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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-00717
PROSPECTUS
Tele-Communications, Inc.
Tele-Communications, Inc. Series A TCI Group Common Stock ($1.00 par value)
Tele-Communications, Inc. Series A Liberty Media Group Common Stock ($1.00 par
value)
This Prospectus relates to (i) an aggregate of 5,000,000 shares (the "TCI
Group Shares") of the Tele-Communications, Inc. Series A TCI Group Common
Stock, par value $1.00 per share (the "TCI Group Series A Common Stock"), of
Tele-Communications, Inc., a Delaware corporation (the "Company" or "TCI"),
and (ii) an aggregate of 1,250,000 shares (the "Liberty Group Shares," and
collectively with the TCI Group Shares, the "Shares") of Tele-Communications,
Inc. Series A Liberty Media Group Common Stock, par value $1.00 per share (the
"LMG Series A Common Stock"), of the Company to be offered and sold from time
to time by the holders thereof (the "Selling Stockholders"). The Selling
Stockholders currently own shares of TCI Group Series A Common Stock and LMG
Series A Common Stock, as well as shares of the Company's Convertible
Preferred Stock, Series D (the "Series D Preferred Stock"), which shares are
convertible into shares of TCI Group Series A Common Stock and LMG Series A
Common Stock. Accordingly, the Shares covered by this Prospectus include both
presently issued and outstanding shares and those issuable upon conversion of
shares of Series D Preferred Stock. The aggregate number of shares of TCI
Group Series A Common Stock and LMG Series A Common Stock currently owned by
the Selling Stockholders and issuable to them upon conversion of the Series D
Preferred Stock exceed the number of Shares covered by this Prospectus. See
"Selling Stockholders."
On August 3, 1995, the Company's Restated Certificate of Incorporation
was amended to, among other things, (i) redesignate the Company's Class A
Common Stock, par value $1.00 per share ("Class A Common Stock"), as TCI Group
Series A Common Stock and the Company's Class B Common Stock, par value $1.00
per share, as Tele-Communications, Inc. Series B TCI Group Common Stock, par
value $1.00 per share (the "TCI Group Series B Common Stock" and, together
with the TCI Group Series A Common Stock, the "TCI Group Common Stock"), and
(ii) authorize two additional series of the Company's common stock, designated
as LMG Series A Common Stock and the Tele-Communications, Inc. Series B
Liberty Media Group Common Stock, par value $1.00 per share (the "LMG Series B
Common Stock" and, together with the LMG Series A Common Stock, the "Liberty
Media Group Common Stock"). Thereafter, the Company distributed to holders of
TCI Group Common Stock one-fourth of a share of the corresponding series of
Liberty Media Group Common Stock in respect of each share of TCI Group Common
Stock held of record as of August 4, 1995, the record date for the
distribution.
Both series of TCI Group Common Stock are identical in all respects,
except (i) each share of TCI Group Series B Common Stock has ten votes and
each share of TCI Group Series A Common Stock has one vote and (ii) each share
of TCI Group Series B Common Stock is convertible, at the option of the
holder, into one share of TCI Group Series A Common Stock. Similarly, both
series of Liberty Media Group Common Stock are identical in all respects,
except (i) each share of LMG Series B Common Stock has ten votes and each
share of LMG Series A Common Stock has one vote and (ii) each share of LMG
Series B Common Stock is convertible, at the option of the holder, into one
share of LMG Series A Common Stock. The shares of TCI Group Series A Common
Stock and LMG Series A Common Stock are not convertible into the shares of TCI
Group Series B Common Stock and LMG Series B Common Stock, respectively.
Shares of the TCI Group Series A Common Stock, the TCI Group Series B
Common Stock, the LMG Series A Common Stock and the LMG Series B Common Stock
are traded on the Nasdaq National Market under the symbols "TCOMA," "TCOMB,"
"LBTYA" and "LBTYB," respectively.
SEE "RISK FACTOR" ON PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE SHARES OFFERED HEREBY.
(continued)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is August 1, 1996.
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Each of the TCI Group Shares and the Liberty Group Shares may be offered
for sale and sold by the Selling Stockholders from time to time in varying
amounts, including in block transactions, on the Nasdaq National Market at
then prevailing prices or in private transactions at prices and on terms to be
determined at the time of sale. The Shares may be sold by the Selling
Stockholders directly, through an underwritten offering, through agents
designated from time to time or to or through broker-dealers designated from
time to time. To the extent required, the number and series of Shares to be
sold, the name of the Selling Stockholder, the purchase price, the public
offering price, if applicable, the name of any such agent or broker-dealer,
and any applicable commissions, discounts or other items constituting
compensation to such underwriters, agents or broker-dealers with respect to a
particular offering will be set forth in a supplement or supplements to this
Prospectus (each, a "Prospectus Supplement"). The aggregate proceeds to the
Selling Stockholders from the sale of the Shares so offered will be the
purchase price of the Shares sold less (i) the aggregate commissions,
discounts and other compensation, if any, paid by the Selling Stockholders to
underwriters, agents or broker-dealers and (ii) certain other expenses of the
offering and sale of the Shares that will be the responsibility of the Selling
Stockholders. See "Selling Stockholders". The Selling Stockholders may also
sell all or a portion of the Shares in transactions under Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act"), or as otherwise
permitted under the Securities Act. See "Plan of Distribution". The Company
will not receive any proceeds from the sale of the Shares. The Company knows
of no selling arrangement between any underwriter, agent or broker-dealer and
the Selling Stockholders.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any discount or commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act, with respect to the Shares. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information pertaining to the
Shares and the Company, reference is made to the Registration Statement.
Statements contained herein or in any document incorporated herein by
reference concerning the provisions of any contract or other document are
not necessarily complete and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document. Each such statement is
qualified in its entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Commission. Reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661; and at Suite 1300, 7 World Trade Center, New
York, New York 10048; and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants (including the Company) that file
electronically with the Commission. The address of the Commission's Web
site is http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
under the Exchange Act and are hereby incorporated into this Prospectus
by reference and made a part hereof (Commission File No. 0-20421): (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (as amended by Form 10-Q//A (Amendment No. 1)), (iii) the
Company's Current Reports on Form 8-K, dated February 9, 1996, June 19,
1996 and July 2, 1996 and (iv) the financial statements and notes thereto
of Cablevision (a combination of certain cable television assets of
Cablevision S.A., Televisora Belgrano S.A., Construred S.A., and Univent's
S.A.) as of December 31, 1994 and 1993, and for each of the years in the
three-year period ended December 31, 1994, which appear in the Current
Report on Form 8-K of the Company, dated April 20, 1995 (as amended by Form
8-K/A (Amendment No. 1)).
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the termination of the offering of the Shares described
in this Prospectus shall be deemed to be incorporated herein by reference
and to be a part hereof from the respective dates of the filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated by reference herein,
other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into the documents that this
Prospectus incorporates). Such requests should be addressed to Stephen M.
Brett, Esq., Executive Vice President and General Counsel, Tele-
Communications, Inc., Terrace Tower II, 5619 DTC Parkway, Englewood,
Colorado 80111-3000; telephone (303) 267-5500.
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RISK FACTOR
The Company incurred net losses of $171 million and $5 million for the
years ended December 31, 1995 and 1993, respectively, and a net loss of
$118 million for the three months ended March 31, 1996. The Company had net
earnings of $62 million for the year ended December 31, 1994, and a net
loss of $45 million for the three months ended March 31, 1995.
Notwithstanding the losses it has incurred, the Company has been able to,
and expects to continue to be able to, satisfy its debt service and other
obligations as and when they become due. The Company's operating cash flow
(operating income before depreciation, amortization and other non-cash
credits or charges) ($1,975 million, $1,798 million and $1,858 million for
the years ended December 31, 1995, 1994 and 1993, respectively, and $537
million and $464 million for the three months ended March 31, 1996 and
1995, respectively) has historically been sufficient to cover its interest
expense ($1,010 million, $785 million and $731 million for the years ended
December 31, 1995, 1994 and 1993, respectively, and $261 million and $240
million for the three months ended March 31, 1996 and 1995, respectively).
The Company's interest coverage ratios for the years ended December 31,
1995, 1994 and 1993 were 196%, 229% and 254%, respectively and for the
three months ended March 31, 1996 and 1995 were 206% and 193%,
respectively. Operating cash flow is a measure of value and borrowing
capacity within the cable television industry and is not intended to be a
substitute for cash flows provided by operating activities, a measure of
performance prepared in accordance with generally accepted accounting
principles, and should not be relied upon as such. Operating cash flow, as
defined, does not take into consideration substantial costs of doing
business, such as interest expense, and should not be considered in
isolation to other measures of performance.
Another measure of liquidity is net cash provided by operating activities
as reflected in the Company's consolidated statements of cash flows. Net
cash provided by operating activities ($957 million, $908 million and
$1,247 million for the years ended December 31, 1995, 1994 and 1993,
respectively, and $317 million and $151 million for the three months ended
March 31, 1996 and 1995, respectively) reflects net cash from the
operations of the Company available for the Company's liquidity needs after
taking into consideration the aforementioned substantial costs of doing
business not reflected in operating cash flow. Amounts expended by the
Company for its investing activities exceed net cash provided by operating
activities.
THE COMPANY
The Company, through its subsidiaries and affiliates, is principally
engaged in the construction, acquisition, ownership and operation of cable
television systems and the provision of satellite-delivered video
entertainment, information and home shopping programming services to
various video distribution media, principally cable television systems.
The Company is one of the largest providers of cable television services in
the United States. The Company also has interests in cable and
telecommunications operations and television programming in certain
international markets, as well as investments in companies and joint
ventures involved in developing and providing programming for new
television and telecommunications technologies. The Company is principally
organized into four principal business groups: Domestic Tele-Communications
and Distribution; Programming; International Cable and Programming; and
Technology/Venture Capital. The Company is a Delaware corporation and its
principal executive offices are located at Terrace Tower II, 5619 DTC
Parkway, Englewood, Colorado 80111-3000; telephone (303) 267-5500.
SELLING STOCKHOLDERS
The Selling Stockholders are Frank Batten, as trustee of the Frank Batten
Trust and as trustee under the will of Fay M. Slover (collectively, the
"Trusts"), and Richard D. Roberts. The TCI Group Shares initially were
acquired as shares of Class A Common Stock (prior to the redesignation of
such shares into shares of TCI Group Series A Common Stock) by the Selling
Stockholders pursuant to that certain Agreement and Plan of Merger, dated
August 8, 1994, by and among the Company, TCI Communications, Inc. ("TCIC")
and TeleCable Corporation (the "Agreement") pursuant to which
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TeleCable Corporation ("TeleCable") was merged with and into TCIC (the
"Merger"). Mr. Batten was Chairman of the Board and Mr. Roberts was
President and Chief Executive Officer of TeleCable prior to the Merger.
All of the Liberty Group Shares were acquired by the Selling Stockholders
in connection with the Company's distribution to the holders of record of
TCI Group Common Stock on August 4, 1995 (the record date for such
distribution), of one-fourth of a share of the corresponding series of
Liberty Media Group Common Stock in respect of each share of TCI Group
Common Stock held as of such record date.
As of July 1, 1996, the Frank Batten Trust owned 7,657,050 shares of
TCI Group Series A Common Stock, 1,946,761 shares of LMG Series A Common
Stock and 184,538 shares of Series D Preferred Stock (which shares as of
such date were convertible at the option of the holder into 1,845,380
shares of TCI Group Series A Common Stock and 461,345 shares of LMG Series
A Common Stock); the Fay M. Slover Trust owned 6,067,801 shares of TCI
Group Series A Common Stock, 1,536,950 shares of LMG Series A Common Stock,
254,940 shares of Series D Preferred Stock (which shares as of such date
were convertible at the option of the holder into 2,549,400 shares of TCI
Group Series A Common Stock and 637,350 shares of LMG Series A Common
Stock); and Richard D. Roberts owned 872,686 shares of TCI Group Series A
Common Stock, 218,171 shares of LMG Series A Common Stock and 20,681 shares
of Series D Preferred Stock (which shares as of such date were convertible
at the option of the holder into 206,810 shares of TCI Group Series A
Common Stock and 51,702.5 shares of LMG Series A Common Stock). Mr. Batten
does not own individually any shares of TCI Group Common Stock, Liberty
Media Group Common Stock or Series D Preferred Stock; however, Mr. Batten
may be deemed to be the beneficial owner of the shares held by the Trusts
by virtue of his duties as trustee of each of the Trusts. The Selling
Stockholders may sell the Shares under the Registration Statement of which
this Prospectus forms a part, in transactions under Rule 145 under the
Securities Act, or as otherwise permitted under the Securities Act.
The Company has agreed to register the resale by the Selling
Stockholders for a period of three years after the effective date of the
Merger (the "Effective Date") with respect to, at all times, 5,000,000
shares of TCI Group Series A Common Stock and 1,250,000 shares of LMG
Series A Common Stock received by the Selling Stockholders pursuant to the
Merger or upon conversion of shares Series D Preferred Stock received by
them pursuant to the Merger. In addition, in connection with the closing
of the Merger, the Company and Frank Batten, as trustee of the Trusts and
as agent for the other former TeleCable shareholders and Mr. Roberts,
entered into a registration rights agreement pursuant to which Mr. Batten,
as trustee of the Trusts and as agent for the other former TeleCable
shareholders and Mr. Roberts, have the right to cause the Company to
register, on not more than two occasions, all of the shares of TCI Group
Series A Common Stock and LMG Series A Common Stock issued to them as a
result of the Merger and TCI Group Series A Common Stock and LMG Series A
Common Stock issuable upon conversion of Series D Preferred Stock issued to
them as a result of the Merger. The registration rights agreement also
entitles Mr. Batten, as trustee of the Trusts and as agent for the other
TeleCable shareholders and Mr. Roberts to certain "piggyback" registration
rights.
Under the Severance Plan Covering Key Employees of TeleCable
Corporation and its subsidiaries (the "Severance Plan"), Richard D. Roberts
became entitled to three weeks of severance pay for each complete year of
service with TeleCable or any of its subsidiaries or affiliates in the
event of the termination of his employment following the Merger. Mr.
Roberts' employment was terminated immediately following the Merger and he
thus became entitled to severance payments of approximately $1,178,509.
Such benefits under the Severance Plan are being paid to Mr. Roberts in
installments as specified therein.
Under the Agreement, the Company has agreed to cause TCIC to
continue to provide indemnification to Messrs. Batten and Roberts for a
period of six years after the Effective Date to the fullest extent
permitted by applicable law, to the extent that they would have been
indemnified under the TeleCable charter and bylaws in effect at the
Effective Date. The Company has guaranteed unconditionally full payment
and performance of such indemnification. The Selling Stockholders have
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not had any position, office or other material relationship within the past
three years with the Company or any of its predecessors or affiliates other
than as described above.
PLAN OF DISTRIBUTION
The Shares may be offered for sale and sold by the Selling Stockholders
in one or more transactions, including block transactions, at a fixed price
or prices (which may be changed) at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at prices
determined on a negotiated or competitive bid basis. The Shares may be
sold by the Selling Stockholders directly, through an underwritten
offering, through agents designated from time to time or to or through
broker-dealers designated from time to time.
If any Shares are sold in an underwritten offering, such Shares may be
acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Unless otherwise indicated in the
applicable Prospectus Supplement, the obligations of any underwriters to
purchase Shares will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of the Shares specified in
such Prospectus Supplement if any are purchased.
Shares may be sold through a broker-dealer acting as agent or broker for
the Selling Stockholders, or to a broker-dealer acting as principal. In
the latter case, the broker-dealer may then resell such Shares to the
public at varying prices to be determined by such broker-dealer at the time
of resale.
The Company has been advised by the Selling Stockholders that they have
not, as of the date of this Prospectus, entered into any arrangement with
an underwriter, agent or broker-dealer for the sale of the Shares.
The Selling Stockholders may also sell all or a portion of the Shares in
transactions under Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act.
The Selling Stockholders and any agents or broker-dealers that
participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any discount or commission received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities which may be incurred in connection with the sale of
Shares under this Prospectus.
To the extent required, the number and series of Shares to be sold, the
purchase price, the public offering price, if applicable, the name of any
underwriter, agent or broker-dealer, and any applicable commissions,
discounts or other items constituting compensation to such underwriters,
agents or broker-dealers with respect to a particular offering will be set
forth in an accompanying Prospectus Supplement.
Certain expenses in connection with the distribution of the Shares,
including registration and filing fees, printing expenses and fees and
disbursements of the Company's counsel and fees and expenses of any
accountants, will be borne by the Company. The Selling Stockholders will
pay any brokerage discounts, commissions or fees, if any, and fees and
disbursements of its counsel and any other expenses attributable to the
distribution of the Shares.
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DESCRIPTION OF COMMON STOCK
The following description of certain terms of the common stock of
TCI does not purport to be complete and is qualified in its entirety by
reference to the Restated Certificate of Incorporation, as amended, of TCI
(the "TCI Charter") which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
The TCI Charter provides, among other things, that TCI is
authorized to issue 2,725,000,000 shares of common stock, par value $1.00
per share (the "TCI Common Stock"), of which 1,750,000,000 shares are
designated Tele-Communications, Inc. Series A TCI Group Common Stock,
150,000,000 shares are designated Tele-Communications, Inc. Series B TCI
Group Common Stock, 750,000,000 shares are designated Tele-Communications,
Inc. Series A Liberty Media Group Common Stock, and 75,000,000 shares are
designated Tele-Communications, Inc. Series B Liberty Media Group Common
Stock.
As of April 30, 1996, 583,361,905 shares of TCI Group Series A
Common Stock, 84,682,729 shares of TCI Group Series B Common Stock,
145,815,385 shares of LMG Series A Common Stock and 21,192,387 shares of
LMG Series B Common Stock (in each case net of shares held by subsidiaries
of TCI) had been issued and were outstanding and 100,524,364 shares of TCI
Group Series A Common Stock were held by subsidiaries of TCI. As of that
date, 90,809,696 shares of TCI Group Series A Common Stock and 20,880,824
shares of LMG Series A Common Stock were reserved for issuance upon
conversion, exchange or exercise of outstanding convertible or exchangeable
securities and options. In addition, TCI has reserved a number of shares
of TCI Group Series A Common Stock equal to the number of shares of TCI
Group Series B Common Stock outstanding, and a number of shares of LMG
Series A Common Stock equal to the number of shares of LMG Series B Common
Stock outstanding, for issuance upon conversion, at the option of the
holder, of the TCI Group Series B Common Stock and LMG Series B Common
Stock, respectively. Additionally, subsidiaries of TCI own shares of the
Company's Convertible Redeemable Participating Preferred Stock, Series F
(the "Series F Preferred Stock") which is convertible into 357,565,989
shares of TCI Group Series A Common Stock.
The TCI Charter also authorizes 52,375,096 shares of preferred
stock (the "TCI Preferred Stock"), of which 700,000 shares are designated
Class A Preferred Stock, par value $0.01 per share (the "Class A Preferred
Stock"), 1,675,096 shares are designated Class B 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock, par value $.01 per share (the "Class B
Preferred Stock"), and 50,000,000 shares are designated Series Preferred
Stock, par value $.01 per share (the "Series Preferred Stock"), issuable in
series. All of the shares of Class A Preferred Stock have previously been
redeemed and retired and may not be reissued, thereby reducing the number
of authorized shares of TCI Preferred Stock. Of the Series Preferred
Stock, as of March 31, 1996, 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"), 500,000 shares
are designated Series F Preferred Stock, 7,259,380 shares are designated
Redeemable Convertible TCI Group Preferred Stock, Series G (the "Series G
Preferred Stock") and 7,259,380 shares are designated Redeemable
Convertible Liberty Media Group Preferred Stock, Series H (the "Series H
Preferred Stock"). As of March 31, 1996, 1,620,026 shares of Class B
Preferred Stock, 70,575 shares of Series C Preferred Stock, 999,569 shares
of Series D Preferred Stock, 277,719 shares of Series F Preferred Stock,
7,259,380 shares of Series G Preferred Stock and 7,259,380 shares of Series
H Preferred Stock had been issued and were outstanding. 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 and may be reissued as shares
of another series of Series Preferred Stock, but not as Series E Preferred
Stock. All of the outstanding shares of Series F Preferred Stock are held
by subsidiaries of TCI. Approximately 33,901,240 shares of Series Preferred
Stock remain available for designation pursuant to the TCI Charter
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as of March 31, 1996. The rights evidenced by the TCI Common Stock are
subject to the prior preferences and rights of the TCI Preferred Stock.
CERTAIN DEFINITIONS
As used herein, the following terms have the meanings specified below:
"Committed Acquisition Shares" means (a) the shares of LMG Series A
Common Stock that TCI had, prior to the record date for the Distribution,
agreed to issue, but as of such record date had not issued, and (b) the
shares of LMG Series A Common Stock that are issuable upon conversion,
exercise or exchange of Convertible Securities that TCI had, prior to the
record date for the Distribution, agreed to issue, but as of such record
date had not issued, in each case including obligations of TCI to issue
shares of TCI's Class A Common Stock, par value $1.00 per share (which has
been redesignated TCI Group Series A Common Stock), which as a result of
the Distribution, constitute obligations to issue, among other securities,
LMG Series A Common Stock or Convertible Securities which are convertible
into or exercisable or exchangeable for LMG Series A Common Stock;
provided, however that Committed Acquisition Shares will not include any
shares of Liberty Media Group Common Stock issuable upon conversion,
exercise or exchange of Pre-Distribution Convertible Securities. The type
and amount of Committed Acquisition Shares issuable will be appropriately
adjusted to reflect subdivisions and combinations of the LMG Series A
Common Stock and dividends or distributions of shares of LMG Series A
Common Stock or LMG Series B Common Stock to holders of LMG Series A Common
Stock and other reclassifications of the LMG Series A Common Stock, in each
case occurring (or the record date for which occurs) after the
Distribution.
"Convertible Securities" means any securities of TCI (other than any
series of TCI Common Stock) that are convertible into, exchangeable for or
evidence the right to purchase any shares of any series of TCI Common
Stock, whether upon conversion, exercise, exchange, pursuant to
antidilution provisions of such securities or otherwise.
"DGCL" means the General Corporation Law of the State of Delaware.
The "Distribution" means the distribution paid by TCI on August 10,
1995 of one-fourth of one share of LMG Series A Common Stock on each
outstanding share of TCI Group Series A Common Stock and one-fourth of one
share of LMG Series B Common Stock on each outstanding share of TCI Group
Series B Common Stock to holders of record on August 4, 1995.
The "Inter-Group Interest" means any equity value of TCI attributable
to the Liberty Media Group that is not represented by outstanding shares of
Liberty Media Group Common Stock. The Inter-Group Interest is represented
by the Number of Shares Issuable with Respect to the Inter-Group Interest.
The "Inter-Group Interest Fraction" means a fraction the numerator of
which is the Number of Shares Issuable with Respect to the Inter-Group
Interest and the denominator of which is the sum of such Number of Shares
Issuable with Respect to the Inter-Group Interest and the aggregate number
of shares of Liberty Media Group Common Stock outstanding.
The "Liberty Media Group" means:
(a) the interest of TCI or any of its subsidiaries in Liberty Media
Corporation or any of its subsidiaries (including any successor thereto
by merger, consolidation or sale of all or substantially all of its
assets, whether or not in connection with a Related Business Transaction
(as defined below under "--Conversion and Redemption-Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock")) and their
respective properties and assets,
(b) all assets and liabilities of TCI or any of its subsidiaries to
the extent attributed to any of the properties or assets referred to in
clause (a) of this sentence, whether or not such assets or
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liabilities are assets and liabilities of Liberty Media Corporation or
any of its subsidiaries (or a successor as described in clause (a) of
this sentence),
(c) all assets and properties contributed or otherwise transferred to
the Liberty Media Group from the TCI Group, and
(d) the interest of TCI or any of its subsidiaries in the businesses,
assets and liabilities acquired by TCI or any of its subsidiaries for the
Liberty Media Group, as determined by the Board of Directors of TCI (the
"TCI Board of Directors");
provided that (i) from and after any dividend or other distribution with
respect to any shares of Liberty Media Group Common Stock (other than a
dividend or other distribution payable in shares of Liberty Media Group
Common Stock, with respect to which adjustment will be made as described in
clause (a) of the definition of "Number of Shares Issuable with Respect to
the Inter-Group Interest," or in other securities of TCI attributed to the
Liberty Media Group for which provision will be made as described in the
penultimate sentence of this definition), the Liberty Media Group will no
longer include an amount of assets or properties equal to the aggregate
amount of such kind of assets or properties so paid in respect of shares of
Liberty Media Group Common Stock multiplied by a fraction the numerator of
which is equal to the Inter-Group Interest Fraction in effect immediately
prior to the record date for such dividend or other distribution and the
denominator of which is equal to the Outstanding Interest Fraction in
effect immediately prior to the record date for such dividend or other
distribution and (ii) from and after any transfer of assets or properties
from the Liberty Media Group to the TCI Group, the Liberty Media Group will
no longer include the assets or properties so transferred. If TCI pays a
dividend or makes any other distribution with respect to shares of Liberty
Media Group Common Stock payable in securities of TCI attributed to the
Liberty Media Group other than Liberty Media Group Common Stock, the TCI
Group will be deemed to hold an amount of such other securities equal to
the amount so distributed multiplied by the fraction specified in clause
(i) of this definition (determined as of a time immediately prior to the
record date for such dividend or other distribution), and to the extent
interest or dividends are paid or other distributions are made on such
other securities so distributed to the holders of Liberty Media Group
Common Stock, the Liberty Media Group will no longer include a
corresponding ratable amount of the kind of assets paid as such interest or
dividends or other distributions in respect of such securities so deemed to
be held by the TCI Group. TCI may also, to the extent any such other
securities constitute Convertible Securities which are at the time
convertible, exercisable or exchangeable, cause such Convertible Securities
deemed to be held by the TCI Group to be deemed to be converted, exercised
or exchanged (and to the extent the terms of such Convertible Securities
require payment or delivery of consideration in order to effect such
conversion, exercise or exchange, the Liberty Media Group will in such case
include an amount of the kind of properties or assets required to be paid
or delivered as such consideration for the amount of the Convertible
Securities deemed converted, exercised or exchanged as if such Convertible
Securities were outstanding), in which case such Convertible Securities
will no longer be deemed to be held by the TCI Group or attributed to the
Liberty Media Group.
"Market Value" of any class or series of capital stock of TCI on any
day means the average of the high and low reported sale prices regular way
of a share of such class or series on such day (if such day is a trading
day, and if such day is not a trading day, on the trading day immediately
preceding such day) or in case no such reported sale takes place on such
trading day the average of the reported closing bid and asked prices
regular way of a share of such class or series on such trading day, in
either case on the Nasdaq National Market, or if the shares of such class
or series are not quoted on such Nasdaq National Market on such trading
day, the average of the closing bid and asked prices of a share of such
class or series in the over-the-counter market on such trading day as
furnished by any New York Stock Exchange member firm selected from time to
time by TCI, or if such closing bid and asked prices are not made available
by any such New York Stock Exchange member firm on such trading day, the
market value of a share of such class or series as determined by the TCI
Board of Directors; provided that for purposes of determining the ratios
described under "--Conversion and Redemption--Conversion of Liberty Media
Group Common Stock at the Option of TCI" and "--Conversion and Redemption--
Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock" and "--Liquidation
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Rights," (a) the "Market Value" of any share of any series of TCI Common
Stock on any day prior to the "ex" date or any similar date for any
dividend or distribution paid or to be paid with respect to such series of
TCI Common Stock will be reduced by the fair market value of the per share
amount of such dividend or distribution as determined by the TCI Board of
Directors and (b) the "Market Value" of any share of any series of TCI
Common Stock on any day prior to (i) the effective date of any subdivision
(by stock split or otherwise) or combination (by reverse stock split or
otherwise) of outstanding shares of such series of TCI Common Stock or (ii)
the "ex" date or any similar date for any dividend or distribution with
respect to any such series of TCI Common Stock in shares of such series of
TCI Common Stock will be appropriately adjusted to reflect such
subdivision, combination, dividend or distribution.
The "Number of Shares Issuable with Respect to the Inter-Group
Interest" is currently zero and will from time to time be
(a) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the
LMG Series A Common Stock and dividends or distributions of shares of LMG
Series A Common Stock or LMG Series B Common Stock to holders of LMG
Series A Common Stock and other reclassifications of LMG Series A Common
Stock,
(b) decreased (but not to less than zero) by (i) the aggregate number
of shares of LMG Series A Common Stock issued or sold by TCI after the
Distribution other than Committed Acquisition Shares, the proceeds of
which are attributed to the TCI Group, (ii) the aggregate number of
shares of LMG Series A Common Stock issued or delivered upon conversion,
exercise or exchange of Convertible Securities (other than Pre-
Distribution Convertible Securities and Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares), the proceeds of which are attributed to the TCI Group, (iii) the
aggregate number of shares of LMG Series A Common Stock issued or
delivered by TCI as a dividend or distribution to holders of TCI Group
Series A Common Stock and TCI Group Series B Common Stock, (iv) the
aggregate number of shares of LMG Series A Common Stock issued or
delivered upon the conversion, exercise or exchange of any Convertible
Securities (other than Pre-Distribution Convertible Securities and
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares) issued or delivered by TCI
after the Distribution as a dividend or distribution or by
reclassification or exchange to holders of TCI Group Series A Common
Stock and TCI Group Series B Common Stock and (v) the aggregate number of
shares of LMG Series A Common Stock (rounded, if necessary, to the
nearest whole number), equal to the aggregate fair value (as determined
by the TCI Board of Directors) of assets or properties attributed to the
Liberty Media Group that are transferred from the Liberty Media Group to
the TCI Group in consideration of a reduction in the Number of Shares
Issuable with Respect to the Inter-Group Interest, divided by the Market
Value of one share of LMG Series A Common Stock as of the date of such
transfer, and
(c) increased by (i) the aggregate number of any shares of LMG Series
A Common Stock and LMG Series B Common Stock which are retired or
otherwise cease to be outstanding following their purchase with funds
attributed to the TCI Group, (ii) a number (rounded, if necessary, to the
nearest whole number), equal to the fair value (as determined by the TCI
Board of Directors) of assets or properties, theretofore attributed to
the TCI Group that are contributed to the Liberty Media Group in
consideration of an increase in the Number of Shares Issuable with
Respect to the Inter-Group Interest, divided by the Market Value of one
share of LMG Series A Common Stock as of the date of such contribution
and (iii) the aggregate number of shares of LMG Series A Common Stock and
LMG Series B Common Stock into or for which Convertible Securities are
deemed to be converted, exercised or exchanged pursuant to the last
sentence of the definition of "TCI Group."
TCI will not issue or sell shares of LMG Series B Common Stock in respect
of a reduction in the Number of Shares Issuable with Respect to the Inter-
Group Interest. Whenever a change in the Number of Shares Issuable with
Respect to the Inter-Group Interest occurs, TCI will prepare and file a
statement of such change with the Secretary of TCI.
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The "Outstanding Interest Fraction" means a fraction the numerator of
which is the aggregate number of shares of Liberty Media Group Common Stock
outstanding and the denominator of which is the sum of such aggregate
number of shares of Liberty Media Group Common Stock outstanding and the
Number of Shares Issuable with Respect to the Inter-Group Interest.
"Pre-Distribution Convertible Securities" means Convertible Securities
that were outstanding on the record date for the Distribution and were,
prior to such date, convertible into or exercisable or exchangeable for
shares of TCI's Class A Common Stock, par value $1.00 per share (which has
been redesignated TCI Group Series A Common Stock).
The "TCI Group" means as of any date of determination thereof:
(a) the interest of TCI or any of its subsidiaries in all of the
businesses in which TCI or any of its subsidiaries (or any of their
predecessors or successors) is or has been engaged, directly or
indirectly, and the respective assets and liabilities of TCI or any of
its subsidiaries, other than any businesses, assets or liabilities of the
Liberty Media Group;
(b) a proportionate interest in the businesses, assets and liabilities
of the Liberty Media Group equal to the Inter-Group Interest Fraction as
of such date;
(c) from and after any dividend or other distribution with respect to
shares of Liberty Media Group Common Stock (other than a dividend or
other distribution payable in shares of Liberty Media Group Common Stock,
with respect to which adjustment will be made as described in clause (a)
of the definition of "Number of Shares Issuable with Respect to the
Inter-Group Interest," or in other securities of TCI attributed to the
Liberty Media Group, for which provision will be made as described in the
penultimate sentence of this definition), an amount of assets or
properties theretofore included in the Liberty Media Group equal to the
aggregate amount of such kind of assets or properties so paid in respect
of such dividend or other distribution with respect to shares of Liberty
Media Group Common Stock multiplied by a fraction the numerator of which
is equal to the Inter-Group Interest Fraction in effect immediately prior
to the record date for such dividend or other distribution and the
denominator of which is equal to the Outstanding Interest Fraction in
effect immediately prior to the record date for such dividend or other
distribution; and
(d) any assets or properties transferred from the Liberty Media Group
to the TCI Group;
provided that, from and after any contribution or transfer of any assets or
properties from the TCI Group to the Liberty Media Group, the TCI Group
will no longer include such assets or properties so contributed or
transferred (other than pursuant to its interest in the businesses, assets
and liabilities of the Liberty Media Group described in clause (b) above).
If TCI pays a dividend or makes any other distribution with respect to
shares of Liberty Media Group Common Stock payable in other securities of
TCI attributed to the Liberty Media Group, the TCI Group will be deemed to
hold an amount of such other securities equal to the amount so distributed
multiplied by the fraction specified in clause (c) of this definition
(determined as of a time immediately prior to the record date for such
dividend or other distribution), and to the extent interest or dividends
are paid or other distributions are made on such other securities so
distributed to holders of Liberty Media Group Common Stock, the TCI Group
will include a corresponding ratable amount of the kind of assets paid as
such interest or dividends or other distributions in respect of such
securities so deemed to be held by the TCI Group. TCI may also, to the
extent any such other securities constitute Convertible Securities which
are at the time convertible, exercisable or exchangeable, cause such
Convertible Securities deemed to be held by the TCI Group to be deemed to
be converted, exercised or exchanged (and to the extent the terms of such
Convertible Securities require payment or delivery of consideration in
order to effect such conversion, exercise or exchange, the TCI Group will
in such case no longer include an amount of the kind of properties or
assets required to be paid or delivered as such consideration for the
amount of the Convertible Securities deemed converted, exercised or
exchanged as if such Convertible Securities were outstanding), in which
case such Convertible Securities will no longer be deemed to be held by the
TCI Group or attributed to the Liberty Media Group.
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VOTING RIGHTS
Holders of TCI Group Series A Common Stock are entitled to one vote
for each share of such stock held, holders of TCI Group Series B Common
Stock are entitled to ten votes for each share of such stock held, holders
of LMG Series A Common Stock are entitled to one vote for each share of
such stock held and holders of LMG Series B Common Stock are entitled to
ten votes for each share of such stock held, on all matters presented to
such stockholders. Except as may otherwise be required by the laws of the
State of Delaware or, with respect to any class or series of TCI Preferred
Stock, in the TCI Charter (including any resolution or resolutions
providing for the establishment of such class or series pursuant to
authority vested in the TCI Board of Directors by the TCI Charter), the
holders of TCI Group Common Stock and the holders of Liberty Media Group
Common Stock and the holders of each class or series of TCI Preferred Stock
entitled to vote on a particular matter will vote as one class for all
purposes. See "--Other Matters."
Neither the holders of TCI Group Series A Common Stock or TCI Group
Series B Common Stock, nor the holders of LMG Series A Common Stock or LMG
Series B Common Stock, have any rights to vote as a separate class or
series on any matter coming before the stockholders of TCI, except with
respect to certain limited class and series voting rights provided under
the DGCL. Under the DGCL, the approval of the holders of a majority of the
outstanding shares of any class of capital stock of a corporation, voting
separately as a class, is required to approve any amendment to the charter
that would alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely, provided that, if any
amendment would alter or change the powers, preferences or special rights
of one or more series of the class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment would be entitled to vote thereon separately as a
class.
DIVIDENDS
Subject to the prior payment of dividends on, and other rights of, any
of the outstanding shares of TCI Preferred Stock, dividends may be paid as
determined by the TCI Board of Directors (i) on the TCI Group Common Stock
out of the lesser of (x) the TCI Group Available Dividend Amount and (y)
funds of TCI legally available therefor under the DGCL and (ii) on the
Liberty Media Group Common Stock out of the lesser of (x) the Liberty Media
Group Available Dividend Amount and (y) funds of TCI legally available
therefor under the DGCL. Under the DGCL the amount of the funds of TCI
legally available for the payment of dividends on any series of TCI Common
Stock is determined on the basis of the entire corporation and not just the
Liberty Media Group or the TCI Group. Consequently, the amount of legally
available funds will be reduced by the amount of any net losses of the
Liberty Media Group or the TCI Group and any dividends or distributions on,
or repurchases of, the TCI Group Common Stock or the Liberty Media Group
Common Stock and dividends on, or certain repurchases of, TCI Preferred
Stock. Certain loan agreements to which certain subsidiaries of TCI are
parties or are subject contain restricted payment provisions that limit the
amount of dividends, other than stock dividends, that those companies may
pay. Future loan agreements may also contain similar restrictions and
limits.
The "TCI Group Available Dividend Amount," as of any date, means
either (a) the excess of (i) an amount equal to the total assets of the TCI
Group less the total liabilities (not including preferred stock) of the TCI
Group as of such date over (ii) the aggregate par value of, or any greater
amount determined to be capital in respect of, all outstanding shares of
TCI Group Common Stock and each class or series of TCI Preferred Stock
attributed to the TCI Group or (b) in case there is no such excess, an
amount equal to TCI Earnings (Loss) Attributable to the TCI Group (if
positive) for the fiscal year in which such date occurs and/or the
preceding fiscal year. "TCI Earnings (Loss) Attributable to the TCI
Group," for any period, means the net earnings or loss of the TCI Group for
such period determined on a basis consistent with the determination of the
net earnings or loss of the TCI Group for such period as presented in the
combined financial statements of the TCI Group for such period, including
income and expenses of TCI attributed to the operations of the TCI Group on
a substantially consistent basis, including without limitation, corporate
administrative costs, net interest and income taxes. The TCI
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Group Available Dividend Amount is intended to be similar to the amount
that would be legally available for the payment of dividends on the TCI
Group Common Stock under the DGCL if the TCI Group were a separate Delaware
corporation. There can be no assurance that there will be a TCI Group
Available Dividend Amount.
The "Liberty Media Group Available Dividend Amount," as of any date,
means the product of the Outstanding Interest Fraction and either (a) the
excess of (i) an amount equal to the total assets of the Liberty Media
Group less the total liabilities (not including preferred stock) of the
Liberty Media Group as of such date over (ii) the aggregate par value of,
or any greater amount determined to be capital in respect of, all
outstanding shares of Liberty Media Group Common Stock and each class or
series of TCI Preferred Stock attributed to the Liberty Media Group or (b)
in case there is no such excess, an amount equal to TCI Earnings (Loss)
Attributable to the Liberty Media Group (if positive) for the fiscal year
in which such date occurs and/or the preceding fiscal year. "TCI Earnings
(Loss) Attributable to the Liberty Media Group," for any period, means the
net earnings or loss of the Liberty Media Group for such period determined
on a basis consistent with the determination of the net earnings or loss of
the Liberty Media Group for such period as presented in the combined
financial statements of the Liberty Media Group for such period, including
income and expenses of TCI attributed to the operations of the Liberty
Media Group on a substantially consistent basis, including, without
limitation, corporate administrative costs, net interest and income taxes.
The Liberty Media Group Available Dividend Amount is intended to be similar
to the amount that would be legally available for the payment of dividends
on the Liberty Media Group Common Stock under the DGCL if the Liberty Media
Group were a separate Delaware corporation. There can be no assurance that
there will be a Liberty Media Group Available Dividend Amount.
Except for dividends declared or paid as described below under "--
Share Distributions" and "--Conversion and Redemption--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock," any
dividends paid on the TCI Group Series A Common Stock or the TCI Group
Series B Common Stock will be paid only on both series, in equal amounts
per share, and any dividends paid on the LMG Series A Common Stock or the
LMG Series B Common Stock will be paid only on both series, in equal
amounts per share.
The TCI Board of Directors, subject to the provisions described herein
under "--Dividends" and below under "--Share Distributions," has the
authority and discretion to declare and pay dividends on the TCI Group
Common Stock or the Liberty Media Group Common Stock in equal or unequal
amounts, notwithstanding the relationship between the TCI Group Available
Dividend Amount and the Liberty Media Group Available Dividend Amount, the
respective amounts of prior dividends declared on, or liquidation rights
of, the TCI Group Common Stock or the Liberty Media Group Common Stock or
any other factor.
At the time of any dividend or other distribution on the outstanding
shares of Liberty Media Group Common Stock (including any dividend of Net
Proceeds from the Disposition of all or substantially all of the properties
and assets of the Liberty Media Group as described below under "--
Conversion and Redemption--Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock"), the TCI Group will (if at such time
there is an Inter-Group Interest) be credited, and the Liberty Media Group
will be charged (in addition to the charge for the dividend or other
distribution paid or distributed in respect of outstanding shares of
Liberty Media Group Common Stock), with an amount equal to the product of
(i) the aggregate amount of such dividend 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, or any other securities of TCI
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or any other person (a "share distribution") is to be made with respect to
the TCI Group Common Stock, such share distribution will be declared and
paid only as follows:
(i) a share distribution consisting of shares of TCI Group Series A
Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of TCI Group Series A
Common Stock) to holders of TCI Group Series A Common Stock and
TCI Group Series B Common Stock, on an equal per share basis; or
consisting of shares of TCI Group Series B Common Stock (or
Convertible Securities convertible into or exercisable or
exchangeable for shares of TCI Group Series B Common Stock) to
holders of TCI Group Series A Common Stock and TCI Group Series B
Common Stock, on an equal per share basis; or consisting of
shares of TCI Group Series A Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for
shares of TCI Group Series A Common Stock) to holders of TCI
Group Series A Common Stock and, on an equal per share basis,
shares of TCI Group Series B Common Stock (or like Convertible
Securities convertible into or exercisable or exchangeable for
shares of TCI Group Series B Common Stock) to holders of TCI
Group Series B Common Stock;
(ii) a share distribution consisting of shares of LMG Series A Common
Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of LMG Series A Common Stock) to
holders of TCI Group Series A Common Stock and TCI Group Series B
Common Stock, on an equal per share basis; provided that the sum
of (a) the aggregate number of shares of LMG Series A Common
Stock to be so issued (or the number of such shares which would
be issuable upon conversion, exercise or exchange of any
Convertible Securities to be so issued) and (b) the number of
shares of such series that are subject to issuance upon
conversion, exercise or exchange of any Convertible Securities
then outstanding that are attributed to the TCI Group (other than
Pre-Distribution Convertible Securities and other than
Convertible Securities convertible into or exercisable or
exchangeable for Committed Acquisition Shares) is less than or
equal to the Number of Shares Issuable with Respect to the Inter-
Group Interest; and
(iii) a share distribution consisting of any class or series of
securities of TCI or any other person other than TCI Group Common
Stock or Liberty Media Group Common Stock (or Convertible
Securities convertible into or exercisable or exchangeable for
shares of TCI Group Common Stock or Liberty Media Group Common
Stock), either on the basis of a distribution of identical
securities, on an equal per share basis, to holders of TCI Group
Series A Common Stock and TCI Group Series B Common Stock or on
the basis of a distribution of one class or series of securities
to holders of TCI Group Series A Common Stock and another class
or series of securities to holders of TCI Group Series B Common
Stock, provided that the securities so distributed (and, if the
distribution consists of Convertible Securities, the securities
into which such Convertible Securities are convertible or for
which they are exercisable or exchangeable) do not differ in any
respect other than their relative voting rights and related
differences in designation, conversion, redemption and share
distribution provisions, with holders of shares of TCI Group
Series B Common Stock receiving the class or series having the
higher relative voting rights (without regard to whether such
rights differ to a greater or lesser extent than the
corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between
the TCI Group Series A Common Stock and the TCI Group Series B
Common Stock), provided that if the securities so distributed
constitute capital stock of a subsidiary of TCI, such rights will
not differ to a greater extent than the corresponding differences
in voting rights, designation, conversion, redemption and share
distribution provisions between the TCI Group Series A Common
Stock and the TCI Group Series B Common Stock, and provided in
each case that such distribution is otherwise made on an equal
per share basis.
TCI will not reclassify, subdivide or combine the TCI Group Series A
Common Stock without reclassifying, subdividing or combining the TCI Group
Series B Common Stock, on an equal per share
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<PAGE>
basis, and TCI will not reclassify, subdivide or combine the TCI Group
Series B Common Stock without reclassifying, subdividing or combining the
TCI Group Series A Common Stock, on an equal per share basis.
DISTRIBUTIONS ON LIBERTY MEDIA GROUP COMMON STOCK. If at any time a
share distribution is to be made with respect to the Liberty Media Group
Common Stock, such share distribution will be declared and paid only as
follows (or as described under "--Conversion and Redemption" with respect
to the redemptions and other distributions referred to therein):
(i) a share distribution consisting of shares of LMG Series A Common
Stock (or Convertible Securities convertible into or exercisable
or exchangeable for shares of LMG Series A Common Stock) to
holders of LMG Series A Common Stock and LMG Series B Common
Stock, on an equal per share basis; or consisting of shares of
LMG Series B Common Stock (or Convertible Securities convertible
into or exercisable or exchangeable for shares of LMG Series B
Common Stock) to holders of LMG Series A Common Stock and LMG
Series B Common Stock, on an equal per share basis; or consisting
of shares of LMG Series A Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of LMG
Series A Common Stock) to holders of LMG Series A Common Stock
and, on an equal per share basis, shares of LMG Series B Common
Stock (or like Convertible Securities convertible into or
exercisable or exchangeable for shares of LMG Series B Common
Stock) to holders of LMG Series B Common Stock; and
(ii) a share distribution consisting of any class or series of
securities of TCI or any other person other than as described in
the immediately preceding clause (i) and other than TCI Group
Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of TCI Group Series A
Common Stock or TCI Group Series B Common Stock), either on the
basis of a distribution of identical securities, on an equal per
share basis, to holders of LMG Series A Common Stock and LMG
Series B Common Stock or on the basis of a distribution of one
class or series of securities to holders of LMG Series A Common
Stock and another class or series of securities to holders of LMG
Series B Common Stock, provided that the securities so
distributed (and, if the distribution consists of Convertible
Securities, the securities into which such Convertible Securities
are convertible or for which they are exercisable or
exchangeable) do not differ in any respect other than their
relative voting rights and related differences in designation,
conversion, redemption and share distribution provisions, with
holders of shares of LMG Series B Common Stock receiving the
class or series having the higher relative voting rights (without
regard to whether such rights differ to a greater or lesser
extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution
provisions between the LMG Series A Common Stock and the LMG
Series B Common Stock), provided that if the securities so
distributed constitute capital stock of a subsidiary of TCI, such
rights will not differ to a greater extent than the corresponding
differences in voting rights, designation, conversion, redemption
and share distribution provisions between the LMG Series A Common
Stock and the LMG Series B Common Stock, and provided in each
case that such distribution is otherwise made on an equal per
share basis.
TCI will not reclassify, subdivide or combine the LMG Series A Common
Stock without reclassifying, subdividing or combining the LMG Series B
Common Stock, on an equal per share basis, and TCI will not reclassify,
subdivide or combine the LMG Series B Common Stock without reclassifying,
subdividing or combining the LMG Series A Common Stock, on an equal per
share basis.
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CONVERSION AND REDEMPTION
CONVERSION OF TCI GROUP SERIES B COMMON STOCK AND LMG SERIES B COMMON
STOCK AT THE OPTION OF THE HOLDER. Each share of TCI Group Series B Common
Stock is convertible, at the option of the holder thereof, into one share
of TCI Group Series A Common Stock. Each share of LMG Series B Common
Stock is convertible, at the option of the holder thereof, into one share
of LMG Series A Common Stock. Shares of TCI Group Series A Common Stock
are not convertible into shares of TCI Group Series B Common Stock, and
shares of LMG Series A Common Stock are not convertible into shares of LMG
Series B Common Stock.
CONVERSION OF LIBERTY MEDIA GROUP COMMON STOCK AT THE OPTION OF TCI.
The TCI Board of Directors may at any time declare that (i) all of the
outstanding shares of LMG Series A Common Stock will be converted into a
number (or fraction) of fully paid and nonassessable shares of TCI Group
Series A Common Stock equal to the Optional Conversion Ratio, and (ii) all
of the outstanding shares of LMG Series B Common Stock will be converted
into a number (or fraction) of fully paid and nonassessable shares of TCI
Group Series B Common Stock equal to the Optional Conversion Ratio.
For these purposes, the "Optional Conversion Ratio" means the quotient
(calculated to the nearest five decimal places) obtained by dividing (x)
the Liberty Media Group Common Stock Per Share Value by (y) the average
Market Value of one share of TCI Group Series A Common Stock over the 20-
trading day period ending on the trading day preceding the Appraisal Date.
The Liberty Media Group Common Stock Per Share Value will equal the
quotient obtained by dividing the Liberty Media Group Private Market Value
by the Adjusted Outstanding Shares of Liberty Media Group Common Stock,
which will be determined in the manner described 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 preceding the month in which the last of the two
appraisers referred to in the immediately following sentence are selected
(the last day of such calendar month is hereinafter referred to as the
"Appraisal Date"). In the event that TCI determines to establish the
Liberty Media Group Private Market Value, two investment banking firms of
recognized national standing will be designated to determine the private
market value of the Liberty Media Group, one designated by TCI (the "First
Appraiser") and one designated by a committee of the TCI Board of Directors
all of whose members are independent directors as determined under Nasdaq
National Market rules (the "Second Appraiser"). The date upon which the
last of such appraisers is selected is hereinafter referred to as the
"Selection Date." Not later than 20 days after the Selection Date, the
First Appraiser and the Second Appraiser will each determine its initial
view as to the private market value of the Liberty Media Group as of the
Appraisal Date and will consult with one another with respect thereto. Not
later than the 30th day after the Selection Date, the First Appraiser and
the Second Appraiser will each have determined its final view as to such
private market value. If the higher of the respective final views of the
First Appraiser and the Second Appraiser as to such private market value
(the "Higher Appraised Amount") is not more than 120% of the lower of such
respective final views (the "Lower Appraised Amount"), the Liberty Media
Group Private Market Value (subject to any adjustment described in the
second succeeding paragraph) will be the average of those two amounts. If
the Higher Appraised Amount is more than 120% of the Lower Appraised
Amount, the First Appraiser and the Second Appraiser will agree upon and
jointly designate a third investment banking firm of recognized national
standing (the "Mutually Designated Appraiser") to determine such private
market value. The Mutually Designated Appraiser will not be provided with
any of the work of the First Appraiser and Second Appraiser. The Mutually
Designated Appraiser will, no later than the 20th day after the date the
Mutually Designated Appraiser is designated, determine such private market
value (the "Mutually Appraised Amount"), and the Liberty Media Group
Private Market Value (subject to any adjustment described in the second
succeeding paragraph) will be (i) if the Mutually Appraised Amount is
between the Lower Appraised Amount and the Higher Appraised Amount, (a) the
average of (1) the Mutually Appraised Amount and (2) the Lower Appraised
Amount or the Higher Appraised Amount, whichever is closer to the Mutually
Appraised Amount, or (b) the Mutually Appraised Amount, if neither the
Lower Appraised Amount nor the Higher Appraised Amount is closer to the
Mutually Appraised Amount, or (ii) if the Mutually Appraised Amount is
greater than the Higher Appraised Amount or less than the
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Lower Appraised Amount, the average of the Higher Appraised Amount and the
Lower Appraised Amount. For these purposes, if any such investment banking
firm expresses its final view of the private market value of the Liberty
Media Group as a range of values, such investment banking firm's final view
of such private market value will be deemed to be the midpoint of such
range of values.
Each of the investment banking firms referred to in the immediately
preceding paragraph will be instructed to determine the private market
value of the Liberty Media Group as of the Appraisal Date based upon the
amount a willing purchaser would pay to a willing seller, in an arm's
length transaction, if it were acquiring the Liberty Media Group, as if the
Liberty Media Group were a publicly traded non-controlled corporation and
the purchaser was acquiring all of the capital stock of such corporation
and without consideration of any potential regulatory constraints limiting
the potential purchasers of the Liberty Media Group other than that which
would have existed if the Liberty Media Group were a publicly traded non-
controlled entity.
Following the determination of the Liberty Media Group Private Market
Value, the investment banking firms whose final views of the private market
value of the Liberty Media Group were used in the calculation of the
Liberty Media Group Private Market Value will determine the Adjusted
Outstanding Shares of Liberty Media Group Common Stock together with any
further appropriate adjustments to the Liberty Media Group Private Market
Value resulting from such determination. The "Adjusted Outstanding Shares
of Liberty Media Group Common Stock" means a number, as determined by such
investment banking firms as of the Appraisal Date, equal to the sum of the
number of shares of Liberty Media Group Common Stock outstanding, the
Number of Shares Issuable with Respect to the Inter-Group Interest, the
number of Committed Acquisition Shares issuable, the number of shares of
Liberty Media Group Common Stock issuable upon the conversion, exercise or
exchange of all Pre-Distribution Convertible Securities and the number of
shares of Liberty Media Group Common Stock issuable upon the conversion,
exercise or exchange of those Convertible Securities (other than Pre-
Distribution Convertible Securities and other than Convertible Securities
which are convertible into or exercisable or exchangeable for Committed
Acquisition Shares) the holders of which would derive an economic benefit
from conversion, exercise or exchange of such Convertible Securities which
exceeds the economic benefit of not converting, exercising or exchanging
such Convertible Securities. The "Liberty Media Group Common Stock Per
Share Value" means the quotient obtained by dividing the Liberty Media
Group Private Market Value by the Adjusted Outstanding Shares of Liberty
Media Group Common Stock, provided that if such investment banking firms do
not agree on the determinations provided for in this paragraph, the Liberty
Media Group Common Stock Per Share Value will be the average of the
quotients so obtained on the basis of the respective determinations of such
firms.
If TCI determines to convert shares of LMG Series A Common Stock into
TCI Group Series A Common Stock and shares of LMG Series B Common Stock
into TCI Group Series B Common Stock at the Optional Conversion Ratio, such
conversion will occur on a conversion date on or prior to the 120th day
following the Appraisal Date. If TCI determines not to undertake such
conversion, TCI may at any time thereafter undertake to reestablish the
Liberty Media Group Common Stock Per Share Value as of a subsequent date.
MANDATORY DIVIDEND, REDEMPTION OR CONVERSION OF LIBERTY MEDIA GROUP
COMMON STOCK. Upon the sale, transfer, assignment or other disposition,
whether by merger, consolidation, sale or contribution of assets or stock
or otherwise (a "Disposition"), in one transaction or a series of related
transactions by TCI and its subsidiaries of all or substantially all of the
properties and assets of the Liberty Media Group to one or more persons,
entities or groups (other than (a) in connection with the Disposition by
TCI of all of TCI's properties and assets in one transaction or a series of
related transactions in connection with the liquidation, dissolution or
winding up of TCI, (b) a dividend, other distribution or redemption in
accordance with any provision described under "--Dividends," "--Share
Distributions," "--Redemption in Exchange for Stock of Subsidiary" or "--
Liquidation Rights," (c) to any person, entity or group which TCI, directly
or indirectly, after giving effect to the Disposition, controls or (d) in
connection with a Related Business Transaction), TCI will on or prior to
the 85th trading day following the consummation of such Disposition,
either:
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(i) subject to the limitations described above under "--Dividends,"
declare and pay a dividend in cash and/or securities or other
property (other than a dividend or distribution of TCI Common
Stock) to the holders of the outstanding shares of Liberty Media
Group Common Stock equally on a share for share basis (subject to
the provisions described in the last sentence of the paragraph
herein which defines the term "Net Proceeds"), in an aggregate
amount equal to the product of the Outstanding Interest Fraction
as of the record date for determining the holders entitled to
receive such dividend and the Net Proceeds of such Disposition;
(ii) provided that there are funds of TCI legally available therefor
and the Liberty Media Group Available Dividend Amount would have
been sufficient to pay a dividend in lieu thereof as described in
clause (i) of this paragraph:
(a) if such Disposition involves all (not merely
substantially all) of the properties and assets of the Liberty
Media Group, redeem all outstanding shares of LMG Series A Common
Stock and LMG Series B Common Stock in exchange for cash and/or
securities or other property (other than TCI Common Stock) in an
aggregate amount equal to the product of the Adjusted Outstanding
Interest Fraction as of the date of such redemption and the Net
Proceeds of such Disposition, such aggregate amount to be
allocated (subject to the provisions described in the last
sentence of the paragraph herein which defines the term "Net
Proceeds") to shares of LMG Series A Common Stock and LMG Series
B Common Stock in the ratio of the number of shares of each such
series outstanding (so that the amount of consideration paid for
the redemption of each share of LMG Series A Common Stock and
each share of LMG Series B Common Stock is the same); or
(b) if such Disposition involves substantially all (but not
all) of the properties and assets of the Liberty Media Group,
apply an aggregate amount of cash and/or securities or other
property (other than TCI Common Stock) equal to the product of
the Outstanding Interest Fraction as of the date shares are
selected for redemption and the Net Proceeds of such Disposition
to the redemption of outstanding shares of LMG Series A Common
Stock and LMG Series B Common Stock, such aggregate amount to be
allocated (subject to the provisions described in the last
sentence of the paragraph herein which defines the term "Net
Proceeds") to shares of LMG Series A Common Stock and LMG Series
B Common Stock in the ratio of the number of shares of each such
series outstanding, and the number of shares of each such series
to be redeemed to equal the lesser of (x) the whole number
nearest the number determined by dividing the aggregate amount so
allocated to the redemption of such series by the average Market
Value of one share of LMG Series A Common Stock during the ten-
trading day period beginning on the 16th trading day following
the consummation of such Disposition and (y) the number of shares
of such series outstanding (so that the amount of consideration
paid for the redemption of each share of LMG Series A Common
Stock and each share of LMG Series B Common Stock is the same);
or
(iii) convert (a) each outstanding share of LMG Series A Common Stock
into a number (or fraction) of fully paid and nonassessable
shares of TCI Group Series A Common Stock and (b) each
outstanding share of LMG Series B Common Stock into a number (or
fraction) of fully paid and nonassessable shares of TCI Group
Series B Common Stock, in each case equal to 110% of the average
daily ratio (calculated to the nearest five decimal places) of
the Market Value of one share of LMG Series A Common Stock to the
Market Value of one share of TCI Group Series A Common Stock
during the ten-trading day period referred to in clause (ii)(b)
of this paragraph.
For these purposes, "substantially all of the properties and assets of
the Liberty Media Group" as of any date means a portion of such properties
and assets that represents at least 80% of the
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then-current market value (as determined by the TCI Board of Directors) of
the properties and assets of the Liberty Media Group as of such date.
A "Related Business Transaction" means any Disposition of all or
substantially all of the properties and assets of the Liberty Media Group
in which TCI receives as proceeds of such Disposition primarily equity
securities (including, without limitation, capital stock, convertible
securities, partnership or limited partnership interests and other types of
equity securities, without regard to the voting power or contractual or
other management or governance rights related to such equity securities) of
the purchaser or 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 TCI Board of Directors.
The "Adjusted Outstanding Interest Fraction" means a fraction the
numerator of which is the number of outstanding shares of Liberty Media
Group Common Stock and the denominator of which is the sum of (a) such
number of outstanding shares, (b) the Number of Shares Issuable with
Respect to the Inter-Group Interest, (c) the number of shares of Liberty
Media Group Common Stock issuable upon conversion, exercise or exchange of
Pre-Distribution Convertible Securities and (d) the number of Committed
Acquisition Shares issuable.
The "Net Proceeds" with respect to any Disposition of any of the
properties and assets of the Liberty Media Group means an amount, if any,
equal to the gross proceeds of such Disposition after any payment of, or
reasonable provision for, (a) any taxes payable by TCI in respect of such
Disposition or in respect of any resulting dividend or redemption (or which
would have been payable but for the utilization of tax benefits
attributable to the TCI Group), (b) any transaction costs, including,
without limitation, any legal, investment banking and accounting fees and
expenses and (c) any liabilities and other obligations (contingent or
otherwise) of, or attributed to, the Liberty Media Group, including,
without limitation, any indemnity or guarantee obligations incurred in
connection with the Disposition or any liabilities for future purchase
price adjustments and any preferential amounts plus any accumulated and
unpaid dividends and other obligations (without duplication of amounts
allocated for the satisfaction of TCI's obligations with respect to Pre-
Distribution Convertible Securities and Committed Acquisition Shares
issuable which are included in the determination of the Adjusted
Outstanding Interest Fraction) in respect of TCI Preferred Stock attributed
to the Liberty Media Group. TCI may elect to pay the dividend or
redemption price referred to in clause (i) or (ii) above either in the same
form as the proceeds of the Disposition were received or in any other
combination of cash or securities or other property (other than TCI Common
Stock) that the TCI Board of Directors determines will have an aggregate
market value on a fully distributed basis, of not less than the amount of
the Net Proceeds. If the dividend or redemption price is paid in the form
of securities of an issuer other than TCI, the TCI Board of Directors may
determine either to (i) pay the dividend or redemption price in the form of
separate classes or series of securities, with one class or series of such
securities to holders of LMG Series A Common Stock and another class or
series of securities to holders of LMG Series B Common Stock, provided that
such securities (and, if such securities are convertible into or
exercisable or exchangeable for shares of another class or series of
securities, the securities so issuable upon such conversion, exercise or
exchange) do not differ in any respect other than their relative voting
rights and related differences in designation, conversion, redemption and
share distribution provisions with holders of shares of LMG Series B Common
Stock receiving the class or series having the higher relative voting
rights (without regard to whether such rights differ to a greater or lesser
extent than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the LMG
Series A Common Stock and the LMG Series B Common Stock), provided that if
such securities constitute capital stock of a subsidiary of TCI, such
rights will not differ to a greater extent than the corresponding
differences in voting rights, designation, conversion, redemption and share
distribution provisions between the LMG Series A Common Stock and LMG
Series B Common Stock, and otherwise such securities will be distributed on
an equal per share basis, or (ii) pay the dividend or redemption price in
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the form of a single class of securities without distinction between the
shares received by the holders of LMG Series A Common Stock and LMG Series
B Common Stock.
At the time of any dividend made as a result of a Disposition referred
to above, the TCI Group will be credited, and the Liberty Media Group will
be charged (in addition to the charge for the dividend paid in respect of
outstanding shares of Liberty Media Group Common Stock), with an amount
equal to the product of (i) the aggregate amount paid in respect of such
dividend times (ii) a fraction the numerator of which is the Inter-Group
Interest Fraction and the denominator of which is the Outstanding Interest
Fraction.
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY. At any time at which
all of the assets and liabilities attributed to the Liberty Media Group are
held directly or indirectly by any one or more corporations all of the
capital stock of which is owned by TCI (the "Liberty Media Group
Subsidiaries"), the TCI Board of Directors may, subject to there being
funds of TCI legally available therefor, redeem on a pro rata basis, all of
the outstanding shares of Liberty Media Group Common Stock in exchange for
an aggregate number of outstanding fully paid and nonassessable shares of
common stock of each Liberty Media Group Subsidiary equal to the product of
the Adjusted Outstanding Interest Fraction and the number of all of the
outstanding shares of common stock of such Liberty Media Group Subsidiary.
In effecting such a redemption, the TCI Board of Directors may
determine either to (i) redeem shares of LMG Series A Common Stock and LMG
Series B Common Stock in exchange for shares of separate classes or series
of common stock of each Liberty Media Group Subsidiary with relative voting
rights and related differences in designation, conversion, redemption and
share distribution provisions not greater than the corresponding
differences in voting rights, designation, conversion, redemption and share
distribution provisions between the LMG Series A Common Stock and LMG
Series B Common Stock, with holders of shares of LMG Series B Common Stock
receiving the class or series having the higher relative voting rights, or
(ii) redeem shares of LMG Series A Common Stock and LMG Series B Common
Stock in exchange for shares of a single class of common stock of each
Liberty Media Group Subsidiary without distinction between the shares
distributed to the holders of the two series of Liberty Media Group Common
Stock. If TCI determines to undertake a redemption as described in clause
(i) of the preceding sentence, the outstanding shares of common stock of
each Liberty Media Group Subsidiary not distributed to holders of Liberty
Media Group Common Stock would consist solely of the class or series having
the lower relative voting rights.
CERTAIN PROVISIONS RESPECTING CONVERTIBLE SECURITIES. Unless the
provisions of any class or series of Pre-Distribution Convertible
Securities or Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares provide
specifically to the contrary, after any conversion date or redemption date
on which all outstanding shares of Liberty Media Group Common Stock were
converted or redeemed, any share of Liberty Media Group Common Stock that
is issued on conversion, exercise or exchange of any Pre-Distribution
Convertible Securities or any Convertible Securities which are convertible
into or exercisable or exchangeable for Committed Acquisition Shares will,
immediately upon issuance pursuant to such conversion, exercise or exchange
and without any notice or any other action on the part of TCI or the TCI
Board of Directors or the holder of such share of Liberty Media Group
Common Stock, be converted into or redeemed in exchange for, as applicable,
the kind and amount of shares of capital stock, cash and/or other
securities or property that a holder of such Pre-Distribution Convertible
Securities or any Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares would have
been entitled to receive pursuant to the terms of such securities had such
terms provided that the conversion, exercise or exchange privilege in
effect immediately prior to any such conversion or redemption of all
outstanding shares of Liberty Media Group Common Stock would be adjusted so
that the holder of any such Pre-Distribution Convertible Securities or any
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares thereafter surrendered for
conversion, exercise or exchange would be entitled to receive the kind and
amount of shares of capital stock, cash and/or other securities or property
such holder would have received as a result of such action had such
securities been converted, exercised or exchanged immediately prior
thereto. With respect to any Convertible Securities which are created,
established or otherwise first authorized for issuance subsequent to the
record date for
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the Distribution (other than Pre-Distribution Convertible Securities and
Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares), the terms and provisions of
which do not provide for adjustments specifying the kind and amount of
capital stock, cash and/or securities or other property that such holder
would be entitled to receive upon the conversion, exercise or exchange of
such Convertible Securities following any conversion date or redemption
date on which all outstanding shares of Liberty Media Group Common Stock
were converted or redeemed, then upon such conversion, exercise or exchange
of such Convertible Securities, any share of Liberty Media Group Common
Stock that is issued on conversion, exercise or exchange of any such
Convertible Securities will, immediately upon issuance pursuant to such
conversion, exercise or exchange and without any notice or any other action
on the part of TCI or the TCI Board of Directors or the holder of such
share of Liberty Media Group Common Stock, be redeemed in exchange for, to
the extent assets of TCI are legally available therefor, the amount of $.01
per share in cash.
GENERAL CONVERSION AND REDEMPTION PROVISIONS. Not later than the 10th
trading day following the consummation of a Disposition referred to above
under "--Mandatory Dividend, Redemption or Conversion of Liberty Media
Group Common Stock," TCI will announce publicly by press release (i) the
Net Proceeds of such Disposition, (ii) the number of outstanding shares of
LMG Series A Common Stock and LMG Series B Common Stock, (iii) the number
of shares of LMG Series A Common Stock and LMG Series B Common Stock into
or for which Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities constitute Pre-
Distribution Convertible Securities or Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares) and the number of Committed Acquisition Shares issuable, (iv) the
Outstanding Interest Fraction as of a recent date preceding the date of
such notice and (v) the Adjusted Outstanding Interest Fraction as of a
recent date preceding the date of such notice. Not earlier than the 26th
trading day and not later than the 30th trading day following the
consummation of such Disposition, TCI will announce publicly by press
release which of the actions described in clauses (i), (ii) or (iii) of the
first paragraph under "--Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock" it has irrevocably determined to take.
TCI also will cause to be given to each holder of outstanding shares
of LMG Series A Common Stock and LMG Series B Common Stock and to each
holder of Convertible Securities convertible into or exercisable or
exchangeable for shares of either such series (unless provision for notice
is otherwise made pursuant to the terms of such Convertible Securities) a
notice setting forth (i) if TCI has determined to pay a dividend described
in clause (i) of the first paragraph under "--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock" (a "Dividend
Election"), (x) the record date for determining holders entitled to receive
such dividend, which will not be earlier than the 40th trading day, nor
later than the 50th trading day, following the consummation of such
Disposition and (y) the anticipated payment date of such dividend (which
will not be more than 85 trading days following the consummation of such
Disposition), (ii) if TCI has determined to redeem shares of Liberty Media
Group Common Stock following a Disposition of all (and not merely
substantially all) of the properties and assets of the Liberty Media Group
as described in clause (ii)(a) of the first paragraph under "--Mandatory
Dividend, Redemption or Conversion of Liberty Media Group Common Stock" (a
"Full Redemption Election"), (x) the redemption date (which will not be
more than 85 trading days following the consummation of such Disposition)
and (y) a statement that all shares of Liberty Media Group Common Stock
outstanding on the redemption date will be redeemed, (iii) if TCI has
determined to redeem shares of Liberty Media Group Common Stock following a
Disposition of substantially all (but not all) of the properties and assets
of the Liberty Media Group as described in clause (ii)(b) of the first
paragraph under "--Mandatory Dividend, Redemption or Conversion of Liberty
Media Group Common Stock" (a "Partial Redemption Election"), (x) a date not
earlier than the 40th trading day and not later than the 50th trading day
following the consummation of such Disposition on which shares of Liberty
Media Group Common Stock then outstanding will be selected for redemption
and (y) the anticipated redemption date (which will not be more than 85
trading days following the consummation of such Disposition) and (iv) in
the event of any conversion as described above under "--Conversion of
Liberty Media Group Common Stock at the Option of TCI" or as described in
clause (iii) of the first paragraph under "--Mandatory Dividend, Redemption
or Conversion of Liberty Media Group Common Stock" (a "Conversion
Election"), (x) a
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statement that all outstanding shares of Liberty Media Group Common Stock
will be converted and (y) the conversion date (which will not be more than
85 trading days following the consummation of the Disposition in the event
of conversion pursuant to the provisions described under "--Mandatory
Dividend, Redemption or Conversion of Liberty Media Group Common Stock" and
which will not be more than 120 days after the Appraisal Date in the event
of conversion pursuant to the provisions described under "--Conversion of
Liberty Media Group Common Stock at the Option of TCI"). Each notice of a
Dividend Election, a Full Redemption Election or a Partial Redemption
Election also will state, as applicable, (i) the kind of shares of capital
stock, cash and/or other securities or property to be distributed in
respect of shares of Liberty Media Group Common Stock (in the case of a
Dividend Election) or paid as the redemption price with respect to shares
of Liberty Media Group Common Stock outstanding on the redemption date (in
the case of a Full Redemption Election) or selected for redemption (in the
case of a Partial Redemption Election); (ii) the Net Proceeds of such
Disposition; (iii) in the case of a Dividend Election and a Partial
Redemption Election, the Outstanding Interest Fraction as of a recent date
preceding the date of such notice, and in the case of a Full Redemption
Election, the Adjusted Outstanding Interest Fraction as of a recent date
preceding the date of such notice; (iv) the number of outstanding shares of
LMG Series A Common Stock and LMG Series B Common Stock and the number of
shares of LMG Series A Common Stock and LMG Series B Common Stock into or
for which outstanding Convertible Securities are then convertible,
exercisable or exchangeable and the conversion, exercise or exchange price
thereof (and, in the case of a Full Redemption Election, stating which, if
any, of such Convertible Securities constitute Pre-Distribution Convertible
Securities or Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares and the number
of Committed Acquisition Shares issuable); (v) in the case of a Full
Redemption Election, the place or places where certificates for shares of
Liberty Media Group Common Stock properly endorsed or assigned for transfer
(unless TCI waives such requirement), are to be surrendered for delivery of
certificates for shares of such capital stock, cash and/or other securities
or property; (vi) in the case of notice to holders of Convertible
Securities, a statement to the effect that holders of such Convertible
Securities will be entitled to receive such dividend (in the case of a
Dividend Election) or participate in such redemption (in the case of a Full
Redemption Election) or in the selection of shares for redemption (in the
case of a Partial Redemption Election) only if such holders appropriately
convert, exercise or exchange such Convertible Securities on or prior to
the record date for determining holders entitled to receive such dividend,
the redemption date, or the date fixed for the selection of shares to be
redeemed, respectively, and a statement as to what, if anything, such
holder will be entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, the provisions described under
"-- Certain Provisions Respecting Convertible Securities" if such holder
converts, exercises or exchanges such Convertible Securities following such
redemption date or date for selection of shares to be redeemed, as
applicable, and (vii) in the case of a Partial Redemption Election, a
statement that TCI will not be required to register a transfer of any
shares of Liberty Media Group Common Stock for a period of 15 trading days
next preceding the date fixed for selection of shares to be redeemed. In
the case of a Partial Redemption Election, TCI also will cause to be given
to each holder of shares of Liberty Media Group Common Stock selected for
redemption, a notice setting forth (i) the number of shares of LMG Series A
Common Stock and LMG Series B Common Stock held by such holder to be
redeemed, (ii) a statement that such shares of LMG Series A Common Stock
and LMG Series B Common Stock will be redeemed, (iii) the redemption date
(which will not be more than 85 trading days following the consummation of
such Disposition), (iv) the kind and per share amount of shares of capital
stock, cash and/or other securities or property to be received by such
holder with respect to each share of such Liberty Media Group Common Stock
to be redeemed, including details as to the calculation thereof, and (v)
the place or places where certificates for shares of such Liberty Media
Group Common Stock, properly endorsed or assigned for transfer (unless TCI
waives such requirement), are to be surrendered for delivery of
certificates for shares of such capital stock, cash and/or other securities
or property. The outstanding shares of Liberty Media Group Common Stock to
be redeemed will be redeemed by TCI pro rata among the holders of Liberty
Media Group Common Stock or by such other method as may be determined by
the TCI Board of Directors to be equitable.
In the case of a Conversion Election, TCI's notice also will state (i)
the per share number of shares of TCI Group Series A Common Stock or TCI
Group Series B Common Stock, as applicable, to be received with respect to
each share of LMG Series A Common Stock or LMG Series B Common
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Stock, including details as to the calculation thereof, (ii) the place or
places where certificates for shares of Liberty Media Group Common Stock,
properly endorsed or assigned for transfer (unless TCI waives such
requirement), are to be surrendered, (iii) the number of outstanding shares
of LMG Series A Common Stock and LMG Series B Common Stock, the number of
Committed Acquisition Shares issuable and the number of shares of LMG
Series A Common Stock and LMG Series B Common Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof and
(iv) in the case of a notice to holders of Convertible Securities, a
statement to the effect that holders of such Convertible Securities will be
entitled to participate in such conversion only if such holders
appropriately convert, exercise or exchange such Convertible Securities on
or prior to the conversion date and a statement as to what, if anything,
such holders will be entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, the provision described under "--
Certain Provisions Respecting Convertible Securities" if such holders
convert, exercise or exchange such Convertible Securities following such
conversion date.
Notice of a Dividend Election will be given not later than the 30th
trading day following the consummation of the Disposition; notice of a Full
Redemption Election will be given not less than 35 trading days nor more
than 45 trading days prior to the redemption date; notice of a Partial
Redemption Election will be given not later than the 30th trading day
following the consummation of the Disposition and the notice to holders of
shares selected for redemption will be given promptly following such
selection, but not earlier than the 40th trading day and not later than the
50th trading day following the consummation of the Disposition; and notice
of a Conversion Election will be given not less than 35 trading days nor
more than 45 trading days prior to the conversion date. All such notices
will be sent by first-class mail, postage prepaid, to a holder at such
holder's address as the same appears on the transfer books of TCI.
If TCI determines to redeem shares of LMG Series A Common Stock and
LMG Series B Common Stock as described above under "--Redemption in
Exchange for Stock of Subsidiary," TCI will promptly cause to be given to
each holder of LMG Series A Common Stock and LMG Series B Common Stock and
to each holder of Convertible Securities convertible into or exercisable or
exchangeable for shares of either such series (unless provision for such
notice is otherwise made pursuant to the terms of such Convertible
Securities), a notice setting forth (i) a statement that all outstanding
shares of Liberty Media Group Common Stock will be redeemed in exchange for
shares of common stock of the Liberty Media Group Subsidiaries, (ii) the
redemption date, (iii) the Adjusted Outstanding Interest Fraction as of a
recent date preceding the date of such notice, (iv) the place or places
where certificates for shares of Liberty Media Group Common Stock, properly
endorsed or assigned for transfer (unless TCI waives such requirement), are
to be surrendered for delivery of certificates for shares of common stock
of the Liberty Media Group Subsidiaries, (v) the number of outstanding
shares of LMG Series A Common Stock and LMG Series B Common Stock and the
number of shares of LMG Series A Common Stock and LMG Series B Common Stock
into or for which outstanding Convertible Securities are then convertible,
exercisable or exchangeable and the conversion, exercise or exchange prices
thereof (and stating which, if any, of such Convertible Securities
constitute Pre-Distribution Convertible Securities or Convertible
Securities which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares) and the number of Committed Acquisition
Shares issuable, and (vi) in the case of a notice to holders of Convertible
Securities, a statement to the effect that holders of such Convertible
Securities will be entitled to receive shares of common stock of the
Liberty Media Group Subsidiaries upon redemption only if such holders
appropriately convert, exercise or exchange such Convertible Securities on
or prior to the redemption date referred to in clause (ii) of this sentence
and a statement as to what, if anything, such holders will be entitled to
receive pursuant to the terms of such Convertible Securities or, if
applicable, the provisions described under "--Certain Provisions Respecting
Convertible Securities" if such holders convert, exercise or exchange such
Convertible Securities following the redemption date. Such notice will be
sent by first-class mail, postage prepaid, not less than 35 trading days
nor more than 45 trading days prior to the redemption date, at such
holder's address as the same appears on the transfer books of TCI.
Neither the failure to mail any notice to any particular holder of
Liberty Media Group Common Stock or of Convertible Securities nor any
defect therein will affect the sufficiency thereof with respect
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<PAGE>
to any other holder of outstanding shares of Liberty Media Group Common
Stock or of Convertible Securities, or the validity of any conversion or
redemption.
TCI will not be required to issue or deliver fractional shares of any
class of capital stock or any fractional securities to any holder of
Liberty Media Group Common Stock upon any conversion, redemption, dividend
or other distribution described above. In connection with the
determination of the number of shares of any class of capital stock that is
issuable or the amount of securities that is deliverable to any holder of
record upon any such conversion, redemption, dividend or other distribution
(including any fractions of shares or securities), TCI may aggregate the
number of shares of Liberty Media Group Common Stock held at the relevant
time by such holder of record. If the number of shares of any class of
capital stock or the amount of securities remaining to be issued or
delivered to any holder of Liberty Media Group Common Stock is a fraction,
TCI will, if such fraction is not issued or delivered to such holder, pay a
cash adjustment in respect of such fraction in an amount equal to the fair
market value of such fraction on the fifth trading day prior to the date
such payment is to be made (without interest). For purposes of the
preceding sentence, "fair market value" of any fraction will be (i) in the
case of any fraction of a share of capital stock of TCI, the product of
such fraction and the Market Value of one share of such capital stock and
(ii) in the case of any other fractional security, such value as is
determined by the TCI Board of Directors.
No adjustments in respect of dividends will be made upon the
conversion or redemption of any shares of Liberty Media Group Common Stock;
provided, however, that if the conversion date or the redemption date with
respect to the Liberty Media Group Common Stock is subsequent to the record
date for the payment of a dividend or other distribution thereon or with
respect thereto, the holders of shares of Liberty Media Group Common Stock
at the close of business on such record date will be entitled to receive
the dividend or other distribution payable on or with respect to such
shares on the date set for payment of such dividend or other distribution,
notwithstanding the conversion or redemption of such shares or TCI's
default in payment of the dividend or distribution due on such date.
Before any holder of shares of Liberty Media Group Common Stock will
be entitled to receive certificates representing shares of any kind of
capital stock or cash and/or securities or other property to be received by
such holder with respect to any conversion or redemption of shares of
Liberty Media Group Common Stock, such holder is required to surrender at
such place as TCI will specify certificates for such shares, properly
endorsed or assigned for transfer (unless TCI waives such requirement).
TCI will as soon as practicable after such surrender of certificates
representing shares of Liberty Media Group Common Stock deliver to the
person for whose account such shares were so surrendered, or to the nominee
or nominees of such person, certificates representing the number of whole
shares of the kind of capital stock or cash and/or securities or other
property to which such person is entitled, together with any payment for
fractional securities referred to above. If less than all of the shares of
Liberty Media Group Common Stock represented by any one certificate are to
be redeemed, TCI will issue and deliver a new certificate for the shares of
Liberty Media Group Common Stock not redeemed. TCI will not be required to
register a transfer of (i) any shares of Liberty Media Group Common Stock
for a period of 15 trading days next preceding any selection of shares of
Liberty Media Group Common Stock to be redeemed or (ii) any shares of
Liberty Media Group Common Stock selected or called for redemption. Shares
selected for redemption may not thereafter be converted pursuant to the
provisions described under "--Conversion of TCI Group Series B Common Stock
and LMG Series B Common Stock at the Option of the Holder."
From and after any applicable conversion date or redemption date, all
rights of a holder of shares of Liberty Media Group Common Stock that were
converted or redeemed will cease except for the right, upon surrender of
the certificates representing shares of Liberty Media Group Common Stock,
to receive certificates representing shares of the kind and amount of
capital stock or cash and/or securities or other property for which such
shares were converted or redeemed, together with any payment for fractional
securities and such holder will have no other or further rights in respect
of the shares of Liberty Media Group Common Stock so converted or redeemed,
including, but not limited to, any rights with respect to any cash,
securities or other property which are reserved or otherwise designated by
TCI as being held for the satisfaction of TCI's obligations to pay or
deliver any cash, securities or other property upon the
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<PAGE>
conversion, exercise or exchange of any Convertible Securities outstanding
as of the date of such conversion or redemption or any Committed
Acquisition Shares which may then be issuable. No holder of a certificate
that, immediately prior to the applicable conversion date or redemption
date for the Liberty Media Group Common Stock, represented shares of
Liberty Media Group Common Stock will be entitled to receive any dividend
or other distribution with respect to shares of any kind of capital stock
into or in exchange for which the Liberty Media Group Common Stock was
converted or redeemed until surrender of such holder's certificate for a
certificate or certificates representing shares of such kind of capital
stock. Upon such surrender, there will be paid to the holder the amount of
any dividends or other distributions (without interest) which theretofore
became payable with respect to a record date after the conversion date or
redemption date, as the case may be, but that were not paid by reason of
the foregoing, with respect to the number of whole shares of the kind of
capital stock represented by the certificate or certificates issued upon
such surrender. From and after a conversion date or redemption date, as
the case may be, for any shares of Liberty Media Group Common Stock, TCI
will, however, be entitled to treat the certificates for shares of Liberty
Media Group Common Stock that have not yet been surrendered for conversion
or redemption as evidencing the ownership of the number of whole shares of
the kind or kinds of capital stock for which the shares of Liberty Media
Group Common Stock represented by such certificates have been converted or
redeemed, notwithstanding the failure to surrender such certificates.
TCI will pay any and all documentary, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of
any shares of capital stock and/or other securities on conversion or
redemption of shares of Liberty Media Group Common Stock. TCI will not,
however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of any shares of capital stock
in a name other than that in which the shares of Liberty Media Group Common
Stock so converted or redeemed were registered and no such issue or
delivery will be made unless and until the person requesting such issue has
paid to TCI the amount of any such tax, or has established to the
satisfaction of TCI that such tax has been paid.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of TCI,
whether voluntary or involuntary, after payment or provision for payment of
the debts and other liabilities of TCI and subject to the prior payment in
full of the preferential amounts to which any class or series of TCI
Preferred Stock is entitled, (i) the holders of the shares of TCI Group
Common Stock will share equally, on a share for share basis, in a
percentage of the funds of TCI remaining for distribution to its common
stockholders equal to 100% multiplied by the average daily ratio (expressed
as a decimal) of X/Z for the 20-trading day period ending on the trading
day prior to the date of the public announcement of such liquidation,
dissolution or winding up, and (ii) the holders of the shares of Liberty
Media Group Common Stock will share equally, on a share for share basis, in
a percentage of the funds of TCI remaining for distribution to its common
stockholders equal to 100% multiplied by the average daily ratio (expressed
as a decimal) of Y/Z for such 20-trading day period, where X is the
aggregate Market Capitalization of the TCI Group Series A Common Stock and
the TCI Group Series B Common Stock, Y is the aggregate Market
Capitalization of the LMG Series A Common Stock and the LMG Series B Common
Stock, and Z is the aggregate Market Capitalization of the TCI Group Series
A Common Stock, the TCI Group Series B Common Stock, the LMG Series A
Common Stock and the LMG Series B Common Stock. Neither a consolidation,
merger nor sale of assets will be construed to be a "liquidation,"
"dissolution" or "winding up" of TCI. The "Market Capitalization" of any
class or series of capital stock of TCI on any trading day means the
product of (i) the Market Value of one share of such class or series on
such trading day and (ii) the number of shares of such class or series
outstanding on such trading day.
No holder of Liberty Media Group Common Stock will have any special
right to receive specific assets of the Liberty Media Group in the case of
any dissolution, liquidation or winding up of TCI.
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<PAGE>
DETERMINATIONS BY THE TCI BOARD OF DIRECTORS
The TCI Charter provides that any determinations made by the TCI Board
of Directors under any provision described under this section will be final
and binding on all stockholders of TCI, except as may otherwise be required
by law. Such a determination would not be binding if it were established
that the determination was made in breach of a fiduciary duty of the TCI
Board of Directors. TCI will prepare a statement of any such determination
by the TCI Board of Directors respecting the fair market value of any
properties, assets or securities and will file such statement with the
Secretary of TCI.
PREEMPTIVE RIGHTS
Holders of the TCI Group Common Stock and Liberty Media Group Common
Stock do not have any preemptive rights to subscribe for any additional
shares of capital stock or other obligations convertible into or
exercisable for shares of capital stock that may hereafter be issued by
TCI.
OTHER MATTERS
The DGCL, the TCI Charter and TCI's Bylaws contain provisions which may
serve to discourage or make more difficult a change in control of TCI
without the support of the TCI Board of Directors or without meeting
various other conditions. The principal provisions of the DGCL and the
aforementioned corporate governance documents are outlined below.
DGCL Section 203, in general, prohibits a "business combination" between
a corporation and an "interested stockholder" within three years of the
date such stockholder became an "interested stockholder," unless (i) prior
to such date the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
exclusive of shares owned by directors who are also officers and by certain
employee stock plans or (iii) on or after such date, the business
combination is approved by the board of directors and authorized by the
affirmative vote at a stockholders' meeting of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
The term "business combination" is defined to include, among other
transactions between the interested stockholder and the corporation or any
direct or indirect majority-owned subsidiary thereof, a merger or
consolidation; a sale, pledge, transfer or other disposition (including as
part of a dissolution) of assets having an aggregate market value equal to
10% or more of either the aggregate market value of all assets of the
corporation on a consolidated basis or the aggregate market value of all
the outstanding stock of the corporation; certain transactions that would
increase the interested stockholder's proportionate share ownership of the
stock of any class or series of the corporation or such subsidiary; and any
receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation or any such subsidiary. In general, and subject to
certain exceptions, an "interested stockholder" is any person who is the
owner of 15% or more of the outstanding voting stock (or, in the case of a
corporation with classes of voting stock with disparate voting power, 15%
or more of the voting power of the outstanding voting stock) of the
corporation, and the affiliates and associates of such person. The term
"owner" is broadly defined to include any person that individually or with
or through his or its affiliates or associates, among other things,
beneficially owns such stock, or has the right to acquire such stock
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement or understanding or upon the exercise of
warrants or options or otherwise or has the right to vote such stock
pursuant to any agreement or understanding, or has an agreement or
understanding with the beneficial owner of such stock for the purpose of
acquiring, holding, voting or disposing of such stock. The restrictions of
DGCL Section 203 do not apply to corporations that have elected, in the
manner provided therein, not to be subject to such section or, with certain
exceptions, which do not have a class of voting stock that is listed on a
national securities exchange or authorized for quotation on an interdealer
quotation system of a registered national securities association or held of
record by more than 2,000 stockholders. The TCI Charter does not contain
any provision "opting out" of the application of DGCL Section 203 and TCI
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has not taken any of the actions necessary for it to "opt out" of such
provision. As a result, the provisions of Section 203 will remain
applicable to transactions between TCI and any of its "interested
stockholders."
The TCI Charter also contains certain provisions which could make a
change in control of TCI more difficult. For example, the TCI Charter
requires, subject to the rights, if any, of any class or series of TCI
Preferred Stock, the affirmative vote of 66 2/3% of the total voting power
of the outstanding shares of Voting Securities, voting together as a single
class, to approve (i) a merger or consolidation of TCI with, or into,
another corporation, other than a merger or consolidation which does not
require the consent of stockholders under the DGCL or a merger or
consolidation which has been approved by 75% of the members of the TCI
Board of Directors (in which case, in accordance with the DGCL, the
affirmative vote of a majority of the total voting power of the outstanding
Voting Securities would, with certain exceptions, be required for
approval), (ii) the sale, lease or exchange of all or substantially all of
the property and assets of TCI or (iii) the dissolution of TCI. "Voting
Securities" is currently defined as the TCI Group Common Stock, the Liberty
Media Group Common Stock and any class or series of TCI Preferred Stock
entitled to vote generally with the holders of TCI Common Stock on matters
submitted to stockholders for a vote. The TCI Charter also provides for a
TCI Board of Directors of not less than three members, divided into three
classes of approximately equal size, with each class to be elected for a
three-year term at each annual meeting of stockholders. The exact number of
directors, currently nine, is fixed by the TCI Board of Directors. The
holders of TCI Group Common Stock, Liberty Media Group Common Stock, Class
B Preferred Stock and certain series of Series Preferred Stock, voting
together as a single class, vote in elections for directors. (TCI's
Convertible Redeemable Participating Preferred Stock, Series F has voting
rights, but outstanding shares are not entitled to vote because they are
held by subsidiaries of TCI.) Stockholders of TCI do not have cumulative
voting rights.
The TCI Charter authorizes the issuance of 50,000,000 shares of Series
Preferred Stock, of which 33,901,240 shares remain available for
designation as of March 31, 1996. Under the TCI Charter, the TCI Board of
Directors is authorized, without further action by the stockholders of TCI,
to establish the preferences, limitations and relative rights of the Series
Preferred Stock. In addition, 1,900,000,000 shares of the TCI Group Common
Stock and 825,000,000 shares of Liberty Media Group Common Stock are
currently authorized by the TCI Charter, of which 1,131,431,002 and
657,992,228 respectively, remained available for issuance as of April 30,
1996 (before giving effect to reservations of shares for issuance upon
conversion, exchange or exercise of outstanding convertible or exchangeable
securities and options). The issue and sale of shares of TCI Group Common
Stock, Liberty Media Group Common Stock and/or Series Preferred Stock could
occur in connection with an attempt to acquire control of TCI, and the
terms of such shares of Series Preferred Stock could be designed in part to
impede the acquisition of such control.
The TCI Charter requires the affirmative vote of 66 2/3% of the total
voting power of the outstanding shares of Voting Securities, voting
together as a single class, to approve any amendment, alteration or repeal
of any provision of the TCI Charter or the addition or insertion of other
provisions therein.
The TCI Charter and TCI's Bylaws provide that a special meeting of
stockholders will be held at any time, subject to the rights of the holders
of any class or series of TCI Preferred Stock, upon the call of the
Secretary of TCI upon (i) the written request of the holders of not less
than 66 2/3% of the total voting power of the outstanding shares of Voting
Securities or (ii) at the request of not less than 75% of the members of
the TCI Board of Directors. Subject to the rights of any class or series
of TCI Preferred Stock, TCI's Bylaws require that written notice of the
intent to make a nomination at a meeting of stockholders must be received
by the Secretary of TCI, at TCI's principal executive offices, not later
than (a) with respect to an election of directors to be held at an annual
meeting of stockholders, 90 days in advance of such meeting, and (b) with
respect to an election of directors to be held at a special meeting of
stockholders, the close of business on the seventh day following the day on
which notice of such meeting is first given to stockholders. The notice
must contain: (1) the name and address of the stockholder who intends to
make the nomination and of the person or persons to be nominated; (2) a
representation that the stockholder is a holder of record of TCI's Voting
Securities entitled to vote at the
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<PAGE>
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 TCI Board of Directors; and (5) the consent of each
nominee to serve as a director of TCI if so elected. Any actions to remove
directors is required to be for "cause" (as defined in the TCI Charter) and
be approved by the holders of 66 2/3% of the total voting power of the
outstanding shares entitled to vote in the election of directors.
LEGAL MATTERS
Certain legal matters with respect to the Shares will be passed upon for
the Company by Stephen M. Brett, Esq., Executive Vice President and General
Counsel of the Company.
EXPERTS
The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 1995, and all related
financial statement schedules, which appear in the December 31, 1995 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein in reliance upon the reports, dated March 18, 1996, of
KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated balance sheet of TeleWest plc and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
operations and cash flows for each of the years in the three year period
ended December 31, 1995, which appear in the December 31, 1995 Annual
Report on Form 10-K of Tele-Communications, Inc., have been incorporated by
reference herein in reliance upon the report, dated March 6, 1996, of KPMG,
independent chartered accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The combined balance sheets of Cablevision (a combination of certain
cable television assets of Cablevision S.A., Televisora Belgrano S.A.,
Construred S.A. and Univent's S.A.) as of December 31, 1994 and 1993, and
the related combined statements of operations and deficit and cash flows
for each of the years in the three-year period ended December 31, 1994,
which appear in the Current Report of Form 8-K of Tele-Communications, Inc.
dated April 20, 1995, as amended, have been incorporated by reference
herein in reliance upon the report, dated March 24, 1995, of KPMG
Finsterbusch Pickenhayn Sibille, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The combined balance sheets of TCI Group as of December 31, 1995 and
1994, and the related combined statements of operations, equity, and cash
flows for each of the years in the three-year period ended December 31,
1995, which appear in the December 31, 1995 Annual Report on Form 10-K of
Tele-Communications, Inc., have been incorporated by reference herein in
reliance upon the report, dated March 18, 1996, of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the combined financial
statements refers to the effects of not consolidating TCI Group's interest
in Liberty Media Group for the periods subsequent to the mergers of TCI
Communications, Inc. and Liberty Media Corporation on August 4, 1994.
28
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The combined balance sheets of Liberty Media Group as of December 31,
1995 and 1994, and the related combined statements of operations, equity,
and cash flows for each of the years in the three-year period ended
December 31, 1995, which appear in the December 31, 1995 Annual Report on
Form 10-K of Tele-Communications, Inc., have been incorporated by reference
herein in reliance upon the report, dated March 18, 1996, of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The statements of operations, stockholders' equity, and cash flows of
Liberty Media Corporation and subsidiaries for the year ended December 31,
1993, which appear in the December 31, 1995 Annual Report on Form 10-K of
Tele-Communications, Inc., have been incorporated by reference herein in
reliance upon the report, dated March 18, 1994, of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1993
financial statements refers to a change in method in accounting for income
taxes.
The combined financial statements of VII Cable which appear in TCI's
Current Report on Form 8-K dated June 19, 1996, have been incorporated by
reference herein in reliance on the report dated February 14, 1996 of Price
Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDER. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION.......... 3
INCORPORATION OF DOCUMENTS BY
REFERENCE................... 3
RISK FACTOR.................... 4
THE COMPANY.................... 4
SELLING STOCKHOLDERS........... 4
PLAN OF DISTRIBUTION........... 6
DESCRIPTION OF COMMON STOCK.... 7
LEGAL MATTERS.................. 28
EXPERTS........................ 28
</TABLE>
TELE-COMMUNICATIONS, INC.
Tele-Communications, Inc. Series A TCI Group
Common Stock ($1.00 par value)
Tele-Communications, Inc.
Series A Liberty Media Group
Common Stock ($1.00 par value)
-----------------------------------------
PROSPECTUS
-----------------------------------------
August 1, 1996
