respect to the Proposed Transaction, but it may not by
summarized, excerpted from or otherwise publicly referred to without our prior
written consent.
Based upon and subject to the foregoing, it is our opinion that the
consideration to be received and the ownership interests to be retained by the
holders (other than the Parent) of the Class A Common in the Proposed
Transaction, taken together, is fair from a financial point of view to such
holders.
Very truly yours,
/s/ Furman Selz Incorporated
FURMAN SELZ INCORPORATED
II-5
<PAGE>
APPENDIX III
INFORMATION CONCERNING PERSONS WHO WILL SERVE
AS DIRECTORS OF UVSG FOLLOWING THE MERGER
The name and principal occupation or employment and five year employment
history of each person chosen to serve as a director of UVSG after the Merger
is set forth below.
COLLEEN ABDOULAH, age 36, has been Vice President of Marketing and New
Business Development for TCI Communications, Inc. ("TCIC") since November
1993. Ms. Abdoulah served as Vice President and General Manager of Netlink
from November 1992 to November 1993 and was Netlink's Vice President of
Operations from September 1990 to November 1992.
DAVID P. BEDDOW, age 51, has served as Senior Vice President of TCI
Technology Ventures, Inc. ("TCITV") since September 1994; previously served as
Vice President of TCI Technology, Inc. ("TCITI") from June 1993 to September
1994. Mr. Beddow was Chief Operating Officer of Primestar Partners, a provider
of direct-to-home satellite services, from March 1990 to June 1993.
ROY L. BLISS, 52, joined UVSG in 1969 and became General Manager of UVSG in
1970. Mr. Bliss became Chief Operating Officer of UVSG in 1976 and also has
been UVSG's President since 1991 and a Director since 1984. Mr. Bliss is also
a director of SSDS. Mr. Bliss has been involved in the cable television
industry since the late 1950s.
PETER C. BOYLAN III, 31, joined UVSG in October 1994 as Executive Vice
President and Chief Financial Officer. Beginning in 1992, Mr. Boylan served
with Hallmark Cards, Inc. in its Kansas City headquarters Corporate
Development and Strategy Group, focusing primarily on the communications and
entertainment industries. From 1986 until he joined Hallmark, Mr. Boylan
served as Vice President in the development, acquisitions, portfolio
management and investment management areas with LaSalle Partners, a privately
held real estate investment management firm. Mr. Boylan is also a director of
SSDS.
WILLIAM J. BRESNAN, age 61, has served since 1984 as the President of
Bresnan Communications, Inc., the managing general partner of Bresnan
Communications Company, a partnership that operates cable systems in the
United States, and of Bresnan International Partners (Chile) and Bresnan
International Partners (Poland), partnerships that operate or invest in cable
systems overseas. TCI or an affiliate of TCI has an interest in each of the
foregoing partnerships.
TONY COELHO, age 53, has been a director of TCI since June 1994 and served
as director of TCIC from March 1994 to August 1994. Since July 1995, Mr.
Coelho has been Chairman and Chief Executive Officer of Coelho Associates, a
New York investment consulting firm. Mr. Coelho was President and Chief
Executive Officer of Wertheim Schroder Investment Services from 1990 to June
1995 and was Managing Director of Wertheim Schroder & Co., Incorporated from
October 1989 to June 1995. Mr. Coelho was formerly a member of the United
States House of Representative from California from January 1979 through June
1989 and served as the Majority Whip of the U.S. House of Representatives from
December 1986 through June 1989. Mr. Coelho also serves as a director of
Circus Circus Enterprises, Inc., Crop Growers Corporation, ICF Kaiser
International, Inc., Service Corporation International, Specialty Retail
Group, Inc., and Tanknology Environmental, Inc.
LAWRENCE FLINN, JR., 60, has been the Chairman of the Board of Directors and
Chief Executive Officer since he acquired a majority ownership interest in
UVSG in 1976. Mr. Flinn has been a full-time professional participant in the
cable television industry for over 30 years. Until recently, Mr. Flinn was the
principal owner of two privately held companies that owned cable television
systems having over 160,000 subscribers. Mr. Flinn is a director of LodgeNet
Entertainment Corporation, a company that provides "in room" television
service to hotels. In addition, Mr. Flinn serves as a director of SSDS.
<PAGE>
PAUL A. GOULD, age 50, has been a Managing Director and Executive Vice
President of Allen & Company Incorporated for over five years. Currently, Mr.
Gould is also serving as a director of National Patent Development
Corporation.
BRUCE W. RAVENEL, age 45, has been a Senior Vice President and Chief
Operating Officer of TCITV since September 1994. Mr. Ravenel served as TCITI's
Vice President of Technology from May 1992 to September 1994. Prior to May
1991, he was the Director of Strategic Alliance Management for U S WEST, Inc.
Currently, Mr. Ravenel is a director of Acclaim Entertainment, Inc.
LARRY E. ROMRELL, age 55, has been an Executive Vice President of TCI since
January 1994. He has been President and Chief Executive Officer of TCITV since
September 1994 and a director since December 1994. Mr. Romrell served as
TCIC's Senior Vice President from January 1991 to September 1994. Prior to
January 1991, Mr. Romrell served as President and Chief Executive Officer of
WestMarc Communications, Inc. and its subsidiaries. Currently, Mr. Romrell is
a director of General Communications, Inc.
J.C. SPARKMAN, age 63, served as Executive Vice President and Executive
Officer of TCI from January 1994 through March 1995. Mr. Sparkman retired from
TCI in March 1995. Mr. Sparkman also served as Executive Vice President of
TCIC from 1987 until October 1994.
J. DAVID WARGO, age 42, has been President of Wargo & Company, a private
investment company specializing in the communications industry, since January
1993. Mr. Wargo was Managing Director of The Putnam Companies from December
1989 to December 1993.
III-2
<PAGE>
APPENDIX IV
RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED VIDEO SATELLITE GROUP, INC.
----------------
ARTICLE I
NAME
The name of the Corporation is United Video Satellite Group, Inc.
ARTICLE II
REGISTERED OFFICE
The location of the registered office of the Corporation in the State of
Delaware is the office of The Prentice-Hall Corporation System, Inc., 32
Loockerman Square, Suite L-100, Dover, Kent County, Delaware 19904. The name
of the registered agent at such address is The Prentice-Hall Corporation
System, Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE IV
AUTHORIZED STOCK
The total number of shares of capital stock that the Corporation shall have
authority to issue is forty-seven million (47,000,000) shares, divided into
the following classes: thirty million (30,000,000) shares of Class A Common
Stock, par value $.01 per share ("Class A Common Stock"); fifteen million
(15,000,000) shares of Class B Common Stock, par value $.01 per share ("Class
B Common Stock"); and two million (2,000,000) shares of preferred stock, par
value $.01 per share ("Preferred Stock"). A description of the Common Stock
and the Preferred Stock of the Corporation, and the relative rights,
preferences and limitations thereof, or the method of fixing and establishing
the same, are as hereinafter in this Article IV set forth.
SECTION A
COMMON STOCK
Each share of the Class A Common Stock and each share of the Class B Common
Stock shall, except as otherwise provided in this Section A, be identical in
all respects and shall have equal rights and privileges.
1. Voting Rights.
Holders of Class A Common Stock shall be entitled to one vote for each share
of such stock held, and holders of Class B Common Stock shall be entitled to
ten votes for each share of such stock held, on all matters
<PAGE>
presented to such stockholders. Except as may otherwise be required by the laws
of the State of Delaware or, with respect to any series of Preferred Stock, in
any resolution or resolutions providing for the establishment of such series
pursuant to authority vested in the Board of Directors by this Certificate, the
holders of shares of Class A Common Stock and the holders of shares of Class B
Common Stock and the holders of shares of each series of Preferred Stock, if
any, entitled to vote thereon shall vote as one class with respect to the
election of directors and with respect to all other matters to be voted on by
stockholders of the Corporation (including, without limitation, any proposed
amendment to this Certificate that would increase the number of authorized
shares of Class A Common Stock, of Class B Common Stock or of any other class
or series of stock or decrease the number of authorized shares of any such
class or series of stock (but not below the number of shares thereof then
outstanding)), and no separate vote or consent of the holders of shares of
Class A Common Stock, the holders of shares of Class B Common Stock or the
holders of shares of any such series of Preferred Stock shall be required for
the approval of any such matter.
2. Conversion Rights.
Each share of Class B Common Stock shall be convertible, at the option of the
holder thereof, into one share of Class A Common Stock. Any such conversion may
be effected by any holder of Class B Common Stock by surrendering such holder's
certificate or certificates for the Class B Common Stock to be converted, duly
endorsed, at the office of the Corporation or any transfer agent for the Class
B Common Stock, together with a written notice to the Corporation at such
office that such holder elects to convert all or a specified number of shares
of Class B Common Stock represented by such certificate and stating the name or
names in which such holder desires the certificate or certificates for Class A
Common Stock to be issued. If so required by the Corporation, any certificate
for shares surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by the holder
of such shares or the duly authorized representative of such holder. Promptly
thereafter, the Corporation shall issue and deliver to such holder or such
holder's nominee or nominees, a certificate or certificates for the number of
shares of Class A Common Stock to which such holder shall be entitled as herein
provided. Such conversion shall be deemed to have been made at the close of
business on the date of receipt by the Corporation or any such transfer agent
of the certificate or certificates, notice and, if required, instruments of
transfer referred to above, and the person or persons entitled to receive the
Class A Common Stock issuable on such conversion shall be treated for all
purposes as the record holder or holders of such Class A Common Stock on that
date. A number of shares of Class A Common Stock equal to the number of shares
of Class B Common Stock outstanding from time to time shall be set aside and
reserved for issuance upon conversion of shares of Class B Common Stock. Shares
of Class B Common Stock that have been converted hereunder shall become
treasury shares that may be issued or retired by resolution of the Board of
Directors. Shares of Class A Common Stock shall not be convertible into shares
of Class B Common Stock.
3. Dividends. Subject to paragraph 4 of this Section A, whenever a dividend
is paid to the holders of Class A Common Stock, the Corporation shall also pay
to the holders of Class B Common Stock a dividend per share equal to the
dividend per share paid to the holders of Class A Common Stock, and whenever a
dividend is paid to the holders of Class B Common Stock, the Corporation shall
also pay to the holders of Class A Common Stock a dividend per share equal to
the dividend per share paid to the holders of Class B Common Stock. Dividends
shall be payable only as and when declared by the Board of Directors.
4. Share Distributions. If at any time a distribution paid in Class A Common
Stock or Class B Common Stock or any other securities of the Corporation or any
other corporation, partnership, limited liability company, trust or other legal
entity ("Person") (hereinafter sometimes called a "share distribution") is to
be made with respect to the Class A Common Stock or Class B Common Stock, such
share distribution may be declared and paid only as follows:
(a) a share distribution consisting of shares of Class A Common Stock (or
any securities of the Corporation that are convertible into, exercisable or
exchangeable for, or evidence the right to purchase any shares of Class A
Common Stock) to holders of Class A Common Stock and Class B Common Stock,
on
IV-2
<PAGE>
an equal per share basis; or consisting of shares of Class B Common Stock
(or securities of the Corporation that are convertible into, exercisable or
exchangeable for, or evidence the right to purchase any shares of Class B
Common Stock) to holders of Class A Common Stock and Class B Common Stock,
on an equal per share basis; or consisting of shares of Class A Common
Stock (or securities of the Corporation that are convertible into,
exercisable or exchangeable for, or evidence the right to purchase any
shares of Class A Common Stock) to holders of Class A Common Stock and, on
an equal per share basis, shares of Class B Common Stock (or securities of
the Corporation that are convertible into, exercisable or exchangeable for,
or evidence the right to purchase any shares of Class B Common Stock) to
holders of Class B Common Stock; and
(b) a share distribution consisting of any class or series of securities
of the Corporation or any other Person other than Class A Common Stock or
Class B Common Stock (or other than securities of the Corporation that are
convertible into, exercisable or exchangeable for, or evidence the right to
purchase any shares of Class A Common Stock or Class B Common Stock) either
on the basis of a distribution of identical securities, on an equal per
share basis, to holders of Class A Common Stock and Class B Common Stock or
on the basis of a distribution of one class or series of securities to
holders of Class A Common Stock and another class or series of securities
to holders of Class B Common Stock, provided that the securities so
distributed (and, if applicable, the securities into which the distributed
securities are convertible, or for which they are exercisable or
exchangeable, or which the distributed securities evidence the right to
purchase) do not differ in any respect other than their relative voting
rights and related differences in designation, conversion and share
distribution provisions with holders of shares of Class B Common Stock
receiving the class or series having the higher relative voting rights
(without regard to whether such rights differ to a greater or lesser extent
than the corresponding differences in voting rights and related differences
in designation, conversion and share distribution provisions between the
Class A Common Stock and the Class B Common Stock) provided that if the
securities so distributed constitute capital stock of a subsidiary of the
Corporation, such rights shall not differ to a greater extent than the
corresponding differences in voting rights, designation, conversion and
share distribution provisions between the Class A Common Stock and the
Class B Common Stock, and provided in each case that such distribution is
otherwise made on an equal per share basis.
The Corporation shall not reclassify, subdivide or combine the Class A Common
Stock without reclassifying, subdividing or combining the Class B Common Stock,
on an equal per share basis, and the Corporation shall not reclassify,
subdivide or combine the Class B Common Stock without reclassifying,
subdividing or combining the Class A Common Stock, on an equal per share basis.
5. Liquidation and Dissolution. In the event of a liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after payment
or provision for payment of the debts and liabilities of the Corporation and
subject to the prior payment in full of the preferential amounts to which any
series of Preferred Stock is entitled, the holders of Class A Common Stock and
the holders of Class B Common Stock shall share equally, on a share for share
basis, in the assets of the Corporation remaining for distribution to its
common stockholders. Neither the consolidation or merger of the Corporation
with or into any other Person or Persons nor the sale, transfer or lease of all
or substantially all of the assets of the Corporation shall itself be deemed to
be a liquidation, dissolution or winding up of the Corporation within the
meaning of this paragraph 5.
6. Merger and Consolidation. In the event of the merger or consolidation of
the Corporation with or into another entity (whether or not the Corporation is
the surviving entity), the holders of the Class A Common Stock and Class B
Common Stock shall be entitled to receive in such merger or consolidation, on a
per share basis, consideration of substantially equivalent value, as determined
in good faith by the Board of Directors of the Corporation, taking into account
all relevant factors, including, without limitation, the anticipated tax
treatment of such consideration to the holders of the Class A Common Stock and
Class B Common Stock. Notwithstanding the foregoing, to the extent that the
holders of the Class A Common Stock and the holders of the Class B Common
Stock, respectively, are entitled to receive in any merger or consolidation
(pursuant to any election or otherwise), securities that do not differ in any
respect other than their relative voting rights and related differences
IV-3
<PAGE>
in designation, conversion and share distribution provisions, which differences
would be permitted in the case of securities distributed in a share
distribution made under paragraph 4 of this Section A, such relative voting
rights and related differences in designation, conversion and share
distribution provisions shall be disregarded in determining the per share value
of the consideration to be received by the holders of the Class A Common Stock
and the holders of the Class B Common Stock, respectively, under this paragraph
6.
SECTION B
PREFERRED STOCK
The Preferred Stock may be issued, from time to time, in one or more series,
with such powers, designations, preferences and relative, participating,
optional or other rights, and qualifications, limitations or restrictions
thereof, as shall be stated and expressed in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors (a
"Preferred Stock Designation"). The Board of Directors, in such Preferred Stock
Designation (a copy of which shall be filed and recorded as required by law),
is also expressly authorized to fix with respect to each series:
(i) the distinctive serial designations and the division of such shares
into series and the number of shares of a particular series, which may be
increased or decreased, but not below the number of shares thereof then
outstanding, by a certificate made, signed, filed and recorded as required
by law;
(ii) the dividend rate or amounts, if any, for the particular series, the
date or dates from which dividends on all shares of such series shall be
cumulative, if dividends on stock of the particular series shall be
cumulative, and the relative rights of priority, if any, or participation,
if any, with respect to payment of dividends on shares of that series;
(iii) the rights of the shares of each series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of each
series;
(iv) the right, if any, of the holders of a particular series to convert
or exchange such stock into or for other classes or series of a class of
stock or indebtedness of the Corporation, and the terms and conditions of
such conversion or exchange, including provisions for the adjustment of the
conversion or exchange rate in such events as the Board of Directors shall
determine;
(v) the voting rights, if any, of the holders of a particular series; and
(vi) the terms and conditions, if any, for the Corporation to purchase or
redeem shares of a particular series.
All shares of any one series of the Preferred Stock shall be alike in every
particular. Except to the extent otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock, the
holders of shares of such series shall have no voting rights except as may be
required by the laws of the State of Delaware.
Except as may be provided by the Board of Directors in a Preferred Stock
Designation or by law, shares of any series of Preferred Stock that have been
redeemed (whether through the operation of a sinking fund or otherwise) or
purchased by the Corporation, or which, if convertible or exchangeable, have
been converted into or exchanged for shares of stock of any other class or
classes shall have the status of authorized and unissued shares of Preferred
Stock and may be reissued as a part of the series of which they were originally
a part or may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors or as part of
any other series of Preferred Stock.
IV-4
<PAGE>
SECTION C
UNCLAIMED DIVIDENDS
Any and all right, title, interest and claim in or to any dividends declared
by the Corporation, whether in cash, stock or otherwise, which are unclaimed
for a period of four years after the close of business on the payment date,
shall be and be deemed extinguished and abandoned; and such unclaimed
dividends in the possession of the Corporation, its transfer agent or other
agents or depositories, shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any Persons whatsoever.
ARTICLE V
DIRECTORS
SECTION A
NUMBER OF DIRECTORS
The governing body of the Corporation shall be a Board of Directors. Subject
to any rights of the holders of any series of Preferred Stock to elect
additional directors, the number of directors shall not be less than three (3)
and the exact number of directors shall be fixed by the Board of Directors by
resolution.
SECTION B
ELECTION AND REMOVAL OF DIRECTORS
Directors shall be elected for a one-year term at each annual meeting of
stockholders. Election of directors need not be by written ballot. Advance
notice of nominations for the election of directors, other than nominations by
the Board of Directors or a committee thereof, shall be given to the
Corporation in the manner provided in the By-laws. Except as set forth in
Section D, directors may be removed from office with or without cause upon the
affirmative vote of the holders of at least 66 2/3% of the total voting power
of the then outstanding shares of Class A Common Stock, Class B Common Stock
and any series of Preferred Stock entitled to vote generally at an election of
directors, voting together as a single class.
SECTION C
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause, and newly created directorships
resulting from any increase in the number of directors on the Board of
Directors, shall be filled by the affirmative vote of a majority of the
remaining directors then in office (even though less than a quorum) or by the
sole remaining director. Any director elected in accordance with the preceding
sentence shall hold office until the next annual meeting of stockholders and
until such director's successor shall have been elected and qualified. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director, except as may be provided in a
Preferred Stock Designation with respect to any additional director elected by
the holders of the applicable series of Preferred Stock.
IV-5
<PAGE>
SECTION D
ELECTION OF DIRECTORS BY
HOLDERS OF PARTICULAR CLASS OR SERIES
Notwithstanding the foregoing provisions of this Article V, whenever the
holders of any one or more classes of series of stock issued by the
Corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
removal, term of office, filling of vacancies and other features of such
directorships shall be governed by the provisions of this Certificate,
including any applicable resolutions of the Board of Directors pursuant to
Article IV. Directors so elected shall be elected by such holders annually
unless expressly provided otherwise by those provisions or resolutions and,
during the prescribed terms of office of those directors, the Board of
Directors shall consist of a number of directors equal to the number of those
directors plus the number of directors determined as provided in Section A of
this Article V.
SECTION E
LIMITATION ON LIABILITY AND INDEMNIFICATION
1. Limitation On Liability.
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or modification
of this paragraph 1 shall be prospective only and shall not adversely affect
any limitation, right or protection of a director of the Corporation existing
at the time of such repeal or modification.
2. Indemnification.
(a) RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. Such right of
indemnification shall inure whether or not the claim asserted is based on
matters which antedate the adoption of this Section E. The Corporation shall
be required to indemnify or make advances to a person in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
(b) PREPAYMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses
incurred by a director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the director
or officer to repay all amounts advanced if it should be ultimately determined
that the director or officer is not entitled to be indemnified under this
paragraph or otherwise.
(c) CLAIMS. If a claim for indemnification or payment of expenses under this
paragraph 2 is not paid in full within 60 days after a written claim therefor
has been received by the Corporation, the claimant may file suit to recover
the unpaid amount of such claim and, if successful in whole or in part, shall
be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
IV-6
<PAGE>
(d) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
paragraph shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of this Certificate,
the By-laws, agreement, vote of stockholders or disinterested directors or
otherwise.
(e) OTHER INDEMNIFICATION. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or nonprofit entity.
3. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Section E
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
SECTION F
AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than 66 2/3% of the members of the Board of
Directors then in office, is hereby expressly authorized and empowered to
adopt, amend or repeal any provision of the By-laws of this Corporation.
ARTICLE VI
MEETINGS OF STOCKHOLDERS
SECTION A
ANNUAL AND SPECIAL MEETINGS
Subject to the rights of the holders of any series of Preferred Stock,
stockholder action may be taken only at an annual or special meeting. Except
as otherwise provided in a Preferred Stock Designation or unless otherwise
prescribed by law or by another provision of this Certificate, special
meetings of the stockholders of the Corporation, for any purpose or purposes,
shall be called by the Secretary of the Corporation (i) upon the written
request of the holders of not less than 66 2/3% of the total voting power of
the outstanding Voting Securities (as hereinafter defined) or (ii) at the
request of at least 66 2/3% of the members of the Board of Directors then in
office. The term "Voting Securities" shall mean the Class A Common Stock,
Class B Common Stock and any series of Preferred Stock entitled to vote with
the holders of Class A Common Stock and Class B Common Stock generally upon
all matters which may be submitted to a vote of stockholders at any annual
meeting or special meeting thereof.
SECTION B
ACTION WITHOUT A MEETING
Except as otherwise provided in the terms of any series of Preferred Stock,
no action required to be taken or which may be taken at any annual meeting or
special meeting of stockholders may be taken without a meeting, and the power
of stockholders to consent in writing, without a meeting, is specifically
denied.
IV-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides, generally,
that a corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (except actions by or in the right
of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. A corporation
may similarly indemnify such person for expenses actually and reasonably
incurred by such person in connection with the defense or settlement of any
action or suit by or in the right of the corporation, provided such person
acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation, and, in the case
of claims, issues and matters as to which such person shall have been
adjudged liable to the corporation, provided that a court shall have
determined, upon application, that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall
deem proper.
Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision may not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. No such provision may
eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision became effective.
Article V, Section E of the Restated Certificate of Incorporation, as
amended ("TCI Charter") of TCI provides as follows:
" 1. Limitation On Liability.
------------------------
To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a
director of the Corporation shall not be liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or modification of this paragraph 1
shall be prospective only and shall not adversely affect any
limitation, right or protection of a director of the Corporation
existing at the time of such repeal or modification.
2. Indemnification.
----------------
a. Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact
that he, or a person for whom he is the legal representative, is or
was a director or officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect
to employee benefit plans, against all liability and loss suffered and
expenses (including attorneys' fees) reasonably incurred by such
person. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which antedate the adoption of this
Section E. The Corporation shall be required to indemnify a person in
connection with a proceeding (or part thereof) initiated by such
person only if the proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
b. Prepayment of Expenses. The Corporation shall pay the
expenses (including attorneys' fees) incurred in defending any
proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a director or officer in
advance of the final disposition of the proceeding shall be made only
upon receipt of an undertaking by the director or officer to repay all
amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this
paragraph or otherwise.
II-1
<PAGE>
c. Claims. If a claim for indemnification or payment of expenses
under this paragraph is not paid in full within 60 days after a
written claim therefor has been received by the Corporation, the
claimant may file suit to recover the unpaid amount of such claim and,
if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to
the requested indemnification or payment of expenses under applicable
law.
d. Non-Exclusivity of Rights. The rights conferred on any person
by this paragraph shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision
of this Certificate, the Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
e. Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity
shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit entity.
3. Amendment or Repeal
-------------------
Any repeal or modification of the foregoing provisions of this
Section E shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the
time of such repeal or modification."
Article II, Section 2.9 of the Bylaws of TCI also contains an indemnity
provision, requiring TCI to indemnify members of the Board of Directors and
officers of TCI and their respective heirs, personal representatives and
successors in interest for or on account of any action performed on behalf
of TCI, to the fullest extent provided by the laws of the State of Delaware
and the TCI Charter.
TCI has also entered into indemnification agreements with each of its
directors (each director, an "indemnitee"). The indemnification agreements
provide (i) for the prompt indemnification to the fullest extent permitted
by law against any and all expenses, including attorneys' fees and all
other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness or participating in (including on
appeal), or in preparing for ("Expenses"), any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation
("Claim"), related to the fact that such indemnitee is or was a director,
officer, employee, agent or fiduciary of TCI or is or was serving at TCI's
request as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise, or by reason of anything done or not done by a
director or officer in any such capacity, and against any and all
judgments, fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection
therewith) of any Claim, unless the Reviewing Party (one or more members of
the Board of Directors or other person appointed by the Board of Directors,
who is not a party to the particular claim, or independent legal counsel)
determines that such indemnification is not permitted under applicable law
and (ii) for the prompt advancement of Expenses, and for reimbursement to
TCI if the Reviewing Party determines that such indemnitee is not entitled
to such indemnification under applicable law. In addition, the
indemnification agreements provide (i) a mechanism through which an
indemnitee may seek court relief in the event the Reviewing Party
determines that the indemnitee would not be permitted to be indemnified
under applicable law (and therefore is not entitled to indemnification or
expense advancement under the indemnification agreement) and (ii)
indemnification against all expenses (including attorneys' fees), and
advancement thereof if requested, incurred by the indemnitee in seeking to
collect an indemnity claim or advancement of expenses from TCI or incurred
in seeking to recover under a directors' and officers' liability insurance
policy, regardless of whether successful or not. Furthermore, the
indemnification agreements provide that after there has been a "change in
control" in TCI (as defined in the indemnification agreements), other than
a change in control approved by a majority of directors who were directors
prior to such change, then, with respect to all determinations regarding a
right to indemnity and the right to advancement of Expenses, TCI will seek
legal advice only from independent legal counsel selected by the indemnitee
and approved by TCI.
The indemnification agreements impose upon TCI the burden of proving
that an indemnitee is not entitled to indemnification in any particular
case and negate certain presumptions that may otherwise be drawn against an
indemnitee seeking indemnification in connection with the termination of
actions in certain circumstances. Indemnitees' rights under the
indemnification agreements are not exclusive of any other rights they may
have under Delaware law, TCI's Bylaws or otherwise. Although not requiring
the maintenance of directors' and officers' liability insurance, the
indemnification agreements require that an indemnitee be provided with the
maximum coverage available for any director or officer of TCI if there is
such a policy.
TCI may purchase liability insurance policies covering its directors and
officers.
II-2
<PAGE>
Item 21. Exhibits.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 10, 1995 among
United Video Satellite Group, Inc., TCI and TCI Merger Sub, Inc.
(Included as Appendix I-A to the Proxy Statement/Prospectus
which is a part of this Registration Statement) .
2.2 Amendment No. 1 dated as of December 18, 1995, to the Agreement
and Plan of Merger. (Included as Appendix I-B to the Proxy
Statement/Prospectus which is a part of this Registration
Statement).
3.1 Restated Certificate of Incorporation of TCI dated August 4, 1994,
as amended on August 4, 1994, August 16, 1994, October 11, 1994,
October 21, 1994, January 26, 1995, August 3, 1995 and August 3,
1995. (Incorporated herein by reference to Exhibit 99.1 to TCI's
Current Report on Form 8-K, dated August 10, 1995 (Commission File
No. 0-20421)).
3.2 Bylaws of TCI as adopted June 16, 1994. (Incorporated herein by
reference to Exhibit 3.2 of TCI's Annual Report on Form 10-K for
the year ended December 31, 1994, as amended by Form 10-K/A
(Amendment No. 1) (Commission File No. 0-20421)).
4.1 Form of Certificate of Designations of Redeemable Convertible TCI
Group Preferred Stock, Series G, par value $.01 per share.
4.2 Form of Certificate of Designations of Redeemable Convertible
Liberty Media Group Preferred Stock, Series H, par value $.01 per
share.
4.3 Specimen Certificate for Redeemable Convertible TCI Group
Preferred Stock, Series G, par value $.01 per share.
4.4 Specimen Certificate for Redeemable Convertible Liberty Media
Group Preferred Stock, Series H, par value $.01 per share.
5 Opinion of Baker & Botts, L.L.P. regarding legality of securities
being registered.
8 Opinion of Holme Roberts & Owen LLC regarding certain Federal
income tax matters.
12 Calculation of Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends of TCI.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG.
23.5 Consent of KPMG Finsterbusch Pickenhayn Sibille.
23.6 Consent of KPMG Peat Marwick LLP.
23.7 Consent of Price Waterhouse LLP.
23.8 Consent of Baker & Botts, L.L.P. (Included in Exhibit 5).
23.9 Consent of Holme Roberts & Owen LLC. (Included in Exhibit 8).
23.10 Consent of Furman Selz Incorporated. (Included in Exhibit 99.1).
24 Power of Attorney. (Included on page II-7).
</TABLE>
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<PAGE>
Exhibit
Number Description
------ -----------
99.1 Opinion of Furman Selz Incorporated. (Included as Appendix II to
the Proxy Statement/Prospectus which is part of this Registration
Statement).
99.2 Form of Proxy.
99.3 Form of Form of Election and Letter of Transmittal.
99.4 Form of Restated Certificate of Incorporation of United Video
Satellite Group, Inc., as the Surviving Corporation of the Merger.
(Included as Appendix IV to the Proxy Statement/Prospectus which
is a part of this Registration Statement).
99.5 Form of Bylaws of United Video Satellite Group, Inc., as the
Surviving Corporation of the Merger.
99.6 Form of Stockholders Agreement between TCI and United Video
Satellite Group, Inc. to be entered into at the closing of the
Merger.
99.7 Form of Employment Agreement between Lawrence Flinn, Jr. and
United Video Satellite Group, Inc. to be entered into at the
closing of the Merger.
99.8 Form of Registration Rights Agreement between TCI and Lawrence
Flinn, Jr., to be entered into at the closing of the Merger.
99.9 Form of First Addendum and Amendment to Employment Agreement for
Roy L. Bliss to be entered into by United Video Satellite Group,
Inc. and Mr. Bliss at the closing of the Merger.
99.10 Form of First Addendum and Amendment to Employment Agreement for
Peter C. Boylan III to be entered into by United Video Satellite
Group, Inc. and Mr. Boylan at the closing of the Merger.
(b) Financial Statement Schedules.
Schedule I -- Condensed Information as to the Financial Position
of the Registrant, December 31, 1994; Condensed Information as to
the Operations and Cash Flows of the Registrant, Year Ended
December 31, 1994 *
Schedule II -- Valuation and Qualifying Accounts, Years Ended
December 31, 1994, 1993 and 1992 *
-------------------
* Incorporated herein by reference to the same schedule included as part
of TCI's Annual Report on Form 10-K for the year ended December 31,
1994, as amended by Form 10-K/A (Amendment No. 1) (Commission File No.
0-20421).
(c) Reports, Opinions or Appraisals.
(1) Opinion of Furman Selz Incorporated. (Included as Appendix
II to the Proxy Statement/Prospectus which is part of this
Registration Statement).
Item 22. Undertakings.
(a) TCI hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
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<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by TCI pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of TCI's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), TCI undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(6) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 15 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of
responding to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective, provided, in the case of a transaction that (but for
the possibility of integration with other transactions) would itself
qualify for an exemption from registration, that (i) such transaction by
itself or when aggregated with other such transactions made since the
filing of the most recent audited financial statements of TCI would have a
material financial effect upon TCI and (ii) the information
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<PAGE>
required to be supplied in a post-effective amendment by this paragraph 8
is not contained in periodic reports filed by TCI pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of TCI pursuant to the provisions described under Item
20 above, or otherwise, TCI has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by TCI of expenses incurred or paid by
a director, officer or controlling person of TCI in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, TCI
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Greenwood Village, State of Colorado, on December 22, 1995.
TELE-COMMUNICATIONS, INC.
By: JOHN C. MALONE
--------------
Title: Chief Executive Officer, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen M. Brett, Esq. and Elizabeth M.
Markowski, Esq., and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and re-substitution for him and
in his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents and each of
them full power and authority, to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, to all
intents and purposes and as fully as they might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents
or their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
BOB MAGNESS Chairman of the Board and December 22, 1995
- ---------------------- Director
JOHN C. MALONE Chief Executive Officer, December 22, 1995
- ---------------------- President and Director
(Principal Executive Officer)
DONNE F.FISHER Executive Vice President, December 22, 1995
- ---------------------- Treasurer and Director
(Principal Financial and
Accounting Officer)
JEROME H. KERN Director December 22, 1995
- ----------------------
JOHN W. GALLIVAN Director December 22, 1995
- ----------------------
KIM MAGNESS Director December 22, 1995
- ----------------------
ROBERT A. NAIFY Director December 22, 1995
- ----------------------
TONY COELHO Director December 22, 1995
- ----------------------
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 10, 1995 among
United Video Satellite Group, Inc., TCI and TCI Merger Sub, Inc.
(Included as Appendix I-A to the Proxy Statement/Prospectus
which is a part of this Registration Statement).
2.2 Amendment No. 1 dated as of December 18, 1995, to the Agreement
and Plan of Merger. (Included as Appendix I-B to the Proxy
Statement/Prospectus which is a part of this Registration
Statement).
3.1 Restated Certificate of Incorporation of TCI dated August 4,
1994, as amended on August 4, 1994, August 16, 1994, October 11,
1994, October 21, 1994, January 26, 1995, August 3, 1995 and
August 3, 1995. (Incorporated herein by reference to Exhibit
99.1 to TCI's Current Report on Form 8-K, dated August 10, 1995
(Commission File No. 0-20421)).
3.2 Bylaws of TCI as adopted June 16, 1994 (Incorporated herein by
reference to Exhibit 3.2 of TCI's Annual Report on Form 10-K for
the year ended December 31, 1994, as amended by Form 10-K/A
(Amendment No. 1) (Commission File No. 0-20421)).
4.1 Form of Certificate of Designations of Redeemable Convertible
TCI Group Preferred Stock, Series G, par value $.01 per share.
4.2 Form of Certificate of Designations of Redeemable Convertible
Liberty Media Group Preferred Stock, Series H, par value $.01
per share.
4.3 Specimen Certificate for Redeemable Convertible TCI Group
Preferred Stock, Series G, par value $.01 per share.
4.4 Specimen Certificate for Redeemable Convertible Liberty Media
Group Preferred Stock, Series H, par value $.01 per share.
5 Opinion of Baker & Botts, L.L.P. regarding legality of
securities being registered.
8 Opinion of Holme Roberts & Owen LLC regarding certain Federal
income tax matters.
12 Calculation of Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends of TCI.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG.
23.5 Consent of KPMG Finsterbusch Pickenhayn Sibille.
23.6 Consent of KPMG Peat Marwick LLP.
23.7 Consent of Price Waterhouse LLP.
23.8 Consent of Baker & Botts, L.L.P. (included in Exhibit 5).
23.9 Consent of Holme Roberts & Owen LLC (included in Exhibit 8).
23.10 Consent of Furman Selz Incorporated (included in Exhibit 99.1).
24 Power of Attorney (included on page II-7).
99.1 Opinion of Furman Selz Incorporated (Included as Appendix II to
the Proxy Statement/Prospectus which is part of this
Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
99.2 Form of Proxy.
99.3 Form of Form of Election and Letter of Transmittal.
99.4 Form of Restated Certificate of Incorporation of United Video
Satellite Group, Inc., as the Surviving Corporation of the
Merger. (Included as Appendix IV to the Proxy Statement/
Prospectus which is a part of this Registration Statement)
99.5 Form of Bylaws of United Video Satellite Group, Inc., as the
Surviving Corporation of the Merger.
99.6 Form of Stockholders Agreement between TCI and United Video
Satellite Group, Inc. to be entered into at the closing of the
Merger.
99.7 Form of Employment Agreement between Lawrence Flinn, Jr. and
United Video Satellite Group, Inc. to be entered into at the
closing of the Merger.
99.8 Form of Registration Rights Agreement between TCI and Lawrence
Flinn, Jr., to be entered into at the closing of the Merger.
99.9 Form of First Addendum and Amendment to Employment Agreement for
Roy L. Bliss to be entered into by United Video Satellite Group,
Inc. and Mr. Bliss at the closing of the Merger.
99.10 Form of First Addendum and Amendment to Employment Agreement for
Peter C. Boylan III to be entered into by United Video Satellite
Group, Inc. and Mr. Boylan at the closing of the Merger.
</TABLE>
<PAGE>
EXHIBIT 4.1
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATIONS
-----------------
SETTING FORTH A COPY OF A RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED AS
"REDEEMABLE CONVERTIBLE TCI GROUP PREFERRED STOCK, SERIES G"
ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
-----------------
The undersigned, an Executive Vice President of TELE-COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), HEREBY CERTIFIES that the Board of
Directors of the Company on DECEMBER 13, 1995, duly adopted the following
resolutions creating a new series of the Company's Series Preferred Stock:
"BE IT RESOLVED, that pursuant to authority expressly granted by the
provisions of Article IV, Section D of the Restated Certificate of Incorporation
of the Company, the Board of Directors hereby creates and authorizes the
issuance of a new series of the Company's Series Preferred Stock, par value $.01
per share ("Series Preferred Stock"), and hereby fixes the powers, designations,
dividend rights, voting powers, rights on liquidation, conversion rights,
redemption rights and other preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions of the
shares of such series (in addition to the powers, designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof set forth in the Restated
Certificate of Incorporation that are applicable to each class and series of the
Company's preferred stock, par value $.01 per share ("Preferred Stock")), as
follows:
1. Designation; Number of Shares. The designation of the series of
Series Preferred Stock, par value $.01 per share, of the Company created hereby
shall be "Redeemable Convertible TCI Group Preferred Stock, Series G" ("Series G
Preferred Stock"). The authorized number of shares of Series G Preferred Stock
shall be [_____________]. Each share of Series G Preferred Stock shall have a
stated value of $21.60 ("Stated Value").
-1-
<PAGE>
Any shares of Series G Preferred Stock redeemed, converted or
otherwise acquired by the Company shall be retired, shall not be reissued as
shares of Series G Preferred Stock and shall resume the status of authorized and
unissued shares of Series Preferred Stock, without designation as to series,
until such shares are once more designated as part of a particular series of
Series Preferred Stock by the Board of Directors.
2. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 2 shall have, for all purposes of this
Certificate of Designations, the meanings herein specified:
"Anniversary Date" shall mean JANUARY 25, 1997.
"Average Market Price" as of any Record Date or Special Record
Date for a dividend payment declared by the Board of Directors shall mean the
average of the daily Closing Prices of the Series A TCI Group Common Stock for
the period of ten (10) consecutive trading days ending on the tenth trading day
prior to such Record Date or Special Record Date, appropriately adjusted in such
manner as the Board of Directors in good faith deems appropriate to take into
account any stock dividend on the Series A TCI Group Common Stock, or any
subdivision, combination or reclassification of the Series A TCI Group Common
Stock that occurs, or the Ex-Dividend Date for which occurs, during the period
following the first trading day in such ten-trading day period and ending on the
last full trading day immediately preceding the Dividend Payment Date or other
date fixed for the payment of dividends to which such Record Date or Special
Record Date relates.
"Board of Directors" shall mean the Board of Directors of the
Company, and, unless the context indicates otherwise, shall also mean, to the
extent permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Company with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in The City of New York, New York are not
required to be open.
"capital stock" shall mean any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Company.
"Closing Price" of a share of Series A TCI Group Common Stock or
of a share of Series A Liberty Media Group Common Stock, or of a share of any
other class or series of capital stock of the Company into which the Series G
Preferred Stock may hereafter become convertible pursuant to paragraph 7, on any
day shall mean the last reported per share sale price (or, if no sale price is
reported, the average of the high and low bid prices) of the Series A TCI
-2-
<PAGE>
Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as the case may be, on such day on the Nasdaq Stock Market or as
quoted by the National Quotation Bureau Incorporated or, if the Series A TCI
Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as applicable, is listed on an exchange, on the principal
exchange on which the Series A TCI Group Common Stock, the Series A Liberty
Media Group Common Stock or such capital stock, as the case may be, is listed.
In the event that no such quotation is available for any day, the Board of
Directors shall be entitled to determine the Closing Price on the basis of such
quotations as it in good faith considers appropriate.
"Contingency" shall have the meaning set forth in paragraph 3(a).
"Conversion Date" of a share of Series G Preferred Stock shall
mean the date on which the requirements for conversion of such share set forth
in paragraph 7(b) of this Certificate of Designations have been satisfied by the
holder thereof.
"Conversion Rate" shall mean the kind and amount of securities,
assets or other property that as of any date are issuable or deliverable upon
conversion of a share of Series G Preferred Stock. The Conversion Rate of a
share of Series G Preferred Stock shall initially be 1.05 shares of Series A TCI
Group Common Stock for each share of Series G Preferred Stock, subject to
adjustment as set forth in paragraph 7 of this Certificate of Designations. In
the event that pursuant to paragraph 7 the Series G Preferred Stock becomes
convertible into more than one class or series of capital stock of the Company,
the term Conversion Rate, when used with respect to any such class or series,
shall mean the number or fraction of shares or other units of such capital stock
that as of any date would be issued upon conversion of a share of Series G
Preferred Stock .
"Convertible Securities" shall mean any or all options, warrants,
securities and rights which are convertible into or exercisable or exchangeable
for Series A TCI Group Common Stock at the option of the holder thereof, or
which otherwise entitle the holder thereof to subscribe for, purchase or
otherwise acquire Series A TCI Group Common Stock; provided, however, that such
term shall not include the Series B TCI Group Common Stock.
"Current Market Price", on the Determination Date for any
issuance of rights, warrants or options or any distribution in respect of which
the Current Market Price is being calculated, shall mean the average of the
daily Closing Prices of the Series A TCI Group Common Stock for the shortest of:
(i) the period of 30 consecutive trading days commencing 45
trading days before such Determination Date,
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance of rights, warrants or options or
the distribution in
-3-
<PAGE>
respect of which the Current Market Price is being calculated and
ending on the last full trading day before such Determination Date,
and
(iii) the period, if any, commencing on the date next
succeeding the Ex-Dividend Date with respect to the next preceding
issuance of rights, warrants or options or distribution for which an
adjustment is required by the provisions of paragraph 7(c)(iv), 7(d)
or 7(e), and ending on the last full trading day before such
Determination Date.
If the record date for an issuance of rights, warrants or options or a
distribution for which an adjustment is required by the provisions of paragraph
7(c)(iv), 7(d) or 7(e) (the "preceding adjustment event") precedes the record
date for the issuance or distribution in respect of which the Current Market
Price is being calculated and the Ex-Dividend Date for such preceding adjustment
event is on or after the Determination Date for the issuance or distribution in
respect of which the Current Market Price is being calculated, then the Current
Market Price shall be adjusted by deducting therefrom the fair market value (on
the record date for the issuance or distribution in respect of which the Current
Market Price is being calculated), as determined in good faith by the Board of
Directors, of the capital stock, rights, warrants or options, assets or debt
securities issued or distributed in respect of each share of Series A TCI Group
Common Stock in such preceding adjustment event. Further, in the event that the
Ex-Dividend Date (or in the case of a subdivision, combination or
reclassification, the effective date with respect thereto) with respect to a
dividend, subdivision, combination or reclassification to which paragraph
7(c)(i), (ii), (iii) or (v) applies occurs during the period applicable for
calculating the Current Market Price, then the Current Market Price shall be
calculated for such period in a manner determined in good faith by the Board of
Directors to reflect the impact of such dividend, subdivision, combination or
reclassification on the Closing Prices of the Series A TCI Group Common Stock
during such period.
"Determination Date" for any issuance of rights, warrants or
options or any distribution to which paragraph 7(d) or 7(e) applies shall mean
the earlier of (i) the record date for the determination of stockholders
entitled to receive the rights, warrants or options or the distribution to which
such paragraph applies and (ii) the Ex-Dividend Date for such rights, warrants
or options or distribution.
"Dividend Payment Date" shall mean, for any Dividend Period, the
last day of such Dividend Period which shall be the FIRST day of each FEBRUARY
and AUGUST, commencing with AUGUST 1, 1997, or the next succeeding Business Day
if any such day is not a Business Day.
"Dividend Period" shall mean the period from the Anniversary Date
to but excluding the first Dividend Payment Date and, thereafter, each semi-
annual period from and including a Dividend Payment Date to but excluding the
next Dividend Payment Date.
"Exchange Preferred Stock" shall have the meaning set forth in
paragraph 7(g).
-4-
<PAGE>
"Ex-Dividend Date" shall mean the date on which "ex-dividend"
trading commences for a dividend, an issuance of rights, warrants or options or
a distribution to which any of paragraph 7(c), (d) or (e) applies in the over-
the-counter market or on the principal exchange on which the Series A TCI Group
Common Stock is then quoted or listed.
"Issue Date" shall mean the date on which shares of Series G
Preferred Stock are first issued.
"Junior Stock" shall mean (i) the TCI Group Common Stock, (ii)
the Liberty Media Group Common Stock, (iii) the Class B Preferred Stock, (iv)
any other class or series of capital stock, whether now existing or hereafter
created, of the Company, other than (A) the Series G Preferred Stock, (B) any
class or series of Parity Stock (except to the extent provided under clause (v)
hereof) and (C) any class or series of Senior Stock, and (v) any class or series
of Parity Stock to the extent that it ranks junior to the Series G Preferred
Stock as to dividend rights, rights of redemption or rights on liquidation, as
the case may be. For purposes of clause (v) above, a class or series of Parity
Stock shall rank junior to the Series G Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation if the holders of shares of Series
G Preferred Stock shall be entitled to dividend payments, payments on redemption
or payments of amounts distributable upon dissolution, liquidation or winding up
of the Company, as the case may be, in preference or priority to the holders of
shares of such class or series of Parity Stock.
"Liberty Media Group Common Stock" shall mean the Series A
Liberty Media Group Common Stock and the Series B Liberty Media Group Common
Stock.
"Liquidation Preference" measured per share of the Series G
Preferred Stock as of any date in question (the "Relevant Date") shall mean an
amount equal to the sum of (a) the Stated Value of such share, plus (b) an
amount equal to all dividends accrued on such share which pursuant to paragraph
3(d) of this Certificate of Designations have been added to and remain a part of
the Liquidation Preference as of the Relevant Date, plus (c) for purposes of
determining the amounts payable pursuant to paragraph 4 and paragraph 5 of this
Certificate of Designations and the definition of Redemption Price, an amount
equal to all unpaid dividends accrued on the sum of the amounts specified in
clauses (a) and (b) above during the period from and including the immediately
preceding Dividend Payment Date (or the Anniversary Date if the Relevant Date is
on or prior to the first Dividend Payment Date) to but excluding the Relevant
Date, and, in the case of clauses (b) and (c) hereof, whether or not such unpaid
dividends have been declared or there are any unrestricted funds of the Company
legally available for the payment of dividends. In connection with the
determination of the Liquidation Preference of a share of Series G Preferred
Stock upon redemption or upon liquidation, dissolution or winding up of the
Company, the Relevant Date shall be the applicable date of redemption or the
date of distribution of amounts payable to stockholders in connection with any
such liquidation, dissolution or winding up.
"Mirror Preferred Stock" shall have the meaning set forth in
paragraph 7(g).
-5-
<PAGE>
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations
promulgated thereunder.
"Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board, President or any Senior Vice President of the Company and
by the Treasurer or an Assistant Treasurer of the Company.
"Parity Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Company ranking on a parity
basis with the Series G Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation. Capital stock of any class or series,
whether now existing or hereafter created, shall rank on a parity as to dividend
rights, rights of redemption or rights on liquidation with the Series G
Preferred Stock, whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Series G
Preferred Stock, if the holders of shares of such class or series shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Company, as the
case may be, in proportion to their respective accumulated and accrued and
unpaid dividends, redemption prices or liquidations prices, respectively,
without preference or priority, one over the other, as between the holders of
shares of such class or series and the holders of Series G Preferred Stock. No
class or series of capital stock that ranks junior to the Series G Preferred
Stock as to rights on liquidation shall rank or be deemed to rank on a parity
basis with the Series G Preferred Stock as to dividend rights or rights of
redemption, unless the instrument creating or evidencing such class or series of
capital stock otherwise expressly so provides. The Series C Preferred Stock,
the Series D Preferred Stock, the Series F Preferred Stock and the Series H
Preferred Stock rank on a parity basis with the Series G Preferred Stock as to
dividend rights, rights of redemption and rights on liquidation and constitute
"Parity Stock" for purposes of this Certificate of Designations.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, limited liability company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity, whether acting in an individual, fiduciary
or other capacity.
"Record Date" for the dividends payable on any Dividend Payment
Date shall mean the 15TH day of the month preceding the month during which such
Dividend Payment Date shall occur as and if designated by the Board of
Directors.
"Redeemable Capital Stock" shall have the meaning set forth in
paragraph 7(c).
"Redemption Date" as to any share of Series G Preferred Stock
shall mean the date fixed for redemption of such share pursuant to paragraph
5(a) or 5(b) of this Certificate of Designations, provided that no such date
will be a Redemption Date unless the applicable Redemption Price is actually
paid in full on such date or the consideration sufficient for the
-6-
<PAGE>
payment thereof, and for no other purpose, has been set apart or deposited in
trust as contemplated by paragraph 5(d) of this Certificate of Designations.
"Redemption Price", as to any share of Series G Preferred Stock
that is to be redeemed on any Redemption Date, shall mean the Liquidation
Preference thereof on such Redemption Date.
"Redemption Securities" shall have the meaning set forth in
paragraph 7(g).
"Senior Stock" shall mean any class or series of capital stock of
the Company hereafter created ranking prior to the Series G Preferred Stock as
to dividend rights, rights of redemption or rights on liquidation. Capital stock
of any class or series shall rank prior to the Series G Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders of
shares of such class or series shall be entitled to dividend payments, payments
on redemption or payments of amounts distributable upon dissolution, liquidation
or winding up of the Company, as the case may be, in preference or priority to
the holders of shares of Series G Preferred Stock. No class or series of capital
stock that ranks on a parity basis with or junior to the Series G Preferred
Stock as to rights on liquidation shall rank or be deemed to rank prior to the
Series G Preferred Stock as to dividend rights or rights of redemption,
notwithstanding that the dividend rate, dividend payment dates, sinking fund
provisions, if any, or mandatory redemption provisions thereof are different
from those of the Series G Preferred Stock, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly so
provides.
"Series A Liberty Media Group Common Stock" shall mean the Tele-
Communications, Inc. Series A Liberty Media Group Common Stock, par value $1.00
per share, which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series A Liberty Media
Group Common Stock, or in the case of a consolidation or merger of the Company
with or into another Person affecting the Series A Liberty Media Group Common
Stock, such capital stock to which a holder of Series A Liberty Media Group
Common Stock shall be entitled upon the occurrence of such event.
"Series A TCI Group Common Stock" shall mean the Tele-
Communications, Inc. Series A TCI Group Common Stock, par value $1.00 per share,
which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series A TCI Group
Common Stock, or in the case of a consolidation or merger of the Company with or
into another Person affecting the Series A TCI Group Common Stock, such capital
stock to which a holder of Series A TCI Group Common Stock shall be entitled
upon the occurrence of such event.
"Series B Liberty Media Group Common Stock" shall mean the Tele-
Communications, Inc. Series B Liberty Media Group Common Stock, par value $1.00
per share, which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series B Liberty Media
Group Common Stock, or in the case of a
-7-
<PAGE>
consolidation or merger of the Company with or into another Person affecting the
Series B Liberty Media Group Common Stock, such capital stock to which a holder
of Series B Liberty Media Group Common Stock shall be entitled upon the
occurrence of such event.
"Series B TCI Group Common Stock" shall mean the Tele-
Communications, Inc. Series B TCI Group Common Stock, par value $1.00 per share,
which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series B TCI Group
Common Stock, or in the case of a consolidation or merger of the Company with or
into another Person affecting the Series B TCI Group Common Stock, such capital
stock to which a holder of Series B TCI Group Common Stock shall be entitled
upon the occurrence of such event.
"Series C Preferred Stock" shall mean the Convertible Preferred
Stock, Series C, par value $.01 per share, of the Company.
"Series D Preferred Stock" shall mean the Convertible Preferred
Stock, Series D, par value $.01 per share, of the Company.
"Series F Preferred Stock" shall mean the Convertible Redeemable
Participating Preferred Stock, Series F, par value $.01 per share, of the
Company.
"Series G Preferred Stock" shall have the meaning set forth in
paragraph 1 of this Certificate of Designations.
"Series H Preferred Stock" shall mean the Redeemable Convertible
Liberty Media Group Preferred Stock, Series H, par value $.01 per share, of the
Company.
"Special Record Date" shall have the meaning set forth in
paragraph 3(d) of this Certificate of Designations.
"Stated Value" of a share of Series G Preferred Stock shall have
the meaning set forth in paragraph 1 of this Certificate of Designations.
"Subsidiary" shall mean (i) a corporation (other than the
Company) a majority of the capital stock of which, having voting power under
ordinary circumstances to elect directors, is at the time, directly or
indirectly, owned by the Company and/or one or more Subsidiaries of the Company
and (ii) any other Person (other than a corporation) in which the Company and/or
one or more Subsidiaries of the Company, directly or indirectly, has (x) a
majority ownership interest and (y) the power to elect or direct the election of
a majority of the members of the governing body of such entity.
"Target Price" shall initially mean $27 and shall be
appropriately adjusted to take into account any stock dividends on the Series A
TCI Group Common Stock or the Series A Liberty Media Group Common Stock, or any
stock splits, reclassifications or combinations of
-8-
<PAGE>
the Series A TCI Group Common Stock or the Series A Liberty Media Group Common
Stock during the period following the Issue Date and ending on the Anniversary
Date or on such earlier date, if any, as of which the Contingency is met.
"TCI Group Common Stock" shall mean the Series A TCI Group Common
Stock and the Series B TCI Group Common Stock.
3. Dividends.
(a) The Contingency. If the sum of (i) the Closing Price of the
Series A TCI Group Common Stock, plus (ii) one-fourth of the Closing Price of
the Series A Liberty Media Group Common Stock equals or exceeds the Target Price
for any ten (10) consecutive trading days during the period of sixty-five (65)
consecutive trading days ending on and including the last trading day
immediately preceding the Anniversary Date (the "Contingency"), no dividends
will accrue or be payable with respect to the Series G Preferred Stock.
(b) Payment. In the event that the Contingency is not met, and only
in such event, the holders of Series G Preferred Stock shall, subject to the
prior preferences and other rights of any Senior Stock and to the provisions of
paragraph 6 hereof, be entitled to receive, when and as declared by the Board of
Directors out of unrestricted funds legally available therefor, cumulative
dividends, in preference to dividends on any Junior Stock, which shall accrue as
provided herein. Except as otherwise provided in paragraph 3(d) of this
Certificate of Designations, dividends on each share of Series G Preferred Stock
will, if the Contingency is not met, accrue on a daily basis at the rate of 4%
per annum of the Liquidation Preference of such share from and including the
Anniversary Date to but excluding the date on which the Liquidation Preference
or Redemption Price of such share is made available pursuant to paragraph 4 or
5, respectively, of this Certificate of Designations or the date of conversion
of such share pursuant to paragraph 7 hereof, as applicable. Dividends shall
accrue as provided herein whether or not such dividends have been declared and
whether or not there are any unrestricted funds of the Company legally available
for the payment of dividends. Accrued dividends on the Series G Preferred Stock
shall be payable semiannually on each Dividend Payment Date, commencing on
AUGUST 1, 1997, to the holders of record of the Series G Preferred Stock as of
the close of business on the applicable Record Date. For purposes of
determining the amount of dividends "accrued" (i) as of the first Dividend
Payment Date and as of any date that is not a Dividend Payment Date, such amount
shall be calculated on the basis of the rate per annum specified above in this
paragraph 3(b) for the actual number of days elapsed from and including the
Anniversary Date (in the case of the first Dividend Payment Date and any date
prior to the first Dividend Payment Date) or the last preceding Dividend Payment
Date (in the case of any other date) to but excluding the date as of which such
determination is to be made, based on a 365-day year, and (ii) as of any
Dividend Payment Date after the first Dividend Payment Date, such amount shall
be calculated on the basis of such rate per annum based on a 360-day year of
twelve 30-day months. For so long as the Liquidation Preference of a share of
Series G Preferred Stock is equal to the Stated Value per share, the amount of
the dividend payable per share on the Dividend Payment Date for each full semi-
annual Dividend Period shall be $.432.
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(c) Method of Payment. All dividends payable with respect to the
shares of Series G Preferred Stock may be declared and paid, in the sole
discretion of the Board of Directors, in cash, through the issuance of shares of
Series A TCI Group Common Stock or in any combination of the foregoing. If any
dividend payment declared by the Board of Directors with respect to the shares
of Series G Preferred Stock is to be paid in whole or in part through the
issuance of shares of Series A TCI Group Common Stock, the amount of such
dividend payment to be paid per share of Series G Preferred Stock in shares of
Series A TCI Group Common Stock (the "Stock Dividend Amount") shall be satisfied
and paid by the delivery to the holders of record of such shares of Series G
Preferred Stock on the Record Date or Special Record Date, as the case may be,
for such dividend payment, of a number of shares of Series A TCI Group Common
Stock determined by dividing the Stock Dividend Amount by the Average Market
Price of a share of Series A TCI Group Common Stock as of such Record Date or
Special Record Date. The Company shall not be required to issue any fractional
share of Series A TCI Group Common Stock to which any holder of Series G
Preferred Stock may become entitled pursuant to this paragraph 3(c). The Board
of Directors may elect to settle any final fraction of a share of Series A TCI
Group Common Stock which a holder of one or more shares of Series G Preferred
Stock would otherwise be entitled to receive pursuant to this paragraph 3(c) by
having the Company pay to such holder, in lieu of issuing such fractional share,
cash in an amount (rounded upward to the nearest whole cent) equal to the same
fraction of the Average Market Price of a share of Series A TCI Group Common
Stock as of the Record Date or Special Record Date, as the case may be, for the
dividend payment with respect to which such shares of Series A TCI Group Common
Stock are being delivered. Such election, if made, shall be made as to all
holders of Series G Preferred Stock who would otherwise be entitled to receive a
fractional share of Series A TCI Group Common Stock on the Dividend Payment Date
or other date fixed for the payment of such dividend.
All dividends paid with respect to the shares of Series G Preferred
Stock pursuant to this paragraph 3 shall be paid pro rata to all the holders of
shares of Series G Preferred Stock outstanding on the applicable Record Date or
Special Record Date, as the case may be.
(d) Unpaid Dividends. If on any Dividend Payment Date the Company,
pursuant to applicable law or otherwise, shall be prohibited or restricted from
paying the full dividends to which holders of Series G Preferred Stock, and any
Parity Stock ranking on a parity basis with the Series G Preferred Stock with
respect to the right to receive dividend payments, shall be entitled, the amount
available for such payment pursuant to applicable law and which is not otherwise
restricted (if any) shall be distributed among the holders of Series G Preferred
Stock and any such Parity Stock ratably in proportion to the full amounts to
which they would otherwise be entitled. On each Dividend Payment Date, all
dividends that have accrued on each share of Series G Preferred Stock during the
Dividend Period ending on such Dividend Payment Date shall, to the extent not
paid on such Dividend Payment Date for any reason (whether or not such unpaid
dividends have been declared or there are any unrestricted funds of the Company
legally available for the payment of dividends), be added cumulatively to the
Liquidation Preference of such share and will remain a part thereof until such
dividends are paid. The rate per annum at which dividends accrue in respect of
that portion of the Liquidation Preference of
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a share of Series G Preferred Stock that consists of accrued unpaid dividends
that have been added to the Liquidation Preference of such share on a Dividend
Payment Date pursuant to this paragraph 3(d) and remain unpaid on the next
succeeding Dividend Payment Date shall increase to 8.625% per annum from and
after such next succeeding Dividend Payment Date to and including the date on
which the Liquidation Preference or Redemption Price of such share is made
available pursuant to paragraph 4 or 5, respectively, of this Certificate of
Designations or the date of conversion of such share pursuant to paragraph 7
hereof, as applicable, unless the portion of the Liquidation Preference that
consists of such accrued unpaid dividends is earlier declared and paid or an
amount sufficient to pay the same in full is irrevocably set apart in trust for
such purpose. That portion of the Liquidation Preference of a share of Series G
Preferred Stock that consists of accrued unpaid dividends, together with all
dividends accrued in respect thereof, may be declared and paid at any time
(subject to the rights of any Senior Stock and to the concurrent satisfaction of
any dividend arrearages then existing with respect to any Parity Stock that
ranks on a parity basis with the Series G Preferred Stock as to the payment of
dividends), without reference to any regular Dividend Payment Date, to holders
of record as of the close of business on such date, not more than 45 days nor
less than 10 days preceding the payment date thereof, as may be fixed by the
Board of Directors (the "Special Record Date"). Notice of each Special Record
Date shall be given, not more than 45 days nor less than 10 days prior thereto,
to the holders of record of the shares of Series G Preferred Stock.
(e) Credit. Any dividend payment made on the shares of Series G
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to the shares of Series G Preferred Stock.
(f) Authorized Shares. All shares of Series A TCI Group Common Stock
issued in payment of any dividend on the Series G Preferred Stock shall, when
issued, be duly and validly authorized, fully paid, nonassessable and free from
all preemptive or similar rights; the delivery of such shares shall be made in
compliance with all applicable Federal and state securities laws, and such
shares shall have been listed for trading on such national securities exchange
or national securities association, if any, on which the Series A TCI Group
Common Stock is then listed.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which any
Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of
Series G Preferred Stock shall be entitled to receive from the assets of the
Company available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in cash
(or, at the election of the Company, property at its fair market value, as
determined by the Board of Directors in good faith) per share, equal to the
Liquidation Preference of a share of Series G Preferred Stock as of the date of
payment or distribution, which payment or distribution shall be made pari passu
with, and if the Company has elected to pay in property, in the same form of
property as, any such payment or distribution made to the holders of any Parity
Stock ranking on a parity basis with the Series G Preferred Stock with respect
to distributions upon liquidation, dissolution or winding
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up of the Company. The holders of Series G Preferred Stock shall be entitled to
no other or further distribution of or participation in any remaining assets of
the Company after receiving the Liquidation Preference per share. If, upon
distribution of the Company's assets in liquidation, dissolution or winding up,
the assets of the Company to be distributed among the holders of the Series G
Preferred Stock and to all holders of any Parity Stock ranking on a parity basis
with the Series G Preferred Stock with respect to distributions upon
liquidation, dissolution or winding up shall be insufficient to permit payment
in full to such holders of the respective preferential amounts to which they are
entitled, then the entire assets of the Company to be distributed to holders of
the Series G Preferred Stock and such Parity Stock shall be distributed pro rata
to such holders based upon the aggregate of the full preferential amounts to
which the shares of Series G Preferred Stock and such Parity Stock would
otherwise respectively be entitled. Neither the consolidation or merger of the
Company with or into any other corporation or corporations nor the sale,
transfer or lease of all or substantially all of the assets of the Company shall
itself be deemed to be a liquidation, dissolution or winding up of the Company
within the meaning of this paragraph 4. Notice of the liquidation, dissolution
or winding up of the Company shall be given, not less than twenty (20) days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective to the holders of record of the
shares of Series G Preferred Stock.
5. Redemption.
(a) Optional Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
shares of Series G Preferred Stock may be redeemed, at the option of the Company
by action of the Board of Directors, in whole or from time to time in part, on
any Business Day occurring on or after FEBRUARY 1, 2001, at the Redemption Price
on the Redemption Date. If fewer than all of the outstanding shares of Series G
Preferred Stock are to be redeemed on any Redemption Date, the shares of Series
G Preferred Stock to be redeemed shall be chosen by the Company pro rata (as
nearly as may be practicable) among all holders of Series G Preferred Stock.
The Company shall not be required to register a transfer of (i) any shares of
Series G Preferred Stock for a period of 15 days next preceding any selection of
shares of Series G Preferred Stock to be redeemed or (ii) any shares of Series G
Preferred Stock selected or called for redemption.
(b) Mandatory Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
Company shall redeem, out of funds legally available therefor, on FEBRUARY 1,
2016 (or, if such day is not a Business Day, on the first Business Day
thereafter) all shares of Series G Preferred Stock remaining outstanding at the
Redemption Price on the Redemption Date. If the funds of the Company legally
available for redemption of shares of the Series G Preferred Stock and any
Parity Stock then required to be redeemed are insufficient to redeem the total
number of such shares remaining outstanding, those funds which are legally
available shall, subject to the rights of any Senior Stock and the provisions of
paragraph 6, be used to redeem the maximum possible number of shares of Series G
Preferred Stock and each such other class or series of Parity Stock. Subject to
the rights of any Senior Stock and the provisions of paragraph 6 hereof, at any
time and from time to time
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thereafter when additional funds of the Company are legally available for such
purpose, such funds shall immediately be used to redeem the shares of Series G
Preferred Stock and of each such other class or series of Parity Stock which
were required to be redeemed that the Company failed to redeem until the balance
of such shares have been redeemed. The selection of shares to be redeemed
pursuant to the two immediately preceding sentences shall be made, as nearly as
practicable, on a pro rata basis as among the different classes or series and as
among the holders of shares of a particular class or series.
(c) Notice of Redemption. Notice of redemption shall be given by or
on behalf of the Company at least sixty (60) days prior to the Redemption Date,
in the case of a redemption pursuant to paragraph 5(a), and not more than sixty
(60) days nor less than thirty (30) days prior to the Redemption Date, in the
case of the redemption pursuant to paragraph 5(b), to the holders of record of
the shares of Series G Preferred Stock to be redeemed; but no defect in such
notice or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of Series G Preferred Stock. In addition to
any information required by law or by the applicable rules of any national
securities exchange or national interdealer quotation system on which the Series
G Preferred Stock may be listed or admitted to trading or quoted, such notice
shall set forth the Redemption Price, the Redemption Date, the number of shares
to be redeemed and the place at which the shares called for redemption will,
upon presentation and surrender of the stock certificates evidencing such
shares, be redeemed, and if the Company has elected to deposit the Redemption
Price with a Redemption Agent in accordance with paragraph 5(d), shall state the
name and address of the Redemption Agent and the date on which such deposit was
or will be made. Such notice shall also set forth the then current Conversion
Rate for the shares of Series G Preferred Stock and the place or places to which
a holder desiring to convert shares of Series G Preferred Stock should deliver
the certificate(s) evidencing such shares, together with such other documents
and instruments as are or may be required pursuant to paragraph 7 of this
Certificate of Designations. In the event that fewer than the total number of
shares of Series G Preferred Stock represented by a certificate are redeemed, a
new certificate representing the number of unredeemed shares will be issued to
the holder thereof without cost to such holder. If the shares of Series G
Preferred Stock evidenced by a certificate selected for partial redemption
pursuant to paragraph 5(a) of this Certificate of Designations are thereafter
converted in part pursuant to paragraph 7 hereof, the shares so converted (as
far as may be) will be deemed to be the shares selected for redemption.
(d) Deposit of Redemption Price. If notice of any redemption by the
Company pursuant to this paragraph 5 shall have been given as provided in
paragraph 5(c) of this Certificate of Designations and if on or before the
Redemption Date specified in such notice an amount in cash sufficient to redeem
in full on the Redemption Date at the Redemption Price all shares of Series G
Preferred Stock called for redemption or required to be redeemed shall have been
set apart so as to be available for such purpose and only for such purpose, then
effective as of the close of business on the Redemption Date, the shares of
Series G Preferred Stock called for redemption, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all remaining rights with respect
to such shares shall
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<PAGE>
forthwith cease and terminate, except the right of the holders thereof to
receive the Redemption Price of such shares, without interest, upon the
surrender of certificates representing the same.
At its election, the Company on or prior to the Redemption Date (but
no more than ninety (90) days prior to the Redemption Date) may deposit
immediately available funds in an amount equal to the aggregate Redemption Price
of the shares of Series G Preferred Stock called for redemption in trust for the
holders thereof with any bank or trust company organized under the laws of the
United States of America or any state thereof having capital, undivided profits
and surplus aggregating at least $50 million (the "Redemption Agent"), with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Company, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the Redemption Date or prior thereto, the Redemption Price of the
shares of Series G Preferred Stock to be redeemed to their respective holders
upon the surrender of the certificates therefor. A deposit made in compliance
with the immediately preceding sentence shall be deemed to constitute full
payment for the shares of Series G Preferred Stock to be redeemed and from and
after the later of the close of business on the date of such deposit (although
prior to the Redemption Date) or the date notice of redemption is mailed, the
shares of Series G Preferred Stock to be redeemed shall no longer be deemed
outstanding and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect to such shares except (x)
the right of the holders thereof to receive the Redemption Price of such shares
(calculated through the Redemption Date), without interest, upon surrender of
the certificates therefor and (y) the right to convert such shares in accordance
with paragraph 7 prior to the close of business on the Business Day immediately
preceding the Redemption Date. Any funds so deposited which shall not be
required for the payment of the Redemption Price of any shares of Series G
Preferred Stock to be redeemed because of the conversion of such shares shall
after such conversion be repaid to the Company by the Redemption Agent. Any
interest accrued on the funds so deposited shall be paid to the Company from
time to time. Any funds so deposited with the Redemption Agent which shall
remain unclaimed by the holders of such shares of Series G Preferred Stock at
the end of one year after the Redemption Date shall be returned by the
Redemption Agent to the Company, after which repayment the holders of such
shares of Series G Preferred Stock called for redemption shall look only to the
Company for the payment thereof, without interest, unless an applicable escheat
or abandoned property law otherwise requires.
6. Limitations on Dividends and Redemptions. If at any time the
Company shall have failed to pay, or declare and set aside the consideration
sufficient to pay, full cumulative dividends for all prior dividend periods on
any Parity Stock which by the terms of the instrument creating or evidencing
such Parity Stock is entitled to the payment of such cumulative dividends prior
to the redemption, exchange, purchase or other acquisition of the Series G
Preferred Stock, and until full cumulative dividends on such Parity Stock for
all prior dividend periods are paid, or declared and the consideration
sufficient to pay the same in full is set aside so as to be available for such
purpose and no other purpose, neither the Company nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any shares of Series
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G Preferred Stock, Parity Stock or Junior Stock, or set aside any money or
assets for any such purpose pursuant to paragraph 5(d) hereof, any sinking fund
or otherwise, unless all then outstanding shares of Series G Preferred Stock, of
such Parity Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed pursuant to the terms hereof
and thereof.
If at any time the Company shall have failed to pay, or declare and
set aside the consideration sufficient to pay, full cumulative dividends on the
Series G Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Series G Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, (i) neither the Company nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Series G Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 5(d) hereof, any
sinking fund or otherwise, unless all then outstanding shares of Series G
Preferred Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed or exchanged pursuant to the
terms hereof and thereof, and (ii) the Company shall not declare or pay any
dividend on or make any distribution with respect to any Junior Stock or Parity
Stock or set aside any money or assets for any such purpose, except that the
Company may declare and pay a dividend on any Parity Stock ranking on a parity
basis with the Series G Preferred Stock with respect to the right to receive
dividend payments, contemporaneously with the declaration and payment of a
dividend on the Series G Preferred Stock, provided that such dividends are
declared and paid pro rata so that the amount of dividends declared and paid per
share of Series G Preferred Stock and such Parity Stock shall in all cases bear
to each other the same ratio that accumulated and accrued and unpaid dividends
per share on the Series G Preferred Stock and such Parity Stock bear to each
other.
If the Company shall fail to redeem on any date fixed for redemption
pursuant to paragraph 5(a) or 5(b) of this Certificate of Designations any
shares of Series G Preferred Stock called for redemption or required to be
redeemed on such date, and until such shares are redeemed in full, the Company
shall not (x) redeem any Junior Stock or, except as provided in paragraph 5(b)
hereof, Parity Stock or (y) declare or pay any dividend on or make any
distribution with respect to any Junior Stock or, except as provided in the
second paragraph of this paragraph 6, Parity Stock, or set aside any money or
assets for any such purpose, and neither the Company nor any Subsidiary thereof
shall purchase or otherwise acquire any Series G Preferred Stock, Parity Stock
or Junior Stock, or set aside any money or assets for any such purpose.
Nothing contained in the first or third paragraph of this paragraph 6
shall prevent (i) the payment of dividends on any Junior Stock solely in shares
of Junior Stock or the redemption, purchase or other acquisition of Junior Stock
solely in exchange for (together with
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a cash adjustment for fractional shares, if any), or (but only in the case of
the first paragraph of this paragraph 6) through the application of the proceeds
from the sale of, shares of Junior Stock; (ii) the payment of dividends on any
Parity Stock solely in shares of Parity Stock and/or Junior Stock or the
redemption, exchange, purchase or other acquisition of Series G Preferred Stock
or Parity Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first paragraph of
this paragraph 6) through the application of the proceeds from the sale of,
shares of Parity Stock and/or Junior Stock; or (iii) the purchase or acquisition
of shares of Series G Preferred Stock pursuant to a purchase or exchange offer
made to all holders of outstanding shares of Series G Preferred Stock, provided
that the terms of the purchase or exchange offer shall be identical for all
shares of Series G Preferred Stock and all accrued dividends on such shares
shall have been paid or shall have been declared and irrevocably set apart in
trust for the benefit of the holders of shares of Series G Preferred Stock and
for no other purpose.
The provisions of the first paragraph of this paragraph 6 are for the
sole benefit of the holders of Series G Preferred Stock and Parity Stock having
the terms described therein and accordingly, at any time when there are no
shares of any such class or series of Parity Stock outstanding or if the holders
of each such class or series of Parity Stock have, by such vote or consent of
the holders thereof as may be provided for in the instrument creating or
evidencing such class or series, waived in whole or in part the benefit of such
provisions (either generally or in the specific instance), then the provisions
of the first paragraph of this paragraph 6 shall not (to the extent waived, in
the case of any partial waiver) restrict the redemption, exchange, purchase or
other acquisition of any shares of Series G Preferred Stock, Parity Stock or
Junior Stock. All other provisions of this paragraph 6 are for the sole benefit
of the holders of Series G Preferred Stock and accordingly, if the holders of
shares of Series G Preferred Stock shall have waived (as provided in paragraph
10 of this Certificate of Designations) in whole or in part the benefit of the
applicable provision, either generally or in the specific instance, such
provision shall not (to the extent of such waiver, in the case of a partial
waiver) restrict the redemption, exchange, purchase or other acquisition of, or
declaration, payment or making of any dividends or distributions on, the Series
G Preferred Stock, any Parity Stock or any Junior Stock.
7. Conversion of Series G Preferred Stock.
(a) Right to Convert. Unless previously redeemed as provided in
paragraph 5 of this Certificate of Designations, shares of Series G Preferred
Stock may be converted at the option of the holder thereof, in the manner and
upon the terms and conditions set forth in this paragraph 7, into fully paid and
nonassessable whole shares of Series A TCI Group Common Stock at the Conversion
Rate in effect on the Conversion Date, at any time prior to the close of
business on the Business Day immediately preceding the Redemption Date for the
redemption of shares of Series G Preferred Stock pursuant to paragraph 5(a) or
5(b) of this Certificate of Designations.
(b) Mechanics of Conversion. In order to convert shares of Series G
Preferred Stock, the holder thereof shall surrender the certificate or
certificates representing the shares of
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Series G Preferred Stock to be converted at the office of the Company or the
office of any transfer agent for the Series G Preferred Stock, which certificate
or certificates shall be duly endorsed to the Company in blank (or accompanied
by duly executed instruments of transfer to the Company in blank) with
signatures guaranteed (such endorsements or instruments of transfer to be in
form satisfactory to the Company), together with a written notice to the Company
at said office of the election to convert the same, specifying the number of
shares of Series G Preferred Stock to be converted and the name or names (with
addresses) in which the certificate or certificates for shares of Series A TCI
Group Common Stock are to be issued. If any transfer is involved in the
issuance or delivery of any certificate or certificates for shares of Series A
TCI Group Common Stock in a name other than that of the registered holder of the
shares of Series G Preferred Stock surrendered for conversion, such holder shall
also deliver to the Company a sum sufficient to pay all taxes, if any, payable
in respect of such transfer or evidence satisfactory to the Company that such
taxes have been paid. Except as provided in the immediately preceding sentence,
the Company shall pay any issue, stamp or other similar tax in respect of such
issuance or delivery.
The Company shall, as soon as practicable after the Conversion Date,
deliver to the holder of the shares of Series G Preferred Stock so surrendered
for conversion, or to such holder's nominee(s) or, subject to compliance with
applicable law, transferee(s), a certificate or certificates for the number of
whole shares of Series A TCI Group Common Stock to which such holder shall be
entitled, together with cash or its check in lieu of any fractional share as
provided in paragraph 7(o). If the shares of Series G Preferred Stock
represented by a certificate surrendered for conversion are converted only in
part, the Company will also issue and deliver to the holder, or to such holder's
nominee(s) or, subject to compliance with applicable law, transferee(s), without
charge therefor, a new certificate or certificates representing in the aggregate
the unconverted shares of Series G Preferred Stock.
The Person in whose name the certificate for shares of Series A TCI
Group Common Stock is issued upon such conversion shall be treated for all
purposes as the stockholder of record of such shares of Series A TCI Group
Common Stock as of the close of business on the Conversion Date; provided,
however, that no surrender of Series G Preferred Stock on any date when the
stock transfer books of the Company are closed for any purpose shall be
effective to constitute the Person or Persons entitled to receive the shares of
Series A TCI Group Common Stock issuable upon such conversion as the record
holders of such shares of Series A TCI Group Common Stock on such date, but such
surrender shall be effective (assuming all other requirements of this paragraph
7 have been satisfied) to constitute such Person or Persons as the record
holders of such shares of Series A TCI Group Common Stock for all purposes as of
the opening of business on the next succeeding day on which such stock transfer
books are open, and such conversion shall be at the Conversion Rate in effect on
the date that such shares of Series G Preferred Stock were surrendered for
conversion (and such other requirements satisfied) as if the stock transfer
books of the Company had not been closed on such date. Upon conversion of
shares of Series G Preferred Stock, the rights of the holder of the shares so
converted, as a holder thereof, will cease.
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Notwithstanding the last sentence of the immediately preceding
paragraph, if the Board of Directors declares any dividend on the Series G
Preferred Stock pursuant to paragraph 3 of this Certificate of Designations, and
the Conversion Date for any shares of Series G Preferred Stock occurs on or
after the Record Date or Special Record Date, as the case may be, and before the
Dividend Payment Date for such dividend (or, in the case of a dividend declared
pursuant to Section 3(d), the date on which such dividend shall be paid in
accordance with such Section 3(d)), then the holder of such shares of Series G
Preferred Stock on such Record Date shall be entitled to receive such dividend
on such Dividend Payment Date (or such other date, as the case may be), as if
such Conversion Date had not occurred.
(c) Adjustments for Change in Capital Stock. If, after the Issue
Date, the Company:
(i) pays a dividend or makes a distribution on the Series A TCI
Group Common Stock in shares of Series A TCI Group Common Stock;
(ii) subdivides the outstanding shares of Series A TCI Group
Common Stock into a greater number of shares;
(iii) combines the outstanding shares of Series A TCI Group
Common Stock into a smaller number of shares;
(iv) pays a dividend or makes a distribution on the Series A TCI
Group Common Stock in shares of its capital stock (other than Series A
TCI Group Common Stock or rights, warrants or options for its capital
stock); or
(v) issues by reclassification of its shares of Series A TCI
Group Common Stock (other than a reclassification by way of merger or
binding share exchange that is subject to paragraph 7(f)) any shares
of its capital stock (other than rights, warrants or options for its
capital stock),
then, subject to the following sentence and to paragraph 7(j), the conversion
privilege and the Conversion Rate in effect immediately prior to the opening of
business on the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be adjusted so
that the holder of any shares of Series G Preferred Stock thereafter converted
may receive the kind and number of shares of capital stock of the Company which
such holder would have owned immediately following such event if such holder had
converted his shares of Series G Preferred Stock immediately prior to the record
date for, or effective date of, as the case may be, such event. Notwithstanding
the foregoing, if an event listed in clause (iv) or (v) above would result in
the shares of Series G Preferred Stock being convertible into shares or units
(or a fraction thereof) of more than one class or series of capital stock of the
Company and any such class or series of capital stock provides by its terms a
right in favor of the Company to call, redeem, exchange or otherwise acquire all
of the outstanding shares or units of such class or series (such class or series
of capital stock being herein referred
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to as "Redeemable Capital Stock") then, at the option of the Company, the
conversion privilege and Conversion Rate of the Series G Preferred Stock shall
not be adjusted pursuant to this paragraph 7(c) and in lieu thereof, but subject
to paragraph 7(j), the adjustment to the Conversion Rate contemplated by
paragraph 7(e) shall be made with the same effect as if the dividend or
distribution of Redeemable Capital Stock or the issuance of the additional class
or series of Redeemable Capital Stock by reclassification had been a
distribution of assets of the Company.
The adjustment contemplated by this paragraph 7(c) shall be made
successively whenever any event listed above shall occur. For a dividend or
distribution, the adjustment shall become effective immediately after the record
date for the dividend or distribution. For a subdivision, combination or
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.
If after an adjustment a holder of Series G Preferred Stock would be
entitled to receive upon conversion thereof shares of two or more classes or
series of capital stock of the Company, the Conversion Rate shall thereafter be
subject to adjustment upon the occurrence of an action taken with respect to any
such class or series of capital stock as is contemplated by this paragraph 7
with respect to the Series A TCI Group Common Stock, on terms comparable to
those applicable to the Series A TCI Group Common Stock pursuant to this
paragraph 7.
Any shares of Series A TCI Group Common Stock issuable in payment of a
dividend shall be deemed to have been issued immediately prior to the time of
the record date for such dividend for purposes of calculating the number of
outstanding shares of Series A TCI Group Common Stock under paragraphs 7(d) and
7(e) below.
(d) Adjustment for Rights Issue. If, after the Issue Date, the
Company distributes any rights, warrants or options to holders of shares of
Series A TCI Group Common Stock entitling them, for a period expiring within 45
days after the record date for the determination of stockholders entitled to
receive such distribution, to purchase shares of Series A TCI Group Common Stock
(or Convertible Securities) at a price per share (or having a conversion price
per share, after adding thereto an allocable portion of the exercise price of
the right, warrant or option to purchase such Convertible Securities, computed
on the basis of the maximum number of shares of Series A TCI Group Common Stock
issuable upon conversion of such Convertible Securities) less than the Current
Market Price on the Determination Date, the Conversion Rate shall be adjusted so
that it shall equal the rate determined by dividing the Conversion Rate in
effect immediately prior to the opening of business on such record date by a
fraction, of which the numerator shall be the number of shares of Series A TCI
Group Common Stock outstanding on such record date plus the number of shares of
Series A TCI Group Common Stock which the aggregate offering price of the total
number of shares of Series A TCI Group Common Stock so offered (or the aggregate
conversion price of the Convertible Securities to be so offered, after adding
thereto the aggregate exercise price of the rights, warrants or options to
purchase such Convertible Securities) to the holders of Series A TCI Group
Common Stock (and to the holders of Convertible Securities and Series B TCI
Group Common Stock referred to in the immediately succeeding paragraph of this
paragraph 7(d) if the distribution to which this
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paragraph 7(d) applies is also being made to such holders) would purchase at
such Current Market Price, and of which the denominator shall be the number of
shares of Series A TCI Group Common Stock outstanding on such record date plus
the number of additional shares of Series A TCI Group Common Stock so offered to
the holders of Series A TCI Group Common Stock (and to such holders of
Convertible Securities and Series B TCI Group Common Stock) for subscription or
purchase (or into which the Convertible Securities so offered are convertible).
Shares of Series A TCI Group Common Stock owned by or held for the account of
the Company shall not be deemed to be outstanding for the purpose of any such
adjustment.
For purposes of this paragraph 7(d), the number of shares of Series A
TCI Group Common Stock outstanding on any record date shall be deemed to include
(i) the maximum number of shares of Series A TCI Group Common Stock the issuance
of which would be necessary to effect the full exercise, exchange or conversion
of all Convertible Securities outstanding on such record date which are then
exercisable, exchangeable or convertible at a price (before giving effect to any
adjustment to such price for the distribution to which this paragraph 7(d) is
being applied) equal to or less than the Current Market Price per share of
Series A TCI Group Common Stock on the applicable Determination Date, if all of
such Convertible Securities were deemed to have been exercised, exchanged or
converted immediately prior to the opening of business on such record date and
(ii) if the Series B TCI Group Common Stock is then convertible into Series A
TCI Group Common Stock, the maximum number of shares of Series A TCI Group
Common Stock the issuance of which would be necessary to effect the full
conversion of all shares of Series B TCI Group Common Stock outstanding on such
record date, if all of such shares of Series B TCI Group Common Stock were
deemed to have been converted immediately prior to the opening of business on
such record date.
The adjustment contemplated by this paragraph 7(d) shall be made
successively whenever any such rights, warrants or options are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If all of the
shares of Series A TCI Group Common Stock (or all of the Convertible Securities)
subject to such rights, warrants or options have not been issued when such
rights, warrants or options expire (or, in the case of rights, warrants or
options to purchase Convertible Securities which have been exercised, if all of
the shares of Series A TCI Group Common Stock issuable upon conversion of such
Convertible Securities have not been issued prior to the expiration of the
conversion right thereof), then the Conversion Rate shall promptly be readjusted
to the Conversion Rate which would then be in effect had the adjustment upon the
issuance of such rights, warrants or options been made on the basis of the
actual number of shares of Series A TCI Group Common Stock (or Convertible
Securities) issued upon the exercise of such rights, warrants or options (or the
conversion of such Convertible Securities).
No adjustment shall be made under this paragraph 7(d) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect immediately
prior to such adjustment.
(e) Adjustments for Other Distributions. If, after the Issue Date,
(i) the Company distributes to all holders of shares of Series A TCI Group
Common Stock any assets
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or debt securities or any rights, warrants or options to purchase securities
(excluding (x) dividends or distributions referred to in paragraph 7(c) (except
as otherwise provided in clause (ii) of this sentence) and distributions of
rights, warrants or options referred to in paragraph 7(d) and (y) cash dividends
or other cash distributions, unless such cash dividends or cash distributions
are Extraordinary Cash Dividends), or (ii) the Company makes a dividend or
distribution of Redeemable Capital Stock on, or issues Redeemable Capital Stock
by reclassification of, the Series A TCI Group Common Stock and determines
pursuant to paragraph 7(c) to treat the same as a distribution of assets of the
Company subject to this paragraph 7(e), then in each such event the Conversion
Rate shall be adjusted by dividing the Conversion Rate in effect immediately
prior to the opening of business on (A) the record date for the determination of
stockholders entitled to receive the distribution or (B) in the case of a
reclassification, the effective date of such reclassification by a fraction, of
which the numerator shall be the total number of shares of Series A TCI Group
Common Stock outstanding on such record date or immediately prior to such
effective date multiplied by the Current Market Price on the Determination Date,
less the fair market value (as determined in good faith by the Board of
Directors) on such record date or effective date of said assets (or Redeemable
Capital Stock) or debt securities or rights, warrants or options so distributed
to the holders of Series A TCI Group Common Stock (and to the holders of
Convertible Securities and Series B TCI Group Common Stock referred to in the
immediately succeeding paragraph of this paragraph 7(e) if the distribution to
which this paragraph 7(e) applies is also being made to such holders), and of
which the denominator shall be the total number of shares of Series A TCI Group
Common Stock outstanding on such record date or immediately prior to such
effective date multiplied by such Current Market Price.
For purposes of this paragraph 7(e), the number of shares of Series A
TCI Group Common Stock outstanding on any relevant date shall be deemed to
include (i) the maximum number of shares of Series A TCI Group Common Stock the
issuance of which would be necessary to effect the full exercise, exchange or
conversion of all Convertible Securities outstanding on such date which are then
exercisable, exchangeable or convertible at a price (before giving effect to any
adjustment to such price for the distribution to which this paragraph 7(e) is
being applied) equal to or less than the Current Market Price on the applicable
Determination Date, if all of such Convertible Securities were deemed to have
been exercised, exchanged or converted immediately prior to the opening of
business on such date and (ii) if the Series B TCI Group Common Stock is then
convertible into Series A TCI Group Common Stock, the maximum number of shares
of Series A TCI Group Common Stock the issuance of which would be necessary to
effect the full conversion of all shares of Series B TCI Group Common Stock
outstanding on such date, if all of such shares of Series B TCI Group Common
Stock were deemed to have been converted immediately prior to the opening of
business on such date.
For purposes of this paragraph 7(e), the term "Extraordinary Cash
Dividend" shall mean any cash dividend with respect to the Series A TCI Group
Common Stock the amount of which, together with the aggregate amount of cash
dividends on the Series A TCI Group Common Stock to be aggregated with such cash
dividend in accordance with the following provisions of this paragraph, equals
or exceeds the threshold percentage set forth below in the following sentence.
If, upon the date prior to the Ex-Dividend Date with respect to a cash
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dividend on Series A TCI Group Common Stock, the aggregate of the amount of such
cash dividend together with the amounts of all cash dividends on the Series A
TCI Group Common Stock with Ex-Dividend Dates occurring in the 365 consecutive
day period ending on the date prior to the Ex-Dividend Date with respect to the
cash dividend to which this provision is being applied (other than any such
other cash dividends with Ex-Dividend Dates occurring in such period for which a
prior adjustment in the Conversion Rate was previously made under this paragraph
7(e)) equals or exceeds on a per share basis 10% of the average of the Closing
Prices during the period beginning on the date after the first such Ex-Dividend
Date in such period and ending on the date prior to the Ex-Dividend Date with
respect to the cash dividend to which this provision is being applied (except
that if no other cash dividend has had an Ex-Dividend Date occurring in such
period, the period for calculating the average of the Closing Prices shall be
the period commencing 365 days prior to the date immediately prior to the Ex-
Dividend Date with respect to the cash dividend to which this provision is being
applied), such cash dividend together with each other cash dividend with an Ex-
Dividend Date occurring in such 365-day period that is aggregated with such cash
dividend in accordance with this paragraph shall be deemed to be an
Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph
7(e) shall be made successively whenever any distribution to which this
paragraph 7(e) applies is made, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution (or, in the case of a reclassification, the effective date).
Shares of Series A TCI Group Common Stock owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
adjustment.
No adjustment shall be made under this paragraph 7(e) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect prior to such
adjustment. In the event that, with respect to any distribution to which this
paragraph 7(e) would otherwise apply, the numerator of the fraction in the
formula set forth in the first paragraph of this paragraph 7(e) is zero or a
negative number, then the adjustment provided by this paragraph 7(e) shall not
be made. If the Company makes a distribution to all holders of its Series A TCI
Group Common Stock of any of its assets or debt securities or any rights,
warrants or options to purchase securities of the Company that, but for the
immediately preceding sentence, would otherwise result in an adjustment in the
Conversion Rate pursuant to the foregoing provisions of this paragraph 7(e),
then, from and after the record date for determining the holders of Series A TCI
Group Common Stock entitled to receive the distribution, a holder of Series G
Preferred Stock that converts such shares in accordance with the provisions of
this paragraph 7 will upon such conversion be entitled to receive, in addition
to the shares of Series A TCI Group Common Stock into which such shares of
Series G Preferred Stock are convertible, the kind and amount of securities,
cash or other assets comprising the distribution that such holder would have
received if such holder had converted such shares of Series G Preferred Stock
immediately prior to the record date for determining the holders of Series A TCI
Group Common Stock entitled to receive the distribution.
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(f) Consolidation, Merger or Sale of the Company. If the Company
consolidates with or merges into, or transfers (other than by mortgage or
pledge) its properties and assets substantially as an entirety to, another
Person or the Company is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Series A TCI Group Common Stock, the
Company (or its successor in such transaction) or the transferee of such
properties and assets shall make appropriate provision so that the holders of
the shares of Series G Preferred Stock then outstanding shall have the right
thereafter to convert such shares into the kind and amount of securities, cash
or other assets receivable upon such transaction by a holder of the number of
shares of Series A TCI Group Common Stock into which such shares of Series G
Preferred Stock could have been converted immediately before the effective date
of such transaction (assuming, to the extent applicable, that such holder failed
to exercise any rights of election with respect thereto and received per share
of Series A TCI Group Common Stock the kind and amount of securities, cash or
other assets received per share by a plurality of the non-electing shares of
Series A TCI Group Common Stock), and the holders of the Series G Preferred
Stock shall have no other conversion rights under these provisions; provided
that (i) effective provision shall be made, in the Articles or Certificate of
Incorporation of the resulting or surviving corporation or otherwise or in any
contracts of sale or transfer, so that the provisions set forth herein for the
protection of the conversion rights of Series G Preferred Stock shall thereafter
be made applicable, as nearly as reasonably may be, to any such other securities
and assets deliverable upon conversion of the Series G Preferred Stock remaining
outstanding or other convertible preferred stock or other securities received by
the holders of Series G Preferred Stock in place thereof; and (ii) any such
resulting or surviving corporation or transferee shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege, such
securities, cash or other assets as the holders of the Series G Preferred Stock
remaining outstanding, or other convertible preferred stock or other securities
received by the holders in place thereof, shall be entitled to receive pursuant
to the provisions hereof, and to make provision for the protection of the
conversion rights of the Series G Preferred Stock, or of any other convertible
preferred stock or other securities received by the holders in place thereof, as
provided in clause (i) of this sentence.
If this paragraph 7(f) applies, paragraphs 7(c), 7(d) and 7(e) shall
not apply.
(g) Effect of Redemption. Subject to paragraph 7(j) and to the
remaining provisions of this paragraph 7(g), in the event that a holder of
Series G Preferred Stock would be entitled to receive upon conversion thereof
pursuant to this paragraph 7 any Redeemable Capital Stock and the Company
redeems, exchanges or otherwise acquires all of the outstanding shares or other
units of such Redeemable Capital Stock (such event being a "Redemption Event"),
then, from and after the effective date of such Redemption Event, the holders of
shares of Series G Preferred Stock then outstanding shall be entitled to receive
upon conversion of such shares, in lieu of shares or units of such Redeemable
Capital Stock, the kind and amount of securities, cash or other assets
receivable upon the Redemption Event by a holder of the number of shares or
units of such Redeemable Capital Stock into which such shares of Series G
Preferred Stock could have been converted immediately prior to the effective
date of such Redemption Event (assuming, to the extent applicable, that such
holder failed to exercise any rights of election with respect thereto and
received per share or unit of such Redeemable Capital Stock the kind and
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amount of securities, cash or other assets received per share or unit by a
plurality of the non-electing shares or units of such Redeemable Capital Stock),
and (from and after the effective date of such Redemption Event) the holders of
the Series G Preferred Stock shall have no other conversion rights under these
provisions with respect to such Redeemable Capital Stock.
Notwithstanding the foregoing, if the redemption price for the shares
of such Redeemable Capital Stock is paid in whole or in part in Redemption
Securities, and the Mirror Preferred Stock Condition is met, the Series G
Preferred Stock shall not be convertible into such Redemption Securities and,
from and after the applicable redemption date, the holders of any shares of
Series G Preferred Stock that have not been exchanged for Mirror Preferred Stock
and Exchange Preferred Stock shall have no conversion rights under these
provisions except for any conversion right that may have existed immediately
prior to the effective date of the Redemption Event with respect to any
securities (including the Series A TCI Group Common Stock), cash or other assets
other than the Redeemable Capital Stock so redeemed. The Mirror Preferred Stock
Condition will be met in connection with a redemption of any Redeemable Capital
Stock into which the Series G Preferred Stock is then convertible, if the
Company makes appropriate provision so that the holders of the Series G
Preferred Stock have the right to exchange their shares of Series G Preferred
Stock on the effective date of the Redemption Event for Exchange Preferred Stock
of the Company and Mirror Preferred Stock of the issuer of the Redemption
Securities. The sum of the initial liquidation preferences of the shares of
Exchange Preferred Stock and Mirror Preferred Stock delivered in exchange for a
share of Series G Preferred Stock will equal the Liquidation Preference of a
share of Series G Preferred Stock on the effective date of the Redemption Event.
The Mirror Preferred Stock will have an aggregate initial liquidation preference
equal to the product of the aggregate Liquidation Preference of the shares of
Series G Preferred Stock exchanged therefor and the quotient of (x) the product
of the Conversion Rate for the Redeemable Capital Stock to be redeemed
(determined immediately prior to the effective date of the Redemption Event) and
the average of the daily Closing Prices of the Redeemable Capital Stock for the
period of ten consecutive trading days ending on the third trading day prior to
the effective date of the Redemption Event, divided by (y) the sum of the amount
determined pursuant to clause (x), plus the fair value of the securities (other
than those being redeemed), cash or other assets that would have been receivable
by a holder of Series G Preferred Stock upon conversion thereof immediately
prior to the effective date of the Redemption Event (such fair value to be
determined in the case of securities with a Closing Price in the same manner as
provided in clause (x) and otherwise by the Board of Directors in the exercise
of its good faith judgment). The shares of Exchange Preferred Stock will have an
aggregate initial liquidation preference equal to the difference between the
aggregate Liquidation Preference of the shares of Series G Preferred Stock
exchanged therefore and the aggregate initial liquidation preference of the
Mirror Preferred Stock.
When used in connection with a redemption by the Company of any
Redeemable Capital Stock into which the Series G Preferred Stock is then
convertible, the following terms have the following meanings:
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(i) "Redemption Securities" means securities of an issuer other
than the Company that are distributed by the Company in payment, in
whole or in part, of the redemption price for such Redeemable Capital
Stock.
(ii) "Mirror Preferred Stock" means convertible preferred stock
issued by the issuer of the Redemption Securities and having terms,
conditions, designations, dividend rights, voting powers, rights on
liquidation and other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof that are identical, or as nearly so as is
practicable in the good faith judgment of the Board of Directors, to
those of the Series G Preferred Stock for which such Mirror Preferred
Stock is exchanged, except that (x) the liquidation preference will be
determined as provided above in this paragraph 7(g), (y) the running
of any time periods pursuant to the terms of the Series G Preferred
Stock shall be tacked to the corresponding time periods in the Mirror
Preferred Stock and (z) the Mirror Preferred Stock shall be
convertible into the kind and amount of Redemption Securities, cash
and other assets that the holder of a share of Series G Preferred
Stock in respect of which such Mirror Preferred Stock is issued
pursuant to the terms hereof would have received upon redemption of
the Redeemable Capital Stock had such shares of Series G Preferred
Stock been converted prior to the effective date of the Redemption
Event.
(iii) "Exchange Preferred Stock" means a series of convertible
preferred stock of the Company having terms, conditions, designations,
dividend rights, voting powers, rights on liquidation and other
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof that
are identical, or as nearly so as is practicable in the good faith
judgment of the Board of Directors, to those of the Series G Preferred
Stock for which such Exchange Preferred Stock is exchanged, except
that (x) the liquidation preference will be determined as provided
above in this paragraph 7(g), (y) the running of any time periods
pursuant to the terms of the Series G Preferred Stock shall be tacked
to the corresponding time periods in the Exchange Preferred Stock and
(z) the Exchange Preferred Stock will not be convertible into, and the
holders will have no conversion rights thereunder with respect to, the
Redeemable Capital Stock redeemed in the Redemption Event.
Notwithstanding the second paragraph of this paragraph 7(g), the
Mirror Preferred Stock Condition shall only be deemed to have been satisfied in
connection with any Redemption Event if, in the good faith determination of the
Board of Directors: (i) receipt of Mirror Preferred Stock and/or Exchange
Preferred Stock in exchange for Series G Preferred Stock pursuant to the second
paragraph of this paragraph 7(g) would not result in the recognition of gain or
loss by the holders of such Series G Preferred Stock for United States federal
income tax purposes; (ii) an adjustment made in the Conversion Rate of the
Series G Preferred Stock with respect to such Redemption Event, as provided in
the first paragraph of this paragraph 7(g), would result in the recognition of
gain or loss by the holders of Series G Preferred Stock for United
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States federal income tax purposes; or (iii) receipt of Redemption Securities
in redemption of the Redeemable Capital Stock to be redeemed in the Redemption
Event would result in the recognition of gain or loss by the holders of such
Redeemable Capital Stock, as the case may be.
(h) Simultaneous Adjustments. In the event that this paragraph 7
requires adjustments to the Conversion Rate under more than one of paragraph
7(c)(iv), (d) or (e), and the record dates for the distributions giving rise to
such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of paragraph 7(c), second, the
provisions of paragraph 7(e) and, third, the provisions of paragraph 7(d).
(i) When Adjustment May Be Deferred. In any case in which this
paragraph 7 shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the occurrence of
such event (x) issuing to the holder of any shares of Series G Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of Series A TCI Group Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and above the
shares of Series A TCI Group Common Stock issuable upon such conversion before
giving effect to such adjustment and (y) paying to such holder cash or its check
in lieu of any fractional interest to which he is entitled pursuant to paragraph
7(o); provided, however, that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to receive
such additional shares of Series A TCI Group Common Stock, and such cash, upon
the occurrence of the event requiring such adjustment.
(j) De Minimis Adjustment; When Adjustment Is Not Required. No
adjustments in the Conversion Rate need be made unless the adjustment would
require an increase or decrease of at least one percent (1%) in the Conversion
Rate. Any adjustment which is not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this paragraph 7 shall be made to the nearest
cent or to the nearest 1/1000th of a share, as the case may be.
No adjustment need be made for rights to purchase shares of Series A
TCI Group Common Stock or for sales of shares of Series A TCI Group Common Stock
which in either case are made pursuant to a Company plan providing for
reinvestment of dividends or interest or pursuant to a bona fide employee stock
option or stock purchase plan of the Company. No adjustment need be made for a
change in the par value of the Series A TCI Group Common Stock.
No adjustment need be made under this paragraph 7 for a transaction
referred to in paragraph 7(c), 7(d), 7(e) or 7(g) if holders of the Series G
Preferred Stock are to participate in the transaction on a basis and with notice
that the Board of Directors in good faith determines to be fair and appropriate
in light of the basis and notice on which holders of Series A TCI Group Common
Stock participate in the transaction; provided that the basis on which the
holders
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of shares of Series G Preferred Stock are to participate in the transaction
shall not be deemed to be fair if it would require the holder to convert his
shares of Series G Preferred Stock, in order to participate, at any time prior
to the expiration of the conversion period specified for the shares of Series G
Preferred Stock pursuant to paragraph 7(a) of this Certificate of Designations.
The immediately preceding sentence shall apply to any transaction referred to in
paragraph 7(c), 7(d), 7(e) or 7(g) only if, in the good faith determination of
the Board of Directors: (i) participation in such transaction by the holders of
the Series H Preferred Stock would not result in the recognition of gain or loss
by such holders for United States federal income tax purposes; (ii) an
adjustment made in the Conversion Rate of the Series H Preferred Stock in lieu
of participating in such transaction, pursuant to this paragraph 7, would result
in the recognition of gain or loss by holders of Series H Preferred Stock for
United States federal income tax purposes; or (iii) participation in such
transaction by the holders of the Series A Liberty Media Group Common Stock
would result in the recognition of gain or loss by such holders for United
States federal income tax purposes.
To the extent the shares of Series G Preferred Stock become
convertible into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.
(k) Company Determination Final. Any determination required to be made
pursuant to paragraph 7(c), 7(d), 7(e), 7(f), 7(g), 7(h), 7(j) or 7(o) shall be
made by the Board of Directors (whether or not reference to the Board of
Directors is expressly made in any such paragraph) and any determination so made
in good faith shall be conclusive and binding, absent manifest error, on the
holders of shares of Series G Preferred Stock. In making any determination as to
the expected tax treatment of any action, transaction or event referred to
herein, including, without limitation, the determinations provided for in the
last paragraph of Paragraph 7(g) and the last sentence of the fourth paragraph
of Paragraph 7(j), the Board of Directors shall be entitled to rely conclusively
on (i) an opinion of counsel rendered by a law firm acceptable to the Board of
Directors, acting in good faith, or (ii) a private letter ruling from the
Internal Revenue Service, to such effect, which opinion of counsel or private
letter ruling may be based upon such assumptions, and be subject to such
qualifications, conditions and limitations, as the Board of Directors shall in
good faith determine to be appropriate under the circumstances. Any such
determination by the Board of Directors shall be based on the expected United
States federal income tax consequences applicable to the transaction in
question, without regard to special tax rules such as those applicable to
dealers in securities, foreign persons, mutual funds, insurance companies,
tax-exempt entities and holders who do not hold the securities or other property
in question as capital assets, or the personal circumstances of any particular
stockholder.
(l) Notice of Adjustment. Whenever the provisions of this paragraph 7
require an adjustment to the Conversion Rate, the Company shall promptly compute
such adjustment and (i) file with the transfer agent for the Series G Preferred
Stock (or with the books of the Company if there is no transfer agent) an
Officers' Certificate setting forth a description of the event requiring the
adjustment, the new Conversion Rate (including a reasonably detailed calculation
thereof), and the kind and amount of capital stock or other securities or cash
or other assets into which the Series G Preferred Stock shall be convertible
after such event, and (ii) cause a notice containing a summary of the
information set forth in said certificate to be given to the holders of Series G
Preferred Stock. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be given under the provisions of
paragraph 7(m).
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(m) Advance Notice of Certain Transactions. If the Company:
(i) takes any action which would require an adjustment in the
Conversion Rate;
(ii) is a party to a consolidation, merger or binding share
exchange, or transfers all or substantially all of its assets to
another Person, and any stockholders of the Company must approve the
transaction; or
(iii) voluntarily or involuntarily dissolves, liquidates or
winds up,
then, in any such event, the Company shall give to the holders of the Series G
Preferred Stock, at least twenty (20) days prior to any record date or other
date set for definitive action if there shall be no record date, a notice
stating the record date for and the anticipated effective date of such action or
event and, if the event is a dividend or distribution or issuance by
reclassification of Redeemable Capital Stock, whether the Company has determined
to adjust the Conversion Rate pursuant to paragraph 7(c) or 7(e); provided,
however, that any notice required hereunder shall in any event be given no later
than the time that notice is given to the holders of Series A TCI Group Common
Stock. Without limiting the obligation of the Company to provide notice of
corporate actions hereunder, the failure to mail the notice or any defect in it
shall not affect the legality or validity of any corporate action or the vote
thereon.
(n) Reservation of Series A TCI Group Common Stock Issuable Upon
Conversion. The Company shall at all times on and after the Issue Date reserve
and keep available out of its authorized but unissued shares of Series A TCI
Group Common Stock, solely for the purpose of effecting the conversion of the
shares of Series G Preferred Stock, such number of its shares of Series A TCI
Group Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series G Preferred Stock; provided that
nothing contained herein shall be construed to preclude the Company from
satisfying its obligations in respect of the conversion of the outstanding
shares of Series G Preferred Stock by delivery of shares of Series A TCI Group
Common Stock which are held in the treasury of the Company. The Company shall
take all such corporate and other actions as from time to time may be necessary
to insure that all shares of Series A TCI Group Common Stock issuable upon
conversion of shares of Series G Preferred Stock at the Conversion Rate in
effect from time to time will, when issued, be duly and validly authorized and
issued, fully paid and nonassessable, and free from all preemptive or similar
rights. In order that the Company may issue shares of Series A TCI Group Common
Stock upon conversion of the Series G Preferred Stock, the Company will in good
faith and as expeditiously as possible endeavor to comply with all applicable
Federal and state securities laws and will in good faith and as expeditiously as
possible endeavor to list such shares to be issued upon conversion on such
national securities exchange or national securities association, if any, on
which the Series A TCI Group Common Stock is then listed.
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(o) Fractional Shares. No fractional shares of Series A TCI Group
Common Stock or scrip shall be issued upon conversion of the Series G Preferred
Stock. Whether or not fractional shares would otherwise be required to be
issued to a holder of Series G Preferred Stock upon such conversion shall be
determined on the basis of the total number of shares of Series G Preferred
Stock the holder is at the time converting into Series A TCI Group Common Stock
and the total number of shares of Series A TCI Group Common Stock issuable upon
such conversion. In lieu of the issuance of fractional shares of Series A TCI
Group Common Stock, the Company shall pay instead an amount in cash or by its
check equal to the same fraction of the Closing Price of a full share of Series
A TCI Group Common Stock on the last full trading day prior to the Conversion
Date.
(p) Impairment. The Company will not, by amendment of this
Certificate of Designations or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, other than as expressly permitted by
this Certificate of Designations or approved by the requisite vote or written
consent of the holders of Series G Preferred Stock taken or given in accordance
with this Certificate, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this paragraph 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of Series G
Preferred Stock against impairment.
8. Voting.
(a) Voting Rights. The holders of Series G Preferred Stock shall have
no voting rights whatsoever, except as required by law and except for the voting
rights described in this paragraph 8; provided, however, that the number of
authorized shares of Series G Preferred Stock may be increased or decreased (but
not below the number of shares of Series G Preferred Stock then outstanding) by
the affirmative vote of the holders of at least 66-2/3% of the total voting
power of the then outstanding Voting Securities (as defined in Section A of
Article VIII of the Restated Certificate of Incorporation of the Company (the
"Restated Certificate")), voting together as a single class as provided in
Article IX of the Restated Certificate. Without limiting the generality of the
foregoing, no vote or consent of the holders of Series G Preferred Stock shall
be required for (a) the creation of any indebtedness of any kind of the Company,
(b) the creation or designation of any class or series of Senior Stock, Parity
Stock or Junior Stock, or (c) any amendment to the Restated Certificate that
would increase the number of authorized shares of Preferred Stock or the number
of authorized shares of Series G Preferred Stock or that would decrease the
number of authorized shares of Preferred Stock or the number of authorized
shares of Series G Preferred Stock (but not below the number of shares of
Preferred Stock or Series G Preferred Stock, as the case may be, then
outstanding).
(b) Election of Directors. The holders of the Series G Preferred
Stock shall have the right to vote at any annual or special meeting of
stockholders for the purpose of electing directors. Each share of Series G
Preferred Stock shall have one vote for such purpose, and shall
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vote as a single class with all other classes or series of capital stock of the
Company that are entitled to vote in any general election of directors, unless
the instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
9. No Preemptive Rights. The holders of shares of Series G
Preferred Stock shall have no preemptive rights, including preemptive rights
with respect to any shares of capital stock or other securities of the Company
convertible into or carrying rights or options to purchase any such shares.
10. Waiver. Any provision of this Certificate of Designations which,
for the benefit of the holders of Series G Preferred Stock, prohibits, limits or
restricts actions by the Company, or imposes obligations on the Company,
including but not limited to provisions relating to the obligation of the
Company to redeem or convert such shares, may be waived in whole or in part, or
the application of all or any part of such provision in any particular
circumstance or generally may be waived, in each case by the affirmative vote or
with the consent of the holders of at least a majority of the number of shares
of Series G Preferred Stock then outstanding (or such greater percentage thereof
as may be required by applicable law or any applicable rules of any national
securities exchange or national interdealer quotation system), either in writing
or by vote at an annual meeting or a special meeting called for such purpose at
which the holders of Series G Preferred Stock shall vote as a separate class.
11. Method of Giving Notices. Any notice required or permitted by
the provisions of this Certificate of Designations to be given to the holders of
shares of Series G Preferred Stock shall be deemed duly given if deposited in
the United States mail, first class mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Company or
supplied by him in writing to the Company for the purpose of such notice.
12. Exclusion of Other Rights. Except as may otherwise be required
by law and except for the equitable rights and remedies which may otherwise be
available to holders of Series G Preferred Stock, the shares of Series G
Preferred Stock shall not have any designations, preferences, limitations or
relative rights other than those specifically set forth in this Certificate of
Designations.
13. Headings of Subdivisions. The headings of the various
subdivisions of this Certificate of Designations are for convenience of
reference only and shall not affect the interpretation of any of the provisions
of this Certificate of Designations.
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FURTHER RESOLVED, that the appropriate officers of this Company are
hereby authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded in accordance
with the requirements of Section 151(g) of the General Corporation Law of the
State of Delaware."
The undersigned has signed this Certificate of Designations on this
______ day of ____________, 199__.
-------------------------------------
Name:
Title: Executive Vice President
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EXHIBIT 4.2
TELE-COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATIONS
---------------
SETTING FORTH A COPY OF A RESOLUTION
CREATING AND AUTHORIZING THE ISSUANCE
OF A SERIES OF PREFERRED STOCK DESIGNATED AS
"REDEEMABLE CONVERTIBLE LIBERTY MEDIA GROUP
PREFERRED STOCK, SERIES H"
ADOPTED BY THE BOARD OF DIRECTORS
OF TELE-COMMUNICATIONS, INC.
---------------
The undersigned, an Executive Vice President of TELE-COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), HEREBY CERTIFIES that the Board of
Directors of the Company on DECEMBER 13, 1995, duly adopted the following
resolutions creating a new series of the Company's Series Preferred Stock:
"BE IT RESOLVED, that pursuant to authority expressly granted by the
provisions of Article IV, Section D of the Restated Certificate of Incorporation
of the Company, the Board of Directors hereby creates and authorizes the
issuance of a new series of the Company's Series Preferred Stock, par value $.01
per share ("Series Preferred Stock"), and hereby fixes the powers, designations,
dividend rights, voting powers, rights on liquidation, conversion rights,
redemption rights and other preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions of the
shares of such series (in addition to the powers, designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof set forth in the Restated
Certificate of Incorporation that are applicable to each class and series of the
Company's preferred stock, par value $.01 per share ("Preferred Stock")), as
follows:
1. Designation; Number of Shares. The designation of the series of
Series Preferred Stock, par value $.01 per share, of the Company created hereby
shall be "Redeemable Convertible Liberty Media Group Preferred Stock, Series H"
("Series H Preferred Stock"). The authorized number of shares of Series H
Preferred Stock shall be [_______________]. Each share of Series H Preferred
Stock shall have a stated value of $5.40 ("Stated Value").
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Any shares of Series H Preferred Stock redeemed, converted or
otherwise acquired by the Company shall be retired, shall not be reissued as
shares of Series H Preferred Stock and shall resume the status of authorized and
unissued shares of Series Preferred Stock, without designation as to series,
until such shares are once more designated as part of a particular series of
Series Preferred Stock by the Board of Directors.
2. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 2 shall have, for all purposes of this
Certificate of Designations, the meanings herein specified:
"Anniversary Date" shall mean JANUARY 25, 1997.
"Average Market Price" as of any Record Date or Special Record
Date for a dividend payment declared by the Board of Directors shall mean the
average of the daily Closing Prices of the Series A TCI Group Common Stock for
the period of ten (10) consecutive trading days ending on the tenth trading day
prior to such Record Date or Special Record Date, appropriately adjusted in such
manner as the Board of Directors in good faith deems appropriate to take into
account any stock dividend on the Series A TCI Group Common Stock, or any
subdivision, combination or reclassification of the Series A TCI Group Common
Stock that occurs, or the Ex-Dividend Date for which occurs, during the period
following the first trading day in such ten-trading day period and ending on the
last full trading day immediately preceding the Dividend Payment Date or other
date fixed for the payment of dividends to which such Record Date or Special
Record Date relates.
"Board of Directors" shall mean the Board of Directors of the
Company, and, unless the context indicates otherwise, shall also mean, to the
extent permitted by law, any committee thereof authorized, with respect to any
particular matter, to exercise the power of the Board of Directors of the
Company with respect to such matter.
"Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in The City of New York, New York are not
required to be open.
"capital stock" shall mean any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Class B Preferred Stock" shall mean the Class B 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock, par value $.01 per share, of the
Company.
"Closing Price" of a share of Series A TCI Group Common Stock or
of a share of Series A Liberty Media Group Common Stock, or of a share of any
other class or series of capital stock of the Company into which the Series H
Preferred Stock may hereafter become convertible pursuant to paragraph 7, on any
day shall mean the last reported per share sale price (or, if no sale price is
reported, the average of the high and low bid prices) of the Series A TCI
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Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as the case may be, on such day on the Nasdaq Stock Market or as
quoted by the National Quotation Bureau Incorporated or, if the Series A TCI
Group Common Stock, the Series A Liberty Media Group Common Stock or such
capital stock, as applicable, is listed on an exchange, on the principal
exchange on which the Series A TCI Group Common Stock, the Series A Liberty
Media Group Common Stock or such capital stock, as the case may be, is listed.
In the event that no such quotation is available for any day, the Board of
Directors shall be entitled to determine the Closing Price on the basis of such
quotations as it in good faith considers appropriate.
"Contingency" shall have the meaning set forth in paragraph 3(a).
"Conversion Date" of a share of Series H Preferred Stock shall
mean the date on which the requirements for conversion of such share set forth
in paragraph 7(b) of this Certificate of Designations have been satisfied by the
holder thereof.
"Conversion Rate" shall mean the kind and amount of securities,
assets or other property that as of any date are issuable or deliverable upon
conversion of a share of Series H Preferred Stock. The Conversion Rate of a
share of Series H Preferred Stock shall initially be .2625 of a share of Series
A Liberty Media Group Common Stock for each share of Series H Preferred Stock,
subject to adjustment as set forth in paragraph 7 of this Certificate of
Designations. In the event that pursuant to paragraph 7 the Series H Preferred
Stock becomes convertible into more than one class or series of capital stock of
the Company, the term Conversion Rate, when used with respect to any such class
or series, shall mean the number or fraction of shares or other units of such
capital stock that as of any date would be issued upon conversion of a share of
Series H Preferred Stock.
"Convertible Securities" shall mean any or all options, warrants,
securities and rights which are convertible into or exercisable or exchangeable
for Series A Liberty Media Group Common Stock at the option of the holder
thereof, or which otherwise entitle the holder thereof to subscribe for,
purchase or otherwise acquire Series A Liberty Media Group Common Stock;
provided, however, that such term shall not include the Series B Liberty Media
Group Common Stock.
"Current Market Price", on the Determination Date for any
issuance of rights, warrants or options or any distribution in respect of which
the Current Market Price is being calculated, shall mean the average of the
daily Closing Prices of the Series A Liberty Media Group Common Stock for the
shortest of:
(i) the period of 30 consecutive trading days commencing 45
trading days before such Determination Date,
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance of rights, warrants or options or
the distribution in
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respect of which the Current Market Price is being calculated and
ending on the last full trading day before such Determination Date,
and
(iii) the period, if any, commencing on the date next
succeeding the Ex-Dividend Date with respect to the next preceding
issuance of rights, warrants or options or distribution for which an
adjustment is required by the provisions of paragraph 7(c)(iv), 7(d)
or 7(e), and ending on the last full trading day before such
Determination Date.
If the record date for an issuance of rights, warrants or options or a
distribution for which an adjustment is required by the provisions of paragraph
7(c)(iv), 7(d) or 7(e) (the "preceding adjustment event") precedes the record
date for the issuance or distribution in respect of which the Current Market
Price is being calculated and the Ex-Dividend Date for such preceding adjustment
event is on or after the Determination Date for the issuance or distribution in
respect of which the Current Market Price is being calculated, then the Current
Market Price shall be adjusted by deducting therefrom the fair market value (on
the record date for the issuance or distribution in respect of which the Current
Market Price is being calculated), as determined in good faith by the Board of
Directors, of the capital stock, rights, warrants or options, assets or debt
securities issued or distributed in respect of each share of Series A Liberty
Media Group Common Stock in such preceding adjustment event. Further, in the
event that the Ex-Dividend Date (or in the case of a subdivision, combination or
reclassification, the effective date with respect thereto) with respect to a
dividend, subdivision, combination or reclassification to which paragraph
7(c)(i), (ii), (iii) or (v) applies occurs during the period applicable for
calculating the Current Market Price, then the Current Market Price shall be
calculated for such period in a manner determined in good faith by the Board of
Directors to reflect the impact of such dividend, subdivision, combination or
reclassification on the Closing Prices of the Series A Liberty Media Group
Common Stock during such period.
"Determination Date" for any issuance of rights, warrants or
options or any distribution to which paragraph 7(d) or 7(e) applies shall mean
the earlier of (i) the record date for the determination of stockholders
entitled to receive the rights, warrants or options or the distribution to which
such paragraph applies and (ii) the Ex-Dividend Date for such rights, warrants
or options or distribution.
"Dividend Payment Date" shall mean, for any Dividend Period, the
last day of such Dividend Period which shall be the FIRST day of each FEBRUARY
and AUGUST, commencing with AUGUST 1, 1997, or the next succeeding Business Day
if any such day is not a Business Day.
"Dividend Period" shall mean the period from the Anniversary Date
to but excluding the first Dividend Payment Date and, thereafter, each semi-
annual period from and including a Dividend Payment Date to but excluding the
next Dividend Payment Date.
"Exchange Preferred Stock" shall have the meaning set forth in
paragraph 7(g).
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"Ex-Dividend Date" shall mean the date on which "ex-dividend"
trading commences for a dividend, an issuance of rights, warrants or options or
a distribution to which any of paragraph 7(c), (d) or (e) applies in the over-
the-counter market or on the principal exchange on which the Series A Liberty
Media Group Common Stock is then quoted or listed.
"Issue Date" shall mean the date on which shares of Series H
Preferred Stock are first issued.
"Junior Stock" shall mean (i) the TCI Group Common Stock, (ii)
the Liberty Media Group Common Stock, (iii) the Class B Preferred Stock, (iv)
any other class or series of capital stock, whether now existing or hereafter
created, of the Company, other than (A) the Series H Preferred Stock, (B) any
class or series of Parity Stock (except to the extent provided under clause (v)
hereof) and (C) any class or series of Senior Stock, and (v) any class or series
of Parity Stock to the extent that it ranks junior to the Series H Preferred
Stock as to dividend rights, rights of redemption or rights on liquidation, as
the case may be. For purposes of clause (v) above, a class or series of Parity
Stock shall rank junior to the Series H Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation if the holders of shares of Series
H Preferred Stock shall be entitled to dividend payments, payments on redemption
or payments of amounts distributable upon dissolution, liquidation or winding up
of the Company, as the case may be, in preference or priority to the holders of
shares of such class or series of Parity Stock.
"Liberty Media Group Common Stock" shall mean the Series A
Liberty Media Group Common Stock and the Series B Liberty Media Group Common
Stock.
"Liquidation Preference" measured per share of the Series H
Preferred Stock as of any date in question (the "Relevant Date") shall mean an
amount equal to the sum of (a) the Stated Value of such share, plus (b) an
amount equal to all dividends accrued on such share which pursuant to paragraph
3(d) of this Certificate of Designations have been added to and remain a part of
the Liquidation Preference as of the Relevant Date, plus (c) for purposes of
determining the amounts payable pursuant to paragraph 4 and paragraph 5 of this
Certificate of Designations and the definition of Redemption Price, an amount
equal to all unpaid dividends accrued on the sum of the amounts specified in
clauses (a) and (b) above during the period from and including the immediately
preceding Dividend Payment Date (or the Anniversary Date if the Relevant Date is
on or prior to the first Dividend Payment Date) to but excluding the Relevant
Date, and, in the case of clauses (b) and (c) hereof, whether or not such unpaid
dividends have been declared or there are any unrestricted funds of the Company
legally available for the payment of dividends. In connection with the
determination of the Liquidation Preference of a share of Series H Preferred
Stock upon redemption or upon liquidation, dissolution or winding up of the
Company, the Relevant Date shall be the applicable date of redemption or the
date of distribution of amounts payable to stockholders in connection with any
such liquidation, dissolution or winding up.
"Mirror Preferred Stock" shall have the meaning set forth in
paragraph 7(g).
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"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations
promulgated thereunder.
"Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board, President or any Senior Vice President of the Company and
by the Treasurer or an Assistant Treasurer of the Company.
"Parity Stock" shall mean any class or series of capital stock,
whether now existing or hereafter created, of the Company ranking on a parity
basis with the Series H Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation. Capital stock of any class or series,
whether now existing or hereafter created, shall rank on a parity as to dividend
rights, rights of redemption or rights on liquidation with the Series H
Preferred Stock, whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share or sinking fund or mandatory
redemption provisions, if any, are different from those of the Series H
Preferred Stock, if the holders of shares of such class or series shall be
entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Company, as the
case may be, in proportion to their respective accumulated and accrued and
unpaid dividends, redemption prices or liquidations prices, respectively,
without preference or priority, one over the other, as between the holders of
shares of such class or series and the holders of Series H Preferred Stock. No
class or series of capital stock that ranks junior to the Series H Preferred
Stock as to rights on liquidation shall rank or be deemed to rank on a parity
basis with the Series H Preferred Stock as to dividend rights or rights of
redemption, unless the instrument creating or evidencing such class or series of
capital stock otherwise expressly so provides. The Series C Preferred Stock,
the Series D Preferred Stock, the Series F Preferred Stock and the Series G
Preferred Stock rank on a parity basis with the Series H Preferred Stock as to
dividend rights, rights of redemption and rights on liquidation and constitute
"Parity Stock" for purposes of this Certificate of Designations.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, limited liability company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity, whether acting in an individual, fiduciary
or other capacity.
"Record Date" for the dividends payable on any Dividend Payment
Date shall mean the 15TH day of the month preceding the month during which such
Dividend Payment Date shall occur as and if designated by the Board of
Directors.
"Redeemable Capital Stock" shall have the meaning set forth in
paragraph 7(c).
"Redemption Date" as to any share of Series H Preferred Stock
shall mean the date fixed for redemption of such share pursuant to paragraph
5(a) or 5(b) of this Certificate of Designations, provided that no such date
will be a Redemption Date unless the applicable Redemption Price is actually
paid in full on such date or the consideration sufficient for the
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payment thereof, and for no other purpose, has been set apart or deposited in
trust as contemplated by paragraph 5(d) of this Certificate of Designations.
"Redemption Price", as to any share of Series H Preferred Stock
that is to be redeemed on any Redemption Date, shall mean the Liquidation
Preference thereof on such Redemption Date.
"Redemption Securities" shall have the meaning set forth in
paragraph 7(g).
"Senior Stock" shall mean any class or series of capital stock of
the Company hereafter created ranking prior to the Series H Preferred Stock as
to dividend rights, rights of redemption or rights on liquidation. Capital stock
of any class or series shall rank prior to the Series H Preferred Stock as to
dividend rights, rights of redemption or rights on liquidation if the holders of
shares of such class or series shall be entitled to dividend payments, payments
on redemption or payments of amounts distributable upon dissolution, liquidation
or winding up of the Company, as the case may be, in preference or priority to
the holders of shares of Series H Preferred Stock. No class or series of capital
stock that ranks on a parity basis with or junior to the Series H Preferred
Stock as to rights on liquidation shall rank or be deemed to rank prior to the
Series H Preferred Stock as to dividend rights or rights of redemption,
notwithstanding that the dividend rate, dividend payment dates, sinking fund
provisions, if any, or mandatory redemption provisions thereof are different
from those of the Series H Preferred Stock, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly so
provides.
"Series A Liberty Media Group Common Stock" shall mean the Tele-
Communications, Inc. Series A Liberty Media Group Common Stock, par value $1.00
per share, which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series A Liberty Media
Group Common Stock, or in the case of a consolidation or merger of the Company
with or into another Person affecting the Series A Liberty Media Group Common
Stock, such capital stock to which a holder of Series A Liberty Media Group
Common Stock shall be entitled upon the occurrence of such event.
"Series A TCI Group Common Stock" shall mean the Tele-
Communications, Inc. Series A TCI Group Common Stock, par value $1.00 per share,
which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series A TCI Group
Common Stock, or in the case of a consolidation or merger of the Company with or
into another Person affecting the Series A TCI Group Common Stock, such capital
stock to which a holder of Series A TCI Group Common Stock shall be entitled
upon the occurrence of such event.
"Series B Liberty Media Group Common Stock" shall mean the Tele-
Communications, Inc. Series B Liberty Media Group Common Stock, par value $1.00
per share, which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series B Liberty Media
Group Common Stock, or in the case of a
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consolidation or merger of the Company with or into another Person affecting the
Series B Liberty Media Group Common Stock, such capital stock to which a holder
of Series B Liberty Media Group Common Stock shall be entitled upon the
occurrence of such event.
"Series B TCI Group Common Stock" shall mean the Tele-
Communications, Inc. Series B TCI Group Common Stock, par value $1.00 per share,
which term shall include, where appropriate, in the case of any
reclassification, recapitalization or other change in the Series B TCI Group
Common Stock, or in the case of a consolidation or merger of the Company with or
into another Person affecting the Series B TCI Group Common Stock, such capital
stock to which a holder of Series B TCI Group Common Stock shall be entitled
upon the occurrence of such event.
"Series C Preferred Stock" shall mean the Convertible Preferred
Stock, Series C, par value $.01 per share, of the Company.
"Series D Preferred Stock" shall mean the Convertible Preferred
Stock, Series D, par value $.01 per share, of the Company.
"Series F Preferred Stock" shall mean the Convertible Redeemable
Participating Preferred Stock, Series F, par value $.01 per share, of the
Company.
"Series G Preferred Stock" shall mean the Redeemable Convertible
TCI Group Preferred Stock, Series G, par value $.01 per share, of the Company.
"Series H Preferred Stock" shall have the meaning set forth in
paragraph 1 of this Certificate of Designations.
"Special Record Date" shall have the meaning set forth in
paragraph 3(d) of this Certificate of Designations.
"Stated Value" of a share of Series H Preferred Stock shall have
the meaning set forth in paragraph 1 of this Certificate of Designations.
"Subsidiary" shall mean (i) a corporation (other than the
Company) a majority of the capital stock of which, having voting power under
ordinary circumstances to elect directors, is at the time, directly or
indirectly, owned by the Company and/or one or more Subsidiaries of the Company
and (ii) any other Person (other than a corporation) in which the Company and/or
one or more Subsidiaries of the Company, directly or indirectly, has (x) a
majority ownership interest and (y) the power to elect or direct the election of
a majority of the members of the governing body of such entity.
"Target Price" shall initially mean $27 and shall be
appropriately adjusted to take into account any stock dividends on the Series A
TCI Group Common Stock or the Series A Liberty Media Group Common Stock, or any
stock splits, reclassifications or combinations of
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the Series A TCI Group Common Stock or the Series A Liberty Media Group Common
Stock during the period following the Issue Date and ending on the Anniversary
Date or on such earlier date, if any, as of which the Contingency is met.
"TCI Group Common Stock" shall mean the Series A TCI Group Common
Stock and the Series B TCI Group Common Stock.
3. Dividends.
(a) The Contingency. If the sum of (i) the Closing Price of the
Series A TCI Group Common Stock, plus (ii) one-fourth of the Closing Price of
the Series A Liberty Media Group Common Stock equals or exceeds the Target Price
for any ten (10) consecutive trading days during the period of sixty-five (65)
consecutive trading days ending on and including the last trading day
immediately preceding the Anniversary Date (the "Contingency"), no dividends
will accrue or be payable with respect to the Series H Preferred Stock.
(b) Payment. In the event that the Contingency is not met, and only
in such event, the holders of Series H Preferred Stock shall, subject to the
prior preferences and other rights of any Senior Stock and to the provisions of
paragraph 6 hereof, be entitled to receive, when and as declared by the Board of
Directors out of unrestricted funds legally available therefor, cumulative
dividends, in preference to dividends on any Junior Stock, which shall accrue as
provided herein. Except as otherwise provided in paragraph 3(d) of this
Certificate of Designations, dividends on each share of Series H Preferred Stock
will, if the Contingency is not met, accrue on a daily basis at the rate of 4%
per annum of the Liquidation Preference of such share from and including the
Anniversary Date to but excluding the date on which the Liquidation Preference
or Redemption Price of such share is made available pursuant to paragraph 4 or
5, respectively, of this Certificate of Designations or the date of conversion
of such share pursuant to paragraph 7 hereof, as applicable. Dividends shall
accrue as provided herein whether or not such dividends have been declared and
whether or not there are any unrestricted funds of the Company legally available
for the payment of dividends. Accrued dividends on the Series H Preferred Stock
shall be payable semiannually on each Dividend Payment Date, commencing on
AUGUST 1, 1997, to the holders of record of the Series H Preferred Stock as of
the close of business on the applicable Record Date. For purposes of
determining the amount of dividends "accrued" (i) as of the first Dividend
Payment Date and as of any date that is not a Dividend Payment Date, such amount
shall be calculated on the basis of the rate per annum specified above in this
paragraph 3(b) for the actual number of days elapsed from and including the
Anniversary Date (in the case of the first Dividend Payment Date and any date
prior to the first Dividend Payment Date) or the last preceding Dividend Payment
Date (in the case of any other date) to but excluding the date as of which such
determination is to be made, based on a 365-day year, and (ii) as of any
Dividend Payment Date after the first Dividend Payment Date, such amount shall
be calculated on the basis of such rate per annum based on a 360-day year of
twelve 30-day months. For so long as the Liquidation Preference of a share of
Series H Preferred Stock is equal to the Stated Value per share, the amount of
the dividend payable per share on the Dividend Payment Date for each full semi-
annual Dividend Period shall be $.108.
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(c) Method of Payment. All dividends payable with respect to the
shares of Series H Preferred Stock may be declared and paid, in the sole
discretion of the Board of Directors, in cash, through the issuance of shares of
Series A TCI Group Common Stock or in any combination of the foregoing. If any
dividend payment declared by the Board of Directors with respect to the shares
of Series H Preferred Stock is to be paid in whole or in part through the
issuance of shares of Series A TCI Group Common Stock, the amount of such
dividend payment to be paid per share of Series H Preferred Stock in shares of
Series A TCI Group Common Stock (the "Stock Dividend Amount") shall be satisfied
and paid by the delivery to the holders of record of such shares of Series H
Preferred Stock on the Record Date or Special Record Date, as the case may be,
for such dividend payment, of a number of shares of Series A TCI Group Common
Stock determined by dividing the Stock Dividend Amount by the Average Market
Price of a share of Series A TCI Group Common Stock as of such Record Date or
Special Record Date. The Company shall not be required to issue any fractional
share of Series A TCI Group Common Stock to which any holder of Series H
Preferred Stock may become entitled pursuant to this paragraph 3(c). The Board
of Directors may elect to settle any final fraction of a share of Series A TCI
Group Common Stock which a holder of one or more shares of Series H Preferred
Stock would otherwise be entitled to receive pursuant to this paragraph 3(c) by
having the Company pay to such holder, in lieu of issuing such fractional share,
cash in an amount (rounded upward to the nearest whole cent) equal to the same
fraction of the Average Market Price of a share of Series A TCI Group Common
Stock as of the Record Date or Special Record Date, as the case may be, for the
dividend payment with respect to which such shares of Series A TCI Group Common
Stock are being delivered. Such election, if made, shall be made as to all
holders of Series H Preferred Stock who would otherwise be entitled to receive a
fractional share of Series A TCI Group Common Stock on the Dividend Payment Date
or other date fixed for the payment of such dividend.
All dividends paid with respect to the shares of Series H Preferred
Stock pursuant to this paragraph 3 shall be paid pro rata to all the holders of
shares of Series H Preferred Stock outstanding on the applicable Record Date or
Special Record Date, as the case may be.
(d) Unpaid Dividends. If on any Dividend Payment Date the Company,
pursuant to applicable law or otherwise, shall be prohibited or restricted from
paying the full dividends to which holders of Series H Preferred Stock, and any
Parity Stock ranking on a parity basis with the Series H Preferred Stock with
respect to the right to receive dividend payments, shall be entitled, the amount
available for such payment pursuant to applicable law and which is not otherwise
restricted (if any) shall be distributed among the holders of Series H Preferred
Stock and any such Parity Stock ratably in proportion to the full amounts to
which they would otherwise be entitled. On each Dividend Payment Date, all
dividends that have accrued on each share of Series H Preferred Stock during the
Dividend Period ending on such Dividend Payment Date shall, to the extent not
paid on such Dividend Payment Date for any reason (whether or not such unpaid
dividends have been declared or there are any unrestricted funds of the Company
legally available for the payment of dividends), be added cumulatively to the
Liquidation Preference of such share and will remain a part thereof until such
dividends are paid. The rate per annum at which dividends accrue in respect of
that portion of the Liquidation Preference of
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a share of Series H Preferred Stock that consists of accrued unpaid dividends
that have been added to the Liquidation Preference of such share on a Dividend
Payment Date pursuant to this paragraph 3(d) and remain unpaid on the next
succeeding Dividend Payment Date shall increase to 8.625% per annum from and
after such next succeeding Dividend Payment Date to and including the date on
which the Liquidation Preference or Redemption Price of such share is made
available pursuant to paragraph 4 or 5, respectively, of this Certificate of
Designations or the date of conversion of such share pursuant to paragraph 7
hereof, as applicable, unless the portion of the Liquidation Preference that
consists of such accrued unpaid dividends is earlier declared and paid or an
amount sufficient to pay the same in full is irrevocably set apart in trust for
such purpose. That portion of the Liquidation Preference of a share of Series H
Preferred Stock that consists of accrued unpaid dividends, together with all
dividends accrued in respect thereof, may be declared and paid at any time
(subject to the rights of any Senior Stock and to the concurrent satisfaction of
any dividend arrearages then existing with respect to any Parity Stock that
ranks on a parity basis with the Series H Preferred Stock as to the payment of
dividends), without reference to any regular Dividend Payment Date, to holders
of record as of the close of business on such date, not more than 45 days nor
less than 10 days preceding the payment date thereof, as may be fixed by the
Board of Directors (the "Special Record Date"). Notice of each Special Record
Date shall be given, not more than 45 days nor less than 10 days prior thereto,
to the holders of record of the shares of Series H Preferred Stock.
(e) Credit. Any dividend payment made on the shares of Series H
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to the shares of Series H Preferred Stock.
(f) Authorized Shares. All shares of Series A TCI Group Common Stock
issued in payment of any dividend on the Series H Preferred Stock shall, when
issued, be duly and validly authorized, fully paid, nonassessable and free from
all preemptive or similar rights; the delivery of such shares shall be made in
compliance with all applicable Federal and state securities laws, and such
shares shall have been listed for trading on such national securities exchange
or national securities association, if any, on which the Series A TCI Group
Common Stock is then listed.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which any
Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of
Series H Preferred Stock shall be entitled to receive from the assets of the
Company available for distribution to stockholders, before any payment or
distribution shall be made to the holders of any Junior Stock, an amount in cash
(or, at the election of the Company, property at its fair market value, as
determined by the Board of Directors in good faith) per share, equal to the
Liquidation Preference of a share of Series H Preferred Stock as of the date of
payment or distribution, which payment or distribution shall be made pari passu
with, and if the Company has elected to pay in property, in the same form of
property as, any such payment or distribution made to the holders of any Parity
Stock ranking on a parity basis with the Series H Preferred Stock with respect
to distributions upon liquidation, dissolution or winding
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up of the Company. The holders of Series H Preferred Stock shall be entitled to
no other or further distribution of or participation in any remaining assets of
the Company after receiving the Liquidation Preference per share. If, upon
distribution of the Company's assets in liquidation, dissolution or winding up,
the assets of the Company to be distributed among the holders of the Series H
Preferred Stock and to all holders of any Parity Stock ranking on a parity basis
with the Series H Preferred Stock with respect to distributions upon
liquidation, dissolution or winding up shall be insufficient to permit payment
in full to such holders of the respective preferential amounts to which they are
entitled, then the entire assets of the Company to be distributed to holders of
the Series H Preferred Stock and such Parity Stock shall be distributed pro rata
to such holders based upon the aggregate of the full preferential amounts to
which the shares of Series H Preferred Stock and such Parity Stock would
otherwise respectively be entitled. Neither the consolidation or merger of the
Company with or into any other corporation or corporations nor the sale,
transfer or lease of all or substantially all of the assets of the Company shall
itself be deemed to be a liquidation, dissolution or winding up of the Company
within the meaning of this paragraph 4. Notice of the liquidation, dissolution
or winding up of the Company shall be given, not less than twenty (20) days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective to the holders of record of the
shares of Series H Preferred Stock.
5. Redemption.
(a) Optional Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
shares of Series H Preferred Stock may be redeemed, at the option of the Company
by action of the Board of Directors, in whole or from time to time in part, on
any Business Day occurring on or after FEBRUARY 1, 2001, at the Redemption Price
on the Redemption Date. If fewer than all of the outstanding shares of Series H
Preferred Stock are to be redeemed on any Redemption Date, the shares of Series
H Preferred Stock to be redeemed shall be chosen by the Company pro rata (as
nearly as may be practicable) among all holders of Series H Preferred Stock.
The Company shall not be required to register a transfer of (i) any shares of
Series H Preferred Stock for a period of 15 days next preceding any selection of
shares of Series H Preferred Stock to be redeemed or (ii) any shares of Series H
Preferred Stock selected or called for redemption.
(b) Mandatory Redemption. Subject to the rights of any Senior Stock
and the provisions of paragraph 6 of this Certificate of Designations, the
Company shall redeem, out of funds legally available therefor, on FEBRUARY 1,
2016 (or, if such day is not a Business Day, on the first Business Day
thereafter) all shares of Series H Preferred Stock remaining outstanding at the
Redemption Price on the Redemption Date. If the funds of the Company legally
available for redemption of shares of the Series H Preferred Stock and any
Parity Stock then required to be redeemed are insufficient to redeem the total
number of such shares remaining outstanding, those funds which are legally
available shall, subject to the rights of any Senior Stock and the provisions of
paragraph 6, be used to redeem the maximum possible number of shares of Series H
Preferred Stock and each such other class or series of Parity Stock. Subject to
the rights of any Senior Stock and the provisions of paragraph 6 hereof, at any
time and from time to time
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thereafter when additional funds of the Company are legally available for such
purpose, such funds shall immediately be used to redeem the shares of Series H
Preferred Stock and of each such other class or series of Parity Stock which
were required to be redeemed that the Company failed to redeem until the balance
of such shares have been redeemed. The selection of shares to be redeemed
pursuant to the two immediately preceding sentences shall be made, as nearly as
practicable, on a pro rata basis as among the different classes or series and as
among the holders of shares of a particular class or series.
(c) Notice of Redemption. Notice of redemption shall be given by or
on behalf of the Company at least sixty (60) days prior to the Redemption Date,
in the case of a redemption pursuant to paragraph 5(a), and not more than sixty
(60) days nor less than thirty (30) days prior to the Redemption Date, in the
case of the redemption pursuant to paragraph 5(b), to the holders of record of
the shares of Series H Preferred Stock to be redeemed; but no defect in such
notice or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of Series H Preferred Stock. In addition to
any information required by law or by the applicable rules of any national
securities exchange or national interdealer quotation system on which the Series
H Preferred Stock may be listed or admitted to trading or quoted, such notice
shall set forth the Redemption Price, the Redemption Date, the number of shares
to be redeemed and the place at which the shares called for redemption will,
upon presentation and surrender of the stock certificates evidencing such
shares, be redeemed, and if the Company has elected to deposit the Redemption
Price with a Redemption Agent in accordance with paragraph 5(d), shall state the
name and address of the Redemption Agent and the date on which such deposit was
or will be made. Such notice shall also set forth the then current Conversion
Rate for the shares of Series H Preferred Stock and the place or places to which
a holder desiring to convert shares of Series H Preferred Stock should deliver
the certificate(s) evidencing such shares, together with such other documents
and instruments as are or may be required pursuant to paragraph 7 of this
Certificate of Designations. In the event that fewer than the total number of
shares of Series H Preferred Stock represented by a certificate are redeemed, a
new certificate representing the number of unredeemed shares will be issued to
the holder thereof without cost to such holder. If the shares of Series H
Preferred Stock evidenced by a certificate selected for partial redemption
pursuant to paragraph 5(a) of this Certificate of Designations are thereafter
converted in part pursuant to paragraph 7 hereof, the shares so converted (as
far as may be) will be deemed to be the shares selected for redemption.
(d) Deposit of Redemption Price. If notice of any redemption by the
Company pursuant to this paragraph 5 shall have been given as provided in
paragraph 5(c) of this Certificate of Designations and if on or before the
Redemption Date specified in such notice an amount in cash sufficient to redeem
in full on the Redemption Date at the Redemption Price all shares of Series H
Preferred Stock called for redemption or required to be redeemed shall have been
set apart so as to be available for such purpose and only for such purpose, then
effective as of the close of business on the Redemption Date, the shares of
Series H Preferred Stock called for redemption, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, shall no
longer be deemed outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and all remaining rights with respect
to such shares shall
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forthwith cease and terminate, except the right of the holders thereof to
receive the Redemption Price of such shares, without interest, upon the
surrender of certificates representing the same.
At its election, the Company on or prior to the Redemption Date (but
no more than ninety (90) days prior to the Redemption Date) may deposit
immediately available funds in an amount equal to the aggregate Redemption Price
of the shares of Series H Preferred Stock called for redemption in trust for the
holders thereof with any bank or trust company organized under the laws of the
United States of America or any state thereof having capital, undivided profits
and surplus aggregating at least $50 million (the "Redemption Agent"), with
irrevocable instructions and authority to the Redemption Agent, on behalf and at
the expense of the Company, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the Redemption Date or prior thereto, the Redemption Price of the
shares of Series H Preferred Stock to be redeemed to their respective holders
upon the surrender of the certificates therefor. A deposit made in compliance
with the immediately preceding sentence shall be deemed to constitute full
payment for the shares of Series H Preferred Stock to be redeemed and from and
after the later of the close of business on the date of such deposit (although
prior to the Redemption Date) or the date notice of redemption is mailed, the
shares of Series H Preferred Stock to be redeemed shall no longer be deemed
outstanding and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect to such shares except (x)
the right of the holders thereof to receive the Redemption Price of such shares
(calculated through the Redemption Date), without interest, upon surrender of
the certificates therefor and (y) the right to convert such shares in accordance
with paragraph 7 prior to the close of business on the Business Day immediately
preceding the Redemption Date. Any funds so deposited which shall not be
required for the payment of the Redemption Price of any shares of Series H
Preferred Stock to be redeemed because of the conversion of such shares shall
after such conversion be repaid to the Company by the Redemption Agent. Any
interest accrued on the funds so deposited shall be paid to the Company from
time to time. Any funds so deposited with the Redemption Agent which shall
remain unclaimed by the holders of such shares of Series H Preferred Stock at
the end of one year after the Redemption Date shall be returned by the
Redemption Agent to the Company, after which repayment the holders of such
shares of Series H Preferred Stock called for redemption shall look only to the
Company for the payment thereof, without interest, unless an applicable escheat
or abandoned property law otherwise requires.
6. Limitations on Dividends and Redemptions. If at any time the
Company shall have failed to pay, or declare and set aside the consideration
sufficient to pay, full cumulative dividends for all prior dividend periods on
any Parity Stock which by the terms of the instrument creating or evidencing
such Parity Stock is entitled to the payment of such cumulative dividends prior
to the redemption, exchange, purchase or other acquisition of the Series H
Preferred Stock, and until full cumulative dividends on such Parity Stock for
all prior dividend periods are paid, or declared and the consideration
sufficient to pay the same in full is set aside so as to be available for such
purpose and no other purpose, neither the Company nor any Subsidiary thereof
shall redeem, exchange, purchase or otherwise acquire any shares of Series
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H Preferred Stock, Parity Stock or Junior Stock, or set aside any money or
assets for any such purpose pursuant to paragraph 5(d) hereof, any sinking fund
or otherwise, unless all then outstanding shares of Series H Preferred Stock, of
such Parity Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed pursuant to the terms hereof
and thereof.
If at any time the Company shall have failed to pay, or declare and
set aside the consideration sufficient to pay, full cumulative dividends on the
Series H Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date, and until full cumulative dividends
on the Series H Preferred Stock for all Dividend Periods ending on or before the
immediately preceding Dividend Payment Date are paid, or declared and the
consideration sufficient to pay the same in full is set aside so as to be
available for such purpose and no other purpose, (i) neither the Company nor any
Subsidiary thereof shall redeem, exchange, purchase or otherwise acquire any
shares of Series H Preferred Stock, Parity Stock or Junior Stock, or set aside
any money or assets for any such purpose, pursuant to paragraph 5(d) hereof, any
sinking fund or otherwise, unless all then outstanding shares of Series H
Preferred Stock and of any other class or series of Parity Stock that by the
terms of the instrument creating or evidencing such Parity Stock is required to
be redeemed under such circumstances are redeemed or exchanged pursuant to the
terms hereof and thereof, and (ii) the Company shall not declare or pay any
dividend on or make any distribution with respect to any Junior Stock or Parity
Stock or set aside any money or assets for any such purpose, except that the
Company may declare and pay a dividend on any Parity Stock ranking on a parity
basis with the Series H Preferred Stock with respect to the right to receive
dividend payments, contemporaneously with the declaration and payment of a
dividend on the Series H Preferred Stock, provided that such dividends are
declared and paid pro rata so that the amount of dividends declared and paid per
share of Series H Preferred Stock and such Parity Stock shall in all cases bear
to each other the same ratio that accumulated and accrued and unpaid dividends
per share on the Series H Preferred Stock and such Parity Stock bear to each
other.
If the Company shall fail to redeem on any date fixed for redemption
pursuant to paragraph 5(a) or 5(b) of this Certificate of Designations any
shares of Series H Preferred Stock called for redemption or required to be
redeemed on such date, and until such shares are redeemed in full, the Company
shall not (x) redeem any Junior Stock or, except as provided in paragraph 5(b)
hereof, Parity Stock or (y) declare or pay any dividend on or make any
distribution with respect to any Junior Stock or, except as provided in the
second paragraph of this paragraph 6, Parity Stock, or set aside any money or
assets for any such purpose, and neither the Company nor any Subsidiary thereof
shall purchase or otherwise acquire any Series H Preferred Stock, Parity Stock
or Junior Stock, or set aside any money or assets for any such purpose.
Nothing contained in the first or third paragraph of this paragraph 6
shall prevent (i) the payment of dividends on any Junior Stock solely in shares
of Junior Stock or the redemption, purchase or other acquisition of Junior Stock
solely in exchange for (together with
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a cash adjustment for fractional shares, if any), or (but only in the case of
the first paragraph of this paragraph 6) through the application of the proceeds
from the sale of, shares of Junior Stock; (ii) the payment of dividends on any
Parity Stock solely in shares of Parity Stock and/or Junior Stock or the
redemption, exchange, purchase or other acquisition of Series H Preferred Stock
or Parity Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any), or (but only in the case of the first paragraph of
this paragraph 6) through the application of the proceeds from the sale of,
shares of Parity Stock and/or Junior Stock; or (iii) the purchase or acquisition
of shares of Series H Preferred Stock pursuant to a purchase or exchange offer
made to all holders of outstanding shares of Series H Preferred Stock, provided
that the terms of the purchase or exchange offer shall be identical for all
shares of Series H Preferred Stock and all accrued dividends on such shares
shall have been paid or shall have been declared and irrevocably set apart in
trust for the benefit of the holders of shares of Series H Preferred Stock and
for no other purpose.
The provisions of the first paragraph of this paragraph 6 are for the
sole benefit of the holders of Series H Preferred Stock and Parity Stock having
the terms described therein and accordingly, at any time when there are no
shares of any such class or series of Parity Stock outstanding or if the holders
of each such class or series of Parity Stock have, by such vote or consent of
the holders thereof as may be provided for in the instrument creating or
evidencing such class or series, waived in whole or in part the benefit of such
provisions (either generally or in the specific instance), then the provisions
of the first paragraph of this paragraph 6 shall not (to the extent waived, in
the case of any partial waiver) restrict the redemption, exchange, purchase or
other acquisition of any shares of Series H Preferred Stock, Parity Stock or
Junior Stock. All other provisions of this paragraph 6 are for the sole benefit
of the holders of Series H Preferred Stock and accordingly, if the holders of
shares of Series H Preferred Stock shall have waived (as provided in paragraph
10 of this Certificate of Designations) in whole or in part the benefit of the
applicable provision, either generally or in the specific instance, such
provision shall not (to the extent of such waiver, in the case of a partial
waiver) restrict the redemption, exchange, purchase or other acquisition of, or
declaration, payment or making of any dividends or distributions on, the Series
H Preferred Stock, any Parity Stock or any Junior Stock.
7. Conversion of Series H Preferred Stock.
(a) Right to Convert. Unless previously redeemed as provided in
paragraph 5 of this Certificate of Designations, shares of Series H Preferred
Stock may be converted at the option of the holder thereof, in the manner and
upon the terms and conditions set forth in this paragraph 7, into fully paid and
nonassessable whole shares of Series A Liberty Media Group Common Stock at the
Conversion Rate in effect on the Conversion Date, at any time prior to the close
of business on the Business Day immediately preceding the Redemption Date for
the redemption of shares of Series H Preferred Stock pursuant to paragraph 5(a)
or 5(b) of this Certificate of Designations.
(b) Mechanics of Conversion. In order to convert shares of Series H
Preferred Stock, the holder thereof shall surrender the certificate or
certificates representing the shares of
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Series H Preferred Stock to be converted at the office of the Company or the
office of any transfer agent for the Series H Preferred Stock, which certificate
or certificates shall be duly endorsed to the Company in blank (or accompanied
by duly executed instruments of transfer to the Company in blank) with
signatures guaranteed (such endorsements or instruments of transfer to be in
form satisfactory to the Company), together with a written notice to the Company
at said office of the election to convert the same, specifying the number of
shares of Series H Preferred Stock to be converted and the name or names (with
addresses) in which the certificate or certificates for shares of Series A
Liberty Media Group Common Stock are to be issued. If any transfer is involved
in the issuance or delivery of any certificate or certificates for shares of
Series A Liberty Media Group Common Stock in a name other than that of the
registered holder of the shares of Series H Preferred Stock surrendered for
conversion, such holder shall also deliver to the Company a sum sufficient to
pay all taxes, if any, payable in respect of such transfer or evidence
satisfactory to the Company that such taxes have been paid. Except as provided
in the immediately preceding sentence, the Company shall pay any issue, stamp or
other similar tax in respect of such issuance or delivery.
The Company shall, as soon as practicable after the Conversion Date,
deliver to the holder of the shares of Series H Preferred Stock so surrendered
for conversion, or to such holder's nominee(s) or, subject to compliance with
applicable law, transferee(s), a certificate or certificates for the number of
whole shares of Series A Liberty Media Group Common Stock to which such holder
shall be entitled, together with cash or its check in lieu of any fractional
share as provided in paragraph 7(o). If the shares of Series H Preferred Stock
represented by a certificate surrendered for conversion are converted only in
part, the Company will also issue and deliver to the holder, or to such holder's
nominee(s) or, subject to compliance with applicable law, transferee(s), without
charge therefor, a new certificate or certificates representing in the aggregate
the unconverted shares of Series H Preferred Stock.
The Person in whose name the certificate for shares of Series A
Liberty Media Group Common Stock is issued upon such conversion shall be treated
for all purposes as the stockholder of record of such shares of Series A Liberty
Media Group Common Stock as of the close of business on the Conversion Date;
provided, however, that no surrender of Series H Preferred Stock on any date
when the stock transfer books of the Company are closed for any purpose shall be
effective to constitute the Person or Persons entitled to receive the shares of
Series A Liberty Media Group Common Stock issuable upon such conversion as the
record holders of such shares of Series A Liberty Media Group Common Stock on
such date, but such surrender shall be effective (assuming all other
requirements of this paragraph 7 have been satisfied) to constitute such Person
or Persons as the record holders of such shares of Series A Liberty Media Group
Common Stock for all purposes as of the opening of business on the next
succeeding day on which such stock transfer books are open, and such conversion
shall be at the Conversion Rate in effect on the date that such shares of Series
H Preferred Stock were surrendered for conversion (and such other requirements
satisfied) as if the stock transfer books of the Company had not been closed on
such date. Upon conversion of shares of Series H Preferred Stock, the rights of
the holder of the shares so converted, as a holder thereof, will cease.
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Notwithstanding the last sentence of the immediately preceding
paragraph, if the Board of Directors declares any dividend on the Series H
Preferred Stock pursuant to paragraph 3 of this Certificate of Designations, and
the Conversion Date for any shares of Series H Preferred Stock occurs on or
after the Record Date or Special Record Date, as the case may be, and before the
Dividend Payment Date for such dividend (or, in the case of a dividend declared
pursuant to Section 3(d), the date on which such dividend shall be paid in
accordance with such Section 3(d)), then the holder of such shares of Series H
Preferred Stock on such Record Date shall be entitled to receive such dividend
on such Dividend Payment Date (or such other date, as the case may be), as if
such Conversion Date had not occurred.
(c) Adjustments for Change in Capital Stock. If, after the Issue
Date, the Company:
(i) pays a dividend or makes a distribution on the Series A
Liberty Media Group Common Stock in shares of Series A Liberty Media
Group Common Stock;
(ii) subdivides the outstanding shares of Series A Liberty Media
Group Common Stock into a greater number of shares;
(iii) combines the outstanding shares of Series A Liberty Media
Group Common Stock into a smaller number of shares;
(iv) pays a dividend or makes a distribution on the Series A
Liberty Media Group Common Stock in shares of its capital stock (other
than Series A Liberty Media Group Common Stock or rights, warrants or
options for its capital stock); or
(v) issues by reclassification of its shares of Series A Liberty
Media Group Common Stock (other than a reclassification by way of
merger or binding share exchange that is subject to paragraph 7(f))
any shares of its capital stock (other than rights, warrants or
options for its capital stock),
then, subject to the following sentence and to paragraph 7(j), the conversion
privilege and the Conversion Rate in effect immediately prior to the opening of
business on the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be adjusted so
that the holder of any shares of Series H Preferred Stock thereafter converted
may receive the kind and number of shares of capital stock of the Company which
such holder would have owned immediately following such event if such holder had
converted his shares of Series H Preferred Stock immediately prior to the record
date for, or effective date of, as the case may be, such event. Notwithstanding
the foregoing, if an event listed in clause (iv) or (v) above would result in
the shares of Series H Preferred Stock being convertible into shares or units
(or a fraction thereof) of more than one class or series of capital stock of the
Company and any such class or series of capital stock (other than the Series A
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Liberty Media Group Common Stock) provides by its terms a right in favor of the
Company to call, redeem, exchange or otherwise acquire all of the outstanding
shares or units of such class or series (such class or series of capital stock
being herein referred to as "Redeemable Capital Stock"), then, at the option of
the Company, the conversion privilege and Conversion Rate of the Series H
Preferred Stock shall not be adjusted pursuant to this paragraph 7(c) and in
lieu thereof, but subject to paragraph 7(j), the adjustment to the Conversion
Rate contemplated by paragraph 7(e) shall be made with the same effect as if the
dividend or distribution of Redeemable Capital Stock or the issuance of the
additional class or series of Redeemable Capital Stock by reclassification had
been a distribution of assets of the Company.
The adjustment contemplated by this paragraph 7(c) shall be made
successively whenever any event listed above shall occur. For a dividend or
distribution, the adjustment shall become effective immediately after the record
date for the dividend or distribution. For a subdivision, combination or
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.
If after an adjustment a holder of Series H Preferred Stock would be
entitled to receive upon conversion thereof shares of two or more classes or
series of capital stock of the Company, the Conversion Rate shall thereafter be
subject to adjustment upon the occurrence of an action taken with respect to any
such class or series of capital stock as is contemplated by this paragraph 7
with respect to the Series A Liberty Media Group Common Stock, on terms
comparable to those applicable to the Series A Liberty Media Group Common Stock
pursuant to this paragraph 7.
Any shares of Series A Liberty Media Group Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately prior to
the time of the record date for such dividend for purposes of calculating the
number of outstanding shares of Series A Liberty Media Group Common Stock under
paragraphs 7(d) and 7(e) below.
(d) Adjustment for Rights Issue. If, after the Issue Date, the
Company distributes any rights, warrants or options to holders of shares of
Series A Liberty Media Group Common Stock entitling them, for a period expiring
within 45 days after the record date for the determination of stockholders
entitled to receive such distribution, to purchase shares of Series A Liberty
Media Group Common Stock (or Convertible Securities) at a price per share (or
having a conversion price per share, after adding thereto an allocable portion
of the exercise price of the right, warrant or option to purchase such
Convertible Securities, computed on the basis of the maximum number of shares of
Series A Liberty Media Group Common Stock issuable upon conversion of such
Convertible Securities) less than the Current Market Price on the Determination
Date, the Conversion Rate shall be adjusted so that it shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior to the
opening of business on such record date by a fraction, of which the numerator
shall be the number of shares of Series A Liberty Media Group Common Stock
outstanding on such record date plus the number of shares of Series A Liberty
Media Group Common Stock which the aggregate offering price of the total number
of shares of Series A Liberty Media Group Common Stock so offered
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(or the aggregate conversion price of the Convertible Securities to be so
offered, after adding thereto the aggregate exercise price of the rights,
warrants or options to purchase such Convertible Securities) to the holders of
Series A Liberty Media Group Common Stock (and to the holders of Convertible
Securities and Series B Liberty Media Group Common Stock referred to in the
immediately succeeding paragraph of this paragraph 7(d) if the distribution to
which this paragraph 7(d) applies is also being made to such holders) would
purchase at such Current Market Price, and of which the denominator shall be the
number of shares of Series A Liberty Media Group Common Stock outstanding on
such record date plus the number of additional shares of Series A Liberty Media
Group Common Stock so offered to the holders of Series A Liberty Media Group
Common Stock (and to such holders of Convertible Securities and Series B Liberty
Media Group Common Stock) for subscription or purchase (or into which the
Convertible Securities so offered are convertible). Shares of Series A Liberty
Media Group Common Stock owned by or held for the account of the Company shall
not be deemed to be outstanding for the purpose of any such adjustment.
For purposes of this paragraph 7(d), the number of shares of Series A
Liberty Media Group Common Stock outstanding on any record date shall be deemed
to include (i) the maximum number of shares of Series A Liberty Media Group
Common Stock the issuance of which would be necessary to effect the full
exercise, exchange or conversion of all Convertible Securities outstanding on
such record date which are then exercisable, exchangeable or convertible at a
price (before giving effect to any adjustment to such price for the distribution
to which this paragraph 7(d) is being applied) equal to or less than the Current
Market Price per share of Series A Liberty Media Group Common Stock on the
applicable Determination Date, if all of such Convertible Securities were deemed
to have been exercised, exchanged or converted immediately prior to the opening
of business on such record date and (ii) if the Series B Liberty Media Group
Common Stock is then convertible into Series A Liberty Media Group Common Stock,
the maximum number of shares of Series A Liberty Media Group Common Stock the
issuance of which would be necessary to effect the full conversion of all shares
of Series B Liberty Media Group Common Stock outstanding on such record date, if
all of such shares of Series B Liberty Media Group Common Stock were deemed to
have been converted immediately prior to the opening of business on such record
date.
The adjustment contemplated by this paragraph 7(d) shall be made
successively whenever any such rights, warrants or options are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive the rights, warrants or options. If all of the
shares of Series A Liberty Media Group Common Stock (or all of the Convertible
Securities) subject to such rights, warrants or options have not been issued
when such rights, warrants or options expire (or, in the case of rights,
warrants or options to purchase Convertible Securities which have been
exercised, if all of the shares of Series A Liberty Media Group Common Stock
issuable upon conversion of such Convertible Securities have not been issued
prior to the expiration of the conversion right thereof), then the Conversion
Rate shall promptly be readjusted to the Conversion Rate which would then be in
effect had the adjustment upon the issuance of such rights, warrants or options
been made on the basis of the actual number of shares of Series A Liberty Media
Group Common Stock (or Convertible Securities) issued
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upon the exercise of such rights, warrants or options (or the conversion of such
Convertible Securities).
No adjustment shall be made under this paragraph 7(d) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect immediately
prior to such adjustment.
(e) Adjustments for Other Distributions. If, after the Issue Date,
(i) the Company distributes to all holders of shares of Series A Liberty Media
Group Common Stock any assets or debt securities or any rights, warrants or
options to purchase securities (excluding (x) dividends or distributions
referred to in paragraph 7(c) (except as otherwise provided in clause (ii) of
this sentence) and distributions of rights, warrants or options referred to in
paragraph 7(d) and (y) cash dividends or other cash distributions, unless such
cash dividends or cash distributions are Extraordinary Cash Dividends), or (ii)
the Company makes a dividend or distribution of Redeemable Capital Stock on, or
issues Redeemable Capital Stock by reclassification of, the Series A Liberty
Media Group Common Stock and determines pursuant to paragraph 7(c) to treat the
same as a distribution of assets of the Company subject to this paragraph 7(e),
then in each such event the Conversion Rate shall be adjusted by dividing the
Conversion Rate in effect immediately prior to the opening of business on (A)
the record date for the determination of stockholders entitled to receive the
distribution or (B) in the case of a reclassification, the effective date of
such reclassification, by a fraction, of which the numerator shall be the total
number of shares of Series A Liberty Media Group Common Stock outstanding on
such record date or immediately prior to such effective date multiplied by the
Current Market Price on the Determination Date, less the fair market value (as
determined in good faith by the Board of Directors) on such record date or
effective date of said assets (or Redeemable Capital Stock) or debt securities
or rights, warrants or options so distributed to the holders of Series A Liberty
Media Group Common Stock (and to the holders of Convertible Securities and
Series B Liberty Media Group Common Stock referred to in the immediately
succeeding paragraph of this paragraph 7(e) if the distribution to which this
paragraph 7(e) applies is also being made to such holders), and of which the
denominator shall be the total number of shares of Series A Liberty Media Group
Common Stock outstanding on such record date or immediately prior to such
effective date multiplied by such Current Market Price.
For purposes of this paragraph 7(e), the number of shares of Series A
Liberty Media Group Common Stock outstanding on any relevant date shall be
deemed to include (i) the maximum number of shares of Series A Liberty Media
Group Common Stock the issuance of which would be necessary to effect the full
exercise, exchange or conversion of all Convertible Securities outstanding on
such date which are then exercisable, exchangeable or convertible at a price
(before giving effect to any adjustment to such price for the distribution to
which this paragraph 7(e) is being applied) equal to or less than the Current
Market Price on the applicable Determination Date, if all of such Convertible
Securities were deemed to have been exercised, exchanged or converted
immediately prior to the opening of business on such date and (ii) if the Series
B Liberty Media Group Common Stock is then convertible into Series A Liberty
Media Group Common Stock, the maximum number of shares of Series A Liberty Media
Group Common Stock the issuance of which would be necessary to effect the full
conversion of all
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shares of Series B Liberty Media Group Common Stock outstanding on such date, if
all of such shares of Series B Liberty Media Group Common Stock were deemed to
have been converted immediately prior to the opening of business on such date.
For purposes of this paragraph 7(e), the term "Extraordinary Cash
Dividend" shall mean any cash dividend with respect to the Series A Liberty
Media Group Common Stock the amount of which, together with the aggregate amount
of cash dividends on the Series A Liberty Media Group Common Stock to be
aggregated with such cash dividend in accordance with the following provisions
of this paragraph, equals or exceeds the threshold percentage set forth in the
following sentence. If, upon the date prior to the Ex-Dividend Date with
respect to a cash dividend on Series A Liberty Media Group Common Stock, the
aggregate of the amount of such cash dividend together with the amounts of all
cash dividends on the Series A Liberty Media Group Common Stock with Ex-Dividend
Dates occurring in the 365 consecutive day period ending on the date prior to
the Ex-Dividend Date with respect to the cash dividend to which this provision
is being applied (other than any such other cash dividends with Ex-Dividend
Dates occurring in such period for which a prior adjustment in the Conversion
Rate was previously made under this paragraph 7(e)), equals or exceeds on a per
share basis 10% of the average of the Closing Prices during the period beginning
on the date after the first such Ex-Dividend Date in such period and ending on
the date prior to the Ex-Dividend Date with respect to the cash dividend to
which this provision is being applied (except that if no other cash dividend has
had an Ex-Dividend Date occurring in such period, the period for calculating the
average of the Closing Prices shall be the period commencing 365 days prior to
the date immediately prior to the Ex-Dividend Date with respect to the cash
dividend to which this provision is being applied), such cash dividend together
with each other cash dividend with an Ex-Dividend Date occurring in such 365-day
period that is aggregated with such cash dividend in accordance with this
paragraph shall be deemed to be an Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph
7(e) shall be made successively whenever any distribution to which this
paragraph 7(e) applies is made, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution (or, in the case of a reclassification, the effective date).
Shares of Series A Liberty Media Group Common Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such adjustment.
No adjustment shall be made under this paragraph 7(e) if the adjusted
Conversion Rate would be lower than the Conversion Rate in effect prior to such
adjustment. In the event that, with respect to any distribution to which this
paragraph 7(e) would otherwise apply, the numerator of the fraction in the
formula set forth in the first paragraph of this paragraph 7(e) is zero or a
negative number, then the adjustment provided by this paragraph 7(e) shall not
be made. If the Company makes a distribution to all holders of its Series A
Liberty Media Group Common Stock of any of its assets or debt securities or any
rights, warrants or options to purchase securities of the Company that, but for
the immediately preceding sentence, would otherwise result in an adjustment in
the Conversion Rate pursuant to the foregoing provisions of this paragraph 7(e),
then, from and after the record date for determining the holders of Series A
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Liberty Media Group Common Stock entitled to receive the distribution, a holder
of Series H Preferred Stock that converts such shares in accordance with the
provisions of this paragraph 7 will upon such conversion be entitled to receive,
in addition to the shares of Series A Liberty Media Group Common Stock into
which such shares of Series H Preferred Stock are convertible, the kind and
amount of securities, cash or other assets comprising the distribution that such
holder would have received if such holder had converted such shares of Series H
Preferred Stock immediately prior to the record date for determining the holders
of Series A Liberty Media Group Common Stock entitled to receive the
distribution.
(f) Consolidation, Merger or Sale of the Company. If the Company
consolidates with or merges into, or transfers (other than by mortgage or
pledge) its properties and assets substantially as an entirety to, another
Person or the Company is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Series A Liberty Media Group Common
Stock, the Company (or its successor in such transaction) or the transferee of
such properties and assets shall make appropriate provision so that the holders
of the shares of Series H Preferred Stock then outstanding shall have the right
thereafter to convert such shares into the kind and amount of securities, cash
or other assets receivable upon such transaction by a holder of the number of
shares of Series A Liberty Media Group Common Stock into which such shares of
Series H Preferred Stock could have been converted immediately before the
effective date of such transaction (assuming, to the extent applicable, that
such holder failed to exercise any rights of election with respect thereto and
received per share of Series A Liberty Media Group Common Stock the kind and
amount of securities, cash or other assets received per share by a plurality of
the non-electing shares of Series A Liberty Media Group Common Stock), and the
holders of the Series H Preferred Stock shall have no other conversion rights
under these provisions; provided that (i) effective provision shall be made, in
the Articles or Certificate of Incorporation of the resulting or surviving
corporation or otherwise or in any contracts of sale or transfer, so that the
provisions set forth herein for the protection of the conversion rights of
Series H Preferred Stock shall thereafter be made applicable, as nearly as
reasonably may be, to any such other securities and assets deliverable upon
conversion of the Series H Preferred Stock remaining outstanding or other
convertible preferred stock or other securities received by the holders of
Series H Preferred Stock in place thereof; and (ii) any such resulting or
surviving corporation or transferee shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such securities, cash or
other assets as the holders of the Series H Preferred Stock remaining
outstanding, or other convertible preferred stock or other securities received
by the holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provision for the protection of the conversion
rights of the Series H Preferred Stock, or of any other convertible preferred
stock or other securities received by the holders in place thereof, as provided
in clause (i) of this sentence.
If this paragraph 7(f) applies, paragraphs 7(c), 7(d) and 7(e) shall
not apply.
(g) Effect of Redemption. Subject to paragraph 7(j) and to the
remaining provisions of this paragraph 7(g), in the event that (i) the Company
redeems all, and not less than all, of the outstanding shares of Series A
Liberty Media Group Common Stock in accordance
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with the terms thereof or (ii) a holder of Series H Preferred Stock would be
entitled to receive upon conversion thereof pursuant to this paragraph 7 any
Redeemable Capital Stock and the Company redeems, exchanges or otherwise
acquires all of the outstanding shares or other units of such Redeemable Capital
Stock (each event referred to in clause (i) and (ii) being a "Redemption
Event"), then, from and after the effective date of such Redemption Event, the
holders of shares of Series H Preferred Stock then outstanding shall be entitled
to receive upon conversion of such shares, in lieu of shares or units of Series
A Liberty Media Group Common Stock or of such Redeemable Capital Stock, as the
case may be, the kind and amount of securities, cash or other assets receivable
upon the Redemption Event by a holder of the number of shares or units of Series
A Liberty Media Group Common Stock or such Redeemable Capital Stock, as the case
may be, into which such shares of Series H Preferred Stock could have been
converted immediately prior to the effective date of such Redemption Event
(assuming, to the extent applicable, that such holder failed to exercise any
rights of election with respect thereto and received per share or unit of Series
A Liberty Media Group Common Stock or such Redeemable Capital Stock the kind and
amount of securities, cash or other assets received per share or unit by a
plurality of the non-electing shares or units of Series A Liberty Media Group
Common Stock or such Redeemable Capital Stock, as the case may be), and (from
and after the effective date of such Redemption Event) the holders of the Series
H Preferred Stock shall have no other conversion rights under these provisions
with respect to the Series A Liberty Media Group Common Stock or such Redeemable
Capital Stock, as the case may be.
Notwithstanding the foregoing, if the redemption price for the shares
of Series A Liberty Media Group Common Stock or such Redeemable Capital Stock is
paid in whole or in part in Redemption Securities, and the Mirror Preferred
Stock Condition is met, the Series H Preferred Stock shall not be convertible
into such Redemption Securities and, from and after the applicable redemption
date, the holders of any shares of Series H Preferred Stock that have not been
exchanged for Mirror Preferred Stock shall have no conversion rights under these
provisions except for any conversion right that may have existed immediately
prior to the effective date of the Redemption Event with respect to any
securities, cash or other assets other than the Series A Liberty Media Group
Common Stock or Redeemable Capital Stock so redeemed. The Mirror Preferred
Stock Condition will be met in connection with a redemption of the Series A
Liberty Media Group Common Stock or the Redeemable Capital Stock into which the
Series H Preferred Stock is then convertible, assuming that the Series H
Preferred Stock is not then convertible into any other security, cash or other
assets, if the Company makes appropriate provision so that the holders of the
Series H Preferred Stock have the right to exchange their shares of Series H
Preferred Stock on the effective date of the Redemption Event for shares of
Mirror Preferred Stock of the issuer of the Redemption Securities, which Mirror
Preferred Stock shall have an aggregate initial liquidation preference equal to
the aggregate Liquidation Preference of the shares of Series H Preferred Stock
to be exchanged therefor.
If, before giving effect to a Redemption Event, a holder of Series H
Preferred Stock would be entitled to receive upon conversion of such Series H
Preferred Stock any securities, cash (other than cash in lieu of fractional
securities) or other assets in addition to the Series A Liberty Media Group
Common Stock or Redeemable Capital Stock being redeemed, and
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the redemption price payable upon such Redemption Event will include Redemption
Securities, then to satisfy the Mirror Preferred Stock Condition, the Company
would be required to make appropriate provision so that the holders of the
Series H Preferred Stock have the right to exchange their shares of Series H
Preferred Stock on the effective date of the Redemption Event for Exchange
Preferred Stock of the Company and Mirror Preferred Stock of the issuer of the
Redemption Securities. The sum of the initial liquidation preferences of the
shares of Exchange Preferred Stock and Mirror Preferred Stock delivered in
exchange for a share of Series H Preferred Stock will equal the Liquidation
Preference of a share of Series H Preferred Stock on the effective date of the
Redemption Event. The Mirror Preferred Stock will have an aggregate initial
liquidation preference equal to the product of the aggregate Liquidation
Preference of the shares of Series H Preferred Stock exchanged therefor and the
quotient of (x) the product of the Conversion Rate for the Series A Liberty
Media Group Common Stock or Redeemable Capital Stock to be redeemed (determined
immediately prior to the effective date of the Redemption Event) and the average
of the daily Closing Prices of the Series A Liberty Media Group Common Stock or
Redeemable Capital Stock, as the case may be, for the period of ten consecutive
trading days ending on the third trading day prior to the effective date of the
Redemption Event, divided by (y) the sum of the amount determined pursuant to
clause (x), plus the fair value of the securities (other than those being
redeemed), cash or other assets that would have been receivable by a holder of
Series H Preferred Stock upon conversion thereof immediately prior to the
effective date of the Redemption Event (such fair value to be determined in the
case of securities with a Closing Price in the same manner as provided in clause
(x) and otherwise by the Board of Directors in the exercise of its good faith
judgment). The shares of Exchange Preferred Stock will have an aggregate
initial liquidation preference equal to the difference between the aggregate
Liquidation Preference of the shares of Series H Preferred Stock exchanged
therefore and the aggregate initial liquidation preference of the Mirror
Preferred Stock.
When used in connection with a redemption by the Company of Series A
Liberty Media Group Common Stock or of any Redeemable Capital Stock into which
the Series H Preferred Stock is then convertible, the following terms have the
following meanings:
(i) "Redemption Securities" means securities of an issuer other
than the Company that are distributed by the Company in payment, in
whole or in part, of the redemption price for the Series A Liberty
Media Group Common Stock or such Redeemable Capital Stock, as the case
may be.
(ii) "Mirror Preferred Stock" means convertible preferred stock
issued by the issuer of the Redemption Securities and having terms,
conditions, designations, dividend rights, voting powers, rights on
liquidation and other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof that are identical, or as nearly so as is
practicable in the good faith judgment of the Board of Directors, to
those of the Series H Preferred Stock for which such Mirror Preferred
Stock is exchanged, except that (x) the liquidation preference will be
determined as provided above in this paragraph 7(g), (y) the running
of any time periods pursuant to the terms of
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the Series H Preferred Stock shall be tacked to the corresponding time
periods in the Mirror Preferred Stock and (z) the Mirror Preferred
Stock shall be convertible into the kind and amount of Redemption
Securities, cash and other assets that the holder of a share of Series
H Preferred Stock in respect of which such Mirror Preferred Stock is
issued pursuant to the terms hereof would have received upon
redemption of the Series A Liberty Media Group Common Stock or
Redeemable Capital Stock, as the case may be, had such shares of
Series H Preferred Stock been converted prior to the effective date of
the Redemption Event.
(iii) "Exchange Preferred Stock" means a series of convertible
preferred stock of the Company having terms, conditions, designations,
dividend rights, voting powers, rights on liquidation and other
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof that
are identical, or as nearly so as is practicable in the good faith
judgment of the Board of Directors, to those of the Series H Preferred
Stock for which such Exchange Preferred Stock is exchanged, except
that (x) the liquidation preference will be determined as provided
above in this paragraph 7(g), (y) the running of any time periods
pursuant to the terms of the Series H Preferred Stock shall be tacked
to the corresponding time periods in the Exchange Preferred Stock and
(z) the Exchange Preferred Stock will not be convertible into, and the
holders will have no conversion rights thereunder with respect to, the
Series A Liberty Media Group Common Stock or Redeemable Capital Stock,
as the case may be, redeemed in the Redemption Event.
Notwithstanding the second and third paragraphs of this paragraph
7(g), the Mirror Preferred Stock Condition shall only be deemed to have been
satisfied in connection with any Redemption Event if, in the good faith
determination of the Board of Directors: (i) receipt of Mirror Preferred Stock
and/or Exchange Preferred Stock in exchange for Series H Preferred Stock
pursuant to the second or third paragraph of this paragraph 7(g) would not
result in the recognition of gain or loss by the holders of such Series H
Preferred Stock for United States federal income tax purposes; (ii) an
adjustment made in the Conversion Rate of the Series H Preferred Stock with
respect to such Redemption Event, as provided in the first paragraph of this
paragraph 7(g), would result in the recognition of gain or loss by the holders
of Series H Preferred Stock for United States federal income tax purposes; or
(iii) receipt of Redemption Securities in redemption of the Series A Liberty
Media Group Common Stock or Redeemable Capital Stock to be redeemed in the
Redemption Event would result in the recognition of gain or loss by the holders
of such Series A Liberty Media Group Common Stock or Redeemable Capital Stock,
as the case may be.
(h) Simultaneous Adjustments. In the event that this paragraph 7
requires adjustments to the Conversion Rate under more than one of paragraph
7(c)(iv), (d) or (e), and the record dates for the distributions giving rise to
such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of paragraph 7(c), second, the
provisions of paragraph 7(e) and, third, the provisions of paragraph 7(d).
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(i) When Adjustment May Be Deferred. In any case in which this
paragraph 7 shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the occurrence of
such event (x) issuing to the holder of any shares of Series H Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of Series A Liberty Media Group Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the shares of Series A Liberty Media Group Common Stock issuable upon such
conversion before giving effect to such adjustment and (y) paying to such holder
cash or its check in lieu of any fractional interest to which he is entitled
pursuant to paragraph 7(o); provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Series A Liberty Media Group Common
Stock, and such cash, upon the occurrence of the event requiring such
adjustment.
(j) De Minimis Adjustment; When Adjustment Is Not Required. No
adjustments in the Conversion Rate need be made unless the adjustment would
require an increase or decrease of at least one percent (1%) in the Conversion
Rate. Any adjustment which is not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this paragraph 7 shall be made to the nearest
cent or to the nearest 1/1000th of a share, as the case may be.
No adjustment need be made for rights to purchase shares of Series A
Liberty Media Group Common Stock or for sales of shares of Series A Liberty
Media Group Common Stock which in either case are made pursuant to a Company
plan providing for reinvestment of dividends or interest or pursuant to a bona
fide employee stock option or stock purchase plan of the Company. No adjustment
need be made for a change in the par value of the Series A Liberty Media Group
Common Stock.
No adjustment need be made under this paragraph 7 for a transaction
referred to in paragraph 7(c), 7(d), 7(e) or 7(g) if holders of the Series H
Preferred Stock are to participate in the transaction on a basis and with notice
that the Board of Directors in good faith determines to be fair and appropriate
in light of the basis and notice on which holders of Series A Liberty Media
Group Common Stock participate in the transaction; provided that the basis on
which the holders of shares of Series H Preferred Stock are to participate in
the transaction shall not be deemed to be fair if it would require the holder to
convert his shares of Series H Preferred Stock, in order to participate, at any
time prior to the expiration of the conversion period specified for the shares
of Series H Preferred Stock pursuant to paragraph 7(a) of this Certificate of
Designations. The immediately preceding sentence shall apply to any transaction
referred to in paragraph 7(c), 7(d), 7(e) or 7(g) only if, in the good faith
determination of the Board of Directors: (i) participation in such transaction
by the holders of the Series H Preferred Stock would not result in the
recognition of gain or loss by such holders for United States federal income tax
purposes; (ii) an adjustment made in the Conversion Rate of the Series H
Preferred Stock in lieu of participating in such transaction, pursuant to this
paragraph 7, would result in the recognition of gain or loss by holders of
Series H Preferred Stock for United
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States federal income tax purposes; or (iii) participation in such transaction
by the holders of the Series A Liberty Media Group Common Stock would result in
the recognition of gain or loss by such holders for United States federal income
tax purposes.
To the extent the shares of Series H Preferred Stock become
convertible into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.
(k) Company Determination Final. Any determination required to be
made pursuant to paragraph 7(c), 7(d), 7(e), 7(f), 7(g), 7(h), 7(j) or 7(o)
shall be made by the Board of Directors (whether or not reference to the Board
of Directors is expressly made in any such paragraph) and any determination so
made in good faith shall be conclusive and binding, absent manifest error, on
the holders of shares of Series H Preferred Stock. In making any determination
as to the expected tax treatment of any action, transaction or event referred to
herein, including, without limitation, the determinations provided for in the
last paragraph of Paragraph 7(g) and the last sentence of the fourth paragraph
of Paragraph 7(j), the Board of Directors shall be entitled to rely conclusively
on (i) an opinion of counsel rendered by a law firm acceptable to the Board of
Directors, acting in good faith, or (ii) a private letter ruling from the
Internal Revenue Service, to such effect, which opinion of counsel or private
letter ruling may be based upon such assumptions, and be subject to such
qualifications, conditions and limitations, as the Board of Directors shall in
good faith determine to be appropriate under the circumstances. Any such
determination by the Board of Directors shall be based on the expected United
States federal income tax consequences applicable to the transaction in
question, without regard to special tax rules such as those applicable to
dealers in securities, foreign persons, mutual funds, insurance companies,
tax-exempt entities and holders who do not hold the securities or other property
in question as capital assets, or the personal circumstances of any particular
stockholder.
(l) Notice of Adjustment. Whenever the provisions of this paragraph 7
require an adjustment to the Conversion Rate, the Company shall promptly compute
such adjustment and (i) file with the transfer agent for the Series H Preferred
Stock (or with the books of the Company if there is no transfer agent) an
Officers' Certificate setting forth a description of the event requiring the
adjustment, the new Conversion Rate (including a reasonably detailed calculation
thereof), and the kind and amount of capital stock or other securities or cash
or other assets into which the Series H Preferred Stock shall be convertible
after such event, and (ii) cause a notice containing a summary of the
information set forth in said certificate to be given to the holders of Series H
Preferred Stock. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be given under the provisions of
paragraph 7(m).
(m) Advance Notice of Certain Transactions. If the Company:
(i) takes any action which would require an adjustment in the
Conversion Rate;
(ii) is a party to a consolidation, merger or binding share
exchange, or transfers all or substantially all of its assets to
another Person, and any stockholders of the Company must approve the
transaction; or
(iii) voluntarily or involuntarily dissolves, liquidates or
winds up,
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then, in any such event, the Company shall give to the holders of the Series H
Preferred Stock, at least twenty (20) days prior to any record date or other
date set for definitive action if there shall be no record date, a notice
stating the record date for and the anticipated effective date of such action or
event and, if the event is a dividend or distribution or issuance by
reclassification of Redeemable Capital Stock, whether the Company has determined
to adjust the Conversion Rate pursuant to paragraph 7(c) or 7(e); provided,
however, that any notice required hereunder shall in any event be given no later
than the time that notice is given to the holders of Series A Liberty Media
Group Common Stock. Without limiting the obligation of the Company to provide
notice of corporate actions hereunder, the failure to mail the notice or any
defect in it shall not affect the legality or validity of any corporate action
or the vote thereon.
(n) Reservation of Series A Liberty Media Group Common Stock Issuable
Upon Conversion. The Company shall at all times on and after the Issue Date
reserve and keep available out of its authorized but unissued shares of Series A
Liberty Media Group Common Stock, solely for the purpose of effecting the
conversion of the shares of Series H Preferred Stock, such number of its shares
of Series A Liberty Media Group Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series H
Preferred Stock; provided that nothing contained herein shall be construed to
preclude the Company from satisfying its obligations in respect of the
conversion of the outstanding shares of Series H Preferred Stock by delivery of
shares of Series A Liberty Media Group Common Stock which are held in the
treasury of the Company. The Company shall take all such corporate and other
actions as from time to time may be necessary to insure that all shares of
Series A Liberty Media Group Common Stock issuable upon conversion of shares of
Series H Preferred Stock at the Conversion Rate in effect from time to time
will, when issued, be duly and validly authorized and issued, fully paid and
nonassessable, and free from all preemptive or similar rights. In order that
the Company may issue shares of Series A Liberty Media Group Common Stock upon
conversion of the Series H Preferred Stock, the Company will in good faith and
as expeditiously as possible endeavor to comply with all applicable Federal and
state securities laws and will in good faith and as expeditiously as possible
endeavor to list such shares to be issued upon conversion on such national
securities exchange or national securities association, if any, on which the
Series A Liberty Media Group Common Stock is then listed.
(o) Fractional Shares. No fractional shares of Series A Liberty Media
Group Common Stock or scrip shall be issued upon conversion of the Series H
Preferred Stock. Whether or not fractional shares would otherwise be required
to be issued to a holder of Series H Preferred Stock upon such conversion shall
be determined on the basis of the total number of shares of Series H Preferred
Stock the holder is at the time converting into Series A Liberty Media Group
Common Stock and the total number of shares of Series A Liberty Media Group
Common Stock issuable upon such conversion. In lieu of the issuance of
fractional shares of Series A Liberty Media Group Common Stock, the Company
shall pay instead an amount in cash or by its check equal to the same fraction
of the Closing Price of a full share of Series A Liberty Media Group Common
Stock on the last full trading day prior to the Conversion Date.
-29-
<PAGE>
(p) Impairment. The Company will not, by amendment of this
Certificate of Designations or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, other than as expressly permitted by
this Certificate of Designations or approved by the requisite vote or written
consent of the holders of Series H Preferred Stock taken or given in accordance
with this Certificate, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this paragraph 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of Series H
Preferred Stock against impairment.
8. Voting.
(a) Voting Rights. The holders of Series H Preferred Stock shall have
no voting rights whatsoever, except as required by law and except for the voting
rights described in this paragraph 8; provided, however, that the number of
authorized shares of Series H Preferred Stock may be increased or decreased (but
not below the number of shares of Series H Preferred Stock then outstanding) by
the affirmative vote of the holders of at least 66-2/3% of the total voting
power of the then outstanding Voting Securities (as defined in Section A of
Article VIII of the Restated Certificate of Incorporation of the Company (the
"Restated Certificate")), voting together as a single class as provided in
Article IX of the Restated Certificate. Without limiting the generality of the
foregoing, no vote or consent of the holders of Series H Preferred Stock shall
be required for (a) the creation of any indebtedness of any kind of the Company,
(b) the creation or designation of any class or series of Senior Stock, Parity
Stock or Junior Stock, or (c) any amendment to the Restated Certificate that
would increase the number of authorized shares of Preferred Stock or the number
of authorized shares of Series H Preferred Stock or that would decrease the
number of authorized shares of Preferred Stock or the number of authorized
shares of Series H Preferred Stock (but not below the number of shares of
Preferred Stock or Series H Preferred Stock, as the case may be, then
outstanding).
(b) Election of Directors. The holders of the Series H Preferred
Stock shall have the right to vote at any annual or special meeting of
stockholders for the purpose of electing directors. Each share of Series H
Preferred Stock shall have one vote for such purpose, and shall vote as a single
class with all other classes or series of capital stock of the Company that are
entitled to vote in any general election of directors, unless the instrument
creating or evidencing such class or series of capital stock otherwise expressly
provides.
9. No Preemptive Rights. The holders of shares of Series H
Preferred Stock shall have no preemptive rights, including preemptive rights
with respect to any shares of capital stock or other securities of the Company
convertible into or carrying rights or options to purchase any such shares.
10. Waiver. Any provision of this Certificate of Designations which,
for the benefit of the holders of Series H Preferred Stock, prohibits, limits or
restricts actions by the
-30-
<PAGE>
Company, or imposes obligations on the Company, including but not limited to
provisions relating to the obligation of the Company to redeem or convert such
shares, may be waived in whole or in part, or the application of all or any part
of such provision in any particular circumstance or generally may be waived, in
each case by the affirmative vote or with the consent of the holders of at least
a majority of the number of shares of Series H Preferred Stock then outstanding
(or such greater percentage thereof as may be required by applicable law or any
applicable rules of any national securities exchange or national interdealer
quotation system), either in writing or by vote at an annual meeting or a
special meeting called for such purpose at which the holders of Series H
Preferred Stock shall vote as a separate class.
11. Method of Giving Notices. Any notice required or permitted by
the provisions of this Certificate of Designations to be given to the holders of
shares of Series H Preferred Stock shall be deemed duly given if deposited in
the United States mail, first class mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Company or
supplied by him in writing to the Company for the purpose of such notice.
12. Exclusion of Other Rights. Except as may otherwise be required
by law and except for the equitable rights and remedies which may otherwise be
available to holders of Series H Preferred Stock, the shares of Series H
Preferred Stock shall not have any designations, preferences, limitations or
relative rights other than those specifically set forth in this Certificate of
Designations.
13. Headings of Subdivisions. The headings of the various
subdivisions of this Certificate of Designations are for convenience of
reference only and shall not affect the interpretation of any of the provisions
of this Certificate of Designations.
FURTHER RESOLVED, that the appropriate officers of this Company are
hereby authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded in accordance
with the requirements of Section 151(g) of the General Corporation Law of the
State of Delaware."
The undersigned has signed this Certificate of Designations on this
______ day of ____________, 199__.
----------------------------------------
Name:
Title: Executive Vice President
-31-
<PAGE>
EXHIBIT 4.3
[FRONT OF STOCK CERTIFICATE]
TELE-COMMUNICATIONS, INC.
PREFERRED STOCK PREFERRED STOCK
NUMBER SHARES
TG
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 87924V 70 5
REDEEMABLE CONVERTIBLE
TCI GROUP PREFERRED STOCK, SERIES G
This Certifies That
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE REDEEMABLE
CONVERTIBLE TCI GROUP PREFERRED STOCK,
SERIES G, PAR VALUE $.01 PER SHARE OF
TELE-COMMUNICATIONS, INC.
(the "Corporation") transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon the surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all of the terms and conditions contained in the
Certificate of Incorporation of the Corporation and all amendments thereto.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
<PAGE>
Dated:
/s/ Stephen M. Brett /s/ John C. Malone
SECRETARY PRESIDENT
[SEAL]
COUNTERSIGNED: TRANSFER AGENT
AND REGISTRAR
BY
THE BANK OF NEW YORK
(NEW YORK)
AUTHORIZED SIGNATURE
[BACK OF STOCK CERTIFICATE]
TELE-COMMUNICATIONS, INC.
THE CORPORATION WILL FURNISH TO EACH STOCKHOLDER, UPON REQUEST AND WITHOUT
CHARGE, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
IF THE CORPORATION ELECTS TO REDEEM IN PART THE SHARES OF REDEEMABLE
CONVERTIBLE TCI GROUP PREFERRED STOCK, SERIES G, THE CORPORATION WILL NOT BE
REQUIRED TO REGISTER A TRANSFER OF (I) ANY SHARES OF SUCH CLASS FOR A PERIOD OF
15 DAYS NEXT PRECEDING ANY SELECTION OF SHARES OF SUCH CLASS TO BE REDEEMED OR
(II) ANY SHARES OF SUCH CLASS SELECTED OR CALLED FOR REDEMPTION.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM- as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT- as tenants by the entireties (Cust ) (Minor)
JT TEN- as joint tenants with under Uniform Gifts to Minors
right of survivorship and Act
not as tenants in common (State)
Additional Abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer
<PAGE>
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated
X
X
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE(S) GUARANTEED:
By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 4.4
[FRONT OF STOCK CERTIFICATE]
TELE-COMMUNICATIONS, INC.
PREFERRED STOCK PREFERRED STOCK
NUMBER SHARES
TH
INCORPORATED UNDER THE LAWS SEE REVERSE SIDE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 87924V 80 4
REDEEMABLE CONVERTIBLE
LIBERTY MEDIA GROUP PREFERRED STOCK, SERIES H
This Certifies That
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE REDEEMABLE
CONVERTIBLE LIBERTY MEDIA GROUP PREFERRED STOCK,
SERIES H, PAR VALUE $.01 PER SHARE OF
TELE-COMMUNICATIONS, INC.
(the "Corporation") transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon the surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all of the terms and conditions contained in the
Certificate of Incorporation of the Corporation and all amendments thereto.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
<PAGE>
/s/ Stephen M. Brett /s/ John C. Malone
SECRETARY PRESIDENT
[SEAL]
COUNTERSIGNED: TRANSFER AGENT
AND REGISTRAR
BY
THE BANK OF NEW YORK
(NEW YORK)
AUTHORIZED SIGNATURE
[BACK OF STOCK CERTIFICATE]
TELE-COMMUNICATIONS, INC.
THE CORPORATION WILL FURNISH TO EACH STOCKHOLDER, UPON REQUEST AND WITHOUT
CHARGE, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
IF THE CORPORATION ELECTS TO REDEEM IN PART THE SHARES OF REDEEMABLE
CONVERTIBLE LIBERTY MEDIA GROUP PREFERRED STOCK, SERIES H, THE CORPORATION WILL
NOT BE REQUIRED TO REGISTER A TRANSFER OF (I) ANY SHARES OF SUCH CLASS FOR A
PERIOD OF 15 DAYS NEXT PRECEDING ANY SELECTION OF SHARES OF SUCH CLASS TO BE
REDEEMED OR (II) ANY SHARES OF SUCH CLASS SELECTED OR CALLED FOR REDEMPTION.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM- as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT- as tenants by the entireties (Cust ) (Minor)
JT TEN- as joint tenants with under Uniform Gifts to Minors
right of survivorship and Act
not as tenants in common (State)
Additional Abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer
<PAGE>
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated
X
X
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE(S) GUARANTEED:
By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
[LETTERHEAD OF BAKER & BOTTS, L.L.P. APPEARS HERE]
EXHIBIT 5
December 22, 1995
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111
Re: Tele-Communications, Inc.
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
Reference is made to the registration statement on Form S-4 (as amended to
the date hereof, the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act") by Tele-Communications, Inc., a Delaware corporation (the
"Company"), with respect to shares of the Company's Redeemable Convertible TCI
Group Preferred Stock, Series G, par value $.01 per share ("TCI Group Preferred
Stock"), Redeemable Convertible Liberty Media Group Preferred Stock, Series H,
par value $.01 per share ("Liberty Media Group Preferred Stock"), Tele-
Communications, Inc. Series A TCI Group Common Stock, par value $1.00 per share
("Series A TCI Group Common Stock"), and Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share ("Series A Liberty
Media Group Common Stock"). The shares of TCI Group Preferred Stock, Liberty
Media Group Preferred Stock, Series A TCI Group Common Stock and Series A
Liberty Media Group Common Stock are being registered under the Securities Act
in connection with an Agreement and Plan of Merger dated as of July 10, 1995, as
amended, among the Company, TCI Merger Sub, Inc., a Delaware corporation and
direct wholly owned subsidiary of the Company ("Merger Sub"), and United Video
Satellite Group, Inc., a Delaware corporation ("UVSG") (together with the
exhibits and schedules thereto, the "Merger Agreement"). The Merger Agreement
provides for, among other things, the merger (the "Merger") of Merger Sub with
and into UVSG, in a transaction in which the holders of UVSG's Class A Common
Stock shall have the right to elect to convert up to 50% of their shares of such
stock into the right to receive, and each share of UVSG's Class B Common Stock
shall be converted into the right to receive, one share of TCI Group Preferred
Stock and one share of Liberty Media Group Preferred Stock (in each case except
as otherwise provided in the Merger Agreement). The TCI Group Preferred Stock
will be convertible into shares of Series A TCI Group Common Stock, and the
Liberty Media Group Preferred Stock will be convertible into shares of Series A
Liberty Media Group Common Stock. The shares of TCI Group Preferred Stock,
Liberty Media Group Preferred Stock, Series A TCI Group Common Stock and Series
A Liberty Media Group
<PAGE>
Common Stock are described in the Proxy Statement/Prospectus (the "Prospectus")
included in the Registration Statement. All capitalized terms used but not
defined herein have the meanings ascribed thereto in the Prospectus.
This opinion of counsel is being furnished, at your request, to you for
filing as Exhibit 5 to the Registration Statement. In rendering our opinion, we
have examined the Company's Restated Certificate of Incorporation and By-Laws,
each as amended; the proposed Certificates of Designations for the TCI Group
Preferred Stock and Liberty Media Group Preferred Stock, respectively (the
"Certificates of Designations"); resolutions of the Board of Directors of the
Company with respect to the Merger, the filing of the Registration Statement and
related matters; the Merger Agreement; and certain other documents, records,
instruments and certificates of public officials and of representatives of the
Company provided to us by the Company and UVSG.
Based upon the foregoing and subject to the limitations set forth in the
immediately following paragraph, and subject to (i) the approval and adoption of
the Merger Agreement by the stockholders of UVSG pursuant to the Delaware
General Corporation Law, as amended (the "DGCL"), (ii) the filing and
effectiveness in accordance with the DGCL of a certificate of merger with
respect to the Merger, as provided in the Merger Agreement, (iii) the filing and
effectiveness of each of the Certificates of Designations in accordance with the
DGCL, (iv) issuance of the shares of TCI Group Preferred Stock and Liberty Media
Group Preferred Stock pursuant to the Merger Agreement and (v) in the case of
our opinion set forth in clause (b) below, the conversion of such shares into
shares of Series A TCI Group Common Stock and Series A Liberty Media Group
Common Stock in accordance with the Certificates of Designations, it is our
opinion that (a) the shares of TCI Group Preferred Stock and Liberty Media Group
Preferred Stock to which the Registration Statement relates, when issued in the
Merger, and (b) the shares of Series A TCI Group Common Stock and Series A
Liberty Media Group Common Stock to which the Registration Statement relates,
when issued upon conversion of such shares of TCI Group Preferred Stock and
Liberty Media Group Preferred Stock, respectively, will be duly authorized,
validly issued, fully paid and non-assessable.
In rendering the foregoing opinion, we have relied on certificates of
officers of the Company as to factual matters. We have assumed the authenticity
of all documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified or conformed
copies or photocopies. We have also assumed the accuracy of the representations
and warranties of the parties contained in the Merger Agreement. We have
further assumed that there will be no changes in applicable law between the date
of this opinion and (A) the issuance of the shares of TCI Group Preferred Stock
and Liberty Media Group Preferred Stock pursuant to the Merger or (B) the
conversion of such shares into shares of Series A TCI Group Common Stock and
Series A Liberty Media Group Common Stock, and that the Merger will be
consummated in the manner contemplated by the Prospectus and in accordance with
the provisions of the Merger Agreement.
<PAGE>
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters" in the Prospectus. In giving the foregoing consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Jerome H. Kern, a partner of Baker & Botts, L.L.P., is a director of the
Company.
Very truly yours,
BAKER & BOTTS, L.L.P.
<PAGE>
EXHIBIT 8
[LETTERHEAD OF HOLME ROBERTS & OWEN LLC]
December 21, 1995
United Video Satellite Group, Inc.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
Re: Merger of a Wholly-Owned Subsidiary of
Tele-Communications, Inc. into
United Video Satellite Group, Inc.
Ladies and Gentlemen:
This tax opinion is with respect to the merger of a wholly-owned
subsidiary ("Merger Sub") of Tele-Communications, Inc. ("TCI") with and into
United Video Satellite Group, Inc. ("UVSG") with UVSG surviving the merger. The
merger will be carried out pursuant to the Agreement and Plan of Merger dated as
of July 10, 1995, as amended, among TCI, UVSG and Merger Sub (the "Merger
Agreement"). Undefined capitalized terms used herein have the same meaning as in
the Proxy Statement/Prospectus included as part of the Registration Statement on
Form S-4 filed with the Securities and Exchange Commission on December 22, 1995
with respect to the transaction (the "Prospectus").
This opinion is rendered in connection with the discussion included under
the caption "Certain Federal Income Tax Consequences" in the Prospectus. In
rendering our opinion, we have examined the Merger Agreement, the Prospectus and
such other documents as are available at this time as we have deemed necessary
to provide a basis for this tax opinion.
Our opinion is based on a number of assumptions. If any of these
assumptions is not true or accurate, our opinion may be different. In rendering
our opinion, we have assumed the following:
<PAGE>
United Video Satellite Group, Inc.
December 21, 1995
Page 2
(a) The Merger Agreement, including the agreements referred to therein,
sets forth the complete agreement among the parties with respect to the Merger
and are binding and enforceable in accordance with their terms;
(b) The Merger and related transactions will take place as described in
the Merger Agreement, the facts and representations described in the Merger
Agreement are accurate and will continue to be accurate as of the Effective
Time, and the conduct of the parties is and will be materially consistent with
those facts;
(c) The Merger will be a valid merger under applicable state law;
(d) The representations made to us by UVSG, TCI and Mr. Flinn as set
forth in letters to us dated December 14, 1995, December 18, 1995 and August 22,
1995 respectively, (which we have not independently verified), are true and
correct in all material respects and will continue to be true and correct in all
material respects at the Effective Time;
(e) The Liberty Media Group Preferred Stock and the LMG Series A Common
Stock constitute voting stock of TCI for federal income tax purposes and TCI's
tax counsel has rendered a favorable opinion on this matter; and
(f) At the Effective Time, the UVSG stockholders will not have any plan
or intention to sell, exchange, or otherwise dispose of more than 50 percent of
their stock interest in TCI that they receive pursuant to the Merger transaction
and will not have any plan or intention to sell, exchange or otherwise dispose
of more than 50 percent of their shares of UVSG common stock remaining after the
Merger. For this purpose, prior or subsequent dispositions of stock related to
the Merger would be considered in determining whether the 50 percent requirement
has been met.
Our opinion is based on the current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and the applicable Regulations issued
thereunder and the public administrative and judicial interpretation thereof.
The Code and the Regulations and the interpretation thereof by the Internal
Revenue Service (the "Service") and the courts are subject to change, and any
changes could be applied retroactively. If the applicable law changes, our
opinion may be different.
<PAGE>
United Video Satellite Group, Inc.
December 21, 1995
Page 3
Subject to the assumptions, conditions and qualifications described
herein and in the section of the Prospectus captioned "Certain Federal Income
Tax Consequences," it is our opinion that for federal income tax purposes: (i)
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code; and (ii) no gain or loss will be recognized by the stockholders of
UVSG from their receipt of TCI/LMG preferred stock in exchange for their UVSG
common stock in the Merger. These matters are not free from doubt and there are
no court decisions or published Service rulings considering a similar
transaction. As described in the Prospectus if the stockholders of UVSG receive
any consideration for their UVSG stock other than the TCI/LMG Preferred Stock,
the other consideration will be taxable to them.
In our opinion: (i) the section of the Prospectus captioned "Certain
Federal Income Tax Consequences" describes the material federal income tax
consequences expected to result to the stockholders of UVSG from the Merger,
subject to the conditions and limitations described therein; and (ii) the
discussion under the caption "Ownership and Disposition of TCI/LMG Preferred
Stock" addresses the principal federal income tax issues expected to arise with
respect to the ownership and disposition of the TCI/LMG Preferred Stock received
in the Merger, subject to the conditions and limitations described therein.
Our opinions are limited in their scope. They only cover those federal
income tax consequences of the Merger expressly addressed above, subject to the
assumptions, conditions and qualifications described above.
Our opinion may change if the applicable law changes, if any of the facts
of the Merger transactions as included in the Merger documents are inaccurate or
change, if any of the representations made to us by UVSG, TCI or Mr. Flinn in
the representation letters are not true and correct in all material respects, if
any of the assumptions described above is not true or accruate, or if the
conduct of the parties is materially inconsistent with the facts reflected in
the Merger documents.
We note that on December 7, 1995, the Treasury Department proposed
legislation that would treat certain preferred stock received in a corporate
reorganization as "boot" and not as qualified stock consideration. If the
TCI/LMG Preferred Stock is not qualified stock consideration, the Merger
transaction would be a taxable transaction. The specific statutory language for
this proposal has not been released by the Treasury Department as of the date of
the Prospectus, but based on the summary descriptions of the proposal that have
been released by the Treasury Department, there is a strong position that the
proposal would not apply to the TCI/LMG Preferred Stock. However, there can be
no assurance that tax legislation
<PAGE>
United Video Satellite Group, Inc.
December 21, 1995
Page 4
enacted in the future would not result in the Merger transaction being a taxable
transaction. As stated above, our opinion is based on current federal income tax
law and we express no opinion as to whether any future legislation will apply to
the Merger transaction.
Our opinion does not cover all tax issues with respect to the Merger.
The opinion represents our current legal judgment on the specific issues
addressed based on the assumptions, conditions, qualifications and applicable
law described above and it has no official legal status of any kind. The
Service may take a position contrary to our opinion and, if the matter is
litigated, a court could reach a contrary decision.
The opinions expressed herein are solely for your benefit and the benefit
of the UVSG stockholders at the Effective Time, and it may not be relied upon in
any manner or for any purpose by any other person.
We hereby consent to the filing of this letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name therein.
Very truly yours,
HOLME ROBERTS & OWEN LLC
By: /s/Robert J. Welter
-----------------------------
Robert J. Welter, Member
<PAGE>
Exhibit 12
TELE-COMMUNICATIONS, INC.
AND CONSOLIDATED SUBSIDIARIES
Calculation of Ratios of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
(amounts in millions, except for ratios)
(unaudited)
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
---------------------------------------- -------------------
1994 1993(a) 1992(a) 1991 1990 1995 1994
---------------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (losses) from continuing operations before income taxes $ 166 161 45 (108) (308) (196) 148
Add:
Interest on debt 811 738 815 928 990 776 582
Interest portion of rentals 27 23 22 23 23 34 19
Amortization of debt expense 13 12 9 6 6 11 8
Distributions from and losses (earnings) of less than
50%-owned affiliates with debt not guaranteed by TCI 38 26 (10) (27) 34 120 (104)
Minority interests in earnings (losses) of consolidated
subsidiaries, including preferred stock dividend requirement
of consolidated subsidiaries - 13 277 24 (63) (36) 8
Elimination of preferred stock dividend requirement
of consolidated subsidiaries to 50%-owned affiliates - - (250) (42) (36) - -
Preferred stock dividend requirement of 50%-owned
affiliates, other than amounts to TCI - - 175 23 15 - -
Earnings available for combined fixed charges ----------------------------------------------------------
and preferred stock dividends $ 1,055 973 1,083 827 661 709 661
==========================================================
Fixed charges:
Interest on debt:
TCI and consolidated subsidiaries 785 731 718 826 868 745 568
Elimination of interest of consolidated subsidiaries to
50%-owned affiliates - - (36) (47) (51) - -
Less than 50%-owned affiliates with debt guaranteed by
TCIC 7 - - - - 7 -
TCI's proportionate share of interest of 50%-owned
affiliates 19 7 133 149 173 24 14
----------------------------------------------------------
811 738 815 928 990 776 582
Interest portion of rentals 27 23 22 23 23 34 19
Amortization of debt expense 13 12 9 6 6 11 8
Preferred stock dividend requirements of consolidated
subsidiaries 20 14 281 61 56 52 12
Elimination of preferred stock dividend requirement
of consolidated subsidiaries to 50%-owned affiliates - - (250) (42) (36) - -
Preferred stock dividend requirement of 50%-owned
affiliates, other than amounts to TCI - - 175 23 15 - -
Capitalized interest 16 9 6 5 6 7 12
----------------------------------------------------------
Total fixed charges $ 887 796 1,058 1,004 1,060 880 633
==========================================================
Ratio of earnings to fixed charges 1.19 1.22 1.02 - - 1.04
Deficiency $ - - - (177) (399) (171) -
</TABLE>
(a) Preferred stock dividend requirements have been increased to an amount
representing the pretax earnings which would be required to cover such
dividend requirements. The effective income tax rate utilized for purposes
of increasing preferred stock dividend requirements in 1993 has been
adjusted to exclude the effect of the federal income tax rate change in the
third quarter of 1993.
(continued)
<PAGE>
TELE-COMMUNICATIONS, INC.
AND CONSOLIDATED SUBSIDIARIES
Calculation of Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(amounts in millions, except for ratios)
(unaudited)
Fixed Charges related to interest on debt of less than 50%-owned affiliates
guaranteed by TCI:
<TABLE>
<S> <C>
Year ended December 31,
1990 710
1991 506
1992 2,517
1993 13,833
1994 5,777
Nine Months Ended September 30,
1994 10,676
1995 4,866
</TABLE>
<PAGE>
TELE-Communications, Inc.
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (REFC)
The ratio of earnings to combined fixed charges and preferred stock dividends of
the Company was 1.02, 1.22, and 1.19 for the years ended December 31, 1992, 1993
and 1994, respectively, and 1.04 for the nine months ended September 30, 1994.
The ratio of earnings to combined fixed charges and preferred stock dividends of
the Company was less than 1.00 for the years ended December 31, 1990 and 1991,
and for the nine months ended September 30, 1995; thus, earnings available for
combined fixed charges and preferred stock dividends were inadequate to cover
combined fixed charges and preferred stock dividends for such periods. The
amounts of the coverage deficiencies were $399 million and $177 million for the
years ended December 31, 1990 and 1991, respectively, and $171 million for the
nine months ended September 30, 1995. For the ratio calculations, earnings
available for combined fixed charges and preferred stock dividends consists of
earnings (losses) before income taxes plus combined fixed charges and preferred
stock dividends (minus capitalized interest), distributions from and (earnings)
loss of less than 50% owned affiliates with debt not guaranteed by the Company
(net of earnings not distributed of less than 50% owned affiliates), and
minority interest in earnings (losses) of consolidated subsidiaries (including
an amount representing the pretax earnings which would be required to cover
preferred stock dividend requirements of consolidated subsidiaries). Combined
fixed charges and preferred stock dividends consist of (i) interest (including
capitalized interest) on debt, including interest of less than 50%-owned
affiliates with debt guaranteed by the Company and excluding interest to 50%
owned affiliates, (ii) the Company's proportionate share of interest of 50%-
owned affiliates, (iii) that portion of rental expense the Company believes to
be representative of interest (one-third of rental expense), (iv) amortization
of debt expense, (v) that portion of minority interests in earnings of
consolidated subsidiaries that represent the amount of pretax earnings that
would be required to cover preferred stock dividend requirements excluding
similarly adjusted preferred stock dividend requirements of consolidated
subsidiaries to 50%-owned affiliates, and (vi) the amount representing the
pretax earnings which would be required to cover preferred stock dividend
requirements of 50%-owned affiliates, other than amounts payable to the Company.
The Company has guaranteed the debt of certain less than 50%-owned affiliates
and certain other entities in which it has an interest. Combined fixed charges
and preferred stock dividends of $710,000, $506,000, $2,517,000, $13,833,000 and
$5,777,000 relating to such guarantees for the years ended December 31, 1990,
1991, 1992, 1993 and 1994, respectively, and combined fixed charges and
preferred stock dividends of $10,676,000 and $4,866,000 relating to such
guarantees for the nine months ended September 30, 1994 and 1995, respectively,
have not been included in combined fixed charges and preferred stock dividends.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 3, 1995, incorporated by reference in the Proxy
Statement of United Video Satellite Group, Inc. which is made a part of the
Registration Statement (Form S-4) of Tele-Communications, Inc. for the
registration of shares of its preferred stock.
Ernst & Young LLP
Tulsa, Oklahoma
December 20, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our
report (and to all references to our firm) included in or made a part of the
Tele-Communications, Inc. registration statement on Form S-4.
Arthur Andersen LLP
Denver, Colorado,
December 15, 1995.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement
on Form S-4 of Tele-Communications, Inc. of our reports dated March 27, 1995,
relating to the consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1994, and all related
financial statement schedules, which reports appear in the December 31, 1994
Annual Report on Form 10-K, as amended, of Tele-Communications, Inc. and to the
reference to our firm under the heading "Experts" in the registration statement.
Our reports covering the December 31, 1994 consolidation financial statements
refer to the adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
KPMG Peat Marwick LLP
Denver, Colorado
December 21, 1995
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement
on Form S-4 of Tele-Communications, Inc. of our reports dated 21 March, 1995,
relating to the consolidated balance sheet of TeleWest Communications plc and
subsidiaries as of 31 December 1994 and 1993, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended 31 December 1994, which report appears in the 31 December 1994
Annual Report on Form 10-K of Tele-Communications, Inc., as amended, and to the
reference to our firm under the heading "Experts" in the registration statement.
KPMG
London, England
December 21, 1995
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement
on Form S-4 of Tele-Communications, Inc. of our report, dated March 24, 1995,
relating to the combined balance sheets of Cablevision (A combination of certain
cable television assets of Cablevision S.A., Televisora Belgrano S.A.,
Construred S.A. and Univent's S.A.) as of December 31, 1994 and 1993, and the
related combined statements of operations and deficit and cash flows for each of
the years in the three-year period ended December 31, 1994, which appear in the
Current Report on Form 8-K of Tele-Communications, Inc. dated April 20, 1995, as
amended, and to the reference to our firm under the heading "Experts" in the
registration statement.
KPMG Finsterbusch Pickenhayn Sibille
Buenos Aires, Argentina
December 21, 1995
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement
on Form S-4 of Tele-Communications, Inc. of our report, dated March 4, 1994,
relating to the consolidated balance sheets of QVC, Inc. and subsidiaries as of
January 31, 1994 and 1993, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended January 31, 1994, which report appears in the Current
Report on Form 8-K of Tele-Communications, Inc. dated February 3, 1995, as
amended, and to the reference to our firm under the heading "Experts" in the
registration statement. Our report refers to a change in the method of
accounting for income taxes.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
December 21, 1995
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Tele-Communications, Inc. of our report dated February 4, 1994,
relating to the financial statements of TeleCable Corporation which appears on
page 12 of the Tele-Communications, Inc. Current Report on Form 8-K dated August
26, 1994. We also consent to the reference to us under the heading "Experts" in
the registration statement.
Price Waterhouse LLP
Norfolk, Virginia
December 21, 1995
<PAGE>
EXHIBIT 99.2
UNITED VIDEO SATELLITE GROUP, INC.
Proxy for Special Meeting of Stockholders to be held on January 25, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lawrence Flinn, Jr., Roy L. Bliss and Peter
C. Boylan, III or any one of them, with full power of substitution, as proxy or
proxies to represent the undersigned at the Special Meeting (the "Special
Meeting") of Stockholders of UNITED VIDEO SATELLITE GROUP, INC. (the "Company")
to be held on January 25, 1996, and at any adjournments or postponements
thereof, and to vote thereat, as designated on the reverse side hereof, all the
shares of Common Stock of the Company held of record by the undersigned at the
close of business on December 11, 1995 with all the power that the undersigned
would possess if personally present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL INDICATED ON THE
REVERSE SIDE. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF
DIRECTORS.
This proxy revokes any proxy heretofore given by the undersigned with respect
to the Special Meeting and may be revoked by the undersigned prior to exercise.
Receipt of the Notice of Special Meeting of Stockholders and the Proxy
Statement/Prospectus dated December 18, 1995 relating to the Special Meeting is
hereby acknowledged.
(Continued on reverse side. Please date, sign and
mail in the enclosed envelope.)
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark your
votes as in this
example.
1 Agreement and Plan of Merger: Approval and adoption of the Agreement and Plan
of Merger, dated as of July 10, 1995, as amended (the "Merger Agreement"),
among Tele-Communications, Inc., a Delaware corporation ("TCI"), TCI Merger
Sub, Inc., a Delaware corporation ("Merger Sub"), and the Company pursuant to
which (a) Merger Sub will be merged with and into the Company, with the
Company as the surviving corporation, following which TCI would hold voting
stock constituting at least 83% of the voting power of the Company's
outstanding voting stock, and (b) the holders of the Company's Class A Common
Stock would have the right to elect to receive shares of two newly created
series of TCI's preferred stock in the merger in exchange for up to 50% of
the shares of the Company's Class A Common Stock held by such stockholders.
FOR AGAINST ABSTAIN
[_] [_] [_]
In their discretion, the named proxies may vote on such other business as may
properly come before the Special Meeting or any adjournments or postponements
thereof.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATION, MERELY SIGN
BELOW; NO BOXES NEED TO BE CHECKED.
I PLAN TO ATTEND THE SPECIAL MEETING. [_]
__________________________________________________ DATE ____________________
Signature
__________________________________________________ DATE ____________________
Signature (if held jointly)
NOTE: Please date and sign name exactly as it appears hereon. Joint
owners should each sign. When signing as attorney, executor,
administrator, trustee, guardian, etc., please give your full title
as such. If the stockholder is a corporation, the full corporate
name should be inserted and this proxy card should be signed by an
officer of such corporation, indicating such officer's title.
- --------------------------------------------------------------------------------
<PAGE>
FORM OF ELECTION AND LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES FOR SHARES OF CLASS A COMMON STOCK OF
UNITED VIDEO SATELLITE GROUP, INC.
SURRENDERED IN CONNECTION WITH THE MERGER OF A WHOLLY OWNED SUBSIDIARY OF
TELE-COMMUNICATIONS, INC. INTO
UNITED VIDEO SATELLITE GROUP, INC. (THE "MERGER")
EXCHANGE AGENT:
<TABLE>
<CAPTION>
THE BANK OF NEW YORK
<S> <C> <C>
By Mail: Facsimile Transmission By Hand or Overnight Courier
Tender and Exchange Department (For Eligible Institutions Only) Tender and Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 For Information Telephone: New York, New York 10286
(800) 507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL AND FORM OF ELECTION ("ELECTION
FORM") TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE OR TELEX TRANSMISSION TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE EXCHANGE AGENT.
IMPORTANT: FOR ANY STATEMENT OF ELECTION CONTAINED HEREIN TO BE CONSIDERED,
THIS ELECTION FORM AND THE RELATED STOCK CERTIFICATES (OR A GUARANTEE OF
DELIVERY AS DESCRIBED HEREIN) MUST BE RECEIVED BY THE BANK OF NEW YORK, THE
EXCHANGE AGENT, BY NO LATER THAN 5:00 P.M., EASTERN STANDARD TIME, ON JANUARY
22, 1996 (THE "ELECTION DEADLINE").
PLEASE READ THIS ELECTION FORM CAREFULLY, INCLUDING THE INSTRUCTIONS AND
DESCRIPTION OF ELECTION PROCEDURES SET FORTH HEREIN. IF YOU HAVE A QUESTION
REGARDING THE PROCEDURES FOR MAKING AN ELECTION HEREUNDER AND EXCHANGING UVSG
CLASS A COMMON STOCK CERTIFICATES FOR CERTIFICATES REPRESENTING TCI GROUP
PREFERRED STOCK AND LIBERTY MEDIA GROUP PREFERRED STOCK (AS SUCH TERMS ARE
DEFINED HEREIN), YOU MAY CONTACT THE EXCHANGE AGENT AT THE ABOVE ADDRESS OR
TELEPHONE NUMBER. ALL OTHER QUESTIONS REGARDING THE MERGER SHOULD BE DIRECTED
TO UNITED VIDEO SATELLITE GROUP, INC., 7140 S. LEWIS AVENUE, TULSA OKLAHOMA
74136-5422, ATTENTION: MANAGER OF INVESTOR RELATIONS (TELEPHONE (918) 488-
4000).
NOTE: Additional copies of this Election Form may be obtained from the
Exchange Agent or from United Video Satellite Group, Inc. (at the addresses
listed above).
[_]CHECK HERE IF CERTIFICATES WILL BE DELIVERED PURSUANT TO A GUARANTEE OF
DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Date of Execution of Guarantee of Delivery _________________________________
Name of Institution that Guaranteed Delivery _______________________________
<PAGE>
PLEASE BE SURE TO COMPLETE AND SIGN BOX D
PLEASE READ THIS ELECTION FORM CAREFULLY, INCLUDING THE INSTRUCTIONS AND
DESCRIPTION OF ELECTION PROCEDURE ON THE REVERSE SIDE, BEFORE COMPLETING AND
DELIVERING IT. AN IMPROPERLY COMPLETED FORM COULD PREJUDICE YOUR RIGHTS TO
MAKE AN ELECTION.
1. The undersigned herewith submits the certificate(s) for shares of Class A
Common Stock, par value $.01 per share (the "UVSG Class A Common Stock"), of
United Video Satellite Group, Inc., a Delaware corporation ("UVSG") listed in
Box A (STATEMENT OF ELECTION) below (the "UVSG Certificates") pursuant to the
Agreement and Plan of Merger dated as of July 10, 1995, as amended (the
"Merger Agreement"), among UVSG, Tele-Communications, Inc., a Delaware
corporation ("TCI") and TCI Merger Sub, Inc., a Delaware corporation. Pursuant
to the Merger Agreement, the undersigned hereby elects, by completion of this
Election Form (an "Election"), to convert each share of UVSG Class A Common
Stock noted in Box A (STATEMENT OF ELECTION) under the heading "Number of
Shares to Be Converted" into one share of Redeemable Convertible TCI Group
Preferred Stock, Series G, par value $.01 per share ("TCI Group Preferred
Stock") and one share of Redeemable Convertible Liberty Media Group Preferred
Stock, Series H, par value $.01 per share ("Liberty Media Group Preferred
Stock") of TCI (collectively, "Merger Consideration").
2. The undersigned has received a copy of the Proxy Statement/Prospectus
(the "Proxy Statement") dated December 21, 1995 relating to the special
meeting of stockholders of UVSG to be held on January 25, 1996 and of the
Merger Agreement, a copy of which is included as Appendix I to the Proxy
Statement. The undersigned understands that an Election made hereby is subject
to the terms, conditions and limitations contained in the Proxy Statement, to
the terms of the Merger Agreement and to this Election Form and the
accompanying INSTRUCTIONS and DESCRIPTION OF ELECTION PROCEDURE.
3. The undersigned represents and warrants that the undersigned has full
power and authority to surrender, sell, assign and transfer the UVSG
Certificates, and the shares of UVSG Class A Common Stock subject to this
Election Form represented thereby, free and clear of all liens, restrictions,
charges, encumbrances and adverse claims, and that the number of shares of
UVSG Class A Common Stock indicated by the undersigned under the heading
"Number of Shares to Be Converted" does not exceed 50% of the total number of
shares of UVSG Class A Common Stock benefically owned by the undersigned on
the date of this Election Form. The undersigned will execute and deliver, upon
request, any additional documents necessary or desirable to complete the
surrender of the UVSG Class A Common Stock referred to in this Election Form.
Delivery of the UVSG Certificates submitted herewith shall be effected, and
risk of loss and title to such UVSG Certificates and the shares of UVSG Class
A Common Stock subject to an Election represented thereby shall pass, only
upon delivery thereof to the Exchange Agent.
4. Unless otherwise indicated in Box B (SPECIAL ISSUANCE INSTRUCTIONS) or
Box C (SPECIAL MAILING INSTRUCTIONS), please (i) register stock certificates
for TCI Group Preferred Stock and Liberty Media Group Preferred Stock in the
name(s) appearing in Box A (STATEMENT OF ELECTION) and (ii) mail such stock
certificates to the address(es) of the registered holder(s) as shown in the
stock transfer records of UVSG. Unless instructions to the contrary are
attached hereto, a single certificate will be issued for all shares of TCI
Group Preferred Stock to which the undersigned is entitled and a single
certificate will be issued for all shares of Liberty Media Group Preferred
Stock to which the undersigned is entitled. Any shares of UVSG Class A Common
Stock that are not subject to an Election but that are represented by a
portion of a UVSG Certificate delivered herewith (or pursuant to a Guarantee
of Delivery) shall be evidenced by the issuance of new certificates in the
names(s) appearing on any such UVSG Certificate and will be mailed to the
address(es) of the registered holder(s) of such shares as shown in the stock
transfer records of UVSG.
<PAGE>
- --------------------------------------------------------------------------------
BOX A: STATEMENT OF ELECTION AND DESCRIPTION OF SHARES OF UVSG CLASS A
COMMON STOCK SUBMITTED HEREWITH (OR PURSUANT TO A GUARANTEE
OF DELIVERY) FOR CONVERSION
Please indicate on the appropriate line below the number of shares of UVSG
Class A Common Stock (up to a maximum of 50% of such shares owned by a
registered holder) and the certificate number(s) representing such shares
submitted herewith (or pursuant to a Guarantee of Delivery) for which you
wish to receive Merger Consideration. THE NUMBER FILLED IN BELOW UNDER THE
HEADING "NUMBER OF SHARES TO BE CONVERTED" MUST NOT EXCEED FIFTY PERCENT
(50%) OF THE NUMBER OF SHARES OWNED BY THE REGISTERED HOLDER.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NUMBER OF SHARES OF UVSG CLASS A COMMON STOCK TO BE CONVERTED
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR ON UVSG CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES TO
NUMBER(S)(1) CERTIFICATES(1) BE CONVERTED(2)
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book Entry Stockholders.
(2) The total number of shares tendered for conversion must not exceed 50%
of the total number of shares of UVSG Class A Common Stock owned by the
registered holder listed above.
- --------------------------------------------------------------------------------
NOTE: YOU MUST DELIVER CERTIFICATE(S) REPRESENTING AT LEAST THE NUMBER OF SHARES
OF UVSG CLASS A COMMON STOCK THAT YOU HAVE ELECTED TO CONVERT INTO MERGER
CONSIDERATION. INDICATE IN BOX A THE CERTIFICATE NUMBER(S) OF THE CERTIFICATE(S)
FOR THE SHARES THAT YOU ARE CONVERTING.
- ------------------------------------- --------------------------------------
BOX B: SPECIAL ISSUANCE BOX C: SPECIAL MAILING
INSTRUCTIONS INSTRUCTIONS
(SEE INSTRUCTIONS 2 AND 3) (SEE INSTRUCTION 2)
(PLEASE PRINT) (PLEASE PRINT)
Fill in ONLY if the stock cer- Fill in ONLY if the stock cer-
tificates for TCI Group Preferred tificates for TCI Group Preferred
Stock and Liberty Media Group Stock and Liberty Media Group
Preferred Stock to be issued in Preferred Stock to be issued in
the Merger with respect to the the Merger with respect to the
shares of UVSG Class A Common shares of UVSG Class A Common
Stock indicated in Box A under Stock indicated in Box A under
the heading "Number of Shares to the heading "Number of Shares to
be Converted" are to be regis- be Converted" are to be issued in
tered in a name OTHER than that the name of the registered hold-
of the name(s) appearing in Box er(s) of the UVSG Certificates
A. but are to be mailed to an ad-
dress OTHER than that of the reg-
Register stock certificates in istered holder(s) as shown in the
the name of: stock transfer records of UVSG.
Name _____________________________ Mail to:
Address __________________________ Name _____________________________
__________________________________ Address __________________________
(INCLUDE ZIP CODE)
__________________________________ __________________________________
TAXPAYER IDENTIFICATION OR SOCIAL (INCLUDE ZIP CODE)
SECURITY NO.
- --------------------------------------------------------------------------------
<PAGE>
BOX D: SIGNATURE
BE SURE ALSO TO COMPLETE AND SIGN THE ATTACHED SUBSTITUTE FORM W-9.
STOCKHOLDER(S) SIGNHERE ____________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF STOCKHOLDER(S) OR AGENT)
Dated: _____________________
(Must be signed by registered holder(s) EXACTLY as name(s) appear(s) on
certificate(s), or by person(s) authorized by documents transmitted herewith
to become registered holder(s). If any certificate surrendered hereby is owned
of record by two or more joint owners, all such owners must sign this Election
Form. If signature is by trustee, executor, administrator, guardian, officer
of a corporation, attorney-in-fact or other person acting in a fiduciary or
representative capacity, please set forth full title and include evidence of
authority to act in such capacity.) (See Instruction 2.)
Name(s): ___________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)
Telephone Number: __________________________________________________________
(INCLUDE AREA CODE)
GUARANTEE OF SIGNATURE(S), IF REQUIRED (SEE INSTRUCTION 2)
Name of InstitutionGuaranteeing Signature(s) _______________________________
____________________________________________________________________________
By _________________________________________________________________________
(AUTHORIZED SIGNATURE)
Dated: _____________________
<PAGE>
INSTRUCTIONS
1. GENERAL
This Election Form or a facsimile of it must be properly completed, dated
and signed, and delivered to the Exchange Agent at the address set forth on
the first page of this Election Form, accompanied by UVSG Certificate(s)
representing all shares of UVSG Class A Common Stock covered hereby and any
supporting documents (see Instruction 2), in order to receive the TCI Group
Preferred Stock and Liberty Media Group Preferred Stock into which UVSG Class
A Common Stock will be converted pursuant to the Merger. The method of
delivery to the Exchange Agent is at the stockholder's election and risk. If
delivery is by mail, insured registered mail, return receipt requested, is
recommended. A return envelope addressed to the Exchange Agent is enclosed for
your convenience. All of the foregoing (or an Election Form accompanied by a
duly executed Guarantee of Delivery as described below) must be received by
the Exchange Agent no later than the Election Deadline (as defined below) in
order for an Election to be considered. (For more information as to procedures
for making Elections, see DESCRIPTION OF ELECTION PROCEDURE below).
If BOX A (STATEMENT OF ELECTION) has insufficient space to list all UVSG
Certificates being submitted to the Exchange Agent, please attach a separate
signed list.
In lieu of delivering UVSG Certificates relating to an Election, a record
holder may make a guarantee of delivery of such UVSG Certificates by using the
enclosed Guarantee of Delivery. A Guarantee of Delivery of such UVSG
Certificates must be executed by (i) a member of any registered national
securities exchange (ii) the National Association of Securities Dealers, Inc.
or (iii) a commercial bank or trust company in the United States. An Election
will be valid only if such UVSG Certificates are in fact delivered by the time
set forth in the Guarantee of Delivery.
In no event will a record holder be able to make an Election for more than
50% of the shares of UVSG Class A Common Stock owned by such record holder. If
a record holder indicates in Box A (STATEMENT OF ELECTION) an Election for
more than 50%, such record holder will be deemed to have made an Election with
respect to 50% of the total number of such shares owned, rounded to the next
lower whole number of shares.
If a record holder returns a signed and otherwise properly completed
Election Form but fails to indicate the number of shares of UVSG Class A
Common Stock for which an Election is being made, such record holder will be
deemed to have made an Election with respect to 50% of the total number of
such shares owned by such record holder at the Election Deadline rounded to
the next lower whole number of shares.
2. SIGNATURES; SIGNATURE GUARANTEES AND ENDORSEMENTS; SPECIAL INSTRUCTIONS
The signature (or signatures, in the case of UVSG Certificates owned by two
or more joint holders) in Box D (SIGNATURE) of the Election Form should
correspond EXACTLY to the name(s) as written on the face of the UVSG
Certificates surrendered unless the shares described on the Election Form have
been assigned by the registered holder(s), in which event the Election Form
should be signed in exactly the same form as the name(s) of the last
transferee(s) indicated on the transfers attached to or endorsed on the UVSG
Certificate(s). If any shares of UVSG Class A Common Stock are registered in
different forms of your name (e.g. "John Doe" and "J. Doe") or in different
forms of ownership, you should complete as many separate Election Forms as
there are different registrations. If you wish to register shares of TCI Group
Preferred Stock and/or Liberty Media Group Preferred Stock in different names,
you must complete a separate Election Form for each name.
When the Election Form is signed by the registered holder(s) of the UVSG
Certificates submitted herewith and stock certificates for TCI Group Preferred
Stock and Liberty Media Group Preferred Stock are to be issued in exactly the
same name(s) written on the face of such submitted certificate(s) without any
change, then no signature guarantee is required on this Election Form and the
UVSG Certificates need not be endorsed.
If the Election Form is signed by a person or entity other than the
registered holder(s) shown on the face of the UVSG Certificates submitted
herewith or if any stock certificates for TCI Group Preferred Stock and
Liberty Media Group Preferred Stock are to be issued in the name of a person
or entity other than such registered holder(s), then (i) the name and address
of such person or entity must be indicated in Box B (SPECIAL ISSUANCE
INSTRUCTIONS) on the Election Form, (ii) the UVSG Certificates submitted must
be endorsed by or accompanied by separate stock powers signed by the
registered holder(s) exactly as the name or names of the registered holder(s)
appear on the face of the surrendered UVSG Certificates, and (iii) the
signature(s) in Box D (SIGNATURE) on the Election Form and on the endorsed
UVSG Certificates or separate stock powers MUST BE GUARANTEED by a commercial
bank or trust company in the United States or by a firm of brokers that is a
member of a national securities exchange or by the National Association of
Securities Dealers, Inc.
If the Election Form or any endorsement or stock power is signed by a
trustee, executor, administrator, guardian, officer of a corporation,
attorney-in-fact or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing (giving such person's
full title in such capacity) and must submit proper evidence, satisfactory to
the Exchange Agent and TCI, of the authority so to act. If additional
documents are required by the Exchange Agent or TCI, you will be so advised.
If a registered holder is deceased or unable to act and no executor or
administrator or personal
<PAGE>
representative has been appointed or if there are questions or a need for
assistance in connection with, among other things, supporting documents, see
Instruction 5.
If any stock certificates for TCI Group Preferred Stock and Liberty Media
Group Preferred Stock are to be issued in the name of the registered holder(s)
shown on the face of the UVSG Certificates, but sent to someone other than the
registered holder(s) or to an address other than that set forth in UVSG's
stock transfer records, the name and address of such other person or the
registered holder's new address should be indicated in Box C (SPECIAL MAILING
INSTRUCTIONS).
3. STOCK TRANSFER TAXES
UVSG will pay all state stock transfer taxes, if any, payable as a result of
the exchange of shares of UVSG Class A Common Stock for Merger Consideration
pursuant to the Merger Agreement. However, if certificates for TCI Group
Preferred Stock and Liberty Media Group Preferred Stock are to be registered
in the name of a person other than the registered holder(s), it will be a
condition to the delivery of such certificate(s) that any transfer or other
taxes required to be paid in connection with the transfer to such person be
paid to the Exchange Agent and that the Exchange Agent be satisfied that such
taxes have been paid or do not apply.
4. LOST OR DESTROYED STOCK CERTIFICATES
If your UVSG Certificates have been either lost or destroyed, an affidavit
of loss and bond of indemnity satisfactory to the Exchange Agent and TCI must
be submitted to the Exchange Agent. Promptly notify the Exchange Agent at the
address set forth on the first page of this Election Form or by telephone at
(800) 507-9357 and you will be instructed as to the steps you must take in
order to receive stock certificates for TCI Group Preferred Stock and Liberty
Media Group Preferred Stock.
5. INQUIRIES
All inquiries regarding appropriate procedures for surrendering UVSG
Certificates should be directed to the Exchange Agent at the address set forth
on the first page of this Election Form or by telephone at (800) 507-9357.
Additional copies of this Election Form may be obtained from the Exchange
Agent at such address.
6. MISCELLANEOUS
As soon as practicable after the effective time of the Merger (the
"Effective Time"), the Exchange Agent will begin mailing and delivering stock
certificates for TCI Group Preferred Stock and Liberty Media Group Preferred
Stock to those holders who are entitled thereto.
DESCRIPTION OF ELECTION PROCEDURE
1. TIME IN WHICH TO MAKE AN ELECTION
To be effective, an Election on this Election Form or a facsimile hereof,
properly completed and signed and accompanied by the UVSG Certificates
described in Box A (STATEMENT OF ELECTION) must be received by the Exchange
Agent, at the address set forth on the first page of this Election Form, no
later than 5:00 P.M., Eastern Standard Time, on January 22, 1996 (the
"Election Deadline"). UVSG stockholders whose certificates are not immediately
available may also make an Election by (a) delivering to the Exchange Agent,
before the Election Deadline, a duly completed and executed Election Form
accompanied by a Guarantee of Delivery in the form furnished herewith and (b)
delivering the related UVSG Certificates to the Exchange Agent by the later of
the Election Deadline or 5:00 p.m., Eastern Standard Time, on the third
trading day on the Nasdaq National Market after the date of execution of the
Guarantee of Delivery.
Holders who do not timely follow one of the procedures described above will
not be entitled to have their Elections considered, and their shares following
the Merger will continue to represent shares of the Class A Common Stock of
UVSG, as the Surviving Corporation, as set forth in the Proxy Statement.
2. CHANGE OR REVOCATION OF ELECTION
Any holder of UVSG Class A Common Stock who has submitted an Election Form
may at any time before the Election Deadline (i) change his Election by giving
written notice of the change accompanied by a properly completed, signed and
revised Election Form received by the Exchange Agent prior to the Election
Deadline or (ii) revoke his Election by giving written notice of revocation,
specifying the name of such holder and the serial numbers of his UVSG
Certificates, received by the Exchange Agent prior to the Election Deadline.
At any time on or after January 31, 1996, if the Merger has not been
consummated, a stockholder may revoke his Election by written notice of
revocation received by the Exchange Agent no later than 5:00 P.M., Eastern
Standard Time, on the fifth business day before the Effective Time of the
Merger. No stockholder will be given prior notice of the Effective Time. All
Elections will automatically be revoked if the Exchange Agent is notified in
writing by UVSG and TCI that the Merger Agreement has been terminated. If an
Election is revoked, the UVSG Certificate(s) (or Guarantee of Delivery, as
appropriate) for the shares of UVSG Class A Common Stock to which such
Election relates shall be promptly returned to the person submitting the same
to the Exchange Agent.
<PAGE>
3. EFFECT OF ELECTION
By properly completing this Election Form, each holder may elect the number
of shares of Class A Common Stock owned by such holder (but not in excess of
50% of the total number of shares of Class A Common Stock owned by such holder)
that such holder desires to have converted into the right to receive the Merger
Consideration. An Election contained in a properly executed and completed
Election Form that is submitted along with the appropriate stock certificates
or with a duly executed Guarantee of Delivery and any supporting documents (see
Instruction 2--Signatures; Signature Guarantees and Endorsements; Special
Instructions) and is received by the Exchange Agent before the Election
Deadline will, unless changed or revoked as provided above, be considered
effective for purposes of the Merger Agreement. All questions with respect to
the Election Form, the Guarantee of Delivery and the Election intended to be
made thereby (including, without limitation, questions relating to the
timeliness or effectiveness of an Election or of a revocation of such Election)
will be determined by TCI, which determinations will be conclusive and binding.
All holders of UVSG Class A Common Stock are advised to read the Proxy
Statement and the Merger Agreement carefully, including the information
contained in the Proxy Statement under "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." Shares of UVSG Class A Common Stock outstanding immediately
prior to the Effective Time as to which an effective Election has not been made
will not be converted into Merger Consideration but will continue to be
outstanding immediately following the Merger as shares of Class A Common Stock,
par value $.01 per share, of UVSG, as the surviving corporation in the Merger.
IMPORTANT TAX INFORMATION
1. GENERAL
Under federal income tax law, a stockholder is required to provide the
Exchange Agent (as payor) with the stockholder's correct taxpayer
identification number on Substitute Form W-9 below. If the stockholder is an
individual, the taxpayer identification number is his or her social security
number. If the Exchange Agent is not provided with the correct taxpayer
identification number, the stockholder may be subject to a $50 penalty imposed
by the Internal Revenue Service. In addition, any reportable payments that are
made to such stockholder may be subject to backup withholding of 31%.
Exempt stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding and reporting
requirements. In order to qualify as an exempt recipient, a foreign individual
must submit a statement, signed under penalties of perjury, attesting to such
individual's exempt status. Such statements can be obtained from the Exchange
Agent. See the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold 31%
of any reportable payments made to the stockholder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
2. HOW TO COMPLETE SUBSTITUTE FORM W-9
A stockholder must provide his or her taxpayer identification number in Part
1 of the Substitute Form W-9, alternatively, a holder that qualifies as an
exempt recipient should write "Exempt" in Part 1 of the Substitute Form W-9. If
a stockholder (1) has not been notified by the Internal Revenue Service that he
or she is subject to backup withholding as a result of a failure to report all
interest or dividends or (2) has been notified by the Internal Revenue Service
that he or she is no longer subject to backup withholding, the stockholder must
check the box in Part 2 of the Substitute Form W-9. If a stockholder (other
than an exempt recipient) does not have a taxpayer identification number and
has applied for a number or intends to apply for a number in the near future,
he or she must check the box in Part 3 of the Substitute Form W-9, write
"applied for" in lieu of the taxpayer identification number in the space
provided and complete the Certificate of Awaiting Taxpayer Identification
Number set forth below. Finally, each stockholder must sign and date the
Substitute Form W-9 where indicated, certifying that the information provided
therein is correct.
If a stockholder checks the box in Part 3 of the Substitute Form W-9, but
does not provide his or her taxpayer identification number to the Exchange
Agent within sixty (60) days, the Exchange Agent will withhold 31% of any
reportable payments payable to the stockholder.
3. WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The stockholder is required to give the Exchange Agent the social security
number or employer identification number of the registered holder of the UVSG
Class A Common Stock being surrendered. If the UVSG Class A Common Stock is
registered in more than one name or is not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to
report.
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 BELOW MAY RESULT
IN BACKUP WITHHOLDING OF 31% OF ANY REPORTABLE PAYMENTS PAYABLE TO YOU.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
PAYOR'S NAME: THE BANK OF NEW YORK
PART 1--PLEASE PROVIDE YOUR ----------------------
TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW.
Social Security Number
SUBSTITUTE or Employer
FORM W-9 Identification Number
DEPARTMENT OF --------------------------------------------------------
THE TREASURY PART 2--Check the box if you are NOT subject to
INTERNAL backup withholding under the provisions of Section
REVENUE SERVICE 3406(a)(l)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to backup withhold as a result of failure to report
all interest or dividends, or (2) the Internal
Revenue Service has notified you that you are no
longer subject to backup withholding [_]
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) PART 3--
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMA-
TION PROVIDED ON THIS FORM IS TRUE,
CORRECT AND COMPLETE.
Awaiting TIN
[_]
--------------------------------------------------------
SIGNATURE ____________________________
DATE ________________
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX INPART 3 OF
SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under the penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number within sixty (60) days, 31% of all reportable
payments made to me thereafter will be withheld.
-------------------------------------- ----------------------------------
Signature Date
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE EXCHANGE AGENT AT
THE ADDRESS AND TELEPHONE NUMBER SET FORTH ON THE FRONT PAGE OF THIS ELECTION
FORM.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payor.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals (1)
3. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
4. (a) The usual revocable The grantor-
savings trust trustee (1)
account (grantor is
also trustee)
(b) So-called trust The actual owner
account that is not a
legal or valid trust
under State law
5. Sole proprietorship The owner (3)
account
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------
<S> <C>
6. Sole proprietorship The owner (3)
7. A valid trust, estate The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.) (4) The
corporation
8. Corporate account The corporation
9. Association, club, or The organization
other tax-exempt
organization
10. The partnership account The partnership
held in the name of the
business
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- ------------------------------------------------
</TABLE>
- -----------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual name of the owner, but you may also enter your
business or "doing business as" name. You may use either your SSN or your
EIN.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a) or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
. Payments made to a nominee.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payor's trade or business and you have not
provided your correct taxpayer identification number to the payor.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under section 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payors
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payor. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your correct taxpayer identification number to a payor, you are
subject to a penalty of $50 for each such failure unless your failure to due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certification or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
(4) MISUSE OF TINS--If the requestor discloses or uses TINs in violation of
Federal law, the requestor may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
GUARANTEE OF DELIVERY
The undersigned, (i) a member firm of a registered national securities
exchange, (ii) a duly authorized officer of the National Association of
Securities Dealers, Inc. or (iii) a duly authorized officer of a commercial
bank or trust company in the United States (any of the foregoing an "Eligible
Institution"), hereby guarantees to deliver to the Exchange Agent the
certificates for the shares of UVSG Class A Common Stock for which Election
has been made on the accompanying Election Form, duly endorsed in blank or
otherwise in a form acceptable for transfer on the books of UVSG, by the later
of the Election Deadline or 5:00 p.m. Eastern Standard Time on the third
trading day on the Nasdaq National Market after the date of execution of this
Guarantee of Delivery.
- ----------------------------------- -----------------------------------
Name(s) of Record Holder(s) Name of Eligible Institution
- ----------------------------------- -----------------------------------
Address(es) of Record Holder(s) Authorized Signature
- ----------------------------------- -----------------------------------
Certificate Number(s) Area Code and Telephone Number
-----------------------------------
Dated:
The Eligible Institution that executes this Guarantee of Delivery must
deliver this Guarantee of Delivery accompanied by a valid Form of Election and
Letter of Transmittal to the Exchange Agent prior to the Election Deadline and
must deliver the certificates of UVSG Class A Common Stock subject to such
Form of Election to the Exchange Agent prior to the time specified above.
Failure to do so could result in a financial loss to such Eligible
Institution.
<PAGE>
EXHIBIT 99.5
UNITED VIDEO SATELLITE GROUP, INC.
A Delaware Corporation
Bylaws
------------------------
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting.
--------------
An annual meeting of stockholders for the purpose of electing
directors and of transacting such other business as may come before it shall be
held each year at such date, time, and place, either within or without the State
of Delaware, as may be specified by the Board of Directors in the notice of
meeting.
Section 1.2 Special Meetings.
----------------
Except as otherwise provided in the terms of any class or series of
preferred stock or unless otherwise provided by law or by the Certificate of
Incorporation, special meetings of stockholders of the Corporation, for any
purpose or purposes, shall be called by the Secretary of the Corporation (i)
upon written request of the holders of not less than 66 2/3% of the total voting
power of the outstanding capital stock of the Corporation entitled to vote at
such meeting or (ii) at the request of not less than 66 2/3% of the members of
the Board of Directors then in office.
Section 1.3 Notice of Meetings.
------------------
Written notice of stockholders meetings, stating the place, date, and
hour thereof, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by the Chairman of the Board, the
Vice Chairman, the Chief Executive Officer, the President and Chief Operating
Officer, any Vice President, the Secretary, or an Assistant Secretary, to each
stockholder entitled to vote thereat at least ten days but not more than sixty
days before the date of the meeting, unless a different period is prescribed by
law.
Section 1.4 Notice of Nominations for the Election of Directors.
---------------------------------------------------
<PAGE>
1.4.1 Annual Meetings of Stockholders.
(a) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (i) pursuant
to the Corporation's notice of meeting delivered pursuant to Section 1.3 of
these Bylaws, (ii) by or at the direction of the Chairman of the Board, the Vice
Chairman, or the Board of Directors or (iii) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complied with the
procedures set forth in this Bylaw and who was a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation.
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of Section
1.4.1(a) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not less than seventy days nor more than ninety days prior to
the first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
2
<PAGE>
(c) Notwithstanding anything in the second sentence of Section
1.4.1(b) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least eighty days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
1.4.2 Special Meetings of Stockholders.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting pursuant to Section 1.3 of these Bylaws.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
the Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complies with the notice procedures set forth in this Bylaw
and who is a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation. Nominations by stockholders of persons for
election to the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by Section 1.4.1(b) of this
Bylaw shall be delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the ninetieth day prior to such special meeting
and not later than the close of business on the later of the seventieth day
prior to such special meeting or the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
1.4.3 General.
(a) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth this
Bylaw. Except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in
3
<PAGE>
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(b) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(c) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 1.5 Quorum.
------
Subject to the rights of the holders of any class or series of
preferred stock and except as otherwise provided by law or in the Certificate of
Incorporation or these Bylaws, at any meeting of stockholders, the holders of a
majority in total voting power of the outstanding shares of stock entitled to
vote at the meeting shall be present or represented by proxy in order to
constitute a quorum for the transaction of any business. In the absence of a
quorum, the holders of a majority in total voting power of the shares that are
present in person or by proxy or the chairman of the meeting may adjourn the
meeting from time to time in the manner provided in Section 1.6 of these Bylaws
until a quorum shall attend.
Section 1.6 Adjournment.
-----------
Any meeting of stockholders, annual or special, may adjourn from time
to time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
4
<PAGE>
Section 1.7 Organization.
------------
The Chairman of the Board, or in his absence the Vice Chairman, or in
his absence the President and Chief Operating Officer, or in their absence any
Vice President, shall call to order meetings of stockholders and shall act as
chairman of such meetings. The Board of Directors or, if the Board fails to
act, the stockholders, may appoint any stockholder, director, or officer of the
Corporation to act as chairman of any meeting in the absence of the Chairman of
the Board, the Vice Chairman, the Chief Executive Officer, the President and
Chief Operating Officer, and all Vice Presidents.
The Secretary shall act as secretary of all meetings of stockholders,
but, in the absence of the Secretary, the chairman of the meeting may appoint
any other person to act as secretary of the meeting.
Section 1.8 Voting.
------
Subject to the rights of the holders of any class or series of
preferred stock and except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws and except for the election of directors, at any
meeting duly called and held at which a quorum is present, the affirmative vote
of a majority of the combined voting power of the shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. At any meeting duly called and held for
the election of directors at which a quorum is present, directors shall be
elected by a plurality of the combined voting power of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.
Section 1.9 Voting List.
-----------
(a) A complete list of the stockholders of the Corporation
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number and class of shares registered in the
name of each stockholder shall be prepared by the officer who has charge of the
stock ledger of the Corporation at least 10 days before every meeting of
stockholders. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
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(b) Upon the willful neglect or refusal of the directors to
produce such a list at any meeting for the election of directors, they shall be
ineligible for election to any office at such meeting.
(c) The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation or to vote in person or by proxy at any
meeting of stockholders.
Section 1.10 Stockholder Action Without a Meeting.
------------------------------------
Subject to the rights of the holders of any class or series of
preferred stock, stockholder action may be taken only at an annual or special
meeting. Except as otherwise provided in the terms of any class or series of
preferred stock, no action required to be taken or which may be taken at any
annual meeting or special meeting of stockholders may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
is specifically denied.
Section 1.11 Inspectors of Election. The Corporation may, and
----------------------
shall if required by law, in advance of any meeting of stockholders, appoint one
or more inspectors of election, who may be employees of the Corporation, to act
at the meeting or any adjournment thereof and to make a written report thereof.
The Corporation may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. In the event that no inspector so
appointed or designated is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector or inspectors so appointed or designated shall (i)
ascertain the number of shares of capital stock of the Corporation outstanding
and the voting power of each such share, (ii) determine the shares of capital
stock of the Corporation represented at the meeting and the validity of proxies
and ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares of capital stock of the Corporation represented at the meeting
and such inspectors' count of all votes and ballots. Such certification and
report shall specify such other information as may be required by law. In
determining the validity and counting of proxies and ballots cast at any meeting
of stockholders of the Corporation, the inspectors may consider such information
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as is permitted by applicable law. No person who is a candidate for an office at
an election may serve as an inspector at such election.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number and Term of Office.
-------------------------
(a) The governing body of this Corporation shall be a Board of
Directors. Subject to any rights of the holders of any class or series of
preferred stock to elect additional directors, the Board of Directors shall be
comprised of not less than three (3) members and shall initially be comprised of
twelve members. The Board of Directors, by resolution adopted by the
affirmative vote of not less than 66 2/3% of the members of the Board of
Directors then in office, may increase or decrease the number of directors.
Directors need not be stockholders of the Corporation.
(b) At each annual meeting of stockholders of the Corporation
the directors shall be elected to hold office for a one-year term expiring at
the next annual meeting of stockholders. The directors will serve until their
respective successors are elected and qualified.
Section 2.2 Resignations.
------------
Any director of the Corporation, or any member of any committee, may
resign at any time by giving written notice to the Board of Directors, the
Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the
President and Chief Operating Officer or the Secretary of the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
be not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective unless otherwise stated
therein.
Section 2.3 Removal of Directors.
--------------------
Subject to the rights of the holders of any class or series of
preferred stock, directors may be removed from office with or without cause upon
the affirmative vote of holders of not less than 66 2/3% of the total voting
power of the then outstanding capital stock of the Corporation entitled to vote
thereon, voting together as a single class.
Section 2.4 Newly Created Directorships and Vacancies.
-----------------------------------------
Subject to the rights of the holders of any class or series of
preferred stock, vacancies on the Board of Directors resulting from death,
resignation, removal, disqualification or other cause, and newly created
directorships
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resulting from any increase in the number of directors on the Board of
Directors, shall be filled by the affirmative vote of not less than 66 2/3% of
the remaining directors then in office (even though less than a quorum) or by
the sole remaining director. Any director elected in accordance with the
preceding sentence shall hold office until the next annual meeting of
stockholders of the Corporation and until such director's successor shall have
been elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director, except
as may be provided in the terms of any class or series of preferred stock with
respect to any additional director elected by the holders of such class or
series of preferred stock.
Section 2.5 Chairman of the Board.
---------------------
The directors shall elect one of their members to be Chairman of the
Board of Directors. He shall perform such duties as may from time to time be
assigned to him by the Board of Directors.
Section 2.6 Meetings.
--------
Notice of each regular meeting shall be furnished in writing to each
member of the Board of Directors not less than five days in advance of said
meeting, unless such notice requirement is waived in writing by each member.
Special meetings of the Board of Directors shall be held at such time
and place as shall be designated in the notice of the meeting. Special Meetings
of the Board of Directors may be called by the Chairman of the Board, the Vice
Chairman or the Chief Executive Officer, and shall be called by the President
and Chief Operating Officer or Secretary of the Corporation upon the written
request of not less than 66 2/3% of the members of the Board of Directors then
in office.
Section 2.7 Notice of Special Meetings.
--------------------------
The Secretary, or in his absence any other officer of the Corporation,
shall give each director notice of the time and place of holding of special
meetings of the Board of Directors by mail at least 10 days before the meeting,
or by telegram, cable, radiogram, or personal service at least three days before
the meeting unless such notice requirement is waived in writing by each member.
Unless otherwise stated in the notice thereof, any and all business may be
transacted at any meeting without specification of such business in the notice.
Section 2.8 Quorum and Organization of Meetings.
-----------------------------------
A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or
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not adjourned from a previous meeting) there shall be less than a quorum
present, a majority of those present may adjourn the meeting to another time and
place, and the meeting may be held as adjourned without further notice or
waiver. Except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws, directors present at any meeting and representing 66 2/3% of the
members of the Board of Directors then in office may decide any question brought
before such meeting. Meetings shall be presided over by the Chairman of the
Board or in his absence, by the Vice Chairman, or in his absence, by the Chief
Executive Officer, or in his absence by such other person as the directors may
select. The Board of Directors shall keep written minutes of its meetings. The
Secretary of the Corporation shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section 2.9 Indemnification.
---------------
The Corporation shall indemnify members of the Board of Directors and
officers of the Corporation and their respective heirs, personal representatives
and successors in interest for or on account of any action performed on behalf
of the Corporation, to the fullest extent provided by the laws of the State of
Delaware and the Certificate of Incorporation, as now or hereafter in effect.
Section 2.10 Executive Committee of the Board of Directors.
---------------------------------------------
The Board of Directors, by the affirmative vote of not less than
66 2/3% of the members of the Board of Directors then in office, may designate
an executive committee, all of whose members shall be directors, to manage and
operate the affairs of the Corporation or particular properties or enterprises
of the Corporation. Subject to the limitations of the law of the State of
Delaware and the Certificate of Incorporation, such executive committee shall
exercise all powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation including, but not limited to, the
power and authority to authorize the issuance of shares of common stock in an
amount not in excess of such number of shares as shall be specifically
authorized from time to time by the Board of Directors in respect of a
particular transaction. The executive committee shall keep minutes of its
meetings and report to the Board of Directors not less often than quarterly on
its activities and shall be responsible to the Board of Directors for the
conduct of the enterprises and affairs entrusted to it.
Section 2.11 Other Committees of the Board of Directors.
------------------------------------------
9
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The Board of Directors may by resolution establish committees other
than an executive committee and shall specify with particularity the powers and
duties of any such committee. Subject to the limitations of the laws of the
State of Delaware and the Certificate of Incorporation, any such committee shall
exercise all powers and authority specifically granted to it by the Board of
Directors, which powers may include the authority to authorize the issuance of
shares of common stock in an amount not in excess of such number of shares as
shall be specifically authorized from time to time by the Board of Directors in
respect of a particular transaction. Such committees shall serve at the
pleasure of the Board; keep minutes of their meetings; and have such names as
the Board of Directors by resolution may determine and shall be responsible to
the Board of Directors for the conduct of the enterprises and affairs entrusted
to them. The Board of Directors at any time may remove, with or without cause,
any members of any committee and may, with or without cause, disband any
committee.
Section 2.12 Committees Generally.
--------------------
The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or disqualification of
a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Each committee that
may be established by the Board of Directors pursuant to these Bylaws may fix
its own rules and procedures. Notice of meetings of committees, other than of
regular meetings provided for by such rules, shall be given to committee
members.
Section 2.13 Directors' Compensation.
-----------------------
Directors shall receive such compensation for attendance at any
meetings of the Board and any expenses incidental to the performance of their
duties, as the Board of Directors shall determine by resolution. Such
compensation may be in addition to any compensation received by the members of
the Board of Directors in any other capacity.
Section 2.14 Action Without Meeting.
----------------------
Nothing contained in these Bylaws shall be deemed to restrict the
power of members of the Board of
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Directors or any committee designated by the Board to take any action required
or permitted to be taken by them without a meeting.
Section 2.15 Telephone Meetings.
------------------
Nothing contained in these Bylaws shall be deemed to restrict the
power of members of the Board of Directors, or any committee designated by the
Board of Directors, to participate in a meeting of the Board of Directors, or
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
ARTICLE III
OFFICERS
Section 3.1 Executive Officers.
------------------
The officers of the Corporation shall be a Chairman of the Board, a
Vice Chairman, a Chief Executive Officer, a President and Chief Operating
Officer, a Chief Financial Officer, one or more Vice Presidents, and a
Secretary, each of whom shall be elected by the Board of Directors, and such
other officers, including a Treasurer and a Controller, as may from time to time
be determined by the Board of Directors and elected or appointed by the Board of
Directors or, if so determined by the Board, by the Chief Executive Officer.
The Chairman of the Board and the Vice Chairman shall be elected from among the
members of the Board of Directors. Subject to Section 3.3, each officer shall
hold office until the first meeting of the Board of Directors following the next
annual meeting of stockholders following their respective election. Any person
may hold at one time two or more offices.
Section 3.2 Powers and Duties of Officers. The officers of the
-----------------------------
Corporation shall have the authority and shall exercise the powers and perform
the duties specified below, and as may be additionally specified by the Board of
Directors or these Bylaws (and in all cases where the duties of any officer are
not prescribed by the Bylaws or the Board of Directors, such officer shall
follow the orders and instructions of the Chief Executive Officer), except that
in any event each officer shall exercise such powers and perform such duties as
may be required by law:
(a) Chairman of the Board. The Chairman of the Board (and, in
---------------------
his absence, the Vice Chairman) shall preside at all meetings of the
stockholders and the Board of Directors of the Corporation and shall have
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<PAGE>
and may exercise all such powers and perform such other duties as may be
assigned to him (or as may be assigned to the Vice Chairman, if the Vice
Chairman is unable or fails to perform his duties) from time to time by the
Board of Directors.
(b) Vice Chairman. The Vice Chairman shall, in the absence of
-------------
the Chairman of the Board, preside at all meetings of the stockholders and the
Board of Directors of the Corporation and shall have and may exercise all such
powers and perform such other duties as may be assigned to him (or as may be
assigned to the Chairman of the Board, if the Chairman of the Board is unable or
fails to perform his duties) from time to time by the Board of Directors.
(c) Chief Executive Officer. The Chief Executive Officer
-----------------------
shall, subject to the direction and supervision of the Board of Directors, (i)
have general and active control of the Corporation's affairs and business and
general supervision of its officers, agents and employees; (ii) in the absence
of the Chairman of the Board or the Vice Chairman (provided that the Chief
Executive Officer does not hold either of such positions), preside at all
meetings of the stockholders and the Board of Directors; (iii) see that all
orders and resolutions of the Board of Directors are carried into effect; and
(iv) perform all other duties incident to the office of Chief Executive Officer
and as from time to time may be assigned to him by the Board of Directors.
Unless otherwise authorized and directed by the Board of Directors or unless the
Chief Executive Officer is unavailable, the Chief Executive Officer shall
execute on behalf of the Corporation all material contracts which implement
policies established by the Board of Directors.
(d) President and Chief Operating Officer. The President and
-------------------------------------
Chief Operating Officer shall, subject to the direction and supervision of the
Board of Directors and the Chief Executive Officer, supervise the day to day
operations of the Corporation and perform all other duties incident to the
office of Chief Operating Officer as from time to time may be assigned to him by
the Board of Directors or the Chief Executive Officer. At the request of the
Chief Executive Officer or in his absence or in the event of his inability or
refusal to act, the President and Chief Operating Officer shall perform the
duties of the Chief Executive Officer, and when so acting shall have all the
powers and be subject to all the restrictions upon the Chief Executive Officer.
(e) Vice President. The Vice President, if any (or if there
--------------
is more than one then each Vice President), shall assist the President and Chief
Operating Officer and shall perform such duties as may be assigned to him by the
Chief Executive Officer, the President and Chief Operating Officer or by the
Board of Directors. Assistant
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vice presidents, if any, shall have the powers and perform the duties as may be
assigned to them by the Chief Executive Officer or by the Board of Directors.
(f) Chief Financial Officer; Treasurer. The Chief Financial
----------------------------------
Officer or, in the absence of a Chief Financial Officer, the Treasurer shall:
(i) be the principal financial officer of the Corporation and have the care and
custody of all funds, securities, evidences of indebtedness and other personal
property of the Corporation and deposit the same in accordance with the
instructions of the Board of Directors; (ii) unless assigned to the Controller,
receive and give receipts and acquittances for moneys paid in on account of the
Corporation, and pay out of the funds on hand all bills, payrolls and other just
debts of the Corporation of whatever nature upon maturity; (iii) unless there is
a Controller, be the principal accounting officer of the Corporation and as such
prescribe and maintain the methods and systems of accounting to be followed,
keep complete books and records of account, prepare and file all local, state
and federal tax returns, prescribe and maintain an adequate system of internal
audit and prepare and furnish to the Chief Executive Officer and the Board of
Directors statements of account showing the financial position of the
Corporation and the results of its operations; (iv) upon request of the Board,
make such reports to it as may be required at any time; and (v) perform all
other duties incident to such office and such other duties as from time to time
may be assigned to him by the Board of Directors or by the Chief Executive
Officer. Assistant treasurers, if any, shall have the same powers and duties,
subject to the supervision of the Chief Financial Officer or Treasurer. If there
is no Chief Financial Officer or Treasurer, these duties shall be performed by
the Secretary or the Chief Executive Officer or other person appointed by the
Board of Directors.
(g) Secretary. The Secretary shall: (i) keep the minutes of
---------
the proceedings of the stockholders, the Board of Directors and any committees
of the Board of Directors, which shall at all reasonable times be open to the
examination of any director; (ii) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (iii) be
custodian of the corporate records, which shall at all reasonable times be open
to the examination of any director, and of the seal of the Corporation; (iv)
keep at the Corporation's registered office or principal place of business a
record containing the names and addresses of all stockholders and the number and
class of shares held by each, unless such a record shall be kept at the office
of the Corporation's transfer agent or registrar; (v) have general charge of the
stock books of the Corporation, unless the Corporation has a transfer agent; and
(vi) in general, perform all other duties incident to the office of Secretary,
including certifying the record of proceedings
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of the meetings of the stockholders or of the Board of Directors or resolutions
adopted at such meetings, signing or attesting certificates, statements or
reports required to be filed with governmental bodies or officials, signing
acknowledgments of instruments, and performing such other duties as from time to
time may be assigned to him by the Chief Executive Officer or by the Board of
Directors. Assistant secretaries, if any, shall have the same duties and powers,
subject to supervision by the Secretary.
(h) Surety Bonds. The Board of Directors may require any
------------
officer or agent of the Corporation to execute to the Corporation a bond in such
sums and with such sureties as shall be satisfactory to the Board, conditioned
upon the faithful performance of his duties and for the restoration to the
Corporation of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 3.3 Resignations; Removals.
----------------------
(a) Any officer of the Corporation may resign at any time,
subject to any rights or obligations under any then existing contracts between
such officer and the Corporation, by giving written notice to the Board of
Directors, the Chairman of the Board, the Vice Chairman, the Chief Executive
Officer, the President and Chief Operating Officer or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time be not specified therein, then upon receipt thereof. The
acceptance of such resignation shall not be necessary to make it effective
unless otherwise stated therein.
(b) The Board of Directors, by a vote of not less than 66 2/3%
of the entire Board, at any meeting thereof, or by written consent, at any time,
may, to the extent permitted by law, remove with or without cause from office or
terminate the employment of any officer, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
(c) Any vacancy in the office of any officer through death,
resignation, removal, disqualification, or other cause may be filled at any time
by the Board of Directors or if such officer was appointed by the Chief
Executive Officer, then by the Chief Executive Officer.
Section 3.4 Proxies.
-------
Unless otherwise provided in the Certificate of Incorporation or
directed by the Board of Directors, the President and Chief Operating Officer,
the Chairman of the Board, the Vice Chairman or the Chief Executive
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Officer, or their designees, shall have full power and authority on behalf of
the Corporation to attend and to vote upon all matters and resolutions at any
meeting of stockholders of any corporation in which this Corporation may hold
stock, and may exercise on behalf of this Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, whether
regular or special, and at all adjournments thereof, and shall have power and
authority to execute and deliver proxies and consents on behalf of this
Corporation in connection with the exercise by this Corporation of the rights
and powers incident to the ownership of such stock, with full power of
substitution or revocation.
ARTICLE IV
CAPITAL STOCK
Section 4.1 Stock Certificates.
------------------
Each stockholder of the Corporation shall be entitled to a certificate
certifying the class and number of shares represented thereby and in such form,
not inconsistent with the law of the State of Delaware or the Certificate of
Incorporation of the Corporation, as the Board of Directors may from time to
time prescribe.
The certificates of stock shall be signed by the Chairman of the
Board, the Vice Chairman, the Chief Executive Officer or the President and Chief
Operating Officer and by the Secretary or the Chief Financial Officer, and
sealed with the seal of the Corporation. Such seal may be a facsimile, engraved
or printed. Where any certificate is manually signed by a transfer agent or by
a registrar, the signatures of any officers upon such certificate may be
facsimiles, engraved or printed. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such before the certificate is issued, it
may be issued by the Corporation with the same effect as if such officer,
transfer agent or registrar had not ceased to be such at the time of its issue.
Section 4.2 Transfer of Shares.
------------------
(a) Shares of the capital stock of the Corporation may be
transferred on the books of the Corporation only by the holder of such shares or
by his duly authorized attorney, upon the surrender to the Corporation or its
transfer agent of the certificate representing such stock properly endorsed.
(b) The person in whose name shares of stock stand on the
books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes, and the Corporation shall not be bound to
15
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recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
Section 4.3 Fixing Record Date.
------------------
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 4.4 Lost Certificates.
-----------------
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The Board of Directors or any transfer agent of the Corporation may
direct a new certificate or certificates representing stock of the Corporation
to be issued in place of any certificate or certificates theretofore issued by
the Corporation, alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors (or any transfer agent of the Corporation
authorized to do so by a resolution of the Board of Directors) may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum as the Board of
Directors (or any transfer agent so authorized) shall direct to indemnify the
Corporation against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of such new certificates, and such requirement may be general or
confined to specific instances.
Section 4.5 Transfer Agent and Registrar.
----------------------------
The Board of Directors may appoint one or more transfer agents and one
or more registrars and may require all certificates for shares to bear the
manual or facsimile signature or signatures of any of them.
Section 4.6 Regulations.
-----------
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation, and replacement of certificates representing stock
of the Corporation.
ARTICLE V
GENERAL PROVISIONS
Section 5.1 Offices.
-------
The Corporation shall maintain a registered office in the State of
Delaware as required by law. The Corporation may also have offices in such
other places, either within or without the State of Delaware, as the Board of
Directors may from time to time designate or as the business of the Corporation
may require.
Section 5.2 Corporate Seal.
--------------
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization, and the words "Corporate Seal" and
"Delaware".
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Section 5.3 Fiscal Year.
-----------
The fiscal year of the Corporation shall be determined by resolution
of the Board of Directors.
Section 5.4 Notices and Waivers Thereof.
---------------------------
Whenever any notice whatever is required by law, the Certificate of
Incorporation, or these Bylaws to be given to any stockholder, director or
officer, such notice, except as otherwise provided by law, may be given
personally, or by mail, or, in the case of directors or officers, by telegram,
cable or facsimile transmission, addressed to such address as appears on the
books of the Corporation. Any notice given by telegram, cable or facsimile
transmission shall be deemed to have been given when it shall have been
transmitted and any notice given by mail shall be deemed to have been given
three business days after it shall have been deposited in the United States mail
with postage thereon prepaid.
Whenever any notice is required to be given by law, the Certificate of
Incorporation, or these Bylaws, a written waiver thereof, signed by the person
entitled to such notice, whether before or after the meeting or the time stated
therein, shall be deemed equivalent in all respects to such notice to the full
extent permitted by law.
Section 5.5 Amendments.
----------
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than 66 2/3% of the members of the Board of
Directors then in office, is hereby expressly authorized and empowered to adopt,
amend or repeal any provision of the Bylaws of this Corporation.
Subject to the rights of the holders of any class or series of
preferred stock, these Bylaws may be adopted, amended or repealed by the
affirmative vote of the holders of not less than 66 2/3% of the total voting
power of the then outstanding capital stock of the Corporation entitled to vote
thereon; provided, however, that this paragraph shall not apply to, and no vote
-------- -------
of the stockholders of the Corporation shall be required to authorize, the
adoption, amendment or repeal of any provision of the Bylaws by the Board of
Directors in accordance with the preceding paragraph.
18
<PAGE>
EXHIBIT 99.6
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT ("Agreement") is entered into as of
___________, 1996, between UNITED VIDEO SATELLITE GROUP, INC., a Delaware
corporation (the "Company"), and TELE-COMMUNICATIONS, INC., a Delaware
corporation ("TCI").
This Agreement sets forth certain rights and obligations of TCI in its
capacity as a beneficial owner of securities of the Company. TCI is entering
into this Agreement in consideration of the agreement of the Company to merge
with a subsidiary of TCI (the "Merger") in accordance with the terms of the
Agreement and Plan of Merger, dated as of July 10, 1995, as amended (the "Merger
Agreement"), and for other consideration set forth in this Agreement.
The Company and TCI agree as follows:
1. DEFINITIONS. As used in this Agreement, the terms set forth below
shall have the meanings indicated in this Section 1.
Affiliate. "Affiliate" shall have the same meaning as in Rule 12b-2
or any successor regulation under the Exchange Act.
Beneficial Ownership. A Person shall be deemed the "beneficial owner"
of, and shall be deemed to "beneficially own," any securities of which such
Person has "beneficial ownership" within the meaning of Rule 13d-3 under the
Exchange Act. Any Person's percentage beneficial ownership of any class of
securities shall be determined in accordance with such rule.
Board of Directors. "Board of Directors" means the board of directors
of the Company.
Disinterested Directors. "Disinterested Directors" at any time shall
mean those members of the Board of Directors who are not directors, officers or
employees of TCI. Any requirement in this Agreement for a concurrence of or
approval by a majority of Disinterested Directors shall also require that there
be Disinterested Directors then in office.
Equity Securities. "Equity Securities" means any shares of the
capital stock of the Company that are entitled to vote generally for the
election of directors of the Company.
<PAGE>
Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
Group. "Group" means any group of Persons that form, join or
participate in concert pursuant to any agreement or understanding with respect
to the voting and disposition of Equity Securities.
Minimum Amount. "Minimum Amount", as of any relevant date, means that
the Equity Securities of the Company beneficially owned by Mr. Flinn as of such
date represent not less than 20% of the then outstanding Equity Securities;
provided, that, if the Company issues additional Equity Securities in one or
more transactions resulting in the Equity Securities owned by Mr. Flinn
representing less than 20% of the Equity Securities outstanding after such
issuance, then the Equity Securities owned by Mr. Flinn will nonetheless be
deemed to represent the Minimum Amount of the outstanding Equity Securities for
long as both (x) Mr. Flinn beneficially owns not less than 3.5 million Equity
Securities (adjusted as appropriate for stock splits, reverse stock splits and
stock dividends) and (y) Mr. Flinn is one of the three largest stockholders of
the Company, including TCI (in terms of numbers of Equity Securities held).
Person. "Person" means any individual or any corporation,
partnership, limited liability company, trust or other legal entity.
TCI Equity Securities. "TCI Equity Securities" means any Equity
Securities beneficially owned by TCI.
2. VOTING AND RELATED RESTRICTIONS. TCI shall cause one or more Persons,
who are duly authorized to vote all the TCI Equity Securities, to be present at
all meetings of the stockholders of the Company at which such stockholders are
to vote on any of the matters described in Section 2(a) or 2(b) (or in
Section 3), or shall cause proxies for all TCI Equity Securities to be present
at all such meetings, to enable all the TCI Equity Securities to be counted for
quorum purposes. At any such meeting, TCI shall cause all the TCI Equity
Securities to be voted as follows:
(a) Directors. TCI shall cause all TCI Equity Securities to be voted
in any general election of directors (i) in favor of the election of Roy
Bliss to the Board of Directors for so long as Mr. Bliss is an executive
officer of the Company, (ii) in favor of the election of Peter C. Boylan
III to the Board of Directors for so long as Mr. Boylan is an executive
officer of the Company and (iii) in favor of the election of Lawrence
Flinn, Jr. to the Board of Directors for so long as Mr. Flinn beneficially
owns Equity Securities of the Company representing not less than the
Minimum Amount. The Board of Directors shall be of such size and shall
include such additional nominees of TCI as TCI may determine in its sole
discretion. For so long as the TCI Equity Securities are required to be
voted in favor of the election of Mr. Bliss or Mr. Flinn to the Board of
Directors, Mr. Bliss or Mr. Flinn, as applicable,
2
<PAGE>
shall also be appointed to the Executive Committee of the Board of
Directors of the Company.
(b) Major Transactions. With regard to any transaction for which
approval of the Company's stockholders is required pursuant to the Delaware
General Corporation Law, if TCI or an Affiliate of TCI (other than the
Company and its subsidiaries) is a party to the transaction or would be a
direct or indirect beneficiary of the transaction (except in its capacity
as a stockholder of the Company), then unless such transaction is approved
by a majority of the Disinterested Directors, TCI shall cause all TCI
Equity Securities to be voted in the same proportion for and against such
transaction as the Equity Securities of the other stockholders of the
Company voting thereon are voted.
As to any matter other than those expressly set forth in Section 2(a) and
Section 2(b), and except to the extent set forth in the second paragraph of
Section 3, TCI shall exercise its sole discretion as to the voting of all TCI
Equity Securities.
3. Certain Mergers and Consolidations. If the Company proposes to enter
into any merger or consolidation subject to Article IV, Section A, paragraph 6
of the Company's Restated Certificate of Incorporation, then, unless a majority
of the Disinterested Directors determines (and, if requested by any
Disinterested Director, the Company obtains an opinion from an independent
financial advisor of national standing (which financial advisor shall be
acceptable to each Disinterested Director, acting in good faith) to the effect)
that the consideration to be received by the holders of the Class A Common Stock
in such transaction is substantially equivalent in value, on a per share basis,
to the consideration to be received by the holders of the Class B Common Stock
in such transaction, taking into account all relevant factors, including,
without limitation, the anticipated tax treatment of such consideration to the
holders of the Class A Common Stock and Class B Common Stock, TCI shall not
permit the TCI Equity Securities to be voted in favor of such merger or
consolidation in any greater percentage than the percentage in which the Equity
Securities of the other stockholders of the Company voting thereon are voted in
favor of such merger or consolidation. Notwithstanding the foregoing, to the
extent that the holders of the Class A Common Stock and the holders of the Class
B Common Stock, respectively, are entitled to receive in any merger or
consolidation (pursuant to any election or otherwise), securities that do not
differ in any respect other than their relative voting rights and related
differences in designation, conversion and share distribution provisions, which
differences would be permitted in the case of securities distributed in a share
distribution made under Article IV, Section A, paragraph 4 of the Company's
Restated Certificate of Incorporation, such relative voting rights and related
differences in designation, conversion and share distribution provisions shall
be disregarded in determining the per share value of the consideration to be
received by the holders of the Class A Common Stock and the holders of the Class
B Common Stock, respectively, under Article IV, Section A, paragraph 6 of the
Company's Restated Certificate of Incorporation.
3
<PAGE>
4. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware.
(b) Severability. The invalidity or unenforceability of any provision
of this Agreement in any application shall not affect the validity or
enforceability of such provision in any other application or of any other
provision of this Agreement.
(c) Specific Performance. TCI and the Company acknowledge that their
respective remedies at law for failure by the other to comply with any
provision of this Agreement would not be adequately compensable in damages
and would cause irreparable harm to the aggrieved party, and that such
covenants may be specifically enforced.
(d) Amendments. Any amendment to this Agreement or waiver of any
right hereunder must be in writing and, if made by the Company, must be
approved by a majority of the Disinterested Directors.
(e) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which shall constitute
a single agreement.
(f) Headings. The section headings in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement.
(g) Binding Effect. This Agreement shall be binding on any Person or
Group to whom TCI transfers beneficial ownership of TCI Equity Securities
the aggregate voting power of which represents a majority of the total
voting power ("Majority Interest") of the Equity Securities outstanding at
the time of such transfer, and shall be binding upon any subsequent
transferee of such Equity Securities representing a Majority Interest at
the time of such subsequent transfer, provided that, at the time of each
such transfer, Mr. Flinn beneficially owns Equity Securities of the Company
representing not less than the Minimum Amount. Upon any such transfer of
Equity Securities representing a Majority Interest, the transferor shall be
released from all obligations hereunder.
4
<PAGE>
The parties hereto have executed this Agreement as of the date first above
written.
UNITED VIDEO SATELLITE GROUP, INC.
By:
-----------------------------------
Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
Title:
5
<PAGE>
EXHIBIT 99.7
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is entered into as of
_________, 1996, between United Video Satellite Group, Inc., a Delaware
corporation (the "Company"), and Lawrence Flinn, Jr. ("Employee").
Recitals
--------
WHEREAS, Tele-Communications, Inc. ("TCI") has taken actions to
acquire a voting interest in the Company of not less than 80% through a merger
of a direct wholly owned subsidiary of TCI, with and into the Company (the
"Merger"); and
WHEREAS, the Company and Employee desire to enter into this Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Company and Employee
hereby agree as follows:
1. Employment. The Company agrees to employ Employee and Employee
agrees to be employed by the Company on the terms set forth in this agreement.
2. Title and Duties; Scope of Responsibilities.
(a) Title and Duties. Employee shall be employed by the Company
and shall serve as Chairman of the Board and Chief Executive Officer of the
Company. Employee shall (i) provide strategic oversight planning and management;
and (ii) act as Chief Executive Officer of the Company and supervise and direct
management employees.
(b) Scope of Responsibilities. Employee shall devote as much
time as is reasonably required to perform his duties under this Agreement. His
actions shall at all times be such that they do not discredit the Company or its
products and services.
3. Compensation.
(a) Salary. For all services rendered by Employee hereunder,
the Company shall pay Employee during the term of this Agreement a base salary,
payable semimonthly in arrears. Employee's base salary of $575,000 per annum in
effect at December 31, 1995 was increased by 12.5% effective January 1, 1996,
and will be subject to
<PAGE>
annual increases of 8% on January 1 in each of the two years after 1996, unless
this Agreement is sooner terminated in accordance with Section 5.
(b) Benefits. In addition to salary payments as provided in
Section 3(a), the Company shall provide Employee, during the term of this
Agreement, with the benefits of such insurance plans, hospitalization plans,
pension or profit sharing plans and other employee fringe benefit plans as shall
be generally provided to employees of the Company and for which Employee may be
eligible under the terms of such plans. Nothing in this Agreement shall require
the Company to adopt or maintain any such employee benefit plans. Employee shall
be entitled to sick leave and vacation in accordance with the Company's
established policies applicable to its employees generally. Benefits to be
provided by the Company under Sections 5(d) and 5(e) after termination of this
Agreement for the periods specified therein shall include health insurance and
long term disability insurance to the extent the company may provide the same to
former employees. Such benefits shall not include participation in the Company's
401(k) plan or any similar benefit plans of the Company. Notwithstanding the
foregoing Employee shall have the benefits, prerequisites, staff and office
facilities in Fairfield County, CT that he has on the date of this Agreement.
(c) Stock Options; Bonuses. Employee may also be granted
options and other equity incentives by the Company from time to time. Nothing in
this Agreement shall require the Company to establish an equity incentive
program or confer on Employee any right to receive any stock option or other
equity incentive. If Employee's employment is terminated by the Company without
cause, all stock options granted by the Company to Employee shall immediately
vest and become fully exercisable. Employee may also be granted bonuses by the
Company from time to time; provided, however, that nothing contained herein
shall obligate the Company to pay any bonuses to Employee or to maintain any
bonus procedures, such matters being left to the sole discretion of the
Compensation Committee of the Board following consultation with independent
compensation consultants.
4. Term. Unless sooner terminated in accordance with Section 5,
this Agreement shall terminate on the third anniversary date of the Closing (as
defined in the Agreement and Plan of Merger dated as of July 10, 1995 ("Merger
Agreement")) of the Merger. Termination of this Agreement under this Section 4,
shall not of itself constitute termination of Employee's employment by the
Company. Sections 6, 7, 8 and 9 shall remain in full force and effect for the
periods specified in such sections notwithstanding any termination of this
Agreement.
5. Early Termination.
(a) Death. If Employee dies during the term of this Agreement,
the Company shall make a lump sum payment (less applicable withholding taxes) to
his estate in an amount equal to the salary (but not bonus) that would have been
payable for the 12 months next following his death.
-2-
<PAGE>
(b) Disability. If during the term of this Agreement Employee
becomes disabled, the Company may terminate this Agreement on 30 days' prior
notice to Employee or his duly appointed legal representative. For purposes of
this Section 5(b), the Employee becomes "disabled" if he is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. If this Agreement is terminated under this Section 5(b), Employee
shall continue to receive his base salary through the date that is 12 months
after such termination.
(c) Cause. The Company may terminate this Agreement at any time
for "cause." For purposes of this Agreement, cause shall be defined as either of
the following: (i) gross negligence by the Employee in the performance of his
duties under this Agreement as determined by the Company; or (ii) the Employee's
engaging in activities that materially adversely affect the Company or that
involve illegal or materially unethical behavior counter to the best interests
of the Company (for example, conveying trade secrets to a competitor). If this
Agreement is terminated for cause, Employee's rights hereunder shall cease
immediately upon such termination.
(d) Change of Control. If Employee's employment is terminated
by the Company or if Employee resigns after being assigned to a position of
lesser responsibility, in either case within a six-month period after the
occurrence of a Change of Control, this Agreement shall immediately terminate
and Employee shall be entitled to receive (i) a severance payment equal to the
amount of his base salary for the remainder of a two-year period following the
occurrence of a Change of Control; and (ii) a continuation of benefits as
specified in Section 3(b) for the remainder of such period. A "Change in
Control" will be deemed to have occurred if a person (as defined in Section
13(a) of the Securities Exchange Act of 1934 (the "Exchange Act")) who does not
beneficially own (as determined pursuant to Rule 13d-3 under the Exchange Act)
shares of the Company's capital stock entitled to vote generally in the election
of directors ("Equity Securities") immediately after the Effective Time (as
defined in the Merger Agreement) of the Merger becomes the beneficial owner of
Equity Securities with 51% of the voting power of all Equity Securities.
(e) Without Cause. The Company may terminate Employee's
employment without cause at any time. In such event, this Agreement shall
immediately terminate and Employee shall be entitled to receive (i) a severance
payment equal to the amount of his base salary that would have been receivable
for the period through the later of (A) the remainder of the term of this
Agreement under Section 4 or (B) one year from the date of termination, (ii) a
continuation of his benefits as specified in Section 3(b) for such period, and
(iii) any additional compensation due under Section 8.
(f) By Employee. Employee may resign from his employment with
the Company at any time. In such event, this Agreement shall terminate
immediately. Such resignation shall have the same effect under this Agreement as
a termination of this Agreement
-3-
<PAGE>
by the Company for cause, i.e., Employee's rights hereunder shall cease
immediately upon such termination; provided, however, Employee shall not lose
any stock options that have theretofore become vested as provided for in Section
3(c).
6. Confidential Information.
(a) Confidentiality. Employee acknowledges that the trade
secrets know-how and proprietary processes of the Company and its confidential
business plans, strategies, concepts, prospects and financial data
(collectively, "confidential information") are valuable, unique assets of the
Company. Employee shall not, during or after the term of this agreement,
disclose any of the confidential information (unless already generally known to
and available for use by the public other than as a result of Employee's acts or
omissions or as required by law) to any person or entity for any purpose, nor
shall Employee use any confidential information except, in either case, as is
required for Employee to perform his duties as an employee of the Company.
(b) Surrender or Destruction. Employee will, upon termination
of his employment with the Company, deliver to the Company all records, forms,
contracts, studies, reports, appraisals, financial data, lists of names or other
customer or supplier data, and any other articles or papers, computer tapes and
materials that have come into his possession by reason of his employment with
the Company, whether or not prepared by him, and he shall not retain memoranda
or copies of any of those items.
7. Covenants Not to Compete or Interfere.
(a) Scope. In view of the unique and valuable executive
services that Employee has been retained to render to the Company and Employee's
current and future knowledge of the customers, trade secrets and other
proprietary information relating to the business of the Company and its
customers and suppliers, Employee agrees that during the period he is an
employee of the Company and for three years after any termination of this
Agreement, he will not Compete Against the Company in the United States of
America.
(b) Definition. For purposes of this Section 7, "Compete
Against" means "directly or indirectly, be employed by or advise any entity that
competes against the business activities of the Company, including the uplinking
of television stations pursuant to compulsory licenses, the transmission of data
and audio signals by satellite for customers for resale as a carrier (common or
otherwise), the delivery of electronic program guides, pay per view guides and
interactive guides to cable television systems, the development of interactive
guides and any other material business the Company shall develop or engage in
during the term of this Agreement. If any restriction contained in this Section
7 is deemed to be invalid, illegal or unenforceable by reason of its duration,
geographical scope or otherwise, then such provision shall be deemed reduced in
extent, duration, geographical scope or otherwise by the minimum reduction
necessary to cause the restriction to be enforceable.
-4-
<PAGE>
(c) Noninterference. During the period he is an employee of the
Company and for three years after any termination of this Agreement, Employee
shall not (i) directly or indirectly cause or attempt to cause any employee of
the Company to leave the employ of the Company, (ii) in any way interfere with
the relationship between the Company and any employee, (iii) directly or
indirectly hire any employee of the Company to work for any organization of
which Employee is an officer, director, employee, consultant, independent
contractor or owner of an equity or other financial interest or (iv) interfere
or attempt to interfere with any transaction in which the Company was involved
during the term of this Agreement or his employment.
8. Certain Additional Severance. If this Agreement is terminated
under Section 5(e), the Company shall pay to Employee, on a semimonthly basis in
arrears, an amount equal to one-half of his then applicable base salary under
Section 3(a) until the earlier of (i) three years after termination of this
Agreement or (ii) the date on which he commences full-time employment or work as
a full-time consultant. Any payment of severance or benefits to Employee under
Section 5(e) with respect to any period shall satisfy and reduce the Company's
payment obligation under this Section 8 for that period. The right to payments
pursuant to this Section 8 shall cease immediately in the event of a breach by
Employee of any of his covenants made in Section 7.
9. Injunctive Relief. Upon an actual or threatened breach by
Employee of Section 6 or Section 7 of this Agreement, the Company shall be
entitled to an injunction restraining Employee from such breach. Nothing in this
Agreement shall limit the Company's ability to obtain any other remedies,
including damages for such actual or threatened breach.
10. Waiver of Breach. A waiver by the Company of a breach of any
provision of this Agreement by Employee shall not be construed as a waiver of
any breach of another provision or subsequent breach of the same provision.
11. Severability. The invalidity or unenforceability in any
application of any provision in this Agreement will not affect the validity or
enforceability of any other provision or of such provision in any other
application.
12. Notices. All communications, requests, consents and other
notices provided for in this Agreement shall be in writing and shall be deemed
given if and when delivered personally by hand, sent by telecopy at the
appropriate number indicated below with electronic confirmation of receipt, or
three business days after the same is deposited in the U.S. mails, first class
mail, postage prepaid, addressed as follows:
(i) If to the Company:
United Video Satellite Group, Inc.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
-5-
<PAGE>
Facsimile No.: (918) 488-4951
(ii) If to Employee:
Mr. Lawrence Flinn, Jr.
100 First Stamford Place
P.O. Box 420
Stamford, Connecticut 06904-0420
Facsimile No. (203) 977-7673
or to such other address or telecopy number as either party may designate by
notice pursuant to this Section 12.
13. Governing Law. This Agreement shall be governed by Oklahoma
laws.
14. Assignment. The Company may assign its rights and delegate its
obligations under this Agreement to any affiliate of the Company or to any
acquiror of substantially all of the business of the Company whether through
merger, purchase of assets, purchase of stock or otherwise. Otherwise, neither
party may assign any rights or delegate any duties under this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective legal representatives, heirs, and permitted successors and
assigns.
15. Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties and supersedes all prior understandings,
agreements or representations by the parties, written or oral, that relates to
the subject matter of this Agreement.
16. Amendments. No provision of this Agreement may be amended or
waived except by an instrument in writing signed by the party sought to be
charged with the amendment or waiver.
-6-
<PAGE>
17. Effective Date. This Agreement shall be effective upon the
Closing of the Merger.
Executed as of the date set forth above.
UNITED VIDEO SATELLITE GROUP,
INC., a Delaware corporation
By:_________________________________
____________________________________
Lawrence Flinn, Jr.
-7-
<PAGE>
EXHIBIT 99.8
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of
_____________, 1995, by and among TELE-COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and Lawrence Flinn, Jr. (the "Seller").
WHEREAS, TCI Merger Sub, Inc. ("Merger Sub"), the Company and United
Video Satellite Group, Inc. ("UV") are parties to an Agreement and Plan of
Merger, dated as of July ___, 1995 (the "Transaction Agreement"), providing for
the merger of Merger Sub with and into UV (the "Merger");
WHEREAS, in connection with the transactions contemplated by the
Transaction Agreement, the Seller received shares of (i) the Company's
Redeemable Convertible TCI Group Preferred Stock, Series G, par value $.01 per
share (the "TCI Group Preferred Stock"), convertible into an aggregate of
________ shares of the Company's Tele-Communications, Inc. Series A TCI Group
Common Stock, par value $1.00 per share (the "TCI Group Common Stock"), and (ii)
the Company's Redeemable Convertible Liberty Media Group Preferred Stock, Series
H, par value $.01 per share (the "LMG Preferred Stock" and, together with the
TCI Group Preferred Stock, the "TCI Preferred Stock"), convertible into an
aggregate of ________ shares of the Company's Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share (the "Liberty Media
Group Common Stock" and, together with the TCI Group Common Stock, the "Common
Stock"), which shares of Common Stock are "restricted securities" (as defined in
Rule 144 under the Securities Act of 1933, as amended), and the Company has
agreed to provide the Seller with the registration rights set forth herein.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions.
Business Day: Any day other than a Saturday, Sunday or holiday on
which banking institutions in Denver, Colorado or New York, New York are closed.
Commission: The Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act or the Exchange Act.
Company Indemnified Parties: As defined in Section 6(b).
Demand Registration: As defined Section 2(a).
Exchange Act: The Securities and Exchange Act of 1934, as amended, or
any successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Losses: As defined in Section 6(a).
<PAGE>
Market Value: As to each Registrable Share at any date, the average
of the daily closing prices for shares of the Common Stock for the 10
consecutive trading days before the day in question. The closing price for such
shares for each day shall be the last reported sale price or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case on the principal United States securities
exchange registered under the Exchange Act on which such shares are listed or
admitted to trading, or if they are not listed or admitted to trading on any
such exchange, the last reported sale price (or the average of the quoted
closing bid and asked prices if no sale is reported) as reported on the Nasdaq
Stock Market, or any comparable system, or if such shares are not quoted on the
Nasdaq Stock Market, or any comparable system, the average of the closing bid
and asked prices as furnished by any market maker in such shares who is a member
of the National Association of Securities Dealers, Inc.
Prospectus: The prospectus included in the Registration Statement as
of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, as amended, and each
prospectus supplement relating to the offering and sale of any of the
Registrable Shares.
Registrable Shares: Shares of Common Stock acquired by the Seller
upon conversion of the TCI Preferred Stock and any other shares of capital stock
of the Company issued in respect of such shares as a result of stock splits,
stock dividends, reclassification, recapitalizations, mergers, consolidations or
similar events. References in this Agreement to amounts or percentages of
Registrable Shares as of or on any particular date shall be deemed to refer to
amounts or percentages after giving effect to any applicable events contemplated
by the preceding sentence. Any Registrable Share will cease to be a Registrable
Share when (i) a registration statement covering such Registrable Share has been
declared effective by the Commission and such Registrable Shares has been
disposed of pursuant to such effective registration statement, (ii) such
Registrable Share may be publicly resold without registration under the
Securities Act or (iii) such Registrable Share is no longer held by the Seller,
members of his family and trusts, partnerships and other entities primarily for
their benefit and that of the Seller.
Registration Statement: A registration statement of the Company on
any form (to be selected by the Company) for which the Company then qualifies
and which permits the secondary resale thereunder of the number of Registrable
Shares required pursuant to this Agreement to be included therein. The term
"Registration Statement" shall also include all exhibits and financial
statements and schedules and documents incorporated by reference in such
Registration Statement when it becomes effective under the Securities Act, and
in the case of the references to the Registration Statement as of a date
subsequent to the effective date, as amended or supplemented as of such date.
Sale Period: Each fifteen (15) day period commencing on the fifth day
following the dates upon which the Company files with the Commission its
Quarterly Report on Form 10-Q or its Annual Report on Form 10-K.
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<PAGE>
Securities Act: The Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Shelf Registration Statement: As defined in Section 2(d).
2. Demand Registration.
(a) At any time after issuance of the Registrable Shares, the Seller
shall have the right to request registration (a "Demand Registration")
under the Securities Act of the Seller's Registrable Shares upon the terms
and subject to the terms, conditions and limitations set forth herein.
(b) The Seller may elect to exercise the right to request a Demand
Registration pursuant to this Section 2 by furnishing the Company with
written notice thereof (a "Demand Notice") which sets forth the number of
Registrable Shares requested to be registered and the Seller's preferred
method of distribution of such Registrable Shares. The Company shall as
soon as practicable after the date on which it receives the Demand Notice,
file with the Commission and use its commercially reasonable efforts to
cause to become effective a Registration Statement which shall cover the
Registrable Shares specified in the Demand Notice.
(c) Notwithstanding the preference of the Seller as to the method of
distribution of any Registrable Shares that may be set forth in a Demand
Notice, the Company, in its sole discretion, may determine that the sale of
Registrable Shares pursuant to any Demand Registration be pursuant to a
firm commitment underwriting, the managing underwriter of which shall be a
nationally recognized investment banking firm selected by the Company. If
the lead managing underwriter of any such underwritten public offering
determines in good faith that the aggregate number of Registrable Shares to
be offered exceeds the number of shares that could be sold without having
an adverse effect on such offering (including the price at which the
Registrable Shares may be sold), then, subject to Section 3(a)(v), the
number of Registrable Shares to be offered shall be reduced to the amount
recommended by such lead managing underwriter. The Company shall enter
into the same underwriting agreement as shall the Seller, containing
representations, warranties, indemnities, and agreements reasonably
acceptable to the Company and not substantially different from those
customarily made by an issuer in underwriting agreements with respect to
secondary distributions.
(d) In response to any Demand Notice, the Company may, in its sole
discretion, prepare and file with the Commission a Registration Statement
covering all of the Registrable Shares for offering and sale on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act (a "Shelf
Registration Statement"). The section of the Shelf Registration Statement
entitled "Plan of Distribution" shall be prepared in accordance with the
requirements of Item 508 of Regulation S-K promulgated by the Commission
under the Securities Act ("Regulation S-K") and, notwithstanding anything
to the contrary contained herein, shall provide that the Seller may
distribute the Registrable Shares pursuant to such Registration Statement
only during a Sale Period and solely in the manner set forth on Exhibit A
hereto.
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<PAGE>
(e) The Company shall be entitled to postpone, for a reasonable period
of time not in excess of 120 days after its receipt of a Demand Notice, the
filing of any Registration Statement, if (i) at any time prior to the
filing of such Registration Statement the Company determines, in its
reasonable business judgment, that such registration and offering could
interfere with or otherwise adversely affect any financing, acquisition,
corporate reorganization, or other material transaction or development
involving the Company or any of its affiliates or require the Company to
disclose matters that otherwise would not be required to be disclosed at
such time and (ii) the Company gives the Seller written notice of such
postponement. Any such notice need not specify the reasons for such
postponement if the Company determines, in its reasonable business
judgment, that doing so would interfere with or adversely affect such
transaction or development or would result in the disclosure of material
non-public information. In the event of such postponement, the Company
shall file such Registration Statement as soon as practicable after it
shall determine, in its reasonable business judgment, that such
registration and offering will not interfere with the matters described in
the first sentence of this Section 2(e). If the Company shall postpone the
filing of any Registration Statement, the Seller shall have the right to
withdraw his request for such registration by giving notice to the Company
within 15 days of the notice of postponement. In the event that the Seller
withdraws his request in the foregoing manner, such request shall not be
counted for purposes of determining the number of registrations to which
the Seller is entitled pursuant to Section 3(a)(i) or Section 3(a)(ii)
hereof.
(f) The Seller may, before any underwriting agreement relating to his
Registrable Shares is signed or before any Registration Statement becomes
effective, withdraw his Registrable Shares from inclusion therein, should
the terms of sale not be satisfactory to him, provided, however, that such
registration shall be deemed to have occurred for the purposes of Section
3(a)(i) and Section 3(a)(ii) hereof, unless the Seller pays, within 20 days
after any such withdrawal, all of the out-of-pocket expenses of the Company
incurred in connection with such registration.
3. Limitations on Registration Rights.
(a) Notwithstanding the provisions of Section 2 hereof, the Company
shall not be required to effect or maintain any registration if (i) the
Company has previously filed with the Commission two Registration
Statements pursuant to Section 2 of this Agreement; (ii) the Company has
previously filed a Registration Statement under the Securities Act pursuant
to Section 2 within the six-month period preceding the receipt of a Demand
Notice; (iii) the Company has previously filed and the Commission has
declared effective under the Securities Act a Shelf Registration Statement
and such Shelf Registration Statement is effective or remained effective
for the two-year period referred to in Section 4(a)(i) hereof; (iv) the
Company, in order to comply with such request, would be required to undergo
a special interim audit or prepare and file with the Commission sooner than
would otherwise be required, pro forma or other financial statements
relating to any proposed or probable transaction; (v) the total number of
Registrable Shares requested to be registered on any Registration Statement
shall be less than two million (2,000,000); (vi) the Common Stock is not
registered under Section 12(b) or 12(g) of the Exchange Act; or (vii) there
shall have been a material breach of a representation, warranty, covenant
or agreement contained in the Transaction Agreement
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<PAGE>
or an unsatisfied claim under any indemnity arrangement relating thereto by
a party other than the Company or any of its affiliates, which breach
continues after the expiration of any applicable notice or cure periods.
(b) Notwithstanding anything to the contrary contained herein, in the
event the Company is required to file a Registration Statement pursuant to
a Demand Notice, the Company shall have the option, in lieu of effecting
any registration hereunder, of purchasing or causing one or more of its
designees to purchase all of the Registrable Shares otherwise required to
be included in such Registration Statement at a price equal to the Market
Value thereof (reduced by an amount per share equal to the anticipated
underwriter or brokerage discounts and commissions or other items
constituting compensation to the anticipated underwriter, agent or broker-
dealer), if any, upon such registered offering and any other expenses that
would be payable by the Seller pursuant to Section 5(b)) on the day
immediately preceding the date on which the Demand Notice has been given to
the Company. Notice of the Company's election to exercise its option
hereunder shall be furnished in writing by the Company to the Seller within
five Business Days after receipt by the Company of the Demand Notice.
Payment for any Registrable Shares purchased by the Company hereunder shall
be made to the Seller in next day funds on a Business Day to be determined
by the Company, which shall be within 20 days of the date the Seller
receives notice from the Company of the Company's decision to exercise the
option provided for in this Section 3(b). Upon any such sale, the Seller
shall be deemed to have made the same representations and warranties
concerning his title to and ownership of his Registrable Shares that are
being so purchased and his power and authority to effect such sale as would
customarily be made by a selling stockholder to an underwriter in an
underwriting agreement with respect to a secondary distribution.
4. Obligations with Respect to Registration.
(a) If and whenever the Company is obligated by the provisions of this
Agreement to effect the registration of any Registrable Shares under the
Securities Act, the Company shall:
(i) subject to Section 4(b), use its diligent efforts to cause
the Registration Statement to remain effective, and prepare and file
with the Commission any amendments and supplements to the Registration
Statement and to the Prospectus used in connection therewith as may be
necessary to keep the Prospectus current and in compliance in all
material respects with the provisions of the Securities Act, until (A)
in the case of a Shelf Registration Statement, the sooner to occur of
the expiration of a two-year period following the date of this
Agreement and the sale of all of the Registrable Shares covered by
such Shelf Registration Statement, and (B) in the case of any other
Registration Statement, the sooner to occur of the sale of all of the
Registrable Shares covered by such Registration Statement or the 90th
day following the effective date of such Registration Statement;
(ii) notify the Seller, (A) when a Registration Statement becomes
effective, (B) when the filing of a post-effective amendment to a
Registration Statement or supplement to the Prospectus is required,
when the same is filed, and
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<PAGE>
in the case of a post-effective amendment, when the same becomes
effective, (C) of any request by the Commission for any amendment of
or supplement to a Registration Statement or any Prospectus relating
thereto or for additional information and (D) of the entry of any stop
order suspending the effectiveness of such Registration Statement or
of the initiation of any proceedings for that purpose;
(iii) furnish to the Seller a conformed copy of the Registration
Statement as declared effective by the Commission and of each post-
effective amendment thereto, and such number of copies of the final
Prospectus and of each supplement thereto as may reasonably be
required to facilitate the distribution of the Registrable Shares
included in such Registration Statement;
(iv) register or qualify the Registrable Shares covered by a
Registration Statement under the securities or blue sky laws of such
jurisdictions in the United States as the Seller shall reasonably
request, and do any and all other acts and things which may be
necessary to enable the Seller to consummate the disposition in such
jurisdictions of such Registrable Shares in accordance with a method
of distribution described in such Registration Statement; provided,
however, that the Company shall in no event be required to qualify to
do business as a foreign corporation or as a dealer in any
jurisdiction where it is not so qualified, to conform its
capitalization or the composition of its assets at the time to the
securities or blue sky laws of such jurisdiction, to execute or file
any general consent to service of process under the laws of any
jurisdiction, to take any action that would subject it to service of
process in suits other than those arising out of the offer and sale of
the Registrable Shares covered by such Registration Statement, or to
subject itself to taxation in any jurisdiction where it has not
theretofore done so; and
(v) cause such Registrable Shares covered by a Registration
Statement to be listed on the principal exchange or exchanges or
qualified for trading on the principal over-the-counter market on
which the Common Stock is then listed or traded upon the sale of such
Registrable Shares pursuant to such Registration Statement.
(b) Notwithstanding anything to the contrary contained herein, if at
any time after the filing of a Registration Statement or after it is
declared effective by the Commission, the Company determines, in its
reasonable business judgment, that such registration and offering could
interfere with or otherwise adversely affect any financing, acquisition,
corporate reorganization, or other material transaction or development
involving the Company or any of its affiliates or require the Company to
disclose matters that otherwise would not be required to be disclosed at
such time, then the Company may require the suspension by the Seller of the
distribution of any of the Registrable Shares by giving notice to the
Seller. Any such notice need not specify the reasons for such suspension
if the Company determines, in its reasonable business judgment, that doing
so would interfere with or adversely affect such transaction or development
or would result in the disclosure of material non-public information. In
the event that such notice is given, then until the Company has determined,
in its reasonable business judgment, that such registration and offering
would no longer interfere with the matters described in the
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<PAGE>
preceding sentence and has given notice thereof to the Seller, the
Company's obligations under Section 2(b), if the Registration Statement has
not become effective, or under Section 4(a)(i), if the Registration
Statement has become effective, will be suspended. In the event of a
suspension pursuant to this Section 4(b) after a Registration Statement has
been declared effective, the ninety-day period of effectiveness of such
Registration Statement referred to in Section 4(a)(i) will be extended by a
number of days equal to the total number of days for which the distribution
of Registrable Shares included in such Registration Statement has been
suspended under this Section 4(b). In the case of an effective Shelf
Registration Statement, in the event of a suspension pursuant to this
Section 4(b) during any Sale Period, then upon notice from the Company that
such suspension is no longer in effect, the Seller may recommence
distribution of Registrable Shares for a number of days equal to the number
of days during such Sale Period in which such suspension was in effect.
(c) The Company's obligations under this Agreement shall be
conditioned upon the Seller's compliance with the following:
(i) the Seller shall cooperate with the Company in connection
with the preparation of the Registration Statement, and for so long as
the Company is obligated to keep the Registration Statement effective,
the Seller will provide to the Company, in writing, for use in the
Registration Statement, all information regarding the Seller and such
other information as may be necessary to enable the Company to prepare
the Registration and Prospectus covering the Registrable Shares and to
maintain the currency and effectiveness thereof;
(ii) the Seller shall permit the Company, the proposed
underwriters, agents or broker-dealers of the offering or other
distribution and their respective representatives and agents to
examine such documents and records and shall supply any information as
they may reasonably request in connection with the offering or other
distribution in which the Seller proposes to participate;
(iii) the Seller shall enter into such agreements with the
Company and any underwriter, broker-dealer or similar securities
industry professional containing representations, warranties,
indemnities and agreements as are in each case customarily entered
into and made by selling stockholders, and will cause its counsel to
give any legal opinions customarily given, in secondary distributions
under similar circumstances;
(iv) during such time as the Seller may be engaged in a
distribution of the Registrable Shares, the Seller will comply with
all applicable laws including but not limited to Rules 10b-6 and 10b-7
promulgated under the Exchange Act and pursuant thereto will, among
other things: (A) not engage in any stabilization activity in
connection with the securities of the Company in contravention of such
rules; (B) distribute the Shares owned by the Seller solely in the
manner described in the Registration Statement; (C) cause to be
furnished to each underwriter, agent or broker-dealer to or through
whom the Registrable Shares may be offered, or to the offeree if an
offer is made directly by the Seller, such copies of the Prospectus
(as amended and supplemented to such date) and documents incorporated
by reference therein as may be required by such underwriter, agent,
broker-dealer or
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<PAGE>
offeree; and (D) not bid for or purchase any securities of the Company
or attempt to induce any person to purchase any securities of the
Company other than as permitted under the Exchange Act;
(v) other than in the case of an underwritten public offering, at
least ten (10) days prior to any distribution of Registrable Shares,
the Seller will advise the Company in writing of the dates on which
the distribution will commence and terminate, the number of the
Registrable Shares to be sold, the terms and the manner of sale
(including, to the extent applicable, the purchase price, the name of
any underwriter, agent or broker-dealer to or through whom such
distribution is being made, and the amount of any selling commissions
or other items constituting compensation to such underwriter, agent or
broker-dealer) and the number of shares of Common Stock that will be
owned beneficially by the Seller after giving effect to such sale; and
(vi) on notice from the Company of the happening of any of the
events specified in clauses (B), (C) or (D) of Section 4(a)(ii), or
that, as set forth in Section 4(b), it requires the suspension by the
Seller of the distribution of any of the Registrable Shares, then the
Seller shall cease offering or distributing the Registrable Shares
until such time as the Company notifies the Seller that offering and
distribution of the Registrable Shares may recommence.
5. Expenses of Registration.
Subject to Section 2(f), all expenses in connection with any
Registration Statement, any qualification or compliance with federal or state
laws required in connection therewith, and the distribution of the Registrable
Shares shall, as between the Seller and the Company, be borne as follows:
(a) The Company shall pay and be responsible for the registration fee
payable under the Securities Act, blue sky fees and expenses, if applicable
(subject to the limitations set forth in Section 4(a)(iv)), printing fees
and all fees and disbursements of the Company's counsel and accountants.
Solely at its discretion, the Company may, in lieu of engaging the services
of a financial printing company with respect to the Registration Statement
or the Prospectus, arrange for the photocopying thereof, in which event the
Company will bear the applicable photocopying costs.
(b) The Seller shall pay all fees and disbursements of his own counsel
and advisers, all stock transfer fees (including the cost of all transfer
tax stamps) or expenses, if any, and all other expenses (including
underwriting or brokerage discounts, commissions and fees) related to the
distribution of the Shares that have not expressly been assumed by the
Company as set forth above.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Seller from
and against any losses, claims, damages or liabilities (collectively
"Losses") to which the
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<PAGE>
Seller may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or 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
under which they were made, not misleading; and, subject to Section 6(c),
the Company will reimburse the Seller for any legal or other expenses
reasonably incurred by him in connection with investigating or defending
any such Losses; provided, however, that the Company will not indemnify or
hold harmless the Seller from or against any such Losses (i) that arise out
of or are based upon any violation of any federal or state securities laws,
rules or regulations committed by the Seller (or any agent, broker-dealer
or underwriter engaged by him) or in the case of a non-underwritten
offering, any failure by the Seller to give any purchaser of Registrable
Shares at or prior to the written confirmation of such sale, a copy of the
most recent Prospectus or (ii) if the untrue statement, omission or
allegation thereof upon which such Losses or expenses are based (x) was
made in reliance upon and in conformity with the information provided by or
on behalf of the Seller specifically for use or inclusion in the
Registration Statement or any Prospectus, or (y) was made in any Prospectus
used after such time as the Company advised the Seller that the filing of a
post-effective amendment or supplement thereto was required, except the
Prospectus as so amended or supplemented, or (z) was made in any Prospectus
used after such time as the obligation of the Company hereunder to keep the
Registration Statement effective and current has expired or been suspended
hereunder.
(b) The Seller agrees to indemnify and hold harmless the Company, its
directors and officers and each person, if any, who controls the Company
within the meaning of either the Securities Act or the Exchange Act (the
"Company Indemnified Parties"), from and against any Losses, joint or
several, to which the Company Indemnified Parties may become subject,
insofar as such Losses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or
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 under which they were made, not misleading, if the
statement or omission was made in reliance upon and in conformity with the
information provided by or on behalf of the Seller specifically for use or
inclusion in the Registration Statement or any Prospectus, or (ii) the use
of any Prospectus after such time as the Company has advised the Seller
that the filing of a post-effective amendment or supplement thereto is
required, except the Prospectus as so amended or supplemented, or (iii) the
use of any Prospectus after such time as the obligation of the Company
hereunder to keep the Registration Statement effective and current has
expired or been suspended hereunder, or (iv) any violation by the Seller
(or any agent, broker-dealer or underwriter engaged by the Seller) of any
federal or state securities law or rule or regulation thereunder or in the
case of a non-underwritten offering, any failure by the Seller to give any
purchaser of Registrable Shares at or prior to the written confirmation of
such sale, a copy of the most recent Prospectus; and, subject to Section
6(c), the Seller will reimburse such Company Indemnified Parties for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses. For purposes of clause (i) of
the preceding sentence and clause (ii) of the last sentence of Section
6(a), but without limiting the generality thereof, any information
concerning the Seller or plan of distribution included in any Registration
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Statement or Prospectus which is provided to the Seller for his review
within a reasonable period before filing or use thereof and to which
information the Seller has not promptly provided written notice of
objection to the Company shall be deemed to have been provided by the
Seller specifically for use in such Registration Statement or Prospectus.
(c) Each party entitled to indemnification under this Section 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 the Indemnifying Party may participate at its own expense in
the defense, or if it so elects, to assume the defense of any such claim
and any action or proceeding resulting therefrom, including the employment
of counsel and the payment of all expenses. The failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party from its obligations to indemnify such Indemnified Party, except to
the extent the Indemnified Party's failure to so notify actually prejudices
the Indemnifying Party's ability to defend against such claim, action or
proceeding. In the event that the Indemnifying Party elects to assume the
defense in any action or proceeding, the Indemnified Party shall have the
right to employ separate counsel in any such action or proceeding and to
participate in the defense thereof, but the fees and expenses of such
separate counsel shall be such Indemnified Party's expense unless (i) the
Indemnifying Party has agreed to pay such fees and expenses or (ii) the
named parties to any such action or proceeding (including any impleaded
parties) include an Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that there may be a
conflict of interest between such Indemnified Party and the Indemnifying
Party in the conduct of the defense of such action (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not assume the defense of such action or
proceeding on such Indemnified Party's behalf, it being understood,
however, that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for all Indemnified Parties,
which firm shall be designated in writing by the Seller or the Company as
the case may be). No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of the Indemnified Party,
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. The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without
its written consent, but if settled with its written consent, or if there
be a final judgment for the plaintiff in any such action or proceeding, the
Indemnifying Party shall indemnify and hold harmless the Indemnified Party
from and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for under this Section 6 is
unavailable to or insufficient to hold the Indemnified Party harmless under
subparagraphs (a) or (b) above in respect of any Losses referred to therein
for any reason other than as specified therein, then the Indemnifying Party
shall contribute to the amount paid or payable by such Indemnified Party as
a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Indemnifying
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Party on the one hand and such Indemnified Party on the other from the
subject offering or distribution or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Indemnifying Party on
the one hand and such Indemnified Party on the other in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. The relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other
hand shall be deemed to be in the same proportion as the net proceeds of
the offering or other distribution (after deducting expenses) received by
the Indemnifying Party bears to the net proceeds of the offering or other
distribution (after deducting expenses) received by the Indemnified Party.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by (or omitted to be supplied by) the Company or the
Seller, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, the relative
benefits received by each party from the sale of the Registrable Shares and
any other equitable considerations appropriate under the circumstances.
The amount paid or payable by an Indemnified Party as a result of the
Losses referred to above in this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
7. Notices. All notices, requests, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, certified or registered mail with
postage prepaid, or sent by telex, telegram or telecopier, as follows:
(a) if to the Company:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention:Stephen M. Brett, Esq.
Facsimile:(303) 488-3245
(b) if to Seller:
Lawrence Flinn, Jr.
100 First Stamford Place
Stamford, Connecticut 06902
Facsimile:203-977-7673
or to such other person or address as any party shall specify by notice in
writing to the other party. All notices and other communications given to a
party in accordance with the provisions
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of this Agreement shall be deemed to have been given (i) three Business Days
after the same are sent by certified or registered mail, postage prepaid, return
receipt requested, (ii) when delivered by hand or transmitted by telecopy
(answer back received) or (iii) one Business Day after the same are sent by a
reliable overnight courier service, with acknowledgement of receipt requested.
Notwithstanding the preceding sentence, notice of change of address shall be
effective only upon actual receipt thereof.
8. Amendment. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing among the
Company and the Seller, executed in the same manner as this Agreement. No
consent, waiver or similar act shall be effective unless in writing.
9. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and understandings,
oral and written, among the parties hereto with respect to the subject matter
hereof.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Colorado, without giving
effect to principles of conflicts of laws.
12. Assignment. The Seller may not assign his rights under this
Agreement without the prior written consent of the Company, except to members of
Seller's family and trusts, partnerships and other entities primarily for their
benefit and that of the Seller. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TELE-COMMUNICATIONS, INC.
By:
------------------------------------
---------------------------------------
LAWRENCE FLINN, JR.
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EXHIBIT A
The Registrable Shares may be sold by the Seller directly or through agents
designated from time to time or to or through broker-dealers designated from
time to time. To the extent required, any such agent or broker-dealer involved
in the offer and sale of the Registrable Shares and any applicable commissions,
discounts or other items constituting compensation to such agents or broker-
dealers will be set forth in a Prospectus Supplement.
The distribution of the Registrable Shares may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at prices determined on a negotiated or
competitive bid basis. Registrable Shares may be sold through a broker-dealer
acting as agent or broker for the Seller, or to a broker-dealer acting as
principal. In the latter case, the broker-dealer may then resell such
Registrable Shares to the public at varying prices to be determined by such
broker-dealer at the time of resale.
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EXHIBIT 99.9
FIRST ADDENDUM AND AMENDMENT TO EMPLOYMENT AGREEMENT
FOR ROY L. BLISS
THIS FIRST ADDENDUM AND AMENDMENT TO EMPLOYMENT AGREEMENT FOR ROY L. BLISS
(this "First Addendum") is entered into this ______ day of __________, 1996 by
and between United Video Satellite Group, Inc., a Delaware corporation (the
"Company"), and Roy L. Bliss ("Employee").
RECITALS
--------
WHEREAS, Employee and the Company entered into an Employment Agreement
dated November 16, 1993 (the "Existing Agreement"); and
WHEREAS, subsequent thereto, Tele-Communications, Inc. ("TCI") and the
Company have taken actions so that TCI may to acquire a voting interest in the
Company of not less than 80% through a merger of a direct wholly owned
subsidiary of TCI with and into the Company (the "Merger"); and
WHEREAS, the Company and Employee desire to supplement and amend the terms
and provisions of the Existing Agreement as hereinafter provided but not
otherwise.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Company and Employee
hereby agree as follows:
1. Compensation.
(a) Section 3(a) of the Existing Agreement, entitled "Salary", is
hereby amended to read in its entirety as follows:
"Salary. For all services rendered by Employee hereunder, the
Company shall pay Employee during the term of this agreement a base
salary, payable semimonthly in arrears. Employee's existing base
salary of $375,000 per annum as of December 31, 1995 shall be
increased by 12.5% effective January 1, 1996, with annual increases of
12.5% on January 1 of each year in the two-year period thereafter,
unless this agreement is sooner terminated in accordance with Section
5."
<PAGE>
(b) Notwithstanding anything contained in Section 3(c) of the Existing
Agreement, entitled "Bonuses", the Company shall not be under any obligation to
pay any bonuses to Employee or to maintain any bonus procedures, such matters
being left to the sole discretion of the Compensation Committee of the Board
following consultation with independent compensation consultants.
(c) Section 3(d) of the Existing Agreement, entitled "Stock Options",
is hereby amended to read in its entirety as follows:
"Stock Options. All stock options held by Employee immediately
prior to the Effective Time of the Merger shall vest 100% at the
Effective Time of the Merger. Employee may also be granted stock
options and other equity incentives by the Company from time to time
following the Merger . Nothing in this Agreement shall require the
Company to establish an equity incentive program or confer on Employee
any right to receive any stock option or other equity incentive. If
Employee's employment is terminated by the Company without cause, all
stock options granted by the Company to Employee shall immediately
vest and become fully exercisable."
2. Term. Section 4 of the Existing Agreement, entitled "Term", is hereby
amended to read in its entirety as follows:
"Term. Unless sooner terminated in accordance with Section 5,
this Agreement shall terminate on the third anniversary of the date of
the Closing (as that term is defined in the Agreement and Plan of
Merger dated July 10, 1995 (the "Merger Agreement")). Termination of
this agreement under this Section 4 shall not of itself constitute
termination of Employee's employment by the Company. Sections 6, 7, 8
and 9 shall remain in full force and effect for the periods specified
in such Sections notwithstanding any termination of this agreement."
3. Early Termination.
(a) The last sentence of Section 5(b) of the Existing Agreement,
entitled "Disability", is hereby amended to read in its entirety as follows:
"If this agreement is terminated under this Section 5(b), Employee
shall continue to receive his base salary through the date that is 12
months after such termination."
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<PAGE>
(b) Clause (iii) of the last sentence of Section 5(e) of the Existing
Agreement, entitled "Without Cause", is hereby amended to read in its entirety
as follows:
"(iii) any additional compensation due under Section 8."
(c) The last sentence of Section 5(f) of the Existing Agreement,
entitled "By Employee", is hereby amended to read in its entirety as follows:
"Such resignation shall have the same effect under this agreement as a
termination of this agreement by the Company for cause, i.e.,
Employee's rights hereunder shall cease immediately upon such
termination, provided, however, Employee shall not lose any stock
options that have theretofore become vested as provided for in Section
3(d)."
4. Certain Severance. Section 7(d) of the Existing Agreement, entitled
"Compensation", is hereby deleted in its entirety; a new Section 8 as set forth
below is hereby added to the Existing Agreement, and existing Sections 8 through
16 are hereby renumbered 9 through 17.
"8. Certain Additional Severance. If this Agreement is terminated
under Section 5(e), the Company shall pay to Employee, on a
semimonthly basis in arrears, an amount equal to one-half of his then
applicable base salary under Section 3(a) until the earlier of (i)
three years after termination of this Agreement or (ii) the date on
which he commences full-time employment or work as a full-time
consultant. Any payment of severance or benefits to Employee under
Section 5(e) with respect to any period shall satisfy and reduce the
Company's payment obligation under this Section 8 for that period. The
right to payments pursuant to this Section 8 shall cease immediately
in the event of a breach by Employee of any of his covenants made in
Section 7."
5. Effective Date. The effective date of this First Addendum shall be
the date of the Closing of the Merger.
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<PAGE>
7. Conflict. In the event of a conflict between the terms of this First
Addendum and the Existing Agreement, this First Addendum shall control.
IN WITNESS WHEREOF, the parties hereto have caused this First Addendum to
be executed as of the date first above written.
UNITED VIDEO SATELLITE GROUP,
INC., a Delaware corporation
By:
-------------------------------
Name:
Title:
ROY L. BLISS-EMPLOYEE
----------------------------------
Roy L. Bliss
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<PAGE>
EXHIBIT 99.10
FIRST ADDENDUM AND AMENDMENT TO EMPLOYMENT AGREEMENT
FOR PETER C. BOYLAN III
THIS FIRST ADDENDUM AND AMENDMENT TO EMPLOYMENT AGREEMENT FOR PETER C.
BOYLAN III (this "First Addendum") is entered into this ______ day of
__________, 1996 by and between United Video Satellite Group, Inc., a Delaware
corporation (the "Company"), and Peter C. Boylan III ("Employee").
RECITALS
--------
WHEREAS, Employee and the Company entered into an Employment Agreement
dated October 18, 1994 (the "Existing Agreement"); and
WHEREAS, subsequent thereto, Tele-Communications, Inc. ("TCI") and the
Company have taken actions so that TCI may acquire a voting interest in the
Company of not less than 80% through a merger of a direct wholly owned
subsidiary of TCI, with and into the company (the "Merger"); and
WHEREAS, the Company and Employee desire to supplement and amend the terms
and provisions of the Existing Agreement as hereinafter provided but not
otherwise.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained in the Agreement and other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, Company and
Employee hereby agree as follows:
1. Compensation.
(a) Section 3(a) of the Existing Agreement, entitled "Salary", is
hereby amended to read in its entirety as follows:
"Salary. For all services rendered by Employee hereunder, the Company
shall pay Employee during the term of this agreement a base salary,
payable semimonthly in arrears. Employee's existing base salary of
$225,000 per annum as of October 17, 1995 shall be increased by 12.5%
effective October 18, 1995, with annual increases of 12.5% on October
18 of each year in the two-year period thereafter, unless this
agreement is sooner terminated in accordance with Section 5."
<PAGE>
(b) Notwithstanding anything contained in Section 3(c) of the Existing
Agreement, entitled "Bonuses", the Company shall not be under any obligation to
pay any bonuses to Employee or to maintain any bonus procedures, such matters
being left to the sole discretion of the Compensation Committee of the Board
following consultation with independent compensation consultants.
(c) The Company and Employee each agree that the Initial Stock Options
granted pursuant to Section 3(d) of the Existing Agreement are with respect to
the Company's Class A Common Stock, and not with respect to the Company's Class
B Common Stock, and that all such Stock Options will become 100% vested upon the
Closing of the Merger.
2. Term. Section 4 of the Existing Agreement entitled "Term" is hereby
amended to read in its entirety as follows:
"Term. Unless sooner terminated in accordance with Section 5, this
agreement shall terminate on the third anniversary of the date of the
Closing (as that term is defined in the Agreement and Plan of Merger
dated July 10, 1995) of the Merger. Termination of this agreement
under this Section 4 shall not of itself constitute termination of
Employee's employment by the Company. Sections 6, 7, 8 and 9 shall
remain in full force and effect for the periods specified in such
Sections notwithstanding any termination of this agreement."
3. Early Termination.
(a) The last sentence of Section 5(b) of the Existing Agreement,
entitled "Disability", is hereby amended to read in its entirety as follows:
"If this Agreement is terminated under this Section 5(b), Employee
shall continue to receive his base salary through the date that is 12
months after such termination."
(b) Section 5(c) of the Existing Agreement is hereby amended to read
in its entirety as follows:
"Cause. The Company may terminate this Agreement at any time for
"cause". For purposes of this Agreement, "cause" shall be defined as
either of the following: (i) gross negligence by the Employee in the
performance of his duties under this Agreement as determined by the
Company; or (ii) the Employee's engaging in activities that materially
adversely affect the Company or that involve illegal or materially
unethical behavior counter to the best interests of the Company (for
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<PAGE>
example, conveying trade secrets to a competitor). If this Agreement
is terminated for cause, Employee's rights hereunder shall cease
immediately upon termination."
(c) Clause (iii) of the last sentence of Section 5(e) of the Existing
Agreement, entitled "Without Cause", is hereby amended to read in its entirety
as follows: "(iii) any additional compensation due under Section 8."
(d) Section 5(f) of the Existing Agreement, entitled "By Employee", is
hereby amended to read in its entirety as follows:
"By Employee. Employee may resign from his employment with the
Company at any time. In such event, this Agreement shall terminate
immediately. Such resignation shall have the same effect under this
Agreement as a termination of this Agreement by the Company for cause,
i.e., Employee's rights hereunder shall cease immediately upon such
termination, provided, however, Employee shall not lose any stock
options that have theretofore become vested as provided for in Section
3(d)."
4. Section 7(d) of the Existing Agreement, entitled "Compensation", is
hereby deleted; a new Section 8 as set forth below is hereby added to the
Existing Agreement, and the existing Sections 8 through 20 are hereby renumbered
9 through 21:
"8. Certain Additional Severance. If this Agreement is terminated
under Section 5(e), the Company shall pay to Employee, on a
semimonthly basis in arrears, an amount equal to one-half of his then
applicable base salary under Section 3(a) until the earlier of (i)
three years after termination of this Agreement or (ii) the date on
which he commences full-time employment or work as a full-time
consultant. Any payment of severance or benefits to Employee under
Section 5(e) with respect to any period shall satisfy and reduce the
Company's payment obligation under Section 8 for that period. The
right to payments pursuant to this Section 8 shall cease immediately
in the event of a breach by Employee of the covenants made in Section
7."
5. The Effective Date of this First Addendum shall be the date of the
Closing of the Merger.
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<PAGE>
6. Conflict. In the event of a conflict between the terms of this First
Addendum and the Existing Agreement, this First Addendum shall control.
IN WITNESS WHEREOF, the parties hereto have caused this First Addendum to
be executed as of the date first above written.
UNITED VIDEO SATELLITE GROUP,
INC., a Delaware corporation
By:
---------------------------------
Name:
Title:
PETER C. BOYLAN III-EMPLOYEE
------------------------------------
Peter C. Boylan III
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