<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-B/A
(AMENDMENT NO. 4)
REGISTRATION OF SECURITIES OF CERTAIN SUCCESSOR ISSUERS
FILED PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
_____________________________
TELE-COMMUNICATIONS, INC.
(Formerly, TCI/Liberty Holding Company)
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Commission File No. 0-20421
Delaware 84-1260157
- --------------------------------- ----------------------------
(State of incorporation (I.R.S. Employer
or organization) Identification Number)
Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Tele-Communications, Inc. Series A TCI Group Common Stock, par value $1.00 per
share
Tele-Communications, Inc. Series B TCI Group Common Stock, par value $1.00 per
share
Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock, par value
$.01 per share
(Title of Class)
<PAGE>
ITEM 4. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
Item 4 of the Form 8-B of Tele-Communications, Inc., a Delaware
corporation (the "Company"), is hereby amended in its entirety to read as
follows:
The Restated Certificate of Incorporation, as amended, of the
Company (the "Charter") provides that the Company 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 "Common Stock"), of which
1,750,000,000 shares are designated Tele-Communications, Inc. Series A TCI
Group Common Stock (the "Series A TCI Group Common Stock"), 150,000,000 shares
are designated Tele-Communications, Inc. Series B TCI Group Common Stock (the
"Series B TCI Group Common Stock," and collectively with the Series A TCI
Group Common Stock, the "TCI Group Common Stock"), 750,000,000 shares are
designated Tele-Communications, Inc. Series A Liberty Media Group Common Stock
(the "Series A Liberty Media Group Common Stock") and 75,000,000 shares are
designated Tele-Communications, Inc. Series B Liberty Media Group Common Stock
(the "Series B Liberty Media Group Common Stock," and collectively with the
Series A Liberty Media Group Common Stock, the "Liberty Media Group Common
Stock"), and (ii) 52,375,096 shares of preferred stock (the "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").
The following description of certain terms of the TCI Group Common
Stock, the Liberty Media Group Common Stock and the outstanding classes and
series of Preferred Stock does not purport to be complete and is qualified in
its entirety by reference to the Charter (including the Certificate of
Designation with respect to each outstanding series of Series Preferred
Stock), copies of which are filed as exhibits to this Registration Statement.
TCI GROUP COMMON STOCK AND LIBERTY MEDIA GROUP COMMON STOCK
As of August 31, 1995, 571,572,351 shares of Series A TCI Group
Common Stock, 84,801,554 shares of Series B TCI Group Common Stock,
142,891,724 shares of Series A Liberty Media Group Common Stock and 21,200,336
shares of Series B Liberty Media Group Common Stock were outstanding (in each
case net of shares held in treasury).
-2-
<PAGE>
CERTAIN DEFINITIONS
As used herein, the following terms have the meanings specified
below:
"Committed Acquisition Shares" means (i) the shares of Series A
Liberty Media Group Common Stock that the Company had, prior to the record
date for the Distribution, agreed to issue, but as of such record date had not
issued, and (ii) the shares of Series A Liberty Media Group Common Stock that
are issuable upon conversion, exercise or exchange of Convertible Securities
that the Company 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 the Company to issue shares of the Company's Class A Common
Stock, par value $1.00 per share (which has been redesignated Series A TCI
Group Common Stock), which as a result of the Distribution, constitute
obligations to issue, among other securities, Series A Liberty Media Group
Common Stock or Convertible Securities which are convertible into or
exercisable or exchangeable for Series A Liberty Media Group 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 Series A Liberty Media Group
Common Stock and dividends or distributions of shares of Series A Liberty
Media Group Common Stock or Series B Liberty Media Group Common Stock to
holders of Series A Liberty Media Group Common Stock and other
reclassifications of the Series A Liberty Media Group Common Stock, in each
case occurring (or the record date for which occurs) after the Distribution.
"Convertible Securities" means any securities of the Company (other
than any series of Common Stock) that are convertible into, exchangeable for
or evidence the right to purchase any shares of any series of Common Stock,
whether upon conversion, exercise, exchange, pursuant to antidilution
provisions of such securities or otherwise.
The "Distribution" means the distribution paid by the Company on
August 10, 1995 of one-fourth of one share of Series A Liberty Media Group
Common Stock on each outstanding share of Series A TCI Group Common Stock and
one-fourth of one share of Series B Liberty Media Group Common Stock on each
outstanding share of Series B TCI Group Common Stock to holders of record on
August 4, 1995.
The "Inter-Group Interest" means any equity value of the Company
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.
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.
-3-
<PAGE>
The "Liberty Media Group" means as of any date of determination
thereof:
(i) the interest of the Company 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;
(ii) all assets and liabilities of the Company or any of its
subsidiaries to the extent attributed to any of the properties or assets
referred to in clause (i) 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 (i) of this
sentence);
(iii) all assets and properties contributed or otherwise transferred
to the Liberty Media Group from the TCI Group; and
(iv) the interest of the Company or any of its subsidiaries in the
businesses, assets and liabilities acquired by the Company or any of its
subsidiaries for the Liberty Media Group, as determined by the Board of
Directors of the Company (the "Board of Directors");
provided that (a) 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 (i) of the
definition of "Number of Shares Issuable with Respect to the Inter-Group
Interest," or in other securities of the Company 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 (b) 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
the Company pays a dividend or makes any other distribution with respect to
shares of Liberty Media Group Common Stock payable in securities of the Company
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 (a) 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
-4-
<PAGE>
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. The Company 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.
"Market Value" of any class or series of capital stock of the Company
on any day means the average of the high and low reported sales 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 the Company, 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 Board of Directors; provided that for purposes of determining
the ratios described under "-Conversion and Redemption-Conversion at the Option
of the Company" and "-Mandatory Dividend, Redemption or Conversion of Liberty
Media Group Common Stock" and "-Liquidation," (i) the "Market Value" of any
share of any series of 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 Common Stock will be reduced by the fair market value of the per
share amount of such dividend or distribution as determined by the Board of
Directors and (ii) the "Market Value" of any share of any series of Common Stock
on any day prior to (a) 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 Common Stock or (b) the "ex" date or any similar date
for any dividend or distribution with respect to any such series of Common Stock
in shares of such series of 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
(i) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
Series A Liberty Media
-5-
<PAGE>
Group Common Stock and dividends or distributions of shares of Series A Liberty
Media Group Common Stock or Series B Liberty Media Group Common Stock to holders
of Series A Liberty Media Group Common Stock and other reclassifications of
Series A Liberty Media Group Common Stock,
(ii) decreased (but not to less than zero) by (a) the aggregate number
of shares of Series A Liberty Media Group Common Stock issued or sold by the
Company after the Distribution other than Committed Acquisition Shares, the
proceeds of which are attributed to the TCI Group, (b) the aggregate number of
shares of Series A Liberty Media Group 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, (c) the
aggregate number of shares of Series A Liberty Media Group Common Stock issued
or delivered by the Company as a dividend or distribution to holders of Series A
TCI Group Common Stock and Series B TCI Group Common Stock, (d) the aggregate
number of shares of Series A Liberty Media Group 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 the Company after the
Distribution as a dividend or distribution or by reclassification or exchange to
holders of Series A TCI Group Common Stock and Series B TCI Group Common Stock
and (e) the aggregate number of shares of Series A Liberty Media Group Common
Stock (rounded, if necessary, to the nearest whole number), equal to the
aggregate fair value (as determined by the 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 Series A Liberty Media Group Common Stock as of
the date of such transfer, and
(iii) increased by (a) the aggregate number of any shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock
which are retired or otherwise cease to be outstanding following their purchase
with funds attributed to the TCI Group, (b) a number (rounded, if necessary, to
the nearest whole number), equal to the fair value (as determined by the Board
of Directors) of assets or properties, theretofore 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 Series A Liberty Media Group Common
Stock as of the date of such contribution and (c) the aggregate number of shares
of Series A Liberty Media Group Common Stock and Series B Liberty Media Group
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."
-6-
<PAGE>
The Company will not issue or sell shares of Series B Liberty Media Group 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, the Company will prepare and
file a statement of such change with the Secretary of the Company.
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 the
Company's Class A Common Stock, par value $1.00 per share (which has been
redesignated Series A TCI Group Common Stock).
The "TCI Group" means as of any date of determination thereof:
(i) the interest of the Company or any of its subsidiaries in all of
the businesses in which the Company 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 the Company or any of its subsidiaries,
other than any businesses, assets or liabilities of the Liberty Media Group;
(ii) 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;
(iii) 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 (i) of the definition of
"Number of Shares Issuable with Respect to the Inter-Group Interest," or in
other securities of the Company 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
-7-
<PAGE>
(iv) 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 (ii) above). If the Company pays a
dividend or makes any other distribution with respect to shares of Liberty Media
Group Common Stock payable in other securities of the Company 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 (iii) 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, 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. The Company 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.
"Trading Day" means each weekday other than any day on which any relevant
class or series of capital stock of the Company is not traded on the Nasdaq
National Market System or in the over-the-counter market.
VOTING RIGHTS
Holders of Series A TCI Group Common Stock are entitled to one vote
for each share of such stock held, holders of Series B TCI Group Common Stock
are entitled to ten votes for each share of such stock held, holders of Series A
Liberty Media Group Common Stock are entitled to one vote for each share of such
stock held and holders of Series B Liberty Media Group 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 Preferred Stock or any series of such
a class, in the Charter (including any resolution or resolutions providing for
the establishment of such class or series pursuant to authority vested in the
Board of Directors by the 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 Preferred Stock, if any, entitled to vote thereon will vote as one
class for all purposes.
Neither the holders of Series A TCI Group Common Stock or Series B TCI
Group Common Stock, nor the holders of Series A Liberty Media Group Common Stock
or Series B
-8-
<PAGE>
Liberty Media Group Common Stock, have any rights to vote as a separate class or
series on any matter coming before the stockholders of the Company, except with
respect to certain limited class and series voting rights provided under the
Delaware General Corporation Law (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
Dividends on TCI Group Common Stock and Liberty Media Group Common
Stock are limited to legally available funds of the Company under the DGCL and
subject to the prior payment of dividends on outstanding shares of Preferred
Stock. The DGCL limits the amount of distributions on the Common Stock to the
funds of the Company legally available for that purpose, which are 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, Preferred Stock. Certain loan agreements to which certain subsidiaries of
the Company 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.
Dividends on the TCI Group Common Stock, in addition to the
limitations set forth above, are further limited to an amount not in excess of
the TCI Group Available Dividend Amount, which 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 "TCI Group Available Dividend Amount," as of any date, means
either (i) the excess of (a) an amount equal to the total assets of the TCI
Group less the total liabilities (not including preferred stock) of the TCI
Group as of such date over (b) 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 Preferred Stock attributed to the TCI
Group or (ii) in case there is no such excess, an amount equal to the Company
Earnings (Loss) Attributable to the TCI Group (if positive) for the fiscal year
in which such date occurs and/or the preceding fiscal year. "Company 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
-9-
<PAGE>
the combined financial statements of the TCI Group for such period, including
income and expenses of the Company attributed to the operations of the TCI Group
on a substantially consistent basis, including, without limitation, corporate
administrative costs, net interest and income taxes.
Dividends on the Liberty Media Group Common Stock, in addition to the
limitations set forth in the first paragraph under this caption, are further
limited to an amount not in excess of the Liberty Media Group Available Dividend
Amount, which 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.
The "Liberty Media Group Available Dividend Amount," as of any date,
means the product of the Outstanding Interest Fraction and either (i) the excess
of (a) 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 (b) 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 Preferred Stock attributed to the
Liberty Media Group or (ii) in case there is no such excess, an amount equal to
Company 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 "Company 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 the Company 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.
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
Series A TCI Group Common Stock or the Series B TCI Group Common Stock will be
paid only on both series, in equal amounts per share, and any dividends paid on
the Series A Liberty Media Group Common Stock or the Series B Liberty Media
Group Common Stock will be paid only on both series, in equal amounts per share.
The 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.
-10-
<PAGE>
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 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 the Company 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 Series A TCI Group
Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of Series A TCI Group
Common Stock) to holders of Series A TCI Group Common Stock and
Series B TCI Group Common Stock, on an equal per share basis; or
consisting of shares of Series B TCI Group Common Stock (or
Convertible Securities convertible into or exercisable or
exchangeable for shares of Series B TCI Group Common Stock) to
holders of Series A TCI Group Common Stock and Series B TCI Group
Common Stock, on an equal per share basis; or consisting of
shares of Series A TCI Group Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for
shares of Series A TCI Group Common Stock) to holders of Series A
TCI Group Common Stock and, on an equal per share basis, shares
of Series B TCI Group Common Stock (or like Convertible
Securities convertible into or exercisable or exchangeable for
shares of Series B TCI Group Common Stock) to holders of Series B
TCI Group Common Stock;
(ii) a share distribution consisting of shares of Series A Liberty
Media Group Common Stock (or Convertible Securities convertible
into or exercisable or exchangeable for shares of Series A
Liberty Media Group Common Stock) to holders of Series A TCI
Group Common Stock and Series B TCI Group Common Stock, on an
equal per share basis; provided that the sum of (A) the aggregate
number of shares of Series A Liberty Media Group Common Stock to
be so issued (or the number of such shares which would be
issuable upon conversion, exercise or exchange of any Convertible
-11-
<PAGE>
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 the Company 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 Series A TCI Group Common Stock and Series B TCI Group Common
Stock or on the basis of a distribution of one class or series of
securities to holders of Series A TCI Group Common Stock and
another class or series of securities to holders of Series B TCI
Group 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 Series B
TCI Group 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 Series A TCI Group Common Stock and the Series B TCI Group
Common Stock), provided that if the securities so distributed
constitute capital stock of a subsidiary of the Company, 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 Series A TCI Group
Common Stock and the Series B TCI Group Common Stock, and
provided in each case that such distribution is otherwise made on
an equal per share basis.
The Company will not reclassify, subdivide or combine the Series A TCI
Group Common Stock without reclassifying, subdividing or combining the Series B
TCI Group Common Stock, on an equal per share basis, and the Company will not
reclassify, subdivide or combine the Series B TCI Group Common Stock without
reclassifying, subdividing or combining the Series A TCI Group Common Stock, on
an equal per share basis.
-12-
<PAGE>
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 Series A Liberty
Media Group Common Stock (or Convertible Securities convertible
into or exercisable or exchangeable for shares of Series A
Liberty Media Group Common Stock) to holders of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common
Stock, on an equal per share basis; or consisting of shares of
Series B Liberty Media Group Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for
shares of Series B Liberty Media Group Common Stock) to holders
of Series A Liberty Media Group Common Stock and Series B Liberty
Media Group Common Stock, on an equal per share basis; or
consisting of shares of Series A Liberty Media Group Common Stock
(or Convertible Securities convertible into or exercisable or
exchangeable for shares of Series A Liberty Media Group Common
Stock) to holders of Series A Liberty Media Group Common Stock
and, on an equal per share basis, shares of Series B Liberty
Media Group Common Stock (or like Convertible Securities
convertible into or exercisable or exchangeable for shares of
Series B Liberty Media Group Common Stock) to holders of Series B
Liberty Media Group Common Stock; and
(ii) a share distribution consisting of any class or series of
securities of the Company 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 Series A TCI
Group Common Stock or Series B TCI Group Common Stock), either on
the basis of a distribution of identical securities, on an equal
per share basis, to holders of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock or on
the basis of a distribution of one class or series of securities
to holders of Series A Liberty Media Group Common Stock and
another class or series of securities to holders of Series B
Liberty Media Group 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 Series B Liberty Media Group 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
-13-
<PAGE>
rights, designation, conversion, redemption and share
distribution provisions between the Series A Liberty Media Group
Common Stock and the Series B Liberty Media Group Common Stock),
provided that if the securities so distributed constitute capital
stock of a subsidiary of the Company, 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 Series A Liberty Media Group
Common Stock and the Series B Liberty Media Group Common Stock,
and provided in each case that such distribution is otherwise
made on an equal per share basis.
The Company will not reclassify, subdivide or combine the Series A
Liberty Media Group Common Stock without reclassifying, subdividing or combining
the Series B Liberty Media Group Common Stock, on an equal per share basis, and
the Company will not reclassify, subdivide or combine the Series B Liberty Media
Group Common Stock without reclassifying, subdividing or combining the Series A
Liberty Media Group Common Stock, on an equal per share basis.
CONVERSION AND REDEMPTION
Conversion at the Option of the Holder. Each share of Series B TCI Group
Common Stock is convertible, at the option of the holder thereof, into one share
of Series A TCI Group Common Stock. Each share of Series B Liberty Media Group
Common Stock is convertible, at the option of the holder thereof, into one share
of Series A Liberty Media Group Common Stock. Any such conversion may be
effected by surrendering the certificate or certificates representing the Series
B TCI Group Common Stock or Series B Liberty Media Group Common Stock to be
converted, duly endorsed, at the office of the Company or its transfer agent,
together with a written notice that such holder elects to convert all or a
specified number of the shares represented by such certificate or certificates
and stating the name or names in which such holder desires the certificate or
certificates deliverable upon conversion to be issued. If so required by the
Company, any certificate for shares surrendered for conversion will be
accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the holder of such shares or the duly authorized representative
of such holder. Such conversion will be deemed to have been made at the close of
business on the date of receipt by the Company or any such transfer agent of the
certificate or certificates, notice and, if required, instruments of transfer
referred to above, and the person or persons entitled to receive the Series A
TCI Group Common Stock or Series A Liberty Media Group Common Stock issuable on
such conversion will be treated for all purposes as the record holder or holders
of such Series A TCI Group Common Stock or Series A Liberty Media Group Common
Stock on that date. Shares of Series A TCI Group Common Stock are not
convertible into shares of Series B TCI Group Common Stock, and shares of Series
A Liberty Media Group Common Stock are not convertible into shares of Series B
Liberty Media Group Common Stock.
Conversion at the Option of the Company. The Board of Directors may at
any time declare that (i) all of the outstanding shares of Series A Liberty
Media Group Common Stock will be converted into a number (or fraction) of fully
paid and nonassessable shares of Series A TCI Group Common Stock equal to the
Optional Conversion Ratio, and (ii) all of the outstanding shares of Series B
Liberty Media Group Common Stock will be converted into a number (or fraction)
of fully paid and nonassessable shares of Series B TCI Group 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 (as defined below) by (y) the
average Market Value of one share of Series A TCI Group Common Stock over the
20-Trading Day period ending on the Trading Day preceding the Appraisal Date (as
defined below).
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
-14-
<PAGE>
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 the
Company 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 the Company (the "First Appraiser") and one designated by a committee of the
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 the 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
-15-
<PAGE>
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.
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 the Company determines to convert shares of Series A Liberty Media
Group Common Stock into Series A TCI Group Common Stock and shares of Series B
Liberty Media Group Common Stock into Series B TCI Group 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 the Company determines
not to undertake such conversion, the Company 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 the
Company 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 the Company of all of the
Company's properties and assets in one transaction or a series of related
transactions in connection with the liquidation, dissolution or winding up of
the Company, (b) a dividend, other distribution or redemption in accordance with
any provision described under "-Dividends," "-Share Distributions,"
-16-
<PAGE>
"-Redemption in Exchange for Stock of Subsidiary" or "-Liquidation Rights," (c)
to any person, entity or group which the Company, directly or indirectly, after
giving effect to the Disposition, controls or (d) in connection with a Related
Business Transaction), the Company is required, on or prior to the 85th Trading
Day following the consummation of such Disposition, to 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 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 assets of the Company 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, then:
(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 Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common
Stock in exchange for cash and/or securities or other property
(other than 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 Series A Liberty
Media Group Common Stock and Series B Liberty Media Group 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 Series A Liberty Media Group Common
Stock and each share of Series B Liberty Media Group 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 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 Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock, such
aggregate amount to be allocated (subject to the provisions
-17-
<PAGE>
described in the last sentence of the paragraph herein which
defines the term "Net Proceeds") to shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group 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 Series A Liberty Media Group 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 Series A
Liberty Media Group Common Stock and each share of Series B
Liberty Media Group Common Stock is the same); or
(iii) convert (A) each outstanding share of Series A Liberty Media
Group Common Stock into a number (or fraction) of fully paid and
nonassessable shares of Series A TCI Group Common Stock and (B)
each outstanding share of Series B Liberty Media Group Common
Stock into a number (or fraction) of fully paid and nonassessable
shares of Series B TCI Group 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 Series A
Liberty Media Group Common Stock to the Market Value of one share
of Series A TCI Group 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" means a portion of such properties and assets that
represents at least 80% of the then-current market value (as determined by the
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 the Company 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 acquiror 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, acquiror 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 Board of Directors. The Related Business
Transaction exception would enable the Company to enter into transactions in
which the properties or assets of the Liberty Media Group may be considered to
be "disposed of" in exchange for equity securities of an entity engaged or
proposing to engage in similar or complementary business areas to those of the
Liberty Media Group while maintaining the capital structure and delineation of
business groups contemplated by the Liberty Media Group Stock Proposal.
-18-
<PAGE>
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. The
effect of using the Adjusted Outstanding Interest Fraction, instead of the
Outstanding Interest Fraction, in the determination of amounts to be paid in
redemption of shares of Liberty Media Group Common Stock following a Disposition
of all of the properties and assets of the Liberty Media Group is to allocate to
the TCI Group a portion of the Net Proceeds of the Disposition, in addition to
the amount so allocated in respect of any Inter-Group Interest, sufficient to
provide for the delivery of the portion of the consideration deliverable by the
Company upon any post-Disposition conversion, exercise or exchange of Pre-
Distribution Convertible Securities that is in substitution for shares of
Liberty Media Group Common Stock that would have been issuable upon such
conversion, exercise or exchange if it had occurred prior to such Distribution
and to make similar provision for the Company's obligation in respect of any
Committed Acquisition Shares that remain issuable. To the extent such Pre-
Distribution Convertible Securities and Committed Acquisition Shares are
included in the determination of the Adjusted Outstanding Interest Fraction, the
Company's obligations in respect of such securities would not be a reduction in
the calculation of Net Proceeds. In the event any redemption of the Liberty
Media Group Common Stock or conversion of the Liberty Media Group Common Stock
into TCI Group Common Stock is made in circumstances in which securities or
property are allocated to the TCI Group in respect of Pre-Distribution
Convertible Securities, Committed Acquisition Shares or other Convertible
Securities entitled to receive such securities or property upon conversion,
exercise or exchange (such securities or other property, the "Reserved
Property"), the TCI Group will segregate and hold such property separate (in the
case of any Reserved Property other than TCI Group Common Stock), or duly
reserve shares of TCI Group Common Stock issuable upon such conversion, exercise
or exchange, for the benefit of the holders of Pre-Distribution Convertible
Securities, Committed Acquisition Shares or other Convertible Securities. In the
event the holders of any such Pre-Distribution Convertible Securities or other
Convertible Securities do not convert, exercise or exchange such securities
prior to the expiration of any conversion or exercise right or the retirement of
such security, or the acquisition relating to such Committed Acquisition Shares
is not consummated (or any Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares are not converted,
exercised or exchanged), then the Reserved Property will revert to the TCI Group
and the former holders of Liberty Media Group Common Stock will have no interest
in such Reserved Property.
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 the Company 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 the Company'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 Preferred Stock
attributed to the Liberty Media Group. The Company may elect to pay the dividend
or redemption price referred to in clause (i) or (ii) of the first paragraph
under "--Mandatory Dividend, Redemption or Conversion of Liberty Media Group
Common Stock" 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 Common Stock) that the 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 the Company, the 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 Series A Liberty Media Group Common Stock and another
class or series of securities to holders of Series B Liberty Media Group 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 Series B Liberty Media Group
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 Series A
Liberty Media Group Common Stock and the Series B Liberty Media Group Common
Stock), provided that if such securities constitute capital stock of a
subsidiary of the Company, 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 Series A Liberty Media
Group Common Stock and the Series B Liberty Media Group Common Stock, and
otherwise such securities will be distributed on an equal per share basis, or
-19-
<PAGE>
(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
Series A Liberty Media Group Common Stock and Series B Liberty Media Group
Common Stock.
The option to convert the Liberty Media Group Common Stock into TCI Group
Common Stock in the event of a Disposition provides the Company with additional
flexibility by allowing the Company to deliver consideration in the form of
shares of TCI Group Common Stock rather than cash or securities or other
properties. This alternative could be used, for example, in circumstances when
the Company did not have sufficient legally available assets under the DGCL to
pay the full amount of an otherwise required dividend or redemption or when the
Company desired to retain such proceeds.
If less than substantially all of the properties and assets of the Liberty
Media Group were disposed of by the Company in one transaction (even if an
additional transaction were consummated at a later time in which additional
properties and assets of the Liberty Media Group were disposed of by the
Company, which, together with the properties and assets disposed of in the first
transaction, would have constituted substantially all of the properties and
assets of the Liberty Media Group at the time of the first transaction), the
Company would not be required to pay a dividend on, redeem or convert the
outstanding shares of Liberty Media Group Common Stock, unless such transactions
constituted a series of related transactions. The second transaction, however,
could trigger such a requirement if, at the time of the second transaction, the
properties and assets disposed of in such transaction constituted at least
substantially all of the properties and assets of the Liberty Media Group at
such time. If less than substantially all of the properties and assets of the
Liberty Media Group were disposed of by the Company, the holders of the Liberty
Media Group Common Stock would not be entitled to receive any dividend or have
their shares redeemed or converted for TCI Group Common Stock, although the
Board of Directors could determine, in its sole discretion, to pay a dividend on
the Liberty Media Group Common Stock in an amount related to the proceeds of
such Disposition.
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 have become
and continue to be held directly or indirectly by any one or more corporations
all of the capital stock of which is owned by the Company (the "Liberty Media
Group Subsidiaries"), the Board of Directors may, subject to the availability of
assets of the Company 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. The effect of
using the Adjusted Outstanding Interest Fraction, instead of the Outstanding
Interest Fraction, in the determination of the shares of the Liberty Media Group
Subsidiaries deliverable in such a redemption is to allocate to the TCI Group a
portion of the shares of the Liberty Media Group Subsidiaries, in addition to
the number of such shares so allocated in respect of any Inter-Group Interest,
sufficient to provide for the delivery of the portion of the consideration
deliverable by the Company upon any post-redemption conversion, exercise or
exchange of Pre-Distribution Convertible Securities that become so payable in
substitution for shares of Liberty Media Group Common Stock that would have been
issuable upon such conversion, exercise or exchange if it had occurred prior to
such redemption and to make similar provision for the Company's obligations in
respect of any Committed Acquisition Shares that remain issuable.
In effecting such a redemption, the Board of Directors may determine
either to (i) redeem shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group 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 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 Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock, with holders of shares of Series
B Liberty Media Group Common Stock receiving the class or series having the
higher relative voting rights, or (ii) redeem shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group 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 the Company 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
-20-
<PAGE>
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 the Company
or the 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 the Company or the 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 the Company 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," the Company will announce publicly by press release (i) the Net Proceeds
of such Disposition, (ii) the number of outstanding shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock, (iii)
the number of shares of Series A Liberty Media Group Common Stock and Series B
Liberty Media Group 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
Committed Acquisition Shares) and the number of Committed Acquisition Shares
issuable, (iv)
-21-
<PAGE>
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,
the Company 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.
If the Company determines to pay a dividend described in clause (i) of
the first paragraph under "-Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock," the Company will, not later than the 30th
Trading Day following the consummation of such Disposition, cause to be given to
each holder of outstanding shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group 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) the record date for
determining holders entitled to receive such dividend, which will be not earlier
than the 40th Trading Day and not later than the 50th Trading Day following the
consummation of such Disposition, (ii) the anticipated payment date of such
dividend (which will not be more than 85 Trading Days following the consummation
of such Disposition), (iii) the kind of shares of capital stock, cash and/or
other securities or property to be distributed in respect of shares of Series A
Liberty Media Group Common Stock and Series B Liberty Media Group Common Stock,
(iv) the Net Proceeds of such Disposition, (v) the Outstanding Interest Fraction
as of a recent date preceding the date of such notice, (vi) the number of
outstanding shares of Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock and the number of shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group Common Stock into or
for which outstanding Convertible Securities are then convertible, exercisable
or exchangeable and the conversion, exercise or exchange prices thereof and
(vii) 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 such dividend only if they appropriately convert, exercise or exchange
them prior to the record date referred to in clause (i) of this sentence. Such
notice will be sent by first-class mail, postage prepaid, at such holder's
address as the same appears on the transfer books of the Company.
If the Company determines to undertake a redemption of shares of Liberty
Media Group Common Stock following a Disposition of all (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," the Company will
cause to be given to each holder of outstanding shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group 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) a statement that all shares of Liberty Media Group Common Stock outstanding
on the redemption date will be redeemed, (ii) the
-22-
<PAGE>
redemption date (which will not be more than 85 Trading Days following the
consummation of such Disposition), (iii) the kind of shares of capital stock,
cash and/or other securities or property to be paid as a redemption price in
respect of shares of Liberty Media Group Common Stock outstanding on the
redemption date, (iv) the Net Proceeds of such Disposition, (v) the Adjusted
Outstanding Interest Fraction as of a recent date preceding the date of such
notice, (vi) the place or places where certificates for shares of Liberty Media
Group Common Stock, properly endorsed or assigned for transfer (unless the
Company waives such requirement), are to be surrendered for delivery of
certificates for shares of such capital stock, cash and/or other securities or
property, (vii) the number of outstanding shares of Series A Liberty Media Group
Common Stock and Series B Liberty Media Group Common Stock and the number of
shares of Series A Liberty Media Group Common Stock and Series B Liberty Media
Group 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 (viii) 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 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 provision described under "-Certain Provisions Respecting Convertible
Securities" if such holders convert, exercise or exchange such Convertible
Securities following such 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 the Company.
If the Company determines to undertake a redemption of 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," the Company will, not later
than the 30th Trading Day following the consummation of such Disposition, cause
to be given to each holder of record of outstanding shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group 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) a date not earlier than the 40th Trading Day and not later
than the 50th Trading Day following the consummation of such Disposition which
will be the date on which shares of the Liberty Media Group Common Stock then
outstanding will be selected for redemption, (ii) the anticipated redemption
date (which will not be more than 85 Trading Days following the consummation of
such Disposition), (iii) the kind of shares of capital stock, cash and/or other
securities or property to be paid as a redemption price in respect of shares of
Liberty Media Group Common Stock selected for redemption, (iv) the Net Proceeds
of such Disposition, (v) the Outstanding Interest Fraction as of a recent date
preceding the date of
-23-
<PAGE>
such notice, (vi) the number of outstanding shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock and the number
of shares of Series A Liberty Media Group Common Stock and Series B Liberty
Media Group Common Stock into or for which outstanding Convertible Securities
are then convertible, exercisable or exchangeable and the conversion or exercise
prices thereof, (vii) 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 selection for redemption only
if such holders appropriately convert, exercise or exchange such Convertible
Securities on or prior to the date referred to in clause (i) 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 if such holders
convert, exercise or exchange such Convertible Securities following such date
and (viii) a statement that the Company 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 referred to in clause (i) of this sentence.
Promptly following the date referred to in clause (i) of the preceding sentence,
but not earlier than the 40th Trading Day and not later than the 50th Trading
Day following the consummation of such Disposition, the Company will cause to be
given to each holder of shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group Common Stock to be redeemed, a notice setting forth
(i) the number of shares of Series A Liberty Media Group Common Stock and Series
B Liberty Media Group Common Stock held by such holder to be redeemed, (ii) a
statement that such shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group 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 the Company 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 notices
referred to in this paragraph will be sent by first-class mail, postage prepaid,
at such holder's address as the same appears on the transfer books of the
Company. The outstanding shares of Liberty Media Group Common Stock to be
redeemed will be redeemed by the Company pro rata among the holders of Liberty
Media Group Common Stock or by such other method as may be determined by the
Board of Directors to be equitable.
In the event of any conversion as described above under "-Conversion at
the Option of the Company" or "-Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock," the Company will cause to be given to each
holder of outstanding shares of Series A Liberty Media Group Common Stock and
Series B Liberty Media Group 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
converted, (ii) the conversion date (which will not be more than 85 Trading Days
following the consummation of such Disposition in the event of a conversion
pursuant to the provisions described under "-Mandatory Dividend,
-24-
<PAGE>
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 a conversion
pursuant to the provisions described under "-Conversion at the Option of the
Company"), (iii) the per share number of shares of Series A TCI Group Common
Stock or Series B TCI Group Common Stock, as applicable, to be received with
respect to each share of Series A Liberty Media Group Common Stock or Series B
Liberty Media Group Common Stock, including details as to the calculation
thereof, (iv) the place or places where certificates for shares of Liberty Media
Group Common Stock, properly endorsed or assigned for transfer (unless the
Company waives such requirement), are to be surrendered, (v) the number of
outstanding shares of Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock, the number of Committed Acquisition Shares
issuable and the number of shares of Series A Liberty Media Group Common Stock
and Series B Liberty Media Group Common Stock into or for which outstanding
Convertible Securities are then convertible, exercisable or exchangeable and the
conversion, exercise or exchange prices thereof 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 participate in such conversion
only if such holders appropriately convert, exercise or exchange such
Convertible Securities on or prior to the conversion 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 provision described under "-Certain Provisions Respecting
Convertible Securities" if such holders convert, exercise or exchange such
Convertible Securities following such conversion 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 conversion date, at such holder's address as
the same appears on the transfer books of the Company.
If the Company determines to redeem shares of Series A Liberty Media
Group Common Stock and Series B Liberty Media Group Common Stock as described
above under "-Redemption in Exchange for Stock of Subsidiary," the Company will
promptly cause to be given to each holder of Series A Liberty Media Group Common
Stock and Series B Liberty Media Group 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 the Company 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 Series A Liberty Media Group Common Stock and Series B
Liberty Media Group Common Stock and the number of shares of Series A Liberty
Media Group Common Stock and Series B Liberty Media Group 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
-25-
<PAGE>
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 the Company.
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.
The Company 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), the Company 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, the Company 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 the Company, 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 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 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
-26-
<PAGE>
distribution, notwithstanding the conversion or redemption of such shares or the
Company'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 the Company
will specify certificates for such shares, properly endorsed or assigned for
transfer (unless the Company waives such requirement). The Company 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, the Company will issue and deliver a
new certificate for the shares of Liberty Media Group Common Stock not redeemed.
The Company 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 the Company as being held for the satisfaction of the
Company'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
-27-
<PAGE>
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, the Company 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.
The Company 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. The Company will not, however, be
required to pay any tax that may be 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 the Company the amount of any
such tax, or has established to the satisfaction of the Company that such tax
has been paid.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the Company and subject to the prior payment in
full of the preferential amounts to which any class or series of 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 the Company
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 the Company 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 Series A TCI Group
Common Stock and the Series B TCI Group Common Stock, Y is the aggregate Market
Capitalization of the Series A Liberty Media Group Common Stock and the Series B
Liberty Media Group Common Stock, and Z is the aggregate Market Capitalization
of the Series A TCI Group Common Stock, the Series B TCI Group Common Stock, the
Series A Liberty Media Group Common Stock and the Series B Liberty Media Group
Common Stock. Neither a consolidation, merger nor sale of assets will be
construed to be a "liquidation," "dissolution" or "winding up." The "Market
Capitalization" of any class or series of capital stock of the Company 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.
-28-
<PAGE>
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 the Company.
DETERMINATIONS BY THE BOARD OF DIRECTORS
The Charter provides that any determinations made by the Board of
Directors under any provision described under "-TCI Group Common Stock and
Liberty Media Group Common Stock" will be final and binding on all stockholders
of the Company, 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 Board of Directors. The Company will prepare a
statement of any such determination by the Board of Directors respecting the
fair market value of any properties, assets or securities and will file such
statement with the Secretary of the Company.
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 the Company.
PREFERRED STOCK
As of August 31, 1995, 1,620,026 shares of Class B Preferred Stock,
70,559 shares of Series C Preferred Stock, 1,000,000 shares of Series D
Preferred Stock and 277,064 shares of Series F Preferred Stock were 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 Preferred Stock. All of the 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 may not be reissued as Series E Preferred Stock. As of August 31, 1995, all
of the outstanding shares of Series F Preferred Stock were held by subsidiaries
of the Company.
CLASS B 6% CUMULATIVE REDEEMABLE EXCHANGEABLE JUNIOR PREFERRED STOCK
Subject to the prior preferences and other rights of any class or series
of 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 preferential cumulative dividends, when and as declared by the Board of
Directors out of unrestricted funds legally available therefor. Dividends accrue
cumulatively (but without compounding) at an annual rate of 6% of the stated
liquidation value of $100 per share (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 Board of Directors, may be declared and paid in cash, in shares of Series A
TCI Group 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 Series
A TCI Group Common Stock or any combination thereof at any time
-29-
<PAGE>
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 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 the Company, the
holders of Class B Preferred Stock will be entitled, after payment of
preferential amounts on any class or series of Preferred Stock ranking prior to
the Class B Preferred Stock with respect to liquidating distributions, to
receive from the assets of the Company 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 prior preferences and other rights of any class or series
of Preferred Stock, the Class B Preferred Stock is redeemable at the option of
the Company, 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. The Company 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 the Company
in whole but not in part at any time for junior subordinated debt securities of
the Company ("Junior Exchange Notes"). If the Company 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 the Company, 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 and junior to the Series C Preferred
Stock, the Series D Preferred Stock and the Series F Preferred Stock as to
dividend rights, rights to redemption and rights on liquidation.
-30-
<PAGE>
For so long as any dividends are in arrears on the Class B Preferred
Stock or any class or series of 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 the Company 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 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, the Company 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 the
Company 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, the Company 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 the Company 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 the Company 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 the Company 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 holders of TCI Group Common Stock and Liberty Media Group
Common Stock, on the basis of one vote per share, in any general election of
directors of the Company.
-31-
<PAGE>
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 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 Series A TCI Group Common Stock and 25 shares of
Series A Liberty Media Group 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 are legally
or contractually available for payment of dividends, except that if the Company
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 the Company, holders
of the Series C Preferred Stock will be entitled to receive from the assets of
the Company available for distribution to stockholders an amount in cash, per
share, equal to the liquidation value of the Series C Preferred Stock.
-32-
<PAGE>
The Series C Preferred Stock is subject to optional redemption by the
Company 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 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 the Company, the Series C Preferred Stock
is required to be redeemed by the Company at any time 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 and on a
parity basis with the Series D Preferred Stock and the Series F 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, the Company 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, the Company 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 the Company 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 the Company 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, the Company may not redeem any junior stock, or
otherwise acquire any shares of such stock or Series C Preferred Stock, except
that the Company 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 the Company 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.
-33-
<PAGE>
SERIES D CONVERTIBLE PREFERRED STOCK
Each share of Series D Preferred Stock is convertible, at the option of
the holder, into 10 shares of Series A TCI Group Common Stock and two and one-
half shares of Series A Liberty Media Group Common Stock, subject to anti-
dilution adjustments. If the Company distributes to holders of Class A Common
Stock rights or warrants to subscribe for or purchase shares of the capital
stock of the Company (other than shares of Class A Common Stock or Class B
Common Stock) or a subsidiary of the Company, 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 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 antidilution 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 the payment of dividends, except that if the Company fails to redeem shares
of Series D Preferred Stock required to be redeemed on a redemption date,
dividends thereafter 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 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
-34-
<PAGE>
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 the Company, holders
of the Series D Preferred Stock will be entitled to receive from the assets of
the Company 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 the
Company 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 the Company 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 Class A Common Stock has
exceeded $37.50 for the period specified in the Certificate of Designations
establishing the Series D Preferred Stock. Subject to the prior preferences and
other rights of any other class or series of 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 the Company, any holder of Series D Preferred Stock, at such holder's option,
may require the Company, 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 the
Company 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 shares of 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 the Company 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 and the Class B Preferred Stock and on a
parity basis with the Series C Preferred Stock and the Series F 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, the Company may not redeem or otherwise acquire any
-35-
<PAGE>
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, the
Company 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 the Company 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 the Company 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, the Company
may not redeem any junior stock, or otherwise acquire any shares of such stock
or Series D Preferred Stock, except that the Company 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% of the
aggregate liquidation value of the Series D Preferred Stock, the Company may not
create any series of 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 Series A TCI Group Common Stock at a rate of 1287.51 shares of
Series A TCI Group 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 the Company or a subsidiary of the
Company will automatically be converted into shares of Series A TCI Group 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 Series A TCI
Group Common Stock in shares of Series A TCI Group Common Stock, by adjusting
the then-current conversion rate such that the holder of Series F Preferred
Stock thereafter surrendered for conversion would receive the number of shares
of Series A TCI Group 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 Series A TCI Group Common Stock of any securities,
evidences of indebtedness or other assets (other than cash dividends or shares
of Series A TCI Group 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 Series A TCI Group Common Stock
and the denominator
-36-
<PAGE>
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 Series A TCI Group Common
Stock, with respect to any cash dividends or distributions declared and paid on
the Series A TCI Group Common Stock. Dividends or distributions on the Series A
TCI Group 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 the Company, holders
of the Series F Preferred Stock are entitled to receive from the assets of the
Company 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 Series A TCI
Group 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 the
Company 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. The Company 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 Series A TCI Group
Common Stock equal to the aggregate redemption price (or designated portion
thereof) of such shares divided by the average market price of the Series A TCI
Group 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
and Liberty Media Group Common Stock and the Class B Preferred Stock and on a
parity with the Series C Preferred Stock and the Series D Preferred Stock as to
dividend rights, rights to redemption and rights on liquidation.
If at any time the Company 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 the Company declares a cash dividend on the shares of
Series A TCI Group 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) the Company 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 the Company
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
-37-
<PAGE>
required to be redeemed under such circumstances are redeemed. If the Company
fails to redeem shares of Series F Preferred Stock required to be redeemed on a
redemption date, the Company 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 the Company 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 the Company 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 will not prevent the Company 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 the Company.
OTHER MATTERS
The DGCL, the Charter and the Company's Bylaws contain provisions which
may serve to discourage or make more difficult a change in control of the
Company without the support of the 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
-38-
<PAGE>
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 by more than 2,000 stockholders. The Charter does not contain any
provision "opting out" of the application of DGCL Section 203 and the Company
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 the Company and any of its "interested stockholders."
The Charter also contains certain provisions which could make a change
in control of the Company more difficult. For example, the Charter requires,
subject to the rights, if any, of any class or series of 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 the Company 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 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 the Company or (iii) the dissolution of the Company. "Voting
Securities" is currently defined as the TCI Group Common Stock, the Liberty
Media Group Common Stock and any class or series of Preferred Stock entitled to
vote generally with the holders of Common Stock on matters submitted to
stockholders for a vote. The Charter also provides for a Board of Directors of
not less than three members, divided into three classes of approximately equal
size, with each class to be elected for a three-year term at each annual meeting
of stockholders. The exact number of directors is fixed by the Board of
Directors. The holders of TCI Group Common Stock, Liberty Media Group Common
Stock, Class B Preferred Stock and Series C
-39-
<PAGE>
Preferred Stock, voting together as a single class, vote in elections for
directors. (The holders of the Company's Series F Preferred Stock are entitled
to vote in the election of directors; however, the DGCL prohibits the voting of
such shares because such shares are held by subsidiaries of the Company.)
Stockholders of the Company do not have cumulative voting rights.
The Charter authorizes the issuance of 50,000,000 shares of Series
Preferred Stock. Under the Charter, the Board of Directors is authorized,
without further action by the stockholders of the Company, 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
Charter. The issue and sale of shares of TCI Group Common Stock, Liberty Media
Group Common Stock and/or Series Preferred Stock that are authorized and
available for issuance could occur in connection with an attempt to acquire
control of the Company, and the terms of such shares of Series Preferred Stock
could be designed in part to impede the acquisition of such control.
The 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 Charter or the addition or insertion of other provisions therein. See "TCI
Group Common Stock and Liberty Media Group Common Stock -- Voting Rights."
The Charter and the Company'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 Preferred Stock, upon the call of the Secretary of the
Company 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 Board of Directors.
Subject to the rights of any class or series of Preferred Stock, the Company'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 the Company, at the
Company'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
the Company'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 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 Board of Directors; and (5) the consent of each nominee to
serve as a director of the Company if so
-40-
<PAGE>
elected. Any actions to remove directors are required to be for "cause" (as
defined in the 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.
-41-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
------------------------------------------
Stephen M. Brett
Executive Vice President and Secretary
Date: October 25, 1995
-42-
